February 2023

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Shiny object syndrome is the phenomenon of being distracted by new and exciting opportunities. For entrepreneurs, this can mean new business ideas, or products or services that aren’t part of their current business plan. They have an urge to try this new thing that someone seems to be doing successfully. Realising you are experiencing shiny object syndrome means admitting that your focus is waning and you’re being pulled away by possibility and a fear of missing out.

Most seemingly overnight successes took years, rather than someone spending a few hours on the latest technology and becoming a billionaire. But as visionary people, entrepreneurs can see the potential of a shiny object very quickly, and they can become infatuated by the potential at the cost of their main business.

Why is shiny object syndrome a problem?

Getting a business off the ground and to any level of success requires focus, effort and persistence. While some businesses can succeed as side projects, those that go the furthest have the full attention of the founders. But founders can overlook the work required to make even the shiniest of objects perform, and barrel forward without realising the cost. Plus, shiny objects are particularly appealing when progress in your main venture is slow. Or even when progress is fast, if you have an underlying fear of success, shiny object syndrome can crop up as a form of self-sabotage.

Either way, succumbing for this common pitfall is a problem because it takes energy, focus and attention away from the core business. It also drills a less useful way of thinking. Rather than someone practising consistency, sustained effort in one direction, and focus, they are pursuing distraction, trends and short-term dopamine hits.

It’s never been harder to avoid shiny object syndrome because there have never been more shiny objects. When setting up a business, the founder needs to do three things: define their core product, know their ideal customer avatar, and find the one channel through which these people are reached. Once this product-market fit is achieved, the task becomes scaling the business based on these three metrics, deviating from the plan only when there’s a clear reason to. Spreading effort across multiple products, multiple customer avatars and multiple marketing channels because you’re trying out every idea that pops up is bad news for the early days and will only serve to confuse you and your audience. Confused customers don’t buy.

What constitutes a shiny object?

Shiny objects can include new business ideas or joint ventures that an entrepreneur might feel tempted to start, especially in the early days when things are less sure or in the later days when they might be stagnating. Shiny objects can include new technologies: AI, blockchain, automation and robotics. Shiny objects might arrive in the form of social media platforms, when someone hears the success stories of entrepreneurs on TikTok and jumps onboard.

New advancements and breakthroughs happen every day, and it’s human nature to wonder if you could be making use of them. Hopping onto the news or social media means you see everything other people are doing and wonder if you should be emulating their strategy. In such a fast-moving world, with so many possibilities, have we forgotten how to double down on one thing?

Attending just one conference can mean consuming hours of talks on why you absolutely should go down this particular route of making money. Attendees leave with notebooks packed with ideas that are full of potential. But scattered effort isn’t what made those speakers successful. They doubled down on one until they saw the fruits of their labour. Focus is a superpower and for entrepreneurs this is especially true. Those that crack the focus code will lap those that don’t. Which camp are you in?

The problem with succumbing to shiny object syndrome is that it’s never over. As soon as you drop the ball on your main venture for that new shiny object, another one appears. Entrepreneurs chasing the next shiny object will forever be chasing, never committing to one path and never seeing it through.

How to avoid shiny object syndrome

Experiencing shiny object syndrome doesn’t mean your existing business is duff. It means you’re human. But recognising when a shiny object is and isn’t useful will help you stay on track. When you become enamoured with the possibility of a new thing, train yourself to think about the potential of your current thing. It’s easy to think about the best-case scenario of something unknown, and harder when you’re facing challenges every day. But remember what you’re working so hard towards and how much progress you’re making.

When you’re hearing someone talk about all the crazy gains they’re getting from this new thing, consider their agenda. Why are they making it sound so easy? Perhaps they’re trying to sell you something. Maybe they have underestimated the time they spent making it move. Then there’s survivorship bias; what about all the people who jumped ship, went all in with the shiny object and didn’t win big? Be curious, ask questions, but tread carefully before changing your plans.

Avoid shiny object syndrome by knowing your strategy and sticking to it. Maybe it sounds obvious, but with a robust and agreed-upon plan of action you truly believe in, you’re going to be far less likely to deviate. If you’re being pulled away, you are forgetting the plan. In that case, make it front and centre. Write your number one goal on your bathroom mirror, make a desktop background of your roadmap to success. Don’t let yourself forget what you’re doing to deflect the shiny objects that won’t stop appearing.

Another way to avoid shiny object syndrome is to have a period of low-media consumption, where you intentionally avoid news and updates in favour of laser-focus on your business. This might mean unsubscribing from newsletters, logging out of social media, not booking meetings and letting a VA handle your email. During this phase you have a clear goal and you know exactly what to do on a daily basis to reach it. Hermit mode is a solid strategy that gives your venture the best chance of succeeding.

There’s often an urgency to shiny objects because they are new and exciting, and the winnings go to the people who jump on them quickly. After the early adopters comes the mass market and the latecomers, and by then it’s too late for meaningful results. This can instil a false sense of priority, that you have to do something immediately. Really, there are very few things that absolutely must be actioned right now. Even if your heart is racing and you can’t wait to get cracking, take a step back, sleep on it, and consider your options only after taking stock.

Finally, before starting a new business or exploring a new technology, think about the downside. If you spend time in this new arena, where does that time come from? It has to come from somewhere. If it’s not your current business it’s your sleep, leisure or family time. Do you really want to skip the gym to learn a new software? Do you want to miss dinner with your daughter for a webinar on AI? Think about what gives in order that a new interest is added. Maybe it’s not so enticing after all.

Shiny object syndrome: tread carefully

Strike that sweet balance between intense focus and unlimited distraction. This means defaulting to opting out, saying no and persevering with your main venture and the product, customers and channels it’s focused on right now. Keep an eye on advancements, make your move at the right time, but don’t be consumed by what every opportunity might mean for you. If you decide to pursue something, be absolutely clear on where that energy is repurposed from, and if that’s a trade-off you’re willing to make. Discern the true opportunities from the distractions in disguise to tame the shiny object syndrome monster that wants to keep you playing small.

Dave:
Hey, everyone. Welcome to On The Market. I’m your host Dave Meyer with Henry Washington today. How’s it going?

Henry:
What’s up buddy? Happy to be here, man. I love doing these types of shows with you.

Dave:
This one was fun, so we today are bringing on Jay Chang who is into co-living, which is a real estate investing strategy that I’m fascinated by. It seems kind of new and I knew nothing about it up until like two weeks ago and really wanted to have someone on tell us about it. So, what’d you think of the interview?

Henry:
I think it’s a really, really cool concept that as you’ll hear in the episode, I just think is going to take off at some point because the market’s calling for it, but it’s really, really early and there’s a lot of stigma I think tied to it right now because there’s only one thing really people know to compare it to, which is college dorm living. But when you look at these facilities and when you look at what they’re actually offering, it’s way cooler than that.

Dave:
It seems really nice. When you come to Denver for BiggerPockets, did you stay at that place, the CatBird by any chance?

Henry:
No, I didn’t.

Dave:
There’s this hotel there that kind of reminds me of, but it’s just a really cool model, really efficient use of space. You’ll hear from Jay, but you get way more rent per square foot than a normal rental, property management costs are a little bit higher, but there’s some really interesting economics behind this and I totally agree with you that whoever figures out how to do this well is going to do extremely well. So, I think this is a fascinating interview and we’re going to get into that in a minute, but first I wanted to talk to you and ask your opinion about something.

Henry:
Uh-oh.

Dave:
Yes, I know that’s what you’re here for.

Henry:
[inaudible 00:01:53].

Dave:
We just want your opinion. So I have been hearing, at least on Instagram, from some people that since the beginning of the year, there’s been an uptick in activity in the housing market and we’re recording this, what is it, January 19th, so just the couple first few weeks of the year that people have an uptick and now there is some data out that’s suggesting that there is more mortgage purchase applications. So, one of the things I love to look at as a proxy for demand in the housing market is the Mortgage Bankers Association releases this data set, how many people applied for a mortgage last week? And, it’s up like 25% over October and November, which is not normally what happens in January, so it’s considerable. So I was wondering, because I’m over here in Amsterdam and I’m just reading spreadsheets, what are you seeing? Is this real?

Henry:
Is it real nationwide? Probably, and here’s my theory, here’s what I think is happening. We talked about this, man, a while back On The Market. What I think you’re starting to see is call it normalization. Interest rates were low and people got used to them and then over the past six months they’ve been going up and going up and now recently flattening out… I wouldn’t say they’re flattening out, but they’re slowing down the speed at which they’re increasing. And typically your mortgage rates, even though the Fed is raising the rate, the mortgage rates are still sitting around anywhere, what, six and a half, 7%, somewhere in there?

Dave:
Yeah, some of them I saw today were like in the low sixes. They’re fluctuating a lot right now, so it really depends what day you’re listening, but the mid, low sixes.

Henry:
And, I think what’s happening is people are just starting to understand this is what mortgage rates are now. They’re starting to get it out of the mindset of expecting them to come down to two, three or four again and realizing that they’re probably going to do the opposite again and go up. And so if I want to buy or need to buy, because not everybody is buying just because they want to, sometimes they have to move for work, sometimes they’ve got to expand for a larger family, sometimes they’re shrinking because people are moving out. There’s all these life situations that are telling people that they need to move and they’re probably just looking and saying, “Well, this is what housing costs now, so I will buy what I can afford.”

Dave:
That makes total sense. I think that’s a very good theory. It’s so funny how your brain gets anchored to these ideas like, “Oh my God,” we were like, “4% a year. Oh my god, that’s crazy, 4%.” Now we’re like, “Yeah, six and a half, it’s so good.” It’s so funny, but I think it’s honestly better for the housing market in the long run to have rates in the fives probably, that’s a neutral rate and I don’t know if it’s going to happen, but right now it looks like that’s where we’re heading. There’s this perfect storm for a recessionary risk plus lower inflation, which both put downward pressure on mortgage rates, and if that is, I think the housing market is going to bottom earlier than people thought, and we are not going to see that big of a price decline, that’s if mortgage rates keep going down, which is a big if, but I think there is case for the housing market outperforming expectations from even just a couple months ago.

Henry:
Pre-COVID, rates were at 6% and people didn’t bat an eye.

Dave:
Still bought houses.

Henry:
Still bought houses.

Dave:
They were a lot cheaper then though, so it really is affordability. Affordability is really still an issue, but I don’t know, it’s going to be very interesting to watch. But anyway, it’s interesting to hear what you said. I saw someone in Seattle said they just got more views on their two open houses in the beginning of this year than they did in the whole fourth quarter combined, which is crazy. So, it’s just something to keep an eye on. I think this is defying my expectation so far this year, so something to keep an eye on, but I’m glad to get your opinion on this. With that, we’re going to take a quick break and then we’re going to come back with Jay Chang who’s going to teach us all about a new strategy called co-living. Jay Chang, welcome to On The Market. Thanks for being here.

Jay:
Good morning, Dave and Harry. Thank you for having me.

Dave:
Could you tell our audience a little bit about yourself and your involvement in real estate investing?

Jay:
Yeah, of course. Right now I’m currently working at Tripalink as a director of real estate, and I have been doing real estate since I graduated, so about eight years. After graduation, I did two years of construction management, working on high rises in Downtown LA. The building was called Metropolis, and then worked on some high-end hotels like the Edition Hotel in West Hollywood. And then after that, I really wanted to get into real estate development, so I joined CIM Group, I was there for three years, and then by 2017, 2018, I started hearing about co-living, and it’s not really a new concept, but it was getting more and more popular. And at the time, there were big co-living operators like Ollie, Starcity, and Common. That really captivated my attention, so a little more than a year ago, I joined Tripalink to do real estate development and they primarily focus on student housing and co-living. So, that’s where I am today.

Henry:
Man, that’s pretty cool. I was looking into some of the co-living communities in preparation for this and to be honest, it was a completely new concept to me. So, I’m sure it’s a new concept to a lot of the listeners. Can you define co-living for us and tell us a little bit about what that really means?

Jay:
Of course, to just put it simply, some people will just say you just have roommates, but it’s a lot more than that because it can be designed in a way that allows privacy, it has more consumers in mind. How do I define co-living? Shared space, shared common area. What we focus on though is having a private bathroom for each of our tenants because that’s where usually tenants get into issues with each other, so co-living, shared space.

Dave:
When someone described it to me, the first time I heard about it was a few weeks ago, someone explained it to me and I was like, “Oh, we’ve got to find an expert to bring on the show,” so thanks for joining us, Jay. But, they basically described it to me as a college dorm. It sounds a little like you do some different stuff like a college. None of my college dorms had a private bathroom, but it sounds like that’s this general idea. Everyone has their own room, has their own space, but there are shared amenities, and it sounds like there’s different models. Some of them maybe have their own kitchen and some of them shared kitchens, some have their own bathroom, maybe there’s a shared bathroom. Is that a reasonable way to describe it?

Jay:
Yeah, a lot of people compare it to a college dorm room, but it’s much, much better than that in many ways. When I was at UCLA, I lived with two other people in the same room. They’re actual roommates, just three adults living in a 200 square feet room. But, why is it better? Like you said, we have the private bathroom and also in our new projects under development, we put a lot of sound insulation and there’s a private electronic lock on at each bedroom. So there’s privacy, a lot of privacy. It’s almost like a private studio, an apartment, but the kitchen is shared. And, a lot of that also has to do with zoning. Sometimes zoning doesn’t allow you to build that many units in a building. So, by building less units and more bedroom per unit, that’s one way to get around it and allow you to build higher density.

Henry:
I agree. When I heard co-living, when started looking into this, the thing that stuck in my head was also college dorm, but then when I started to look at some of the properties that you guys are building or associated with, a college dorm is the last thing that came to my mind once I started seeing how beautiful these things are. So, what are some of the myths around co-living or the stigmas around co-living and then how are you dispelling those myths? What are the benefits or things that people get from co-living in the way that you guys do it versus what maybe people are thinking in their minds?

Jay:
The probably thing is the kitchen is dirty, the flooring is old, but they’re all new projects, new buildings. We have toured with a lot of… Sometimes banks come to look at our jobs and they say, “Wow, I can’t believe this is what college students get to live nowadays.” And it’s just brand new, brand new kitchen. We provide them a kitchen set, kitchenware when they first move in, and the common area is clean. We have a new project here that is a little denser, so we clean that every day.
We clean the main area. The kitchen is sparkling clean. Of course, that’s not for every property, it depends. Some properties are just cleaned twice or three times a week, and then in terms of amenities there, we provide amenities for our communities. So, we’re building areas that are close the school, close to metro station, so they’re very conveniently located to each other. And when we do that, we don’t think about each building as an independent building. We build communities… Sorry, communities, but also amenities, like a study room, a game lounge that have a pool table and ping pong table in there. Sometimes we host events, we have yoga room, just things like that for people to get together.

Henry:
When I look at this, I look at it from two lenses. It’s the lens of who is going to live in this space and what are their expectations, what do they get? And, then I also look at it from the lens of an investor, which is like, what am I going to provide them? And then, what does that mean for me in terms of expenses? So, when you look at a community like this and you provide this co-living, it typically means you are, you’re providing these amenities. So, it sounds like you provide cleaning frequently, it sounds like these places typically come furnished, is that true?

Jay:
That’s true. Not all operators do that, but we do.

Henry:
So from a tenant perspective, that’s a cool thing to be able to think about, but as an investor, it sounds like there’s probably a lot more expenses that come with this, and then you offset those expenses by density, building essentially more units because you’re just renting rooms that, am I on the right track there?

Jay:
Thank you for summarizing that for us. So as a renter, the main benefit that we haven’t touched based on is obviously the rent. In Los Angeles right now, if you were to live in the new studio in a decent place that’s built, at least 2,000 a month for a 450 square feet studio, so you’re paying basically $4 minimum a foot. Now, that’s ridiculous. What is a starting salary for a college grad? You can’t afford that, and right now in 2022, 40% of renters are spending more than 35% of their income on rent. And the way the economy is trending and how technology is getting better and better, a lot of the middle class is getting displaced and it’s going to become more and more unaffordable. No one’s going to buy a house unless your parents can help. So, that’s why co-living is such a popular choice.
And, also it’s very conveniently located in good locations. We’re not going to put it in the middle of a suburb. We put it next to grocery stores, a nice grocery store, like Erewhon or Whole Foods, or we put in next to a metro station or even a hospital for hospital workers. So, there are tons of opportunities, and in respect to investors, it really comes down to the bottom line. Of course, it’s higher expenses, but ultimately because of the density, even though each person is paying less on rent, the price per square footage per rent you can get on each property is much higher. So, if you’re getting $4 a foot on the studio, you can probably get up to $5 a foot, so that’s a 25% difference.

Dave:
That’s pretty impressive. And, what about on the renter side? Can you quantify the savings for the average renter? How much are they saving living in a co-living arrangement rather than in a studio, for example?

Jay:
At least 30%.

Dave:
Wow.

Henry:
Pretty substantial.

Dave:
That’s incredible. And, are the leases the same? Are you signing one-year leases or are they different in any way?

Jay:
It depends. Most of the time we sign a one-year lease, but I know some properties we do like a short term lease, like three months, six months. I know Common does three months, but when you do a three-month lease, they’re going to jack up the price by 20, 30% higher because there’s just higher turnover and vacancies.

Dave:
That was actually going to be my next question about turnover and vacancies. Do you find that people treat this as a short term option until they can find a more conventional living arrangement or how is your lease renewal rate with co-living?

Jay:
Most of our property is on student housing, so the renewal rate is less than 50%, but that’s because most people, they graduate from school and a lot of them are master’s. They teach here for a year. We also have a lot of international students coming here. We have a marketing team in China actually to market that, but to answer your question, for sure co-living is more attractive to young professionals and students were just here for a couple years. Let’s say you’re moving to a new city, you don’t know anybody. It is a really great way to get plugged in.
So, we obviously don’t want tenants to leave, and we also understand that not everyone wants to share a kitchen indefinitely. So, a lot of our properties we’re developing right now, it has a mixture of co-living and studios, one bedrooms. Personally, I wouldn’t live with five other people, even though I’m very big on co-living. If I were moving to a new city, I would, but I think we can all agree on first, everyone needs a place to live, and second, everyone wants a community. So even though you move out a co-living suite, you go into a studio or one bedroom, you can still enjoy the amenities and the community that you once was part of.

Dave:
You graduate from the co-living and you just move up a floor to a nicer apartment.

Jay:
True that.

Dave:
So for me, I can definitely see the appeal of it from the renter side. For saving 30% on your rent, honestly, sharing a kitchen doesn’t seem like that big of a concession. My big question is, how difficult is the property management for you on something like this?

Jay:
It is difficult, very difficult. However, we hire a resident manager, not really hire, we’ll give them some discounts and just help us… Most of the issues are related to maybe some cleaning or roommate conflicts. So, we give them some discount on rent and then just help us mitigate the issues, but to be honest, if you have higher sound insulation, we add resilient channels between the walls. Typically, you don’t do that on this unless it’s like a studio, in an apartment, so it’s better to soundproof. If an amenity area is clean, there’s really not that much issue. And plus, you have your private bathroom, you keep your bathroom as clean as you want.

Henry:
The private bathroom has to be the huge win to keeping… We used to call them… In the corporate world, we call them people issues. Private bathrooms have got to go a long way to keeping the people issues at a minimum, and then if you’re professionally cleaning the common areas and the kitchens because every roommate issue I had was typically around somebody leaving their dirty dishes in the sink.

Dave:
Do you have any thoughts on what the additional cost of property management is? I don’t know if you employ your team full time or do you play outsource it?

Jay:
We do it in-house. We’re not really charging more than an average property management. We’re actually cheaper than Greystar, and we try to automate a lot of the issues. AAA actually has a tech arm that works on a lot of automation, and we’re building a technology. So, AAA has three main functions. The first function is the tech arm that I discussed, and then the second arm is the property management. We manage all our properties that we built and we manage for others, for big developers like Jamison and Wiseman. So, I think 2,000 units in K-Town that we’re managing for other people. And, then the third arm is what I do. We do real estate development, so sometimes we co-GP with other developers, but most of the time we own it outright, and then we do the design entitlement, permitting, and then construction, and then we rent. Sometimes we exit.

Henry:
We talked a little bit about, obviously there’s going to be a higher turnover if you’re going to have a student base. So when you’re underwriting these, if you’re going to do a new property, do you underwrite them? What vacancy percentage are you underwriting? What are you expecting these to do consistently from a vacancy perspective?

Jay:
Our vacancy rate near USC is actually quite low. It’s about 2%.

Henry:
Oh, wow.

Dave:
Okay.

Henry:
That’s insane.

Jay:
There’s definitely turnover, but a lot of people are showing every year and we lease it out.

Dave:
Wow. What about maintenance costs? In my mind, I keep thinking this business model is a mashup between rental properties and short term rentals because you have the cleaning element of short-term rentals, you have the furnished, at least for you as an operator, not again, like Jay said, not every co-living operator does this, but you have furnished parts. And from my experience in short-term rentals, these places get used pretty hard. There’s a lot of need to replace equipment and furniture. Do you see that as well in co-living?

Jay:
Yeah, for sure. There’s definitely a higher maintenance cost. It comes at a cost. Our expenses also is about I would say 10% higher than a average traditional apartment because of the repair, maintenance, and also cleaning, and we also include utilities as part of our expense. So, you can really just come in with a luggage and moving into a newly built apartment for 30% below studio.

Dave:
Wow.

Jay:
And then in terms of replacement, we started to use higher grade materials, so they’re more durable. Some of them are commercial grade, better paint, more durable paint, all that stuff. One thing that’s difficult when you’re managing a co-living property is that it’s hard for you to do maintenance. When you do a studio, someone moves out, it’s easy for you to go in and repaint the whole thing or do all the cleaning, but in co-living, there are other residents in there. So, it’s better to use a better quality material, so you don’t need to do any extensive maintenance frequently.

Henry:
So, you’re budgeting that on the front end in your acquisition costs because you’re going to have to build it with the higher quality materials. How does that work? Or said differently, can you take something existing and convert it to co-living, or are you typically only doing new construction and designing it for co-living ground up?

Jay:
You can in some places, but the layout in an old apartment is really hard to do. If you were to convert office, I think there’s definitely room to do that. The office, that’s a big open space, but if you’re converting an old apartment, probably they have a bigger two bedroom, sometimes they have more than 1,000 square feet per bedroom. For a two bedroom, you can probably put that through a three bedroom, but you’re just adding one extra room. And, also it’s really hard for you to add plumbing. You cannot add a private bathroom without significant cost, so it’s not really worth it. And, also the way we look at it is we want it to be compact, but also not too compact. For a three bedroom, we try to keep it around 900 square feet, so it’s like 300 square feet per room. When we say 300 square feet, that includes the common area, the corridor, and the bedrooms, the entire unit.

Dave:
Jay, it sounds like you don’t do this, but have you seen any operators who do this with single family homes? I guess that’s more called-

Jay:
Yeah, bungalow.

Dave:
I guess that’s more called rent by the room. So, what’s their model?

Jay:
Their model is they find a single family house owner, and then they master lease it and rent it out. I know they also got some funding and started to buy a lot of single family houses. I have looked at it, kind of did. I was interested in seeing how much money they’re actually making per single family house, and I did some quick underwriting. I just don’t think that they can make much money from single family house because the maintenance is really high and you can’t really scale. Each location has five, six bedroom max, but for us, each location can be 40 to 100 plus bedrooms. So, it’s harder to do that effectively with a single family house.

Henry:
I can totally see this making sense in markets that are expensive and have high college density, like LAs, New Yorks, these major cities. What other areas do you think this model fits or make sense in?

Jay:
You hit it right on. Exactly what you said, to be honest, co-living will only make sense in the unaffordable market, in a key gate market like New York, LA, San Francisco. San Francisco is not really a great market right now, but pre-COVID it would have been an excellent market. I would say this though, as a traditional apartment developer, a lot of the metrics they look at is the income to rent ratio. So, they want the tenants to obviously be able to afford higher rent. So, they want the rent to not be too high, so they can afford it, but for us, it’s different. We actually look at it in reverse. We look at areas that are unaffordable. It’s a different target market.

Dave:
So, if people wanted to do that calculation for themselves and identify a market where they could consider co-living, how do you do that calculation? What metrics do you use? Do you have any advice for our listeners on how they can do it?

Jay:
Yeah, in an affordable market, usually the income to rent ratio is at least 3X. So if you make 100,000 a year, your rent a year is about 30,000. So if the income to rent ratio is less than 2.5, then it’s a signal that it’s not affordable, and they’re spending more than 30% of their income on rent. But in 2020… Actually I said earlier about affordability, the 23% of renters actually is now spending 50% or more of their income on rent now.

Dave:
That’s crazy, wow.

Jay:
23%. A quarter of us are spending all of it on rent.

Henry:
So if someone, let’s say from an investor perspective, they’re hearing this and they’re going, this might be something I’m interested investing in, getting into learning about, what options are there for people? Are there funds that they can invest in or are there companies that they can talk to who are doing these kinds of things? How does one go about getting into this space from an investor’s perspective?

Jay:
You cannot invest in a REIT. The couple challenges in co-living right now is it’s not considered investment grade because it’s a new type of property and it’s not investment grade because you cannot repackage a loan and sell it to Fannie Mae for agency loan. So, it’s harder to get financing. We had to work with local, smaller banks. So your question was, how can they invest? So, they cannot invest really on a public REIT, but if they’re a developer or they’re interested in investing, they can reach out to some co-living developers such as Tripalink. We actually have an investor portal. I really don’t know how else you could invest in co-living. Another way you can do that is some people, they buy their own house and it’s basically just house hacking and you rent it out in a small scale.

Dave:
They call it rent by the room or just house hacking a single family home. You can definitely do something like that because I’ve read some stuff about rent by the room where you get similar premium on rent per square foot or per bedroom, a 20%, 25% increase in rent by doing that with a corresponding headache in property management.

Jay:
Honestly, it makes sense financially, but is it really worth it to have five other roommates with you and then you have to clean the common area? I don’t know, it depends.

Henry:
It depends on how much rent is.

Dave:
I’m just remembering the houses I lived in with friends in college and it just seems like it was fun back then, but man, the property manager must have hated us. Jay, are there syndications available? If you’re an accredited investor, are there development projects that investors could invest in co-living passively?

Jay:
Yeah, I think there’s not that many co-living developers, but if you go to networking events, you might be able to meet some. We do some syndications. We know a few other small developers in the area also doing syndication.

Dave:
All right, great. Well, Jay, thank you so much for being here. We really appreciate you sharing this. I’ve learned a lot. I think this is super compelling. I do want to learn how to… If there’s syndications available, or maybe Henry and I are going to go in on our first one, but this has been super helpful. I think it’s a really cool idea that clearly there’s going to be demand for this. That part seems just so obvious to me that this seems like a cool place to live for way less than what you would pay elsewhere. So, good on you for being in this really cool industry. Is there anywhere people can connect with you if they want to learn more about this?

Jay:
Thank you for having me. You can contact me on BiggerPockets. It’s Jay Chang, and then you can also fly me on LinkedIn. BiggerPockets will have most of the links that you would need to contact me directly.

Dave:
I love that, you’re just sending people to BiggerPockets. That’s maybe the first time we’ve ever had that, but as an employee of BiggerPockets, we really appreciate that.

Jay:
No problem.

Dave:
Thanks, man. Big thanks to Jay for joining us. Henry, what’d you think?

Henry:
Man, it’s a pretty unique space, and I do think that demand for this kind of living in those expensive markets are just going to increase. It’s like the market conditions right now are saying that this is something people need. The interest rates are higher, the inflation is crazy. And so, not only is it costing people a lot to rent in these places, but gosh, groceries too, so if they can save 30% and have to share a kitchen, I think people would be willing to sacrifice that.

Dave:
Totally, I feel like there’s just going to be huge demand for this. First, saving 30% on your rent is enormous. We talk to people all the time, I’m sure about, if you want to get into real estate, low money down, what’s the best way to do it? Either house hack or reduce your living expenses. This is a great way to reduce your living expenses. So when I went into this show, I was like, “Man, this is going to be interesting for investors,” and it is, but also to invest it, but I think it’s also interesting for aspiring investors to consider living in one of these things because you’ll probably saved some money and then invest in real estate. But I also think the element of having… I think you’ve done this too, I moved to some new cities in my life where I don’t know a lot of people, I think the community element is kind of cool. It reminds me of a hostel environment, right?

Henry:
But, gorgeous.

Dave:
They’re really nice, but they’re more open. It’s just like going to a common area, hanging out, having a beer, doing like that, and it’s in a super nice place. So, I could imagine it being really popular.

Henry:
Let’s be real, I don’t want to clean my kitchen anyway.

Dave:
No.

Henry:
So, if I can use a kitchen that somebody else is going to go clean and I can go downstairs and have a beer with all my neighbors [inaudible 00:35:18]-

Dave:
That’s so [inaudible 00:35:18]. What’s the weirdest or worst place you lived?

Henry:
Oh gosh, man, the very first dorm I ever lived in was probably the weirdest place I ever lived because it was like if a sleazy Motel 6 was a dorm room, and we had this shared living space, and it was supposed to be furnished, but it was really just a futon as a couch and then a TV stand with no TV on it and shag carpet.

Dave:
Ooh, nice.

Henry:
And, then I had a bedroom with bunk beds that I had a roommate in. So that was-

Dave:
Oh God, that sounds not that-

Henry:
Not my favorite place to live.

Dave:
I bought my first house with three partners, but one of the partners and I were roommates at the time, and we were going to house hack it, that was our plan, we were going to move in. But, then Denver’s starting to do well and we’re like, “Man, we could get way more for rent than what we would pay in our own rents,” so we’re like, “Why would we house hack?” And, his grandmother had just passed away and she lived in a retirement community and the market was still falling like crazy and his mom was like, “You guys just pay the utilities, take care of the house. You can live there,” but it was like a 55 and over community, so we couldn’t tell anyone. So we moved in the middle of the night, just lived in this house. We were like, “It’s going to be six months,” but it was free, so we wound up living there for three years. And, I lived in the basement, so I lived in his dead grandma’s basement in a retirement community for three years.

Henry:
Did you just go to the community hall and destroy elderly citizens at ping pong, crushing them at ping pong full board?

Dave:
Yeah, exactly. There was no community area. I guess there was a little bit, but we never went, but we were just like… People loved it, actually. We would just carry their boxes then, just be the young guys who could pick up stuff. We just did it, and later and later we were just throwing ragers there. They had this nice outside space and we would just throw these huge parties there.

Henry:
Did your neighbors come?

Dave:
They’d wave, but unfortunately we never got them in, but that was a weird place to live. So long story short, I probably would’ve preferred to live in one of these co-living spaces.

Henry:
I don’t know, it sounds like it was pretty awesome.

Dave:
It was fun looking back on it. Sometimes I was like, “What the hell am I doing with my life?” But, it saved a lot of money. Anyway, now I’ve lost my whole train of thought, so let’s get out of here. Thanks for being here, man, and thank you all for listening. Hopefully this is interesting to you. I think it’s going to be a big trend. I guess that’s the last thing is I was a little disappointed that there’s not really an easy way to invest in it right now it sounds like if you’re just a regular investor and not a developer.

Henry:
But, typically this is when you should be looking for those opportunities because somebody’s going to get in early on figuring out a way to make this available to the public to invest in. So, I would try to be the early adopter because the demand is going to be there.

Dave:
Totally, it’s like every time we do one of these shows, like this one, and particularly the 3D printed houses one, it’s not easy, but whoever figures this out is going to make a killing off of it. So if you’re interested, follow Jay, follow some of the other operators. Maybe you can learn from them or get in on it, but we hope this was helpful to you. We always try and bring you these types of new investment strategies that are cutting edge because that’s what we’re about. So, we’d would love to hear if these types of episodes are helpful to you. So if you have any thoughts on this kind of episode, hit me up on Instagram where I’m at thedatadeli or Henry, you are at thehenrywashington, right?

Henry:
That’s correct.

Dave:
All right, so Let us know what you think. Thank you so much for listening. We’ll see you on Monday for another episode of On The Market.
On The Market is created by me, Dave Meyer and Caitlin Bennett, produced by Caitlin Bennett, editing by Joel Esparza and Onyx Media, researched by Pooja Jindal, and a big thanks to the entire BiggerPockets team. The content on the show On The Market are opinions only. All listeners should independently verify data points, opinions, and investment strategies.

Recession. The word is enough to strike fear into business owners’ hearts. Naturally, they start looking for ways to trim any expenses they can. And those cuts could impact everyone from the CEO to front-line employees to the people companies serve.

While the ultimate goal is to keep the business afloat, slashing marketing budgets isn’t always wise. A lean strategy can still include ample marketing spend on activities designed to support growth. Even in a recession, businesses can grow. It may sound counterintuitive, but historical data backs this notion up.

Companies that kept spending on marketing and advertising during previous recessions outpaced the competition. In the financial crisis of 2008, businesses decreased advertising dollars by 13% across the board. Leaders who maintained their marketing spend, however, saw a 3.5 times increase in brand visibility. In tough economic times, growth marketing strategies are a way to keep reaching your audiences with maximum impact. Here’s how.

Engage Consumers Via Email

In a recession, shoppers aren’t going to respond to marketing messages with the same levels of enthusiasm. In an effort to be cost-conscious, most consumers will think twice about every purchase. If something sounds too good to be true, they’ll pass. The same goes for any in-your-face promos for solutions shoppers perceive as nonessential.

Businesses that are accustomed to healthy conversion rates from promotional email campaigns will doubtless find this unnerving. The solution is to embrace a growth marketing perspective and employ email as a relationship-building tool for the long term. Use email to engage leads in various sales funnel stages. Don’t simply push your product as a way to nudge consumers; showcase your company as a helpful resource even if prospects don’t buy right away. Your patience now will result in higher lifetime customer value later.

You can also use email to keep existing customers in the loop. Segmenting your client list by interests and past behaviors lets you target customers with relevant content. Highlight what your company is doing for local communities and educate people about how your solutions fill market needs. Email newsletters can build audiences for your online content, providing further opportunity to highlight your value and expertise.

Become a Go-To Resource

Online content is a cost-effective way to increase brand awareness. Consumers may tighten their belts, but they still need to know your company exists. More importantly, shoppers need to be aware of what your brand stands for and why they should consider you.

Digital content, including a blog, helps consumers get to know your brand. But the information must be beneficial while appealing to shoppers’ motivations. Your business won’t get far with superficial, self-promoting blog posts and website pages. Whatever materials you produce shouldn’t leave your target audiences with more questions than answers.

You can help your digital content stand out by making it a go-to resource for consumers. When customers have a problem to solve, your online tutorials and how-to videos should help them do just that.

Of course, you aren’t limited to blog posts and videos. You might find your audience engages better with something more interactive. Livestreams, webinars and polls on social media sites represent a few ideas. Keep experimenting to find what works, regardless of which formats you initially choose.

Reward Loyal Customers

Growth marketing strategies are all about cultivating your client base. When companies only offer incentives to new customers, it prompts loyal ones to look for greener pastures. Why should they pay more for the same product? More importantly, why should they remain customers of your company if you care more for new customers than those of long standing?

As with any relationship, consumers need a reason to stay invested. Providing exceptional service or a unique product may not be a big enough incentive. In a recession, it’s not unusual for consumers to start looking for lower-priced substitutes. While this behavioral shift is typical with commodities, hypercompetitive markets are turning once novel products into pedestrian offerings. Think specialty coffee and wireless phone service.

Reward programs can be effective, provided they don’t have several hoops for customers to jump through. So can referral programs that offer incentives to new and existing clients. With referral rewards, your company doesn’t have to spend as much money on attracting brand-new business. Current customers do the advertising for you. Plus, consumers are more likely to trust what someone they know says about your business versus what your company says about itself.

Form Partnerships With Industry Thought Leaders

A well-known industry thought leader who advocates for your brand could quickly increase its visibility. Someone whom your target audience respects and listens to will help you make more inroads in the market. Consumers are skeptical of companies without positive endorsements from trusted sources. If you’re only tooting your own horn, the kudos will come across as inauthentic.

Partnerships with influencers give both sides a chance to say something more meaningful. A thought leader might enable your business to reach a coveted but elusive market segment. You can also feed off each other’s knowledge to create resources your competitors can’t duplicate.

Before joining forces with any thought leader, evaluate what the partnership can bring to the table. You want someone who will align with your company’s values and identity. While an influencer’s large following is nice, it’s not the most critical factor. Look for a voice with longevity — one you can envision representing your brand well for the foreseeable future.

Growing a Recession-Proof Business

Some industries seem to naturally withstand one economic downturn after another. But many businesses don’t have the luxury of being inherently immune to recessions. To help their companies survive, leaders must develop strategies to buffer the effects of reduced consumer spending. Growth marketing initiatives can keep revenues flowing by investing in long-term engaging relationships with customers instead of transactional ones.

David:
This is the BiggerPockets Podcast show 729. When we talk about why, I think it’s a combination of factors, but most of them are related to technology. So if you think about the ’50s, what made someone determine where they’re going to move? It’s probably where dad’s going to work. So, markets would explode stuff like New York or Boston. You had these areas, like you mentioned, San Francisco, where you had to be physically present because this is where things were done, Detroit, Michigan, right? You moved to where the jobs were. Well, internet has increased its capability rapidly in the last 10, 15 years, and we’ve gotten to the point where now people are specializing, and they work from home all the time.
What’s going on, everyone? This is David Greene, your host of the BiggerPockets Real Estate podcast here today with my partner in crime, Dave Meyer, to talk about real estate by the numbers. Funny enough, that’s the same book that he helped write with J Scott. We get into migratory patterns, absolutely. We get into data. We get into information. We get into objectiveness. If you like Excel spreadsheets, if you like to make your decisions on the firm bedrock of information, you are going to love today’s show about where you should be investing in 2023.
Before we move on with that, today’s quick tip is if you like this kind of information, if you listen to the show, you get all the way to the end. You say, “That’s what I want more of. I want people telling me the numbers, the data, the statistics, the facts, the cold hard facts about where I should invest.” Consider checking out the BiggerPockets’ YouTube channel. Now, this is a podcast, and there are other podcasts, and those do go on YouTube, but in addition to that, we make additional content that you might not know about that never makes it into the podcast realm. It only goes on YouTube.
You could catch me on there talking about the nitty-gritty details of what it takes to have a career in real estate, or loan products you might not know about, or negotiation techniques that you need to tell your agent to be using. You could catch Dave on there talking about more information like this, what studies have been done, how to interpret that data, and what the next trend in real estate investing is going to be. So if you’re like me, and you’re addicted to YouTube, and you listen to it all the time, go follow and subscribe to the BiggerPockets’ YouTube channel, and get more information in between the podcast that we try to release as frequent as we can.
All right, Dave, what were some of your favorite parts of today’s show?

Dave:
I think today’s shows is one of my favorite ones we’ve done in a while, because this is one of those areas where investors can really gain an edge over their competition. This is like… If you’re the kind of person who likes to research and understand what’s going on around you, this is a great practical episode where you can learn some of the specific things that you should be looking for and identifying to pick markets. We’re going to talk about where people are moving, why people are moving, where businesses are moving, and why they’re moving.
If you can follow these trends, and extrapolate them out to what might happen over the next couple of years, you’re going to be in a really good position to identify great locations and great markets to invest in real estate.

David:
Yes, and on today’s show, we name names. We’re not just talking principle. We get into the theories and the principles of why this works, and we actually give you specific cities that we think are going to do well and why. This is what nobody ever wants to do in our space, because if you’re wrong, you look like a fool, and nobody likes that, but that’s okay. Dave and I are willing to risk that in order to share where we invest and where we think that you can do well because we love you. All right, let’s get into today’s show.
What’s going on? Dave Meyer, I’m so happy you’re here today. We get to talk about a topic that I love. As the author of Long Distance Real Estate Investing, I like to track where people are going, what markets are heating up. As the BiggerPockets host of the podcast, I like to talk about where people could be buying real estate, what listeners from BiggerPockets happen to listen in the hot city that everything’s happening in, or a cold city that people are leaving. I think this stuff is really important. So glad you’re here with me today. Can you just briefly explain to people why you are the person that we brought in to talk about this with us?

Dave:
Well, sure. It’s a really fun topic to discuss, I think, as you just said, in normal times. But ever since the pandemic, basically, the trends of migration and businesses moving to new places has accelerated in a way we really haven’t seen. A lot of the trends that we were used to are now the opposite, and we’re seeing a lot of changes in where people are moving and where money is being invested. Obviously, this has implications for everyone and the whole country, but as real estate investors, we really want to know where population is growing, where money is being invested, because it has big implications for rent growth, for appreciation, for vacancy, for all these important things.
I’m pretty excited to talk about this, because there’s a lot of cool information that we’ve gathered for you.

David:
We have several headwinds that have all joined together to create this huge rush that’s made a lot of money in real estate in the last several years. We have the fed printing a whole lot of money, so you have this oversupply where this money needs to find a home. Then we have, obviously, COVID-19 and the way that that shook up the way that work is done, and so we have people moving into different areas based on all kinds of different reasons that we’re going to talk about. Then we have the fact interest rates were incredibly low, so you really couldn’t get any return on your money in most traditional cases, just like putting it in the bank.
So, you had to invest your money. You have a lot more money to invest, maybe not the individual, but the economy as a whole, and people are moving quicker. So if you got the right location, and all the money flooded to that place, you did really, really well. If you didn’t get the right location, you still did well because assets in general, the prices of them-

Dave:
You got lucky.

David:
That’s exactly right. But now that you see it starting to turn around, we’re starting to head into a bit of a recession. The people who bought in the areas that appreciated the most, they’ve got the most cushion, so they’re going to be hurt the least when things turn around. That’s why we’re talking about this, because we always want to try to be ahead of what’s going to be happening next. Let’s start off, and just have you get into the great reshuffling as we’ve called it. Tell me what’s going on in the way that real estate investing has changed.

Dave:
I think basically, you’ve hit on a couple of the major things that are happening. The first one, like you said, is the pandemic and just remote work. We saw that all sorts of people were working from home for the first time, and not that long into the pandemic, a lot of companies said, “We’re actually going to make this permanent,” and so people for the first time really in history were untethered from locations in a way that they never have. Historically, if you wanted to have a great job, you’d move to where you are, David, in San Francisco or New York or any of these big major metropolitan areas that have strong job growth, strong wage growth, economic growth.
Now, people were saying, “I can still make a San Francisco salary, or I can still make a New York salary and move somewhere else.” What we’ve seen just in terms of data, what’s going on here is that the number of people who are moving out of state who are moving to a different metro area has exploded. Just from data from Redfin came out, and showed that of all the people searching on Redfin for homes, 25% of U.S. home buyers were looking to move to a new metro in Q3. That’s up significantly from pre-pandemic levels, and it’s still…
We’re no longer in lockdown mode anymore, and we’re still seeing this elevated sense of migration. So, I think what I was hoping to talk about a little bit is what happened over the last couple of years, and are these trends likely to continue?

David:
I think that’s a great place for us to jump off here. Let’s get a bit of a foundation and understanding what led to the change, and then let’s talk about what we think is going to happen. Then before we do, I just want to highlight why we’re talking about this, why it’s important. In the past, it’s been enough with real estate to just teach someone how to analyze a property. What’s it going to cash flow? Is it going to make or lose money? Add a little bit of sauce on the top. Can you throw a little bit equity in there? Can you upgrade a little bit?
Boom, you’re good. You got a property, and that’s going to take you to financial freedom if you just repeat it a couple times. There has been so much changing in our industry that it gets a little bit more complicated with every single change, and you need a little bit more information to stay competitive in this market. That’s why we’re bringing this information. That’s why we’re not just only bringing in the story of the gym teacher that bought four duplexes, and now they’re done, and they don’t have to work. It’s getting harder and harder to do that, but at the same time, it’s getting more and more important that you are investing in real estate.
That’s why so many people are flooding into the space, because they’re recognizing the safety, the long-term benefits, and the fact that when you compare it to other investment options, they don’t stack up at all. The word is out. More people are hearing about this. We just want to bring more information so you can stay ahead of the others that are chasing after these same vehicles.

Dave:
That’s a very good point. I mean, there is also a good point about what you said earlier that even during the pandemic, it didn’t matter where you invested because everything was going up so much, but we’re not in that market anymore, and different housing markets are going to start to behave different from one another, which is normal for the record. Having some markets that are better for cash flow, and having some markets that are better for appreciation is the normal state of affairs. We were just in this crazy abnormal situation for the last couple years.
So, by studying and understanding different markets and some of the trends about population, migration, where money’s being invested, you’ll have a good sense of what markets are likely to withstand this downturn the best, and likely to start growing again in the future the soonest and the most dramatically. All right, so now you know why we’re talking about this, and why this is important. We know that people are moving a lot, and they’re continuing to move more than they used to. So before we jump into where they’re going and what this all means, maybe we should hit a little bit on why people are moving from where they currently live.

David:
That’s a great point, because if you can understand the why, you’re more likely to predict what will happen in the future. First thing I’ll say, I think this is going to continue in even more frequency as we go. People are moving more than they ever did before. It’s more important to know it than they ever did before. I don’t think this is a fad. I think this is going to continue. I think if we look at the next 5, 10, 15, 20 years, you’re going to see an increase in the velocity of human beings jumping around between markets and businesses probably doing the same thing.
When we talk about why, I think it’s a combination of factors, but most of them are related to technology. So if you think about the ’50s, what made someone determine where they’re going to move is probably where dad’s going to work, right? Back then, you got dad’s going to work. Mom’s staying at home, raising the kid. We have very traditional gender roles that people are operating through, and you can’t… There’s no Zoom calls. There’s no internet. You are driving into a physical location to attend meetings in person. I’m sure some stuff was done over the phone, but I don’t think it was very much.
So, markets would explode stuff like New York or Boston. You had these areas, like you mentioned, San Francisco, where you had to be physically present because this is where things were done, Detroit, Michigan. You moved to where the jobs were. This is the way that human beings have been for a very long time. If you go back before jobs, you have the Native Americans following the bison across the planes like, “I got to go to where I get my food, which now is our work.” Well, internet has increased its capability rapidly in the last 10, 15 years, and we’ve gotten to the point where now people are specialized, and they work from home all the time.
We had the capability to do that, but we just didn’t break out of the pattern. Then COVID-19 hit, and that was a pattern disruptor. You absolutely had to change the way you’re doing things, because you could not leave your house. So as they say, necessity is the mother of invention. People change the way that they operate in the workspace, and you started seeing more people working from home. Now, you also see that people can learn skills much faster, because we have technology-assisted abilities in the workplace. So if you’re someone who writes code on computers, you can learn how to write new code faster in different ways.
If you work for a company, and you’re in sales and marketing, you probably don’t have to be in that company. You’re probably locked into your computer studying algorithms of different social media websites. A lot of these tech-based jobs can be done anywhere. So, you got this niche where people can bounce around from different job to different job, and they can work from home. Then COVID-19 happens, and the place where certain people lived had its resources shut down. So where I’m at in San Francisco, it was terrible. I don’t live in the city of San Francisco, but I sell a lot of houses there, and they just shut down everything.
It was so hard to sell anyone on why they should live in San Francisco, because all the restaurants were closed. All the nightlife was closed. All the museums were closed. All the reasons that people want to be in San Francisco, they disappeared. Same thing happened in New York. Basically ,two of our biggest hubs for business in the country had the same thing happen. Some people moved into the suburbs, or they moved into new states. There were political differences, and I think we can agree that there’s becoming a bigger spread in the spectrum politics every year.
So certain people said, “I don’t want to live in a state that’s this way, or I don’t want to live in a state that’s that way,” and they moved to a different state. After a couple years of doing this, we figured it out. It became easier and easier to go from one area, and work one job to another area, and either work that same job or get a new job. Then technology increased with stuff like Airbnb and VRBO, and we had more people putting supply into the market, and so it became much easier to live in a new area. It used to be you stayed at a hotel that was super expensive, or you had to commit to a lease. Landlords like us don’t want to commit to a two-month lease for someone. It was a 12-month lease.
So if you didn’t know anyone in the area to move to, it was very hard to go get there, get established, set a foothold, figure out if you like it or not, and then make a long-term solution. Well, now Airbnb makes that so easy. You’ve got expensive options if you want to move your whole family into a big house. You’ve got cheap options if you just want to live in someone’s basement, and sleep on a pullout bed. It has become so easy to bounce around from location to location that people have figured this out, and what used to be a dream, “I want to make a bunch of money and quit and retire so I can travel,” is now something that you can do while you’re still working.
You don’t have to wait until you’re 50, 60, 70 years old to retire and travel. You can do it at the same time. You’re doing your work right now from Amsterdam. Are you in Amsterdam today?

Dave:
I am.

David:
So, you’re the perfect example of the person who is able to do a great job at their job, also work a side hustle hobby of sandwich connoisseurship if I can say so, and do it from different locations in the world. This is happening all over the place, and understanding these patterns and these trends will help investors buy in the areas where there’s going to be rising demand.

Dave:
Absolutely. I think one of the things you talked about, I just want to follow up on, which is that people used to have to move to these places to get good paying jobs like New York or San Francisco. We’re just picking on those two. You’re from around San Francisco. I grew up around New York, so we can pick on those cities, but basically, what happened though is because they offered in many cases the highest paying jobs or the highest concentration of high-paying jobs, there was so much demand that those places got insanely expensive. It’s not a coincidence that San Francisco and New York are two of the most expensive real estate markets in the world. It’s because people want to live there, because they want to have access to those very expensive jobs.
Now, you’re saying, “Oh, I can get that San Francisco or New York salary, but I don’t have to live there. I can go to Nashville, or I can go to Dallas, or I can go to somewhere in Florida, and live.” It’s basically getting a raise. You could be getting a 20% or 30% raise. People were doing this, and companies over the last couple years who have been struggling to find employees were allowing people to do this, because it was a way for them to basically give their employees a free raise as well. If you’re Facebook or Twitter or Google or whatever, if you say you can take your San Francisco salary, and move to wherever you want, you’re giving them a much higher quality of life, and I think for just cost of living wise.
I think people really wanted to take advantage of that. I don’t necessarily think they’re going back. I know you hear some of these high profile things where people are getting called back to the office, and some are. But if you actually look at the data about how much people work remote, it’s pretty stable. It peaked a couple years ago. It has come down a little bit, but now it’s pretty flat. So, I think we are going to continue to see people able to work remote. To your point, David, I think that’s going to just increase this transience among people going forward.

David:
Well, I think in some of the places that we’ve seen more people moving to than anywhere else, like the winners that are going to show up here, a lot of these were places that typically people only went to when they retired, which means they wanted to be there. It had a lower cost of living, a better client, more amenities, but they couldn’t. They had to wait till they were done. You think Florida’s exploded. That is our typical retirement community of America. Everybody waits to retire the move to Florida. You’ve got Arizona. Arizona has exploded in demand as Californians have realized it’s a little bit hotter, but it’s not a whole lot of different climate than what we’re used to, but it’s a third as expensive as the Bay Area.
Like you said, it’s a huge… it’s like getting a raise to move there. Texas has been a place that typically like you were just from Texas or that was it. Nobody was going into Texas, but the people that lived in Texas loved it. Now that the word is out, I’m sure the Texans don’t love this that are listening to this, but everyone else wants to go there. Tennessee was another place that a lot… It was like a niche market. You were a musician, and you went to Nashville to try to make it. It was like the Hollywood of the south a little bit, or you retired, and you moved up there. But if you lived in Tennessee, you knew about some of the gems, like the Smokey Mountains, Nashville, the areas that people wanted to go vacation to.
Now, you can just live in those areas. People are… They wanted to be there the whole time, but their job was restricting them. As we’ve cut the tethers of your workplace requiring you to be someone, we see people naturally going to where they wanted to go. That’s one of the reasons that I invest in those markets. I don’t see that changing in the future.

Dave:
100%, totally agree. Before we move on, I just want to say, David and I have been talking a lot about price-wise affordability. I do think that is probably the number one major driver people want to go where they want to go. But when we look at some of the data to why people are moving, I just also want to say that some of the things that we’ve noticed are, one, income tax. States with no or low income tax have been major winners like Nevada, Texas, Florida.

David:
Tennessee.

Dave:
Tennessee. Exactly. There you go. Then a lot of times… This is pandemic related too, but just a lot more space. People who were living in small spaces when you were confined to your home wanted bigger areas, so we saw suburbs really take off as well. Places that had affordable suburbs were other areas that really we’re seeing a lot of net migration, and are still seeing a lot of net migration. All those things combined have led to this trend, and now we have seen and have some winners and losers that we can actually share with you over the last couple of years, which markets have seen the most and most people lost and the most people gained.

David:
It’s funny. Three years ago, I was doing real estate meetups in the East Bay Area, and people would say, “You wrote long distance real estate investing. Where should I buy it?” I was like, “Everyone overthinks it. We overthink it so much.” You want to buy in places with warm climate and low state income tax, because the people who are making the most money are living in New York and California. They’re paying the highest in taxes, and people in New York don’t like the cold. They would rather live in the warm, and people in California can’t live in the cold. We can only live in the warm because we’ve been spoiled.

Dave:
You’re not adapted to the cold.

David:
Yes. It’s like 50 degrees over here, and everyone’s complaining like, “This is ridiculous. We’re going to die. My petunias can’t make it in this 50-degree weather.” We don’t adapt at all. I said, “You should invest in Texas, Tennessee, and Florida. That’s it.” Find the areas that someone would move to to start, and those places have exploded, and everybody has made money that’s invested there. It really can be simple when you understand the principles that we’re about to get into now.

Dave:
Hopefully those people listen to you.

David:
All right, so Dave, the numbers guy, the data guy I should say, tell me, what is Redfin statistics on this trend? What’s the data telling us?

Dave:
Well, we’ve been picking on New York and California, and I will say that those are the two cities, two states, excuse me, that had the largest out migration. New York, over the last couple of years, has lost 180,000 residents, and California has lost 300… No, excuse me. They’ve lost 343,000, but they gained another 150,000. Like we’ve been saying, you see, if you look at this and dig into it a little bit more, a lot of it is from the New York City area, San Francisco and LA areas. They’re very, very expensive, and we’re going to talk about that in just a moment.
A lot of this, I believe, is not just personal lifestyle, but you’ve seen a lot of companies move out of San Francisco and LA. You’ve seen a lot of finance companies, for example, leave New York, and head to Florida. Those aren’t super surprising. The other general area that has lost a lot of population is the Midwest. People are leaving Illinois and Ohio, and where they’re heading, no surprise, some of the states that we’ve already named, which are Florida, which gained a net of 400,000 residents. Texas has also gained 400,000 residents, and now is the second state after California with over 30 million residents.
The other ones are all in the south. Arizona, North Carolina, South Carolina, Tennessee, and Georgia lead the way in terms of cities with a ton of migration. I’m guessing you are not surprised by anything I just said.

David:
No, I think… Man, it’s not too hard to see the writing on the wall. Florida was the only state doing things the way they did, and because of that, what was the net addition to people that moved there? Was it 500,000 you said?

Dave:
400,000.

David:
400,000, that’s a lot of people moving into an area that doesn’t have enough supply of homes. It’s typically only retirees that are moving into Florida, or immigrants that are on that part of the world. So, you’re seeing a massive amount of houses that are being built. Florida’s trying to adapt to this. There’s subdivisions going up everywhere. Prices are increasing super fast. The Floridians, they think they’re in a bubble. They’re over there like, “That house used to cost 300,000. Now, it’s costing 440,000. This is ridiculous,” but the New Yorkers are like, “I was paying 1.2 million, and I could go live there for 440,000, and it’s warm. Sign me up.”

Dave:
I mean, my friends who still live in New York would pay 1.5 million for a one-bedroom apartment. It’s nothing to them. They still see that this is a good deal, but I do think it is just… I will say this is a tangent, but Florida is one of those states where it’s really depends what city you’re in. Some markets are just humming along, which we’ll get to in a minute. Some I think might be at risk of oversupply, but regardless of supply, people are moving there. A lot of people are moving there, and that trend does not seem to be slowing down.
We wanted to talk about another thing here, which is not just that people are on the move, but businesses are really on the move. It was actually… It’s hard to find data for this. I was surprised at how difficult it was, but I’ve seen some evidence, and I think we just know this anecdotally, that there’s a lot of businesses moving their headquarters. I could only find data that was reliable, that goes back to 2009. So, it’s not really all pandemic related, but just over the last decade, we’ve seen that some of the major winners for businesses moving places are at the same places, so Arizona, Florida, Texas, but also Illinois, which I find was strange, because people were moving out of Illinois, but they’re gaining businesses which doesn’t really make so much sense.
Then losers were California, New York, and Nevada, which I was also interested, and Utah, because Utah and Nevada, they weren’t on our list of places where most people are moving, but Nevada and Utah have absolutely seen a lot of population growth over the last couple of years. I mean, Salt Lake City is one of the fastest growing real estate markets in the country. I just thought that was really interesting. I mean, Texas and Florida are making a lot of headlines, but to me, this is a really interesting long-term trend that we might just be seeing the beginning of. Because like you were saying with how people can move now in terms of Airbnb, and it’s made it more easy, look, just go look at what vacancy rates on offices are around this country.
They are exploding. So if there was ever a time where office… You want to move from New York to Miami or wherever to wherever. Now is pretty good time to negotiate a good office. There’s a lot of flexibility. People might be willing to leave, and so I think this is one of those trends that, I think, really did start to pick up. I don’t have a lot of data on this, but this is just my anecdotal opinion that really started to pick up during the pandemic, and I think is going to increase a lot over the next couple of years. What do you think about that?

David:
I think this makes perfect sense with what we’re just describing. If we’re talking about people needing to be in a specific location to work less, but then wanting to travel more, you’d expect office space to decrease within areas, because people don’t have to go to an office to work. They’re working from where they live, and you’d expect demand to increase in the residential space. That’s exactly what we’ve seen. Specifically within the short-term rental markets, you’ve seen increasing demand, which has been so much that even as supply has flooded the market, we all know someone out there who’s like, “Oh yeah, we just threw our house up on Airbnb, or we put a trailer in the backyard.”
Everyone’s doing this, which is funny because it’s not a thing that you would think could be supported if everyone threw their properties up. It’s not meant to be something everyone can just do. You have to match supply with demand. Yet, there’s been so much demand that so many people have put stuff up there, and they’ve done well, and then, like you said, commercial space, office space, it’s becoming very easy to lease and very difficult to manage. I bought into some office space, and vacancies have been up. It’s been harder and harder to figure that out.
You and I have brought guests on to talk about what we’re going to do converting some of this commercial space into residential space, because demand across the board is going down for those locations. I think that part makes sense, but I also thought another interesting factor that you brought up was that some of the areas where businesses are moving into have people moving out. What’s your thoughts on why that might be happening, some of those states?

Dave:
I have two ideas about this. The first one is the inverse of what we were talking about where people used to move to cities where there were good paying jobs, but companies used to also move to places where there was a good talent pool, where they had the type of people who could fill the jobs that they need. Now, if those people are spreading out from San Francisco or New York, the businesses have the same incentive to leave those expensive markets that people do. So if you could get maybe in Illinois or wherever, Utah, wherever these places are, maybe there are cheaper places. Maybe there’s cheaper for office space.
Then the second thing I wanted to say is that there is… I listened to this podcast about this, but states and cities are just at war with each other with tax incentives trying to bring companies in. I listened to this podcast. It was crazy about… You know the city, Kansas City, obviously. It’s split between Missouri and Kansas. Apparently, every couple of years, they just move. The companies will just move back and forth across the river because Kansas will be like, “Wait, you won’t pay taxes for 10 years.” Then Missouri will be like, “You won’t pay taxes for 12 years,” and so they’re all doing this.
I think that now because a lot of companies, workers are remote, they can take advantage of these tax advantages that states are throwing at them. So if it’s like… If you run a business, and it’s going to cost you 20% less whatever in taxes to move to Nebraska, maybe you do it because your employees wouldn’t even care, because they’re remote anyway. That’s just my personal opinion. That’s not really backed up by any data, but I was thinking about it, and that’s where I came out. What about you?

David:
You’re exactly right. We saw that play out with Tesla. With Elon Musk in the Bay Area, they have a Fremont plant, and there’s all these regulations that are put on them. Taxes are very high. That’s where the talent pool has been is the Bay Area is known for having some of the brightest minds, because we have Stanford and Berkeley, two colleges that are known for attracting the brightest minds. People move here. They get exposed to that California weather and California amenities. They don’t want to leave.
I mean, this is… California is expensive, but it’s expensive for a reason. We’ve got mountains. We’ve got beaches. We’ve got deserts. We’ve got incredible urban infrastructure, restaurants, all kinds of really cool things in diversity that once you see this, you’re like, “Oh, I wouldn’t want to live anywhere else,” but we also have high taxes. We also have a lot of regulation. There’s negatives that come along with that. He was basically saying, “I’m going to move to Texas, or I’m going to move to Nevada. I’m going to move somewhere that I wanted.”
Those states that said, “Come here. We want you,” where California’s making it look like, “We don’t want you. We want your money. We want your taxes, but we don’t want to support your business.” That absolutely happened, and as I was just saying, when people or businesses see someone else does it, they’re more likely to follow suit. You see a lot of businesses leaving California, and moving into Texas. It’s like you mentioned. It’s like getting a raise for them too. If their employees were paying a 13.5% state income tax, and they could go to Texas where there’s a zero state income tax, they can pay them the same amount, but claim that they gave a 13.5% raise. It’s absolutely true.

Dave:
The employees feel that. They actually feel it.

David:
It is easier to save money than it is to make money. That’s one of the things I talk about all the time. Even if you make money, that money gets taxed. Well, when you save money, you’re not having to pay taxes on what was saved. So, I think it’s fascinating that different businesses are recognizing that different states offer different opportunities. So even though the California population did decrease, I think you mentioned more businesses moved into California. Is that correct?

Dave:
That’s true.

David:
That’s the talent pool. Those are the types of businesses that are saying, “We need this kind of brain, and these people aren’t leaving California, so we are willing to go there and pay more money to get them.” But if you’re a different business, maybe you’re an international business that’s not dependent on the California amenities like the talent pool, you’re absolutely going to go to Tennessee, and you’re going to save some money. It’s not as simple as just understanding, “Are they coming in, or are they coming out?” That’s where the conversation starts. The next question is what types of companies are coming in, and what types are coming out?
Tech has notoriously been known for paying more wages than other industries. Those companies are in California still. Silicon Valley is still the hub. That’s one of the reasons that real estate in that area is so dang expensive, because the wages are incredibly high.

Dave:
They’ll make so much money.

David:
So much money. If you buy in those areas where tech jobs move, you tend to do really well. If we could travel back in time 10 years, and buy a lot of Seattle real estate, Austin Real Estate, San Francisco Real Estate… Birmingham Alabama’s even had some of the tech company move out there. Madison, Wisconsin has seen a lot of that. South Florida has seen… Those are not coincidentally the areas that we’ve seen the biggest spike in prices, because the wages that were paid went up a lot. So, understanding not just are businesses moving in and out, what kind of businesses.
If you’re a tire manufacturing plant, you don’t need to be in San Jose, California. You can absolutely go to Nevada, and save a lot of money. But if you’re working on the next microchip, and you’ve got 700 moving pieces that all have to come together to make that happen, you probably have to be where the people are.

Dave:
Absolutely. It makes sense. I think that one of the… We’ll talk about this in just a couple minutes, but one of the major things as an investor that you want to see is wage growth. That is one of if not the best predictor of rent growth in your city and appreciation for homes. So if you see businesses that are paying high wages, that happens… That bodes very well for real estate investing. It’s not just those things. If you think about something like Tesla or all these other companies moving to Austin all at once, think about how much money the city then has to invest into infrastructure.
They’re going to be hiring engineers. They’re going to be bringing in construction workers. They’re going to be building a new airport terminal, all of these things that increased demand for housing, increased demand for rentals, increased demand for just shoots up prices across the board. That’s why we’re talking about this is that it’s not just interesting to see, but it does have actual implications for these local economies.

David:
100%. Now, let’s talk a little bit about the south, because on this podcast, we’ve been talking about this for a long time. I’ve made the joke that if you take the United States of America on a flat plane, and you just tilt it down into the right, that’s where everybody tends to be moving into, and it’s been this way for a long time. My partner, Andrew Cushman and I buy multi-family property. We’re only buying for the most part in the south. We’ve done very, very well in these, because we’ve seen so many more people moving there, and the demand has increased faster than supply. It can’t keep up.
For a long time, that was all you had to do. Just go by somewhere in the south, and if it happened to be an area that wages were increasing, you crushed it. This is why knowing this information matters. So, what’s some of the data and the numbers on where people are moving in the south?

Dave:
So if you look at businesses, it’s Texas, Florida, Tennessee in the south, but I did pull some data about just some of the cities that overlap in terms of the most popular places for both business to be moving, and people. On a state level, it’s Florida, Texas, and Arizona. That’s not super surprising, but like we said for the combination of reasons why people are moving Florida, Texas, and Arizona. If you want to know specific markets though, it’s not that easy. We talk about it on the show, and this is my fault talking about it at a state level, but each market is super different.
Let’s just talk about specific cities. Dallas is really one of them. Atlanta, which we haven’t talked a lot about Georgia, but Atlanta has to be one of the fastest growing in terms of population and businesses. Atlanta is just absolutely exploding. Austin, of course, Tampa and St. Pete, Raleigh, Durham, Miami, Phoenix, Charlotte, these are all just massive. Raleigh, all these cities are just enormously and exploding. There was one in the north though. Boston was one of the top 10, but all the rest were basically in the Sun Belt as they say, which is, I guess, the south but also includes Texas and Arizona.
I don’t know what you call Arizona if that’s technically the south, but the whole Sun Belt area seems to be just absolutely exploding, and those markets are at the top.

David:
That’s the perfect mix here of where people are moving and businesses are moving. Now, the only question left to ask is are these businesses that tend to pay better? Now, there’s one thing I want to point out, where when people are just headline readers, and they don’t ask the why, it’s very easy to see markets like Phoenix or even Tampa that’s been listed in their Las Vegas as they’re dropping in prices. It would appear from the outside like, “Oh, that’s a declining market. You want to get out of it. You don’t want to buy there.”
They’re dropping because they rose so freaking fast. It was almost impossible. They were skyrocketing, and they finally tailored off, and they’re correcting to where they need to be, but they are set up to where you should expect to see long-term growth in those markets over the future. It doesn’t mean jump in and pay list price right now. We’re not saying that. You probably don’t have to get into a bidding war if you’re buying in Arizona, but if everybody else was in a frenzy, and they bid these prices up, you can now come in and get them significantly less than less price if you make the right offers and you work with the right agent.
Shout out to BiggerPockets’ agent finder here. Use that if you want to find someone on BiggerPockets to help you do that. But over the next five to 10 years, there is a reason why they were shooting up. There is a reason why those markets had so much demand is the smart money is looking at this, and they see, “This is where people are moving. This is where business are moving.” We do have a window with rising interest rates where you can get in there, and get some of these properties, whereas before, it wasn’t even possible.

Dave:
Totally. I think similar to you, people ask me a lot like, “Where should I invest?” Over the next few years, I think that there’s this interesting dynamic where the cities and markets that have the best long-term potential have the worst short-term potential right now and vice versa. So it’s like… You look at Austin. Austin is crashing harder than any city. Austin is going to explode over the next 20 years. I try and not time the market, but like you said, you can try and bid under asking, find a diamond in a rough right now, because Austin is one of those cities where it’s like people are going to want to move there. Businesses are moving there.
Austin’s the poster child for everything we were just talking about. Same with Tampa. Cities like that are going to keep doing well. Tampa’s actually doing okay right now, but I think there is a really important difference between what’s going to happen in the next, let’s say, 12 to 24 months, and what’s going to happen in the next 10 years. Those are not necessarily the same thing, and so as an investor, you really have to think about that. I’m not sure I would flip a house in Austin right now, but would you find a great deal, bid under asking, and find a great location in Austin, and hold onto it for 10 years? Probably.

David:
Let’s sum up some of the advice that we have for the people. One of the points here is you should watch migration patterns closely. It is not enough to say, “Where is the cheapest real estate, or where is the highest price to rent ratio right now without thinking about the future,” because real estate’s great over the long term, but one of the downsides of it is you own it for a long time. It’s been traditionally easy to sell, but that doesn’t mean it will stay that way. If you buy in a market that people are leaving, you can’t think, “I’m just going to sell if it doesn’t perform well,” because there’s no one to buy it.
It’s hard to get rid of it. That’s a thing we need to be thinking about more in the future is we’ve just assumed buy as much real estate as you could possibly own. We haven’t even had to worry about where. If you’re in one of these areas where people are leaving like some of the areas in the Midwest, and you go buy five or six properties there, and it gets harder and harder to get tenants, and the tenants you’re able to get are worse and worse, and you’re not wanting to own. Don’t think, “I’ll just sell it,” because no one’s going to buy it. It doesn’t work that way. But watch these patterns closely, and try to get out of markets early that people are leaving, and get into markets early that people are moving to.
Look at the types of the jobs and the businesses coming to a city, not just is their business coming. We use the example of the hypothetical tire manufacturing plant versus a tech company that’s trying to make the next super, duper microchip. Then look at how this will impact the overall makeup of a market’s economy. Are businesses moving in that bring other businesses with them? If you look at commercial real estate, you see the same pattern. They’ll take an anchor tenant like a Target. They’ll put this in a shopping center, and then you’ll have all these little additional tenants that will jump on like the place you get your haircut.
Do you notice there’s always the ice cream shop next to a haircut place?

Dave:
There’s always a Chick-fil-A. They follow them around. It’s an actual thing. We talked about this on the market show the other day. It’s like the Chick-fil-A follows around Lowes. They do it on purpose.

David:
They’re smart to do that. I noticed there’s always a [inaudible 00:41:13] around. There’s ice cream next to the haircut place, because every parent wants to get their seven-year-old to sit still, and they say, “If you do, I’ll take you to go buy ice cream”. They know a certain demographic of people shops at Target, and if you put stuff next to Target that’s convenient for people that are shopping there, they’re more likely to go and buy those products, or get that food or whatever the case will be. Real estate in general works this way, so look at what types of companies are moving somewhere. Think about the type of human being that’s going to want to follow that, and then think about what type of real estate they’re going to want to own.
This is why for so long when companies were like Austin, Texas was exploding, high rises was the flavor of the month. Everyone was building these high-rise condos in pristine locations. You were seeing redevelopment happening, where they were tearing down a two-story building, and replacing it with a 200-story building right next to the downtown area that everybody wanted to live. That was the trend until COVID-19 shook that up. Think about that. Don’t just blindly follow where you see other investors going. Dave, anything you want to add about that?

Dave:
No, just that similar to how I was saying that you shouldn’t look at a state, and be like, “Everything is one way in that state.” You need to look at the market. I would say that look at even in the submarkets in a city as well. You talked about Birmingham, Alabama. I did an investment there. They are losing population on a macro scale, the whole metro area, but there are some areas of Birmingham that are absolutely exploding. I’m sure when you, David, talk about “the Bay Area,” there are so many different submarkets within the Bay Area that are performing really differently.
So, don’t just look and read the headlines. Again, the more you dig in, the more you look at this data on a really specific basis, the better you’re going to make decisions.

David:
Such a good point. The people that need to hear this are the people that are unfamiliar with the market, because what happens is you don’t know the Bay Area. You don’t know Birmingham. You’re going to go look for the cheapest real estate you can find, because that’s the safest. At least that’s what you’re thinking, that you need to talk to an agent.

Dave:
Not the safest.

David:
No, it’s almost always the opposite, right? I have people that say, “Hey, I’ve been looking to invest in the Bay Area, but it’s really, really expensive. So, what do you think about Stockton, California?” That’s one of those. I know that area very well. I grew up near there. I went to college there, huge red flags. You better be super careful if you’re going to be investing in Stockton. You need an agent that knows the market really well, so some questions that people can ask when they do use their BiggerPockets agent finder, or they reach out to me, or they reach out to you, and say, “Hey, I need an agent in that area that you know.”
Ask them what type of people live in this city? What are they doing for work? What’s industry like here? In these neighborhoods, what type of people live in these neighborhoods versus those? Is this a commuter area? Is this an area where people have… It’s high walk scores, so they don’t even need to have a car. They’re just going to stay in this space all the time. Have a really good understanding for what types of people want to live both in the city and in neighborhoods within the city before you commit to this 30-year mortgage you’re going to be making on this house payment.

Dave:
Absolutely. I think that’s great advice.

David:
All right. Well, Dave, if people want to hear more about your studies, your data collection, where can they do that?

Dave:
Well, I host a podcast twice a week called On The Market. It’s also made by BiggerPockets. You can find it on Spotify and Apple. It comes out every Monday and Friday. The whole premise of the show is basically to keep investors up to date on all the latest news, data, and trends that should inform your investing decisions. So, you should do that. If you want to actually reach out to me and connect, you can find me on Instagram where I’m @thedatadeli.

David:
Yes, and I highly encourage any of you here to reach out to Dave for questions about real estate data, or questions about sandwiches. He is a highly underrated sandwich expert. He is the guy. He’s my go-to person every time I’m not sure, “Do I want this Buffalo Chicken Ranch, or should I stick with a turkey and avocado?” Dave is a whizz. In the same way that people come to me on Seeing Greene, and they say, “I’m stuck. I don’t know what to do,” I can go to Dave every single time if I’m not sure if I want to get the aioli or just a straight mayonnaise. He knows the questions to ask. He’s the guy to of to.

Dave:
Oh my God. What a topic. We could talk… This could be a whole episode.

David:
All right. If you want to reach out to me, you could do so at davidgreene24 on Instagram or on YouTube or anywhere else. As always, if you didn’t know, BiggerPockets has more resources than just this podcast. There’s an entire website, an entire world, an ecosystem of information, amazing forums that you can read questions other people have asked and had answered, or you can ask your own, a host of books that you can buy at biggerpockets.com/store, honestly, more than I could say on this episode, and I couldn’t do it justice anyway.
So if you got a minute, just type in biggerpockets.com, and get lost exploring all the ways that we provide value for you, including a lot of Dave’s work on data and reports that he’s put together. All right, I’m going to let you get out of here, Dave. Do you have any last words before we go?

Dave:
No, thanks for having me. This was a lot of fun.

David:
This is David Greene for Dave, the sandwich guru, Meyer signing off.

We live in an era defined by personalization and instant gratification. This has made customer service more important than ever. Each interaction with a customer, both before and after the point of sale, doesn’t just decide if they have a positive experience.

It can also influence their reviews and word-of-mouth marketing for a brand — and that stuff really does matter. 90% of customers base their brand loyalty on the quality of the customer service that they experience. If they have a good time, they come back. If they’re offended or unsatisfied, they let everyone know about it.

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Set Up a Chatbot

We’ve all become used to IVR (Interactive Voice Response) systems. Automated menus and pre-recorded responses can help resolve some issues. But often, customer service requires a more nuanced approach.

Chatbots use AI and machine learning to interact with customers in a more complex customer service environment. They can predict questions based on circumstances. They can also adjust recommendations and answers after receiving input from a customer.

Rideshare giant Lyft has made a splash for its use of AI chatbots in its in-app help option. Third-party developers have even taken things further by building chatbots that allow drivers to connect directly to regular riders through channels like Messenger. This allows them to create consistent, high-quality service at customizable rates.

Provide Expert Lifelines

In a world that is quickly becoming dominated by automated responses and lifeless interactions, it’s important to consider where the human touch is still needed. Chatbots and pre-recorded messages are only an initial step. In many cases, more complicated support is needed.

When that happens, businesses need to have customer support channels established that give customers access to expert assistance.

For example, HVACDirect.com, an online marketplace for HVAC systems, has a chatbox that appears the moment a visitor arrives on their site. Unlike the chatbots previously mentioned, this chatbox connects users to humans. And not just humans — expert technicians. The same can be said about their established phone and email options. Using experts for a customer support team means a company can answer detailed questions in an informed manner that can calm customer fears, boost buying confidence, and ultimately increase brand loyalty.

Utilize Social Media

Social media is often seen as a fluid and contemporary arm of the marketing department. It focuses on building customer communities and working with influencers.

What many overlook, though, is its power as both a direct and indirect customer service channel.

On the one hand, businesses can use messaging and group forums to field direct questions and concerns from clientele. On the other hand, McKinsey points out that social media can also be a way to follow up on poor customer experiences when the customer vents on a social platform.

A timely, sensitive response can salvage a situation and even serve as a public message that a brand cares about its customers — even the unhappy ones.

Building the Right Customer Service Support Network

Customer service is no longer a single lifeline between businesses and their customers. It’s a complex and nuanced network of channels, each of which serves a different purpose.

Chatbots field initial inquiries. Social channels allow for clean-up and the salvaging of negative experiences. Elite support from human experts provides that professional touch that many customers miss.

When brought together, they can create a synergistic level of support that can address any and every customer need, even in the ever-evolving modern business landscape.

Ashley:
This is Real Estate Rookie episode 262.

David:
There’s two parts to a system. I talk about this in Scale. Everybody understands the first part, which is you need to create a checklist of things that need to get done or a library of videos that show somebody how to do it. That is the first step in creating a system. The error becomes when we think that’s all a system is, because the second part of a system is having a human being that is skilled and capable at doing those things. We have all had a position where we hired someone to do something and it was super clear what they needed to do and they still screwed it up.

Ashley:
My name is Ashley Kehr and I’m here with my co-host, Tony Robinson.

Tony:
And welcome to the Real Estate Rookie Podcast, where every week, twice a week, we’ll bring you the inspiration, motivation, and stories you need to hear. Today, I want to shout out someone by the username of Maryelle PC who left a five-star review on Apple Podcasts that says, “Speaking honestly, I discovered this podcast after first listening to the OG Bigger Pockets Podcast. I ran out of content and wanted more. This podcast, the Ricky Show, is now my favorite podcast. It’s so relatable to someone who is still early in their real estate investing journey and provides so much useful and concrete advice. Tony and Ashley are phenomenal hosts and I would highly recommend this podcast to anyone looking to further their real estate investing career.”
Maryelle, we appreciate you. That it’s such a great and nice and positive review. If you’re in the Rookie audience and you haven’t yet left us a review, take the two minutes, leave that review. We would appreciate it.
Ashley Kehr, we have a heck of an episode for everyone today, right? Some really cool things we’re going to be getting into.

Ashley:
Yeah, and I wish our guests would’ve been on today when you read that review for the intro that we’re recording here.

Tony:
Yeah, that’s true.

Ashley:
Today, we have David Greene on, and it is amazing how fast he can analyze a deal if you guys don’t know that about him. He wrote a book called Scale and he’s going to talk about scaling your business, and we’re going to focus mostly on how you can quickly analyze a deal to grow your business and things you should be implementing into your systems. It’s definitely a book for any business type, I would say. It’s not even just real estate agent specific or even investor specific, so really looking forward to that. But we actually get to see David in Denver in a couple of weeks.

Tony:
Yeah. We’re doing a little host get together for all the Bigger Pockets podcasts. That’ll be fun. But Ash, me and you just got to hang out in Orlando for a few days as well, so I appreciate you coming out to the summit.

Ashley:
Yeah. We just did Tony’s short-term rental summit. It’s my second one I’ve gone to, and both have been awesome and such a great learning experience. You know where I took the most notes down? It was Tony’s wife, Sarah, when she did her presentation, afterwards, the Q&A, just the amazing questions people were asking and she was answering were just these little things that you just don’t even think of that were just like aha moments to me. Like if you allow pets, have super strict expectations like no pets on the furniture. If there is dog hair found, you will be charged X amount. Also, provide a dog bed. Such an easy, cheap, inexpensive thing to do. I was just on my little no pet on my phone adding all these things in.

Tony:
Yeah, it was super fun. We’re always super excited to to get, we had almost 400 people at that event come down to Orlando with us. We’re going to Austin in the spring, so it’ll be fun to take this thing on the road and meet some more people and talk more short-term rentals. But me and Sarah both appreciate you coming out and being our biggest fan for a couple of days.

Ashley:
Well, that’s really nice of you to say, even though I brought the bad weather with me as usual. It wasn’t super bright and hot and sunny the whole time.

Tony:
Yeah, but at least flights didn’t get canceled. We didn’t get stuck. Luggage wasn’t lost.

Ashley:
Yeah. Yeah, yeah.
David Greene, welcome back to the show. I mean, is this your second, third, maybe even fourth time on the Real Estate Rookie Podcast?

David:
It might be the fourth time. You guys are such a good host that I have such a good time. I’m constantly bothering our production team saying, “Can I come on the Rookie show please?” It’s a blast.

Ashley:
Yeah. I mean, we’ve been paid lots of money to continuously have you back on the show. It’s been working out great for all of us.

Tony:
It’s a win-win situation. But I think you hold the record, David, for most Ricky appearances right now. So dude, kudos to you, man.

David:
Well, that just goes to show that we never stop being rookies, right? No matter how many properties you buy, there’s always something to learn. There’s always things that go wrong. There’s always ways you can improve.

Tony:
Dude, so hold on. I know we have a totally different topic to talk about today, but I love what you just said, because it’s like people look at me and they’re like, “Oh my gosh, I want to be like Tony.” And then I look at you and Brandon and I’m like, “Oh man, I want to be like you guys.” And you guys are looking at I don’t know who else, Ken McElroy, and you guys want to be like him, and Ken’s looking at someone else saying, “I want to be like them.” Even for the people that are listening to this podcast, just know that all the folks you look up to are looking up to someone else that they’re trying to emulate. I love that concept, man. Thank you for sharing that.

David:
That’s a really good point. I heard there was some NBA players that were having fans trash talk them, like, “You’re not as good as LeBron James, you suck.” One of them made a really good point. They said, “I am closer to LeBron James than you are to me.” Okay? That’s a very good point, right? Do you ever want a good video YouTube, the Brian Scalabrine challenge.

Tony:
I saw that.

David:
It’s awesome, right? He’s this scrub by NBA standards that everybody makes fun of and he picked the best players he could possibly find that thought they could beat him and wiped the floor with all of them. It just goes to show how good those guys are in the NBA. The people listening to this to own a house or two, or their house hacking, they’re looking at you guys and they’re like, “Oh, I wish I could be them.” You’re so much closer to Ashley, Tony, and me than you are to the people that don’t even understand that real estate matters, that finances matter, that you should be saving your money and you should have a budget and you should have a plan. You’re so much closer to where we are than the average American that’s just naively walking through life hoping that they win the lottery. Don’t be discouraged by where you’re at right now. If you’re just listening to this, you’re already better off than most people.

Ashley:
And you’re an expert or experienced in that one thing that you’re doing or maybe a couple things that you’re doing. But David, if we said to you let’s set up a glamping site in Buffalo, New York, would you be an expert in that?

David:
Absolutely not. No. See?

Ashley:
Yeah, exactly. Even looking up to somebody who you think is this awesome, amazing expert experience investor, there’s things that you may know and you may know better than them than somebody else, because maybe you just have that one little camping, glamping, campground and you’re way ahead of the three of us sitting here because we don’t have anything like that. Think about that too, you guys, when you’re comparing yourself to others that you may know more than you think that too.

David:
Oh yeah. Before the show, the three of us were having a conversation about the industry in general that we’re all a part of where we are sharing real estate education. The trend right now is to find a person who has a better plan than everyone else and copy their blueprint. There’s tons of people selling courses and this is like, “Be like this person, be like this person.” They all have their own little branding and that’s how they make money. The problem with that method is you might not have Tony’s skillset or Ashley’s skillset or name your favorite influencer’s skillset. You might not have their resources. You might not have their personality to where they run a wholesaling business and they have a gift of gab and they can talk anyone. They could sell ice to an Eskimo and they’re very good at that. Or you might not be intensely analytical at an incredible multifamily investor like someone else.
We see the stories of X amount of money over X amount of units that we think, “I want to have what they have.” I think you’re way better off to say, “I want to be who they are.” Who’s the person that I can identify with that my skillset, my personality, my goals, my principles aligns with them and then maybe make that be the main place where you get your food from. It’s so hard to know who’s the right person to follow because there’s so many ways to make money in this, but you’re not going to be equally successful at all of them. You could be great at glamping, but you could be terrible at flipping or different ways. And if you pick up a method that is not in line with your strengths and what feels light to you, you’ll hate every day of real estate investing just like you hated every day of the W2 job that you tried to get out of it. There actually is a little more thought that needs to go into making sure you pick the right path.

Ashley:
David, that’s a great point and it kind of leads us into our discussion as to why you’re on here because you wrote a book sharing your experience with others. Can you tell us a little bit about that book and your reasoning why you think people should learn from it?

David:
Yeah, thank you. When I left my W2 job, which was being a police officer, I jumped into being a real estate agent, which is a wildly different environment. The things that make you good at a cop do not make you good at selling houses. I had to learn completely different. It would be like someone who was a long distance marathon runner wanting to go work out with Tony and they want to be a bodybuilder. If you’re good at one, you’re not going to necessarily be good at the other. It was a very challenging journey for me that ended up leaving me a more well-rounded person. I do think that was the divine plan that I was supposed to take. But it was motivated by recognizing agents just weren’t good. I kept as an investor finding agents, working with them, and realizing I know more about real estate than they do. This is really frustrating. I’m listening to more podcasts, I’m reading more books, I’m having more conversations. I’m paying more attention to how this world works than my agent does who’s supposed to be my guide.
When I started to work as a real estate agent, I just had a different approach than what everyone else did and I had this fire to learn how to be good at being an agent. So I signed up for every piece of Keller Williams training I could. I talked to all the top producers that were in GoBundance, all the ones in my office. If they were good at selling houses, I wanted to analyze them, dissect them, and figure out why they were good at it, and then slowly I started applying that to me. Now, in that process, I realized I don’t have the personality and the makeup we were just describing to be great at selling homes.
I don’t like having conversations all day long. I’m way more introverted. I’m way more analytical. I like to figure out what makes it work, but I don’t like the execution. I don’t like having to talk to you for two hours and make you feel good about the process. Whereas the top producers, that was the pattern I saw. They loved humans, they loved talking to people, they loved making someone’s day. They were high eye on the disc profile and mine was very low. So instead of focusing on just becoming the best agent, I sort of shifted and focused on training agents to be the best agents and growing a team, which was way more down my line. It felt way more like investing. The principles were very similar. You work very hard to get an investment property, you add value to it, over time it starts performing better.
You eliminate problems that could go wrong. I never talked to a tenant. I don’t want to have to be the person to talk to a tenant. That’s a property manager. That’s the first thing I wanted to leverage. Well, that started to work with real estate as I created systems to help agents figure out what they should do and how to do it, provided them with tools, provided them with training, provided them with knowledge, they were much better at talking to the clients and walking them through the process, and so I built a real estate team. At the end of that journey I looked back and I said, “Okay, how do I share all this information that I’ve figured out over the last six or seven years with every other agent that’s out there in the Bigger Pockets ecosystem?” Because they need that help too. The people that were teaching how to buy homes, they need better agents.
I worked out a book deal with Bigger Pockets where I wrote three books in the top producer series. The first is called Sold, and that just focuses on the first steps for an agent: what you do to just make money at all, how you just sell a house, the basics that your broker should be teaching you and they’re probably not. Then the second book in the series was called Skill. That was about becoming a top producer, the best agent in your market, the one everybody wants to work with, the one makes a very good living and makes a lot of money so that they can then reinvest that into hopefully real estate.
This third book that’s coming out is called Scale. This book is about taking, once you are a top producer and you’re making a lot of money, you want to turn your job into a business so you’re free to do other things or you can scale it at a really big degree. This book is full of principles that any business person can use to move from, “I have a job,” to, “I run a business.” It works for being a real estate agent. It works for being a short-term rental operator that doesn’t want to be the one doing all the work. It works if you own a pool company and you’re cleaning the pools and you want to get to where you’re scaling this business to where you’re getting pool contracts all across the city. The principles are the same.

Tony:
David, I love the distinction between having a job and running a business, and obviously so much of our audience are people who are at the beginning of their journey. When do you think, at what point in their real estate investing life cycle should someone think about the fact that they’re actually building a business? Let me give you some context. I think so often people make decisions when they’re starting off their investing career with the idea of, “Oh, I’m a real estate investor and I have one or two houses,” and not, “I’m a real estate entrepreneur who owns a business.” What’s your advice to folks who are just getting started about having that mindset of they’re actually running a business from day one?

David:
That is such a great, great point, because they are, but you don’t realize it. I think let me start with what I think screws people up. Most of us don’t make decisions where we sit down and we really think about what we want our life to look like and then we start building that out. That would be the ideal way to do it. But I’ll be the first one to say, when I first joined GoBundance and they were like, “Well, what are your goals?” It’s like, “To not be where I am right now.” “What does that mean?” “I want to get more than three hours of sleep a night.” “How are you going to get there?” “I don’t know, but that’s what I want.” Right? We don’t really understand how to get out of the place we’re at, but that is a better path. If you know what you want your life to look like, you can start buying the right property, setting it up the right way, taking the steps that you need to get where you want to go.
Just like you, Tony, you’re doing body building. You know what the body looks like that’s going to win the competition. You don’t just go in the gym and grab stuff and work out and hope that you look better. There is a purpose to what you’re doing, how you’re doing it, and the way you’re going about it. And then you make little pivots along the way. If this body part isn’t coming along or this one’s coming along too much and you have to balance that out, you tweak it, right? That’s the right way to go about being good at something. But what most of us do is we say, “I’m in pain. I don’t like my job, I don’t like my commute, I don’t like being broke. I don’t like something about my life. That would be better than where I am now, so let me just go do that.”
Then we go do it and it is better. But then that situation has its own pains. We say, “okay, I don’t like this. What can I do differently?” We end up schizophrenically bouncing around from thing to thing to thing. We call it the shiny object syndrome. We call it building too many bridges. We have all these different ways we describe what’s happening. But it’s basically just human beings moving from pain point to pain point in their life hoping that they where they end up. It’s being addicted to hopium. You’re just hoping if this goes better, that I’ll finally be happy. And it rarely is. What you’re talking about is coming up with a plan to own a business that you choose what role you will play in that business. If you want to do sales, if you want to do operations, if you want to do legal stuff, if you want to just talk about it, if you want to market it, whatever it is, you get to have that option.
When you are an investor, you do own a business. Having a house affords you the opportunity to be the property manager, the construction person. You can be your own agent. You can do all the work yourself or you can leverage that out to different people in the team. What I want to highlight is the human beings that think that they want to get six houses, you probably don’t want six houses. What you want is to get out of where you are right now. Then you can own six houses and decide you don’t like that either and you want to get out of that. Understanding the principles that are in this book Scale will put you in a position that when you decide I don’t like where I’m at, it’s very easy to remove yourself and put somebody else in that place and focus on the thing you do like, not scrap the whole project that you were working on and start a new one from scratch.

Tony:
Yeah. David, so many good nuggets in what you just shared. You talk about the hopium, I’ve never heard it phrased that way before, but I love that saying. Dude, it reminds me so much of me when I was in my early twenties. You know guys know Blue Host is kind of like GoDaddy, the domain hosting website. If you logged into my GoDaddy account between the age of 19 and 27, there’s like 40 different domains there that I purchased because every couple of months I had this next crazy business idea. I found myself not finding success and the reason was I wasn’t really focused on one thing. And when I started in real estate investing, I really told myself not only do I want to be a real estate investor, but I want to be a real estate investor that focuses on just this one asset class.
When I really made that decision to get world-class in this one thing, that’s when the success started to really follow. So if there’s advice for our rookie listeners, it is that even at the beginning of your journey, the more clarity you can have around the thing you once get good at, the easier it then becomes to get really good at that thing. The other thing you said was just about having those goals up front. I think if we can take the time to think five, 10 years down the road and say, “What do I want my business to look like?” It helps us make better decisions today that support those goals. But if you’re just going with the flow, you can end up in any kind of situation because you don’t have that clarity around what it is you’re working towards.

David:
Yeah, that’s exactly right. I only starting the interview off by pointing this out because it’s sort of like the vegetables nobody wants to eat. There’s someone else’s voice that’s going to say, “If you just take my course, if you just use my program, all your problems will be solved.” People throw themselves into it, they spend their money, they invest into it, and then in the middle of it, at some point they realize, “Oh, this is not any different than the situation I was in. What’s the next thing?”
There isn’t a next thing. The principles of scaling a business are the same across any enterprise that you want to take. If you could focus on that, you get good at those, you pursue excellence in what you’re doing, what you said, Tony, is exactly what will happen. You will pick your thing, you’ll become excellent at it, you’ll play the role in that business that works for your personality, and then you’ll have doors open all over if you want to go bring a new thing into it or start a second or just double or triple or quadruple down on that thing and blow it up to have a whole bunch of them.
Whatever it is that you want to do in life can happen when you build a business, not just chase the job.

Ashley:
David, I think it’s pretty obvious from our conversation so far is that this book, even though it’s somewhat tailored to real estate agents, that it is business in general. This book will help anybody who is trying to grow and scale any business. The first question I have that comes up when growing and scaling, especially as a real estate agent or even as an investor is, okay, I’ve been buying in Buffalo, New York, now I’m going to take my business model and I want to grow and scale to another market. Can you talk about some of the things that you need to be aware of, you need to research, and kind of do that education before actually building out a business in a whole new other market?

David:
Yeah, That’s a great point. The typical newbie will say, “What’s the hot market? Where should I invest. Buffalo? Okay, I’ll go to Buffalo.” They invest in Buffalo because other people are, and maybe they got it right and that market grows, and they make money, and now they go bragged all their friends at their net worth increased, right? It’s that same vibe you got from NFT or crypto investors. They became millionaires overnight and all of a sudden they’re an expert and then they lose it just as fast. It’s better to know why Buffalo worked. What were the fundamentals that happened that caused Buffalo to do so well and what steps did you take that worked and what made them work? As opposed to monkey see monkey do, I just copy what I saw someone else doing.
When you’re wanting move to a new market, you want to have a good understanding of just basically macroeconomics. What is the country doing? Is our money supply going up or down? Is real estate desirable? Is it not desirable? Is there an area where tenants are moving to in greater droves than others or businesses are moving to where wages are going up? And how does supply and demand work? This sounds really boring. But almost every question I get about what can I expect the market to do, if you understand supply and demand, it becomes very easy to anticipate. Okay, so when this hypothetical Buffalo did well, odds are there was a constriction in supply and an increase in demand that led to some form of result of rents going up and values going up, and that’s why it went well.

Ashley:
David, where can somebody find this information, so get these statistics, find this data?

David:
The easy answers are the US Bureau of Labor and Statistics that tracks where people move to. Okay? I believe you could also see where wages are increasing in those areas. But to be transparent, I don’t usually use that. I look at the people who like to read that stuff, the nerds that are tracking that, that then they publish those findings. Bigger Pockets, like Dave Meyer, right? When we do State of the Market, we’re talking about what we see happening with the data that are showing where people move to. If you were following COVID, you saw a lot of people left California and a lot of people left New York during that time. It was all over the news. You didn’t have to have a specific place to go look. It was pretty clear. Californians moved to Idaho, Nevada, Arizona, kind of the states that are close to us, Oregon. And then New Yorkers moved to Florida. A lot of Wall Street moved into South Florida. It’s not a coincidence that real estate values in South Florida exploded at the same time that money was leaving New York and going into Florida.
If you understand the principles of real estate, you can see, well, at a certain point South Florida would be too expensive for people to move to and what are they going to do? They’re going to say, “Well, what’s close to South Florida that’s cheaper?” That’s going to be the emerging market where the people are moving into. These principles, they’re not rocket science. You don’t have to outsmart everyone else. You just have to have a commitment to understanding what drives real estate values and rents increasing.
Once you understand the basics of analyzing a property, knowing if it cash flows, that’s kind of the first step everyone gets. The next step is understanding, well, what would make cash flow go up? What would make values go up? How do I find an area that is more likely to be desirable in the future than what it is right now? And just listening to the news, just watching bankrate.com, you can see about where interest rates are tending to be going. It doesn’t have to be something that people are religiously studying all the time. Just paying attention in general and understanding these principles will give you a huge edge when you’re trying to pick your market and then decide which properties to buy in that market.

Ashley:
Yeah, for any rookie listeners right now that haven’t checked out any of this data, even just pick a random city and go to the places that David recommended, and just get familiar with these websites. I was listening to On the Market podcast today with Dave Meyer, who David recommended to check out. He released this report on Bigger Pockets. If you go to biggerpockets.com/report, he just put together a 2023 almost market outlook. It’s giving you data on different cities. What he is forecasting, you’ll kind of see within the next year. I think it’s free to pro members, it might be free to everyone, but you can go to biggerpockets.com/report. He’s put it out before and there is tremendous value, so I highly recommend you guys check that out and the other websites, too, that David mentioned and just get familiar with those things.
David, what about becoming efficient with growing and scaling? Now that you’re going to different markets, how are you making sure that you’re doing this the best way that you can and you’re not just wasting your time and building from scratch again?

David:
The mistake most new investors make is they make up for knowledge and skill with sheer volume. They’ll say, “All right, I’m going to analyze a hundred deals and I’m going to find the one deal, the needle in the haystack, that works.” They go on Zillow and they just start randomly looking at houses that are pretty and analyzing them, and then they get discouraged. “Nothing works. Man, I can’t find anything that cash flows. It’s not going to give me my number that I’ve been told to get, that 10% return.” Whereas if you showed me that same Zillow profile, I wouldn’t even bother analyzing, and I could tell you right away, that is not going to work. Single family homes that are in that good of condition at that price point are nothing close to the 1% rule. You don’t even need to bother analyzing it.
Now, I think the key is if you take it the next step further and you say, “What would have to change in order for it to cash flow?” Well, the rents are 2,500 a month. The property’s 500,000. It’s about a half a percent. You’d almost have to have two units in the same house for the same price. Well, if you had one unit that rented for 2,500 and one unit that rented for 2100, you’re now close enough to the 1% rule that it could work. So if you can find in that same area for around 500,000, a property with two units that are close to the rent amounts that I just said, it is now worthy of digging into and analyzing. Okay? That one tiny bit of information could literally save someone five to six hours of time bouncing around, analyzing every single single family home, hoping that they find one that just miraculously cash flows.
Rather than the person who understands, “I need to bump the rent up. No one’s paying more than 2,500 to live in this city, so I need to get two units or I need to get three units.” And then you start looking at the property and saying, “Well, could I convert the garage? I only want to look at properties that have ADUs. Do they have basements that are already converted that I could add a bathroom to and then rent out?” Just a little bit of elbow grease. Can you just use a little bit of creativity to find something that would work in that market? Because you understand what makes properties cash flow. That alone makes those investors way more efficient when they’re deciding which properties they should be pursuing and looking into versus the one who doesn’t know why the number at the end, the cash on cash return, ended up good or bad.

Tony:
David, I want to get your opinion because the market has shifted. Right? What we saw the last couple of years, it was very much a seller’s market where multiple offers, over asking, no contingencies, and what we’re seeing now is more a return to normalcy where it’s kind of a buyer’s market, right? Buyers have a little bit more leverage right now. I’ve shared this on the podcast before, but there’s a property that we just got under contract and actually pulled it up while you were chatting. Seven months ago, that property was listed for $500,000. They subtly dropped the price over the next couple of months. When I initially put in my offer, it was about four months ago, they had listed it at 410. I offered 312 on that house. They rejected my offer flat out. They came back a few months later after a 50K price drop and said, “Hey, we dropped the price 50 K, do you want it now?”
I said, “No, my price is 312.” They came back later, “Will you take 325?” “No, my price is 512. They said, “Will you take 315?” I said, “No, my price is 312.” We’re under contract now at 312. There’s obviously, I think like you said, an importance of knowing what kind of properties you should be looking for, but for our rookies that are listening, do you think that they should maybe ignore the purchase or the asking price right now and really just focus on, okay, what do I need to offer for this deal to make sense?

David:
That’s the first half, yes. You’ve got to know the number of the deal makes sense for you. The error that people make once they have their number is they try to force the seller to accept that 12 is what they should sell for. You’ll see them asking questions like, “How do I get the seller to agree to create a finance? How do I get the seller to agree to sell for this price? They have to understand their house isn’t worth that.” That’s an exercise in futility. Half the half of the game is knowing what number to offer. The other half is knowing how to identify which sellers are likely to take your number. Right? Just you telling me this story, the fact that they kept coming back to you tells me you created a form of impression. You built some kind of relationship with that listing agent that they knew that you would close and you were very interested.
You did not shotgun an offer. Yes or no, they said no and just forgot about it. You planted some seeds that let them know I really want this house but it has to be at this price, please come back to me when you’re ready. That follow up is what businesses do. That is a principle that we talk about in Skill. You don’t just go to a real estate client and say, “Hey, can I be your agent?” “I don’t want to buy a house right now.” “Well, then you’re dead to me. Go pound sand.” Right? You have to keep a relationship alive with that person so that they come back when they’re ready to buy a house. It would be the same for anything. The guy who walked in my office yesterday wanting to sell me high speed internet for my office or something, he’s not going to get the sale the first try, but if I see that person over and over and over and he happens to catch me at a time when my internet just crashed and I’m pissed off, I will probably say, “Yes, I’ll take your internet.” That’s a business principle.
The people that get that, when they get into real estate investing, they miraculously get these great deals at 12. The problem is someone hears that and they go, “Well, I don’t know. Tony just gets better deals than me. When I wrote an offer at 312 on a $500,000 house, they said no. It doesn’t work.” Right? It’s the approach of understanding. I literally have a spreadsheet when I’m looking at properties and we write an offer. The fact that I wrote an offer on a house is the first column on my spreadsheet, offers written. I use that to follow up every two weeks if I really like that property. Has it sold yet? Are your sellers thinking different? Because you never know what’s going to happen. A lot of the times the sellers say no. Then they start looking at houses themselves on Zillow and they fall in love with one, but they’ve got to sell their house to go buy that one. And when you come back after one of them just fell in love with a new house, now that offer that you sent might be more appealing than when they first received it.
I’ll follow up constantly. There’s a house I had in contract a couple months ago. I had to back out because it needed $75,000 of work on the deck. The house still hasn’t sold yet. Every couple weeks I tell my agent, “Check in and see how the sellers changed their mind yet.” That’s a business principle that works in any business. I’d love to see investors getting more into understanding that. And then the next column on my spreadsheet is properties and escrow, and then close, and then with a rehab. I’ve got this whole process of how we track the properties that I’m buying. But the first step is following up on that deal that you really want and kind of monitoring it over time.

Ashley:
David, talking about your spreadsheets here, Tony and I both use monday.com to track similar things, but would you go a little more in depth with your process so that a rookie can maybe get faster at analyzing deals? What are some things they should be implementing in their business to become more experienced at that deal analysis so that they are going through their buy box or their criteria and not wasting so much time on, okay, here’s one MLS listing. I’m plugging it into this calculator. I’m going through the full analysis for each property. What are some kind of tips you can do to speed up that process?

David:
That is a great question. I’m so glad to hear you say this, because this is what people need to hear. When you’re learning how to analyze a deal, yeah, you got to go analyze a hundred deals, but once you know how to do it, there’s no value in just repeating this process and trying to push this square peg into a round hole. When you are pretty good at understanding what are the numbers, the inputs that go into determining if it’s going to cash flow or not, now you want to move into phase two, which is, well, what makes some properties work and other properties not work. Okay? In my analysis, the first thing I’m looking at is the area. I have in my head, there’s 10 ways that we make money through real estate, and a couple of them would be buying equity. That’s just buying the property at less the market value. Tony’s property’s going to appraise for more than 312. He’s already made money going into the deal right away. There’s also forcing equity. That would be fixing up a property, improving it cosmetically, adding square footage, something like that.
What we tend to think about is only is just cash flow. That’s one out of the tent that we drill down on and we’re just looking to see which one of these things have cash flow. But even then there’s forced cash flow. Can I come in and add a unit to that property that will make it cash flow better? There’s natural cash flow, which is just what happens because of inflation going up, but then there’s market appreciation cash flow. What if you bought in a market like South Florida before it exploded? You could expect your cash flows to rise disproportionately to the market as a whole.
I’m trying to identify the areas where I’m putting the odds in my favor. I don’t know it’s going to appreciate. I don’t know it’s going to go up. But statistically speaking, if I identified South Florida or Seattle a couple years ago, or Austin, Texas five years ago as an area that tech was going to be moving into and bringing big jobs and there was a restricted amount of properties that could be built because the area was already built out, so that supply and demand were going to be way off with way more demand than supply, it’s reasonable to think that I’m going to get higher returns in that area than somewhere else. The area itself is the first thing that I look for.I’m wanting to know, is this a desirable place people want to live? What’s the weather like? What’s the economic environment like? What’s the political environment like? What’s the tax structure of that actual city or that state like?
And then does it have restricted supply? I don’t know that Topeka, Kansas is ever going to be the hottest market, because Kansas is so big and they can just build some more homes. All you Kansas listeners out there, we love you. If prices of Kansas go up, they’ll just build a million more houses, and there’s plenty of room to do it, right? When you look at the market that are doing really well over the last eight years: San Francisco, Seattle, Portland, Austin, they’re all tiny little hubs where everyone moved to and they were already developed, but there wasn’t anywhere to build. That’s not rocket science, but for some reason it goes over investors’ head because there’s nowhere in the calculator to point out that type of stuff.
The area’s the very first thing I’m looking for. I’m looking for restricted supply, low crime, and signs of development. Are companies moving there and are they bringing higher wages? Because even if you want to pay a higher rent, you have to be able to afford it. You have to be able to make more money to be able to pay that higher rent. The second thing that I look at after area is revenue, which is where most people start. Is it close to the 1% rule? It does not have to be the 1% rule. Especially as interest rates were lower, the 1% rule, you could get farther and farther off of it. Maybe if interest rates are at 15%, you’ve got to hold tight to the 1% rule, but they’re still pretty low considering. It doesn’t have to be exactly there. I’m not even going to bother analyzing properties that are way off.
If someone’s looking at single family homes in Austin, Texas that cost 800 grand and they rent for 3,200, don’t bother. Just don’t even analyze it unless you see an angle and you have the capital to convert extra units out of that property or you’re analyzing it for a flip because there’s a lot of equity there. I like to look at three years down the road rather than year one, sometimes five years down the road. This is another piece of advice that is very unpopular. People don’t like to hear it, but I’m being honest about how I look at real estate. Very few deals right now look incredibly promising. The second you buy them. I’m sure you guys can both agree. Most of what you analyze is not giving you that 12 to 15% cash on cash return that we could get five years ago, or 10 years ago you could get 20 to 25% cash on cash return.
There is so much competition for real estate right now, and there’s so few competing asset classes where people can put their money that it’s all going into real estate. If you’re just wanting an incredible cash flow the second you buy the home, nothing’s going to work. What I’m doing is I’m looking at three years down the road, four years down the road, five years down the road. With rent increases, with increasing demand, with the property finally being stabilized, will this be a good investment or will this still suck?
Because a lot of the people I hear about that get stuck into bad deals bought them from turnkey companies, or they went and bought something in Indiana for $40,000 that looked amazing, and five years down the road they’ve lost money because the minute that one thing goes wrong, all their cash flow is right out the door, or they get one bad tenant and it’s disappeared. Okay? There’s no input on a spreadsheet for those types of things when we’re monitoring for cash flow. I’m thinking five years down the road, what’s development going to be like? You don’t know, but you also don’t know if year one cash flow is going to work. It’s this fallacy that the calculator telling you that you’ll get a certain return is what is actually going to work out. I always take that longer term approach and try to put the odds in my favor with understanding that there’s no guarantee there.

Ashley:
David, along those lines with looking at the three-year outlook, is there anything specific right now that someone should pivot or implement in their business that you’re seeing compared to the last two years with the market conditions changing? Is there anything just top of head that you would give advice to rookie? Maybe you were in a real estate investor’s course and learned this over the past two years, or you watched other investors do this, and now that the market has changed, don’t do that anymore or do this instead? Did you just have any little tidbits like that?

David:
Well for one, the government was printing so much money over the last five years. Almost anything you bought was going to grow in value. But the problem was us investors would take credit for that. Okay? Someone would go buy a property in some just random area and then it appreciated by 20% and they were like, “I’m so smart. I’m a genius.” No, you’re not like you. In fact, the way I look at it is properties did not appreciate by 20%, the dollar was devalued by 20%. You just took that credit on your books. That’s a big thing I think a lot of people haven’t realized is we didn’t do as great investing in real estate as we thought, money was devalued. And that’s why I’m not surprised that eggs are expensive or the gas is expensive or the cars are expensive. Everything is becoming more expensive because of inflation.
The best move investors made was we put our money in something that retained its value. It didn’t actually grow in value, and that’s humbling when you can accept that, but it also creates a sense of urgency that you need to put your money into something that will hold its value because naturally the value of money is eroding along with inflation. As we have increased interest rates, we have kind of slowed down prices going up, but I don’t think that that means we’ve stopped it. The minute rates come back down, we’re going to see another poof in value. Part of the strategy right now is balancing, “I can’t buy a property I can’t afford hoping it goes up.” That’s speculation. We don’t do that. It has to be something you can afford. But you do need to maybe temper your expectations that it’s not going to perform great until four to five years of inflation occurs and the rents that you can expect are higher.
Or if you’re buying a property right now, like I just had to refinance one of my BRRRR projects that I had a bridge loan into a 10.75% interest rate. That sucks. This is a $2.2 million loan. I did not like that whatsoever. Okay? But when rates go down, if it drops from I had to pay 10, maybe someone else might have to pay seven or eight. If it goes back down to four or five, what’s going to happen to the value of that property? It appraised at 2.9. When the rates go down a lot, it’s probably appraising at 3.7. If I can refinance from that high rate into something less, my $17,000 mortgage probably goes down to 11 or 12,000, and all of a sudden there’s a lot of cash flow.
I can only buy properties I can afford. I don’t love that that’s the situation I found myself in, but I will be fine if I take the longer term approach. I don’t think investors were thinking that way in the last five to six years. It was like, “We’re printing money. We’re drowning the country in stimulus. All hands on deck. You’ve got to put your money somewhere right now to ride this increasing tide that’s going up.” Now you’ve got to be a little bit more careful and you have to think, “Am I buying in an area that will maintain its desirability over the next three to five years, because then I’m going to look like a genius.”

Ashley:
I think a big takeaway that rookies should look at right there with what you just said, David, is don’t have such high expectations. You’re watching people on social media. Like, “Wow, I got that 20% in appreciation from doing this rehab on this property. I made that so valuable.” Decrease those expectations a little bit and don’t get stuck. Still take action. Having a return or cash flowing sum on a property, it’s still going to be great. Don’t get focused on having that perfect deal, the one that’s completely maximizing every single dollar you’re putting into that investment, because you just want to make that first deal. That’s going to give you the momentum to propel you. So don’t get caught up in what other people are doing or what they did the past two years, or you did a BRRRR and you’re not pulling all your money out. Maybe you’re leaving a couple thousand dollars into the property. That’s not the end of the world at all. That’s still amazing. You just got this property for $2,000 and people are paying you to live there. You get mortgage pay down and you’re building equity into it. Try not to get focused on what was happening in the past two years and restabilize yourself and stay in your own lane and stay focused on what’s happening now.

David:
That is such a good point. I hear that one a lot. “Oh, I didn’t get all my money out of the BRRRR they failed.” It’s like, well, you would’ve put 25% down plus your rehab. You’d have been left with 35 to 40% of your money in the deal if you bought it traditionally. Instead, you left 10% of your money in there and you think that you did something wrong. That that’s absolutely still a win. I think to your point, if we compare ourselves to the influencer on TikTok that showing their huge wins that you may or may not be able to confirm that they actually did that, we feel bad. If we compare ourselves to the person that did nothing, you should feel really good. That’s just an overall lesson. If we’re all comparing ourselves to Tony, we’re going to think I’m not doing good enough in the gym. Right? Or we’re comparing ourselves to Ashley, we’re like, “I’m just not funny enough.” But if we compare ourselves to what we were yesterday, all that matters is am I stronger and am I funnier than where I was.

Tony:
David, I want to talk a little bit more about the systems and processes that real estate investors should be building when they’re thinking about the business that they have. As an example, I just had to hire a new assistant in my business. When I was onboarding my previous assistant, I did a really good job of recording videos on Loom for the different tasks that I wanted that first assistant to do. So like, “Hey, pay this credit card bill here. Here’s a Loom video. Pay this invoice. Here’s a video. Pay this team member. Here’s a video. Do this other little random task. Here’s a video.” Every time I did this task for that first EA, it was easy for me to train her when I had to replace her. Now it’s even easier because every time I ask this new EA to do something, I just send her a video with the link as well. If you think about that process of building the systems within that little example, how can we apply that to someone who’s building a real estate business? What are some of the things they should start doing today so that way they can start systematizing their real estate business?

David:
That is another principle that applies whether it’s investing in real estate, running a business as an agent, running any kind of business. It’s easier to just take whatever has to get done and just go do it, but that puts you on the hamster wheel that you never get off. There’s two parts to a system. I talk about this in Scale. Everybody understands the first part, which is you need to create a checklist of things that need to get done or a library of videos that show somebody how to do it. That is the first step in creating a system. The error becomes when we think that’s all a system is, because the second part of a system is having a human being that is skilled and capable at doing those things. We have all had a position where we hired someone to do something and it was super clear what they needed to do and they still screwed it up.
And then what happens is you go, “You know what? People don’t work. There’s no way to do this. I just need to go and do it myself.” Because when it’s our business, we will always figure out some way to do the things that need to be done. That’s not the end of the world, because at least when you have a checklist yourself, you’re less likely to make mistakes. You’re less likely to forget to do stuff. You’re going to be more efficient in getting it done. What I talk about in Scale is the process of leveraging out what you’re doing needs to be viewed with the same approach that you took when you were learning to do it yourself. I talk about the three dimensions of success.
The first is just a plain one dimension, it moves left to right. That’s what I call learn. We start off knowing nothing and we slowly move down this spectrum towards a hundred. And the closer we get to a hundred, the more money we make, the less time it takes, the more skill we have, the better success you achieve. This is you who knows how to run a short-term rental. You are much closer to 100 because you’ve done this for a while. You’re good at analyzing them. You’re good at anticipating problems. You’re good at maximizing revenue. You’re good at mitigating guest complaints. You’re good at getting good reviews. You’ve learned how to be good at this job, so make good money. The problem is, at a certain point, you reach the end. You cannot get any better. You’re managing 15 of them and you’re like, “16 would break me. I can’t do another thing.” At that point, you have a choice. You could be happy with your 15 and just work hard and make good money forever, or you could start over on a new spectrum, a new dimension, that I call leverage.
And again, you’re going to start at zero and now you’re moving in another direction. It’s your second dimension. Now you’re going up. You’ve got to get to a hundred at the ability to leverage, the skill of leverage. It’s different than learning. Where people mess this up is they think, “I’ve already learned how to do this. I should start at a hundred on leverage.” And you don’t. There’s a completely different skillset that involves identifying talent, training talent, holding talent accountable. All the things that go into being good at leverage, you suck at, and you’re going to start all the way over at the beginning as you fail and fail and fail. And if no one tells you that’s what’s coming, you’ll give it one or two tries. You’ll say, “This isn’t for me.” You’ll quit. You go back to the learn where you’re comfortable and you’ll just work your butt off and never tell anyone that you hate your life because you make good money but you have no time to spend it or enjoy it because you’re working all the time.

Tony:
David, dude, so many good examples. It’s funny, I actually had a call earlier today with my ops manager for our short-term rental cleaning company. One of the new roles that we instituted in that company was someone who’s a property inspector. Their whole job is to go to these short-term rentals after the cleaners are done and inspect how good of a job the cleaners did. And my ops manager was saying, “Hey Tony, when the inspector finds an issue, I just want her to clean it on the spot. That way we can get it handled quickly and the guests can check in with no issues.” I said, “That it’s absolutely not what we’re going to do.” Because if that property inspector cleans it on the spot, now we’re taking away accountability from the cleaners of doing that job correctly themselves.
What I want is that if the inspector finds an issue, they notify the cleaner who then drives back to the property for a second time that day to solve the actual problem. Right? The reason I share that is because so often we feel that it’s easier to just solve these problems in ourself as we’re building our business, but what we’re doing is handicapping the people that should be developing the skills to solve those problems for us. So if we can do a better job of pushing that accountability towards the people who we’ve hired or partnered with to do that, it eventually allows us to take a step back and let the business grow on its own.

David:
What you just described is part of the skill of leverage. You probably didn’t learn that automatically. You had to go through a couple situations being very frustrated that the cleaners are like, “Oh cool, I don’t have to do anything.” What you realized was if I want to be good at leverage, I have to create pain for the person who made the mistake, otherwise they will just keep making it. No one tells you that, that’s a part of something you have to get good at. I had to learn that lesson with my businesses too, where I had this tendency to want to jump in and help the agent who makes a mistake and save their bacon and try to keep the deal alive. We all have a thing where, “It’s easier if I just fix it.” And then the problem continually happens for the rest of your life. There has to be a point where the person that you’ve leveraged to feels pain, is forced to take responsibility, and solves their own problem so you don’t solve it.
There’s a lot of things like that that are going to pop up during leverage. You’re going to have to figure out the right cleaners. You’re going to have to get good at reading people. Is this a cleaner that’s going to show up every day or is this a cleaner that’s like, “I’m behind on my bills. I really need a job. I’m going to tell Tony everything he wants to hear and I’m going to work hard for two months and then I’m going to get caught up and I’m going to stop being motivated and I’m just going to slip back into doing a bad job again.” You have to learn how to anticipate these things, and at a certain point you will get leverage down, and you can now go from having 12 single family short-term rentals into 40. You’ve got a huge portfolio.
But there’s another dimension if you want to go past that, and the third dimension is leadership. That’s a whole new skillset. You have to learn a whole new way of approaching things and you have to start over at zero. In Scale, I talk about these facts because everybody wants financial freedom and they know real estate’s going to help them get there, so then they do it. Then they realize they’re a slave to managing real estate and they need the leverage, so they want to get out of it. So then they get out of that and then they realize, well, I’m still a slave in a sense to all these people that depend on me for how to do the job. Until you get to leadership, you’re not ever actually really in control of your life. You haven’t turned it into a business, you’ve just turned it into a job.

Tony:
Man, David, so many good things, brother, and I feel like we could go on this point for days and days. But I think the really quick one on the leadership and the leverage piece is that every single person that wants to build a big portfolio should be thinking about those principles from day one, because the more you can integrate that into your business when it’s small, the easier it is to have success when your business gets big.
I also just want to recap, Dave, some of the other things you’ve mentioned. When we talk about market selection and really the deal analysis piece and things you called out were in order to quickly analyze, talk about the area that you’re focused on and knowing what markets you should be moving into. You talked about the revenue potential and quickly being able to exclude certain properties because you know that they’re not going to check that box because you’ve already analyzed a few deals in that market. Looking for markets that are maybe appreciating and not just focusing on that one metric which is cash flow. Ultimately, I think the biggest thing is that even if you have this framework, people still have to take action on a consistent basis to find the benefit of knowing those things. That’s where a lot of rookies get stuck.
David, I guess one last question for you. If someone reads through the books, if someone listens to the podcast, how can they consistently take action? What advice do you have for someone to actually do the things they need to do to see this all the way through?

David:
Well, start off with knowing what actions would need to be taken. Who would I need to be or what would I need to know to actually be good at this? Just sticking with your weightlifting analogy, you don’t just … Part of the job is working really hard, but you don’t want to just show up at the gym and work really hard with no plan. Can you identify what makes muscles grow? What foods need to be eaten? Right? How hard is too hard or is there a too hard? Can you get clear on what even makes this successful? When you have that, you just focus on what the next step is. So many investors, this is just my personal opinion, are looking at the guy that’s got 700-unit apartment complexes and saying, “I want to be them.” They’re trying to copy this blueprint or this system that is not realistic for them to achieve.
They’re not going to go become a syndicator and raise a bunch of money and buy 100-unit apartment complex and learn that way. They would be so much better to just house hack, just put three and a half percent down on a property, and get used to the fundamentals, get used to seeing what goes wrong, get used to figure out which part of real estate you like. And then at the end of a year, rent out whatever part of the house you were living in, the bedroom, the unit, whatever, and house hack again. Just do that every year for the next three, four, maybe five years. You’ll get this sense that real estate just starts to become kind of predictable. Right?
You buy a house, you’re like, “Okay, I’m going to go sign. This is what I’m going to check for in the documents. I need to make sure that this gets done. This is the part the contractor always misses.” When you are anticipating what’s going to go wrong right before it does, you’re getting to the point that you’re ready to take the next step. And after you’ve just house hacked, you’ve just put 5% down on a house, you didn’t risk all your money on one deal several times in a row. You’ve built up some equity, you’re in a position to take a HELOC out of that property, you have a very good understanding of the fundamentals of real estate. Then say like, “Okay, I think I could buy a 12 unit apartment complex.” Or if you’re really confident, maybe buy a 20 or 25. And then just give yourself a year to figure out how that works. Then leverage off parts of it, get a property manager to take it over, get a different company to focus on the leases, and then kind of take the next step of what you’re getting into.
It’s really there’s two ways to err. You could go way too big and try to do too much and get yourself caught up and do nothing. Or you can say, “I’m not ready at all. I’m just going to sit here and do nothing.” Just take very small steps all the time. I’ve been getting back into the gym recently myself. It was discouraging because I expected myself to lift what I did two years ago when I was going all the time, and it was nothing close to that. There’s this little voice that’s like, “Just don’t do it. There’s no point.” Right? The key wasn’t like to monitor how much I was lifting. It was just to make sure, did I go to the gym? Did I work out to failure? Who cares if that my old warmup is now my max. It doesn’t matter. It just matters did I do it.
And then in time it slowly starts coming back and coming back, and now about three months later, I’m literally increasing the weight every single time I go and I’m feeling good. It’s that reminder to myself, because we’re all a rookie. You just have to do it over and over and over and make sure you’re doing it, and then the doors open up. It wasn’t like, “How do I know what I’m ready to lift more weight.” You can tell. You could go heavier and it’s not going to fall on your face, and so you do that. You’ll know after a couple of house acts it’s time to go bigger. And once you’ve gone bigger, you’ll know this is getting boring. I’m ready to take the next step.

Ashley:
Well, David, next time we have you on, you’ll have to do some kind of lift competition with Tony now that you’re back working out.

David:
Yeah. That’s what Bigger Pockets needs, the bigger pump competition.

Ashley:
We’ll do some kind of charity event where people could donate dollars as to who they thinks going to win. Yeah. Well, David, thank you so much for joining us on the Real Estate Rookie Podcast. Can you let everyone know where they can find your new book?

David:
Yeah, they can. If you go to bigger pockets.com/scale, or scalebook, but scale’s less words, so type that one. You can get the book there and you can find out more about me on social media at davidgreene24.

Ashley:
Okay. And if you guys go to the bigger pockets.com/scalebook and use the discount code scale262, you can get 10% off.

David:
That’s right. I believe we’re also putting together another marketing plan where if they buy all three books, they can get a free month membership into the mastermind that I’m running, which the books are nothing close to what the mastermind would cost, so it’s a super good deal. And if you don’t know, if you’re not an agent, just buy them and give them to the real estate agents that you have. They will appreciate it. It’s a hard job and they’re not getting nearly enough guidance that they need.

Ashley:
Or if you already have the two other books, it’s probably still worth it to buy the three and give one to somebody.

David:
Yeah, that’s pretty true.

Ashley:
And just to get into the mastermind for free, that’s a really cool value. Okay, so make you guys check that out at the Bigger Pockets bookstore.
I’m Ashley at Wealth Firm Rentals, and he’s Tony at Tony J. Robinson, and we will be back with another guest.

Speaker 4:
(Singing).

Redfin CEO Glenn Kelman joins Brian Sullivan and the ‘CNBC Special: Taking Stock’ to discuss housing data and what’s really going on in the market right now.