March 2023

Here’s an excerpt from this week’s CxO newsletter. To get it to your inbox, sign up here.

My favorite franchise at Forbes (besides this one, of course) is our 30 Under 30 List. Launched in 2011 by chief content officer Randall Lane, it’s a testament to the power of entrepreneurship and creativity across all parts of the economy.

We’ve just published our 2023 Under 30 Europe List. This year’s entertainment list includes Italian actress Simona Tabasco from the HBO hit The White Lotus, as well as Rhian Teasdale and Hester Chamber of the British indie band Wet Lag. (If you haven’t heard Wet Lag’s music, Chaise Longue is a good place to start. And White Lotus fans might enjoy SNL’s take.) Here’s the methodology behind this year’s list.

A 19-year-old tennis phenom, three soccer stars and a female racing driver who’s outpacing her male peers are among the athletes highlighted on this year’s list. The 27-year-old creative director of Ferragamo and a “magicineer” bringing cocktail elixirs to life are among the game-changers reshaping fashion, food and the arts. Climate is a central theme on this year’s list of social-impact entrepreneurs while AI infuses our manufacturing and industry list. Then there are the financiers and scientists like Rochelle Niemeijer, who is developing tools to tackle antibiotic resistant infections through her startup Nostics.

I have to give a special mention to Ludovico Mitchener, CTO of PhycoWorks. One reason is that the venture he cofounded with Stefan Grossfurthner combines AI and synthetic biology to develop algae strains that can transform carbon dioxide into new products. The other reason is that his mother is Daniela Vincenti, a friend and former classmate at Columbia Journalism School,, who’s now an advisor at the European Economic and Social Committee. (Such shout-outs are a newsletter writer’s prerogative, no?) As a working mom, I take that as a signal that building our own careers need not come at a cost to our kids. In fact, it might actually inspire them.

Under 30 Europe showcases leadership at its best and is a reminder that there are plenty of areas in which Europe is on par with, or ahead of, the United States. Gender parity is one, but success comes down to what’s happening in companies, not countries. Jena McGregor this week took a look at how Swedish retail giant IKEA managed to achieve the rare feat of reaching near-gender parity in its leadership roles. It didn’t happen because of legislation, which Europeans have long deployed as a tool to diversify boards, but rather through clear targets, training and incentives. And it was achieved at IKEA’s operations around the world. More proof that you don’t have to be under 30 to be a pioneer or game-changer in your industry.

Indeed, Forbes and Mika Brzezinski’s Know Your Value initiative are currently cohosting the 30/50 Summit in Abu Dhabi. (Click here for the live blog.) The event, now in its second year, brings together women from our 30 Under 30 lists and our 50 Over 50 lists to inspire and learn from each other. Here’s a preview of the lineup, which includes former Secretary of State Hillary Clinton, Nobel Peace Prize Malala Yousafzai, Ukraine’s First Lady Olena Zelenska, Sweet July founder Ayesha Curry and actress Catherine O’Hara. Be sure to check back for coverage.

Have a great week.

David Greene:
This is the Bigger Pockets Podcast show 736. Fannie Mae came up with a guideline and said, “Hey, we’re not going to let you refinance anything if you’re pulling cash out unless it’s been seasoned for 12 months.” It used to be six months. This is where that six month rule that everybody looks into that has to do with the Burr method and, well, I can’t refinance for six months. It’s because of a Fannie Mae guideline. Now they’ve bumped it up to 12 months. I don’t believe they’ve said why they’re doing it. My suspicions would be they’re trying to make it harder for investors to buy deals because they want home prices to come down without having to raise rates even more. What’s going on everyone? This is David Greene, your host of the Bigger Pockets podcast here today with my co-host Dave Meyer, doing a special edition of Bigger News.
As you’ve noticed, we are in a beautiful scenic place. We’re here in Denver, Colorado bringing you one of the bigger news episodes where we’re going to be covering what is going on in the world of real estate, what is going on in the headlines and what you need to know about them. We’re going to be trying something new for Bigger News. Dave and I are going to be reviewing the top headlines in the real estate investing space and talking, commenting and diving into how they can affect the real estate market and our position as investors. Dave, nice to see you.

Dave Meyer:
Yes, man, this is a lot of fun. First time we’re doing this in person.

David Greene:
And you’re even more handsome in person than you were on camera. I didn’t think that it could happen.

Dave Meyer:
Wow. It’s all this fancy equipment they have surrounding us.

David Greene:
It doesn’t hurt. This is how hard they got to work to make me look good, but hey, I’ll take it.

Dave Meyer:
I feel like we’re going to break something. It’s a lot of expensive stuff.

David Greene:
Yes, that’s true. When you’re walking through, you have that same feeling like you’re at grandma’s house and you’re in the living room where no one’s supposed to go.

Dave Meyer:
Yes, exactly. And we look like real newscasters. We’ve got our sheets of paper. We need one of those little ear things that they put in.

David Greene:
Yes. I’ll be Will Ferrell and you could be Christina Applegate.

Dave Meyer:
Thank you.

David Greene:
All right, well, why don’t we start with the first headline, what you got?

Dave Meyer:
All right, so our first headline, we need to talk about mortgage rates. I know this is something we talk about a lot, but they’ve been really volatile and just for some history here, obviously we all know mortgage rates went up a lot last year. For a while, it seemed like they had peaked at about 7.4% back in November, and they had fallen down to almost 6%. Now they’re back up to almost 6.8%, and a lot of this seems to be because of recent economic data. There’s just been a lot of things, two things really. One, a really strong labor report back in January and inflation data that was pretty ugly and disappointing, and this to me at least seems like this is a green light for the Fed to just keep raising interest rates. What do you think about that?

David Greene:
That’s what it looks like right now. They’re showing fearlessness when it comes to just being willing to continue raising rates, and we know the reason that they’re doing that is they believe this is going to stop inflation. That’s debatable whether it’s going to stop inflation, delay inflation, it definitely has an impact on the economy in many ways. We can’t predict here, we don’t know, but I would expect rates to continue raising and every time that there’s anything less than optimal in the economy in general, and they think that prices are going to get too high or unemployment is too low, we’re going to raise rates to try to turn that around, which obviously affects our position as real estate investors.
I think this is something that’s very difficult is we typically base our decisions off of a comparable price for a home, and when rates bounce around like this, the value of homes bounce around like this too, it makes it very difficult to just not have a moving target where you can drill in and say well, this is what a house is worth. Have you seen within the bigger pockets community frustration or maybe some hesitancy of people to move forward and pull the trigger where before they may have done it when they felt more stability?

Dave Meyer:
I hadn’t really thought about that point, about the calming aspect of this, but it does seem like for a while in January and February, I think we talked about this recently, that people were starting to get back into the market a little bit. And people were starting to feel like inflation was on a positive trend, mortgage rates were trending downwards, but now that it’s reversed, I do think there’s a risk that there might be some demand pulling back out of the market at least for the next couple of months, but I don’t know yet.
I think it’s just going to be really hard for people who are new to this to jump in with all of this volatility because it’s up, it’s down. It’s really hard to get a beat on it, and unless you’re an experienced investor who has been through something like this or just knows your numbers so cold that you’re can be confident whether your mortgage is six and a half or 7% that your deal is going to work out. I do think there’s a chance that people take a step back and pause at least till there’s some more stability.

David Greene:
We were talking before we recorded about what you call the pump and glide method of driving where my Uber driver was making me sick because they hit the gas and then they take their foot off the gas and the car slows down.

Dave Meyer:
If you drive like that, please stop for all of our sakes. Just don’t drive like that.

David Greene:
Well, it made me think that’s what the market’s doing. Is you’re seeing, we just had, on the David Greene team, a really good February because rates had just come down, so it was like we’re moving forward, and then the rates come up and everything slows, and then it’s moving this back and forth, and investors are having a very hard time getting a grip. So what I would expect for maybe at least the near future in 2023 is you’re going to continue to see buyers jumping in as a group and buyers withdrawing as a group, and you’re sort of playing this game where you’re trying to catch the wave. Maybe you can think of kinking a hose, letting it out, kinking a hose, letting it out, and as long as interest rates keep doing this, we probably just have to get used to the fact that this is how the market’s going to operate.

Dave Meyer:
Totally, and I think inventory is going to be kind of the same way, right?

David Greene:
Yes.

Dave Meyer:
We’re starting to see more people start to list their property.

David Greene:
Because the rates went down. They think they can sell for more.

Dave Meyer:
Exactly. So there’s just going to be, like you said, the pumping glide effect, and unfortunately it just doesn’t seem like there’s a good line of sight on economic stability. Inflation was looking good, took a step back. We’re hearing a lot of layoffs in the job market and tech market. Tech makes up 2% of the labor market, and now we’re seeing that the January labor numbers were actually pretty strong, surprisingly strong, and it just shows that no one really knows what’s going to happen right now, and we all just have to admit that and expect some of this volatility. It doesn’t mean you can’t find deals, but you should not expect things to be clear I think for the next, at least three, maybe six months, and then hopefully by then we’ll at least know some direction, whether good or bad, which way things are heading because it’s just so murky right now.

David Greene:
Now, the good news if you’re looking to buy in this market is that sellers are feeling that same thing. They’re putting their house on the market, then they’re hearing the labor report come out, they’re seeing interest rates go up. They’re also going from greed to fear and they’re cycling. So if you are in the market to be buying a house, whether you just want to live somewhere or you’re looking to invest, you’ve got your eye on a property, you’re waiting on the right time. I always watch the news and I wait for the doom and gloom, and then I go, right, more aggressive offers, and that’s worked for me several times where a seller saw the same news and we’re like, Jerome Powell just said they’re taking this thing to the moon. I need to sell now before there’s blood in the streets. And then three months later, rates came right back down again.

Dave Meyer:
That’s very good advice. All right, well, maybe one day we’ll stop talking about mortgage rates, but that’s not today.

David Greene:
It’s given quite a bit of fodder to get into, right?

Dave Meyer:
Yes.

David Greene:
There’s always some new dramas. Mortgage rates are the Kardashians of the real estate market now.

Dave Meyer:
Yes, exactly. They are. Everyone wants to know. But there are other good headlines for us to talk about. The second one today is about refinancing and really will impact one of your favorite strategies. The Burr method. What happened was on February 1st, Fannie Mae, which is a giant mortgage lender, government backed entity, updated its eligibility policy for cash out refinance transactions to require that any existing first mortgage be paid off through the transaction, be at least 12 months old as of measured from the note date of the existing loan to the note date of the new loan. So first and foremost, can you just explain what that means to everyone?

David Greene:
Yes, so Fannie Mae. You’ve often heard the name Freddie Max, another one. This isn’t going to be perfectly accurate, but in general, they are the enterprise that will buy the loans from whoever your mortgage broker is when you’re getting conventional financing. So because they say, “Well, if we’re going to buy a loan, it has to meet these guidelines.” Now all the mortgage brokers and the lenders go conform to what those guidelines are so that they can sell to Fannie Mae.
This is keeps what we call liquidity in the market. So if I lend you my money and you just kept it for 30 years on that property, I can’t go lend to somebody else. So by lending you the money and then you go sell it to somebody else and Fannie Mae ends up pushing money back in thumb when they buy these notes, the government is able to keep rates lower than they would normally be. Even though rates are higher right now than they’ve been traditionally, they’re still lower than what they’d be if we didn’t have Fannie Mae.

Dave Meyer:
That’s right.

David Greene:
Well, Fannie Mae came up with a guideline that said, “Hey, we’re not going to let you refinance anything if you’re pulling cash out unless it’s been seasoned for 12 months.” Now that used to be six months. This is where that six month rule that everybody looks into that has to do with the Burr method and well, I can’t refinance for six months. It’s because of a Fannie Mae guideline. Now they’ve bumped it up to 12 months. I don’t believe they’ve said why they’re doing it. My suspicions would be they’re trying to make it harder for investors to buy deals because they want home prices to come down without having to raise rates even more. And so this gives an advantage to people that are just a primary residence person who’s going to be going in to buy, and there’s also probably going to be an element of risk reduction for them, because when rates fluctuate like this, it causes a little bit of anxiety in us buyers, but it causes massive anxiety in the lending industry.
So they’re going to take this loan and they’re going to sell this to a pool of people who are going to buy it as a mortgage backed security. Those people don’t want to go invest all their money into interest rates at 7% if they think they’re going to be at 10% later or if rates are going to be going down, they’re going to want to buy more when they’re at 7%. So the pricing of these loans bounces around every time that the rates bounce around. All the people that are making loans right now, they typically have about two and a half years before they break even.
So if I give a mortgage to somebody, the costs that are included in doing that, I usually don’t get my money back for about two and a half years. So they don’t like it when cash out refinances or rate and term refinances happen frequently. They want to slow that down. So this is another way that lenders who are actually putting money into the market to sponsor these loans can protect themselves by not letting someone go in, get a mortgage and then refinance six months later when rates are down by a point and a half.

Dave Meyer:
That’s a really important note because at first my thought was yes, they’re sort of taking aim at flippers and perhaps Burr, but it also really matters that this is their business model and that they need to make money as well, and so they’re probably doing it, I would imagine some combination of it. So what do you think? Is this going to impact Burr?

David Greene:
Yes, I think this is going to impact Burr. People who are already struggling with Burr because rates were going up and values weren’t increasing as fast as they were. So one of the common mistakes I think people make with the Burr method is they assume they got to get 100% of their money out of the deal and that they have to do it in a six-month timeframe, that’s like a grand slam if you can do that. When you compare it to the traditional method where you put 20 or 25%, then you dumped another five to 10% of the property value, and on a rehab, you’re looking at somewhere between 30 and 45% of the property’s value is invested and stuck in it. So if you do a bird and you leave 10% of your money in there, that is still a clear win over leaving 35%.
It doesn’t have to be 100%, but this does make it a little bit trickier there. There’s no doubt about that, that these lending fluctuations are like an earthquake and then the ripples go out all throughout the industry, but we’re having earthquakes every single time the Fed announces something new. It’s like it’s going this way, then it’s going that way. So there’s all these changes that are happening. It does affect probably more Burr than flipping because it’s only is for cash out refinances. This is if you’re looking to take more money out of the deal than what you put in. So a flipper, they’re just going to be selling the note.
They don’t have to worry about a cash-out refinance, but it also makes it even more important to pay attention to what’s going on in the fit. I’ve been saying this is the time in real estate where education information matters more than it ever has before. For a long time, real estate was just the same thing for years, for decades, it didn’t really change a whole lot, and now as we see these changes that are being made at a high level are having massive, massive impact on the way that we’re doing business and what we expect home values to do.

Dave Meyer:
So what do you think people should do? Is there a way to mitigate this or something that you can do to continue to do the birth strategy despite these new regulations?

David Greene:
I think it makes it harder to do buy a house, cash out, refinance, get all your money back, at six months buy another one. That was a supercharged method that people were, I was doing this too, growing your portfolio very, very quickly with the same capital recycling it. These principles work, but you’re not going to be able to execute it at the same speed. What this really does is it benefits people that have a larger portfolio of properties that were accumulated over a longer period of time. So if you bought real estate consistently for the last four or five years, you can still cash out, refinance the stuff you bought four years ago, get that capital, put that back into new properties, and then refinance the stuff you bought three years ago. It makes it harder for the person who’s trying to get started.
So the advice that I’m continually giving is one will keep house hacking because if you could put three and a half percent or 5% down, you don’t need to do the Burr method. There’s not a whole lot of money you’re having to take out of it. That’s one way you can get your portfolio started picking up steam. And the other one is just to decrease your expectations that real estate should never be a sprint. It is a marathon all the time. So it doesn’t really matter what’s happening right now because you’re building wealth over the next 10, 20, 30, 40 years, and as you pick up that steam, you’ll be able to do a cash-out refinance, building, use any of the tools that we talk about without these regulations changing. They’re always tools that affect the short term, and if you can get out of the short term model and into a long-term model, you can operate independently of this stuff.

Dave Meyer:
Yes, and that’s excellent advice. I think for the last couple of years, this low inventory where people have to buy quickly and sell, and there’s just so much going on frenzy and you had to move quickly, at least on the acquisition side. People get ramped up and they feel like they need to do everything really quickly and it’s not necessary. The other thing you can do too is if you want to refinance something quickly, you can look into portfolio loans, as David was explaining, conventional loans, conforming loans get sold and repurchased to people like Fannie Mae and Freddie Mac. Portfolio loans are when the bank hold onto the loan, so maybe they’ll be-

David Greene:
That was a great-

Dave Meyer:
… Emergence of portfolio lenders who’ll be willing to do cash out refis for investors.

David Greene:
That’s a great point. Portfolio loans, you avoid the whole Fannie Mae situation. The other one that I forgot to mention is DSCR Loans. We do a lot of those at the one brokerage, and when you get that loan, it’s not being sold to a conventional lender. It’s being sold in a private markets basically. So some of those DSCR lenders are going to follow the Fannie Mae guidelines because they’re the big dog in charge. What they do, everyone else falls in line, but other ones won’t. So asking a mortgage broker or asking a lender, do you have a DSCR lender that will do this without making me wait 12 months? That’s another workaround also. It’s pretty much just applies to people that want the very best rate and the very best terms they could get.

Dave Meyer:
Absolutely. But I feel like when these regulations happen in a capitalist system, someone fills the void. And there’s going to be a lender, there’s going to be someone who sees that investors still want this type of product and probably will create something like that. It’ll probably take a little while, but.

David Greene:
That’s literally how DSCR loans came to be.

Dave Meyer:
Oh, really?

David Greene:
Yes. Someone like me that has more than 10 properties, I just couldn’t get another loan. I can’t get a conventional loan. So there was enough people that wanted them, and they were like, well, we can’t use Fannie Mae guidelines for this person. What can we do? We can use commercial underwriting standards where we just look at the cash flow of a property we’ll qualify it based on that, and that’s literally what happened. Is this new thing stepped into where there was a need in the market. So don’t panic. Don’t eat panic in Anikins.

Dave Meyer:
Cleaning around.

David Greene:
Wait, and there will be a solution that will come to fruition.

Dave Meyer:
Awesome. All right. Well, that is very good advice and something we’ll definitely be keeping an eye on. For our third point, we got to talk about Chat GPT.

David Greene:
Are people talking about that now?

Dave Meyer:
I don’t know if we’re even a news show. If you don’t mention it, you have to talk about it. Have you used it yet?

David Greene:
No, but everyone else has.

Dave Meyer:
I have.

David Greene:
I’m a little scared to use it. Is that weird?

Dave Meyer:
You should be because you’re going to like it.

David Greene:
That’s what I’m afraid of.

Dave Meyer:
So Chat GPT, if you haven’t heard of it, is called a generative AI platform. Basically what it is you can go on and text, you can ask it questions and a computer program, which has studied 1,000s of textbooks and websites and books. Will use the information from that studying to form unique and novel answers for you so you can have a real conversation with it. Honestly, it’s pretty remarkable to use, and stuff like this has existed before. But I think what’s unique about the recent advances is how conversational it feels, it sort of feels like you’re talking to another human being and it’s not as generic as it used to be. And this is clearly just the beginning and the pace of acceleration here in Chat GPT, and it’s not just Chat GPT. Bing also has a new program. Google is working on one called Bard. So I think it’s likely that these types of interactive AI systems are just going to keep growing and growing and growing from here.

David Greene:
Do you think they’re going to get along with each other, or do you think we’re going to have a rivalry?

Dave Meyer:
Yes, see, everyone always talks about AI versus humankind as the battle that might happen. The matrix. Maybe it’s going to AIs versus each other, and we’re [inaudible 00:17:24].

David Greene:
[inaudible 00:17:24] relevant.

Dave Meyer:
Yes, exactly. It’s like Transformers.

David Greene:
It’s like Transformers versus human, deceptive cons versus auto bots here. Who’s going to win?

Dave Meyer:
Yes, but we’re still going to be the collateral damage.

David Greene:
Yes, that’s true.

Dave Meyer:
It’s kind of fun. And as a data science background person, I really enjoyed playing around with it. It’s pretty fun.

David Greene:
What are some of the things you’ve done with it so far?

Dave Meyer:
Oh, I was asking it real estate questions, honestly. I started asking it data questions which is not very good at yet, like interpreting data. So my job is safe for at least six more months, but it does do a really good job of it… It is what’s called generative AI, so it can have a conversation with you, which is remarkable. And I was curious what your feelings about this and how it’s going to impact the real estate industry.

David Greene:
I am a bit of a contrarian in a lot of ways in general. I think people ask the wrong questions sometimes. When people say, “How do I buy real estate so I can quit my job in two years and never work again?” Wrong question. You’re probably going to get into the wrong deals if that’s what you’re trying to do. Real estate works better over a long period of time, buying in the right locations, letting an asset stabilize naturally over time than it does if you just rush in and try to buy a bunch of $40,000 properties in some turnkey market that end up causing you headaches. One of the wrong questions people ask is, “How do I make this easy? How do I automate this thing so I don’t have to do the work?” And the problem with that approach is once it’s made easy, it can be replicated and amplified at a big scale as someone with more capital resources than you can come in and do it very easily.

Dave Meyer:
Hey, you need a barrier to entry.

David Greene:
Those are so crucial.

Dave Meyer:
Yes, absolutely.

David Greene:
Yes. Imagine if you’re trying to get people across a body of water and you’re the guy that is hired because you know where the rocks are, you know where the sharks are, you know where the areas that you could get shipwrecked are going to be, you know the area very well. You will always have a job. The minute that you remove all those and you just have a big deep water, nice channel, some huge boat can come in and load up way more people than you ever could and take them across and you’re out of work. This is the problem with us always looking for an easy answer. The minute real estate investing became something that could be done at scaled from all the software, the systems, the ways that we were able to do it easily. BlackRock comes in and they buy all the houses.
So I’m worried about AI doing the job of copywriting, doing the job of making your pictures of your property look better, looking at what short-term rental listings are doing well, copying it, and then just blasting it across everybody because then you’re not winning doing the job of what the best people did. You’re just leveling the playing field and now your property will not have an advantage over somebody else’s because you pay more attention to it. That’s my concern for how this could work with real estate investing is if you were a short-term rental operator and you were paying attention to the market and your competition was lazy and they weren’t, you were following the algorithm that Airbnb or VRBO had, you were changing your description, you were getting new pictures taken, you were adding amenities as you saw what was happening in the market, you were the person on that little raft navigating these dangerous waters to help people.
The minute that AI can come in and do that for you, the person who’s not paying any attention to their property gets all the benefits of what the good operator was doing. So one of the ways that I’m looking at, I’m expecting that’s going to happen. I’m trying to figure out what properties can I get into, what asset classes could I buy, what approach could I take that could not easily be replicated? The hacks that we’re always looking for, do you remember when Craigslist was brand new when you would list your Toyota Camry for sale, and then people learned if they put Honda Accord in the description, that it would trigger the search engine of people that were looking for Honda Accords?

Dave Meyer:
Yes. Or everyone would put $1. So everything, no matter what your price actually was, it would just show up.

David Greene:
Yes, it was a way of getting traffic to your page you wouldn’t normally have got. That, I think is just going to happen everywhere, that type of thing. And so I don’t know what the answer’s going to be yet, but when I look at AI affecting real estate investing, it means the masses will be able to do this. So you’re going to have to be extra picky about the property you take. So when I’m looking to buy, let’s say a cabin in the mountains as a short-term rental, I need to that cabin to have something that other people cannot replicate because AI is going to be able to replicate any advantage I might have had in other areas. So AI can’t replicate a view that other cabins don’t have or a location that’s going to be better. These fundamentals are the things we talk about all the time will become more important when technology improves to the point that everybody loses their advantage. What do you think?

Dave Meyer:
Yes, that’s a great point. I totally think so, and I think copywriting is definitely one of them. Anything where content creation I think is going to be really interesting. People who are marketing for properties, for example, sending out mailers, that’s something AI could do really easily and probably write a pretty compelling letter to someone. I think as an agent, it will be really interesting. I read some article about how agents are already using it to write their descriptions of listings that they’re putting up, which doesn’t seem that hard. I don’t know, but put a lot of big adjectives and big fancy words in there, but I’m sure there is some art to it.

David Greene:
I’m sure that’s what they’re doing, and they think that it makes their job better. The problem is every listing’s going to read the same way, so it’s not going to stand out anymore.

Dave Meyer:
Yes, totally. So I think it’s going to be really interesting. I was saying I was asking it data questions, and it doesn’t really do that yet, but I do think that is an inevitability. Eventually you’re going to be able to say, what’s the best cash flow market or something, and it will tell you, and then everyone’s going to go to that, like your point. And so I think there’s going to have to be this contrarian view where there’s going to be have to be some sort of genuine thought leadership where people actually are doing something different than everyone else, and you can’t just follow the herd of what the AI is telling you to do, but you’re actually going to have to be doing the analysis for yourself and doing the hard work, like you said.

David Greene:
It’s a very good point. If you think about how most people make decisions, they watch social media, they watch a podcast, they go on a blog, they hear what everyone else is doing, then they go do it, and for a while, that has been a pretty good, solid strategy. The problem is AI’s going to make this happen so quickly that by the time you hear about what everyone’s doing, it might already be done.

Dave Meyer:
It’s just like Jim Kramer, no offense to Jim Kramer, but these guys who talk about stocks on CNBC. By the time it’s on CNBC, it’s already too late. And I think there’s going to be some element of that in predicting real estate markets, where to buy neighborhoods, that kind of stuff. Maybe I’m just saying that because I do that a lot with my time and I think I can do it better, but I do think they’re at least going to attempt to start doing that.

David Greene:
The other thing to be concerned about or just pay attention to with AI is the version of it we’re talking about now is radically different than what it’s going to be in six months.

Dave Meyer:
Of course. Yes, absolutely.

David Greene:
So us thinking that we can use AI to strategize what we’re going to do, it’s very possible by the time the person listening to this hears it, it’s already evolved way past what’s going to happen. So-

Dave Meyer:
It’s already in the matrix, by the way.

David Greene:
Yes. If there’s someone using AI to build their business an incredible way, how long before AI figures that you can ask it, well, help me do what Grant Cardone [inaudible 00:24:30]. He goes, “Boom, here’s the game plan right here. Go do the same thing.” How do I grow my followers from this to this? And it can just do that for you. So I really think this is going to make real estate more valuable because business I think is just going to be leveled out. The playing field is going to become very, very plain for so many people that are getting into it, but real estate is something that people are always going to watch. One reason why I’m more interested in investing in real estate when I see all the technological advances.

Dave Meyer:
That’s a really good point. Hard physical assets will not be as-

David Greene:
AI can manipulate cryptocurrencies. They’ll build it and manipulate NFTs. I can’t control anything that’s happening. It will not be able to, at least I hope, build another property in the same place where mine is where people want to visit.

Dave Meyer:
Absolutely. All right. So our next headline is about Facebook or their parent company Meta, which will no longer support the ability for sellers, people who want to sell real estate as a business anymore. So you basically have to use your individual personal account. So for example, if you were a car dealer in the past, you could list all of your cars, even though that you’re a business on Facebook now, only an individual who wants to sell a car or real estate in our industry are going to be able to do that. So this brings up a lot of questions. I’m first curious, do you think this is going to impact people who are wholesaling or trying to sell businesses or even looking for tenants?

David Greene:
I think it will, but I think this is a positive change for us in real estate. I don’t want some huge house flipping business or BlackRock to come in and say, “Hey, here’s 400 houses that you could buy in the same forum where somebody’s trying to do a for sale by owner on a property.” So if we’re the investor, we’re looking for the deal, you want to be person to person. I want to be talking to another human that’s not experienced in this, that is not a business that knows more than I do. I want to buy a car from a regular Joe. I don’t want to buy a car from the dealership that has skills and experience, what gives them an advantage. That’s why you go to Facebook marketplace is to avoid getting taken advantage of by the people that know more than you. So I like Facebook getting rid of the professionals out of the mom and pop type of a group, which is cool because we don’t see much of that in real estate. We’re losing the mom and pop feel as institutional money kind of comes into our industry.

Dave Meyer:
Totally. Yes. I think it allows Facebook to almost specialize a little bit more. It’s like if you want to see all the deals that a agent has, go on the MLS, the MLS is [inaudible 00:26:57]. If you want to find tenants, you can market that on dozens of different aggregator websites. It is actually nice for Meta to be able to do this and allow people to sell individual properties or to just be able to amplify their personal businesses and listings in a way that they’re not competing with major businesses. But I’m just curious, do you think this has any risk? It sounds like some of the feedback about this is that if you’re a seller and you have to use your own name, that there might be a security risk there.

David Greene:
Yes, I suppose. But that’s always been the case. If you’re going to use Facebook marketplace, I believe it’s linked to your Facebook profile anyway, so people can find out who you are.

Dave Meyer:
And that’s true.

David Greene:
I don’t think it’s going to be additional risk that wasn’t there before. I’d like to see Airbnb do the same thing. I don’t like when I’m looking for a Airbnb to stay at, and then some big hotel has their stuff on Air. I think most people see that and they’re like, I’m trying to avoid the big expensive hotel and I’m trying to look for a local person to support or more value a bigger space or less money, whatever it would be. When you let the people that are professionals at doing this come in, they just bully everybody else out. They have resources, they have marketing, they have skills, they have experience. We’re trying to create almost a barrier to that, like a barrier entry like we were saying before. So I’m happy to see Facebook making this move. I would love it if VVRBO and Airbnb would take a similar step. I don’t want to see a Hilton listing when I’m looking for a short-term rental stay at in some city I’m going to be visiting.

Dave Meyer:
Yes, absolutely. That makes sense. Do you think this is going to be the resurgence of Craigslist? All of a sudden it’s going to rise to the top?

David Greene:
Yes. That’s what our producer Kaylin said is this going to be the rise of Superman Craigslist going to come right back again. I think Craigslist has so many bugs, it’d be very difficult. That’s why people moved into Facebook marketplace. They got tired of.

Dave Meyer:
But it’ll always be there. It’s like Craigslist, every other technology can move light years ahead and Craigslist will still be there being the exact same website it’s always been.

David Greene:
Yes, it’s Jack in the Box. 2:30 in the morning, Jack in the Box is always there for you. Is it the best experience you’re going to have? No. Are you going to regret it in the morning? Yes.

Dave Meyer:
Yes.

David Greene:
But it is there.

Dave Meyer:
All right. I’ve actually never been to Jack in the Box.

David Greene:
In your whole life?

Dave Meyer:
Never. If they didn’t really have it on the East Coast where I grew up. It’s like a West Coast thing, but.

David Greene:
I had no idea. I just figured it was everywhere.

Dave Meyer:
I’ve never had it.

David Greene:
So do you have a 24-hour place that you guys can go to on the East Coast?

Dave Meyer:
Not-

David Greene:
You’re just going to be hungry.

Dave Meyer:
… Think of.

David Greene:
The 7-Eleven.

Dave Meyer:
They’d have McDonald’s that was like 20-

David Greene:
24 hour.

Dave Meyer:
I grew up in the suburbs, so not there. All right.

David Greene:
Probably a good thing.

Dave Meyer:
Yes. Next time I come to California, we’ll go. So for our last one, we have one more headline, which is the Biden administration released a framework for rental protections. And so you’ve heard of this, I assume.

David Greene:
Oh, yes.

Dave Meyer:
And my take on this, just so everyone knows this, there’s a lot of intention here, stuff that they’re planning to do, but there’s not a lot of meat. There’s not a lot to sink your teeth into form an opinion on. But do you have some thoughts on what has been released so far?

David Greene:
Well, there’s a couple components to it. One of them has to do with my understanding, it’s limiting background investigations that can be done on your tenant. So they’re already starting this in certain places in California where they’re making it illegal for landlords to run a criminal search on any potential tenant that’s going to be coming in. And they’re claiming that it’s unfair to people who have a criminal history that they don’t have the same access to housing that other people do. So it’s slipping into the fair housing ethos for certain jurisdictions, which obviously, it’s just like every political change, it benefits some people and it hurts other people, or it benefits some strategies and it hurts other strategies. There’s always a give and a take. So if you’re somebody who’s coming from that place, you’ve had a hard time getting housing, this sounds like a positive change for you.
If you’re a landlord who has been relying on criminal backgrounds and help make decisions for tenants, it’s going to change probably where you’re going to invest. I would assume in the cities that do enact these policies, you’re going to see less investor demand. It doesn’t mean houses aren’t going to sell, but you’re not going to have as many investors going there. And if this does become a thing that becomes a sweeping regulation, that this is something where landlords have less authority or control or autonomy, I should say, over the decisions that are made. The location you buy in will become extra important and maybe the price point.
So I don’t know exactly how that works out, but this might affect areas where rent is $400 a month more than it would affect an area where it’s $4,000 a month. So it’s another thing to be thinking about if this does pass, location is going to become different. And then probably some other things like Section eight I think would gain some traction. Because if you’re getting paid from the government for your tenant, you’re not as worried about what the individual tenant is going to be up to considering their ability to repay.

Dave Meyer:
That’s really interesting. That is one of them. I’m interested to see what they actually recommend. And the reason I was saying before, what the Biden administration has announced so far is like they’re going to direct the FTC to look into this or the Consumer Financial Protection Bureau to look into this. So we don’t know these specific suggestions, but it does sound like they’re following the lead of California, and that might be one of the examples that they look into. One of the other ones is the FHFA, which is the Federal Housing Finance Agency announce it will launch a new public process to examine proposed actions including renter protections and limits on egregious rent increases. This would only be for federally backed housing, but curious what you think about that.

David Greene:
Well, this is a form of rent control. It’s not like it’s a new thing. We’ve had this for a long time in certain areas, rent control is bigger than others. Again, I’m in California, so Los Angeles has significant rent control. San Francisco has significant rent control. Investors still do very well in those areas, but in certain situations it can become problematic over time. So every once in a while we’ll find a San Francisco listing where the landlord is not able to increase the rent past a certain point. So you’ll get somewhere where fair market rent might be $5,500 a month, and there’s a tenant paying $1,200 a month, that will affect the value of the real estate significant. They want to sell this property, this triplex and two of the units are occupied at $1,200 a month. You can’t get a investor that’s going to go buy that property.
But also, this bleeds into house hacking because it’s not all pure investors. There’s people in San Francisco that just have regular W2 blue collar workers that could not afford to live there if they weren’t house hacking. And now you have two of your units that are not available that can’t be rented out because they’re occupied by below market rents. So I think long-term, if you’re looking at how this could affect if this stuff does pass, this would actually make, because traditionally real estate has done better, the longer that you own it, this can turn the odds against you in some of those cases. So maybe short-term rentals will become more popular.
There’s going to be less long-term rentals which ironically would reduce the amount of housing available, make it worse for renters as there’s less housing available, there’s less supply. So now landlords can charge more because the demand versus supply is all whacked out. So this type of stuff, when it happens, there’s winners and there’s losers in every category. You can’t just blindly follow a mold. This makes the person who’s paying attention to these things, it gives them a big advantage over the person who bought a property 20 years ago and just doesn’t pay attention to the market anymore.

Dave Meyer:
Yes, absolutely. You’re going to have to be pretty nimble and to pay attention to this.

David Greene:
Yes.

Dave Meyer:
I do think this one is really interesting because what the Biden administration said was they were basically looking at public backed properties, which isn’t a huge amount. I think it’s like 28% of the market, but there was also a letter sent to the Biden administration from some members of Congress encouraging a more broad look at rent control. And I do think there’s a lot of studies, I’ve looked into this, there’s a great Freakonomics podcast episode if anyone wants to listen to it, about the pros and cons of rent control. And it just seems like it doesn’t actually work, even for the intended effect, which is like even if you wanted to help provide fair and affordable housing for people, it actually really helps the incumbents, like the people who are already in property.

David Greene:
That’s exactly right.

Dave Meyer:
But for people who are moving to that city-

David Greene:
There’s less-

Dave Meyer:
… Moving into that apartment-

David Greene:
[inaudible 00:35:14] To get into.

Dave Meyer:
It actually goes higher.

David Greene:
Yes.

Dave Meyer:
Because landlords need to compensate for those, the people who stay in their apartments for a long time. So they actually charge more for people who are moving in. And there are some studies in California actually, and I think in Portland also, that goes up. So I understand that there is an issue with affordable housing. I just hope that whatever comes out of this is a evidence backed solution that helps both sides.

David Greene:
Well, my subjective opinion, again, I don’t know this is going to happen. I’m not speaking for anyone but myself, is that these changes make real estate investing less passive than what it used to be. So the idea of passive income buy a couple properties, live off the rent, never work. That’s getting harder and harder and harder to do as we’re talking about, you have to stay on top of the changes that are being made. If Chat GPT comes in and makes sweeping regulations to the short-term rental market, guys like me, we buy short-term rentals. We hire a property manager. We’re like, you do it, I don’t want to hear about it. Next thing you know, revenue’s down by 60% because my proper manager can’t get it booked because everybody’s using the strategies that they used to have an advantage in as a professional.
Well, now there are no professionals because Chat GPT can do it for everyone. Or like we were talking about with rent control. So that makes the people that are investing in real estate have to pay attention to what’s going on with their property. It’s turning it more into you’re a business operator. You’re more of an entrepreneur as you’ve always been an entrepreneur, but it requires more out of you to manage properties than what it did before, which gives people listening to podcasts and reading the news and getting informed and advantage over the people that aren’t paying attention.

Dave Meyer:
Absolutely. Yes. The operational load is-

David Greene:
It’s a great way to inspire.

Dave Meyer:
Yes. It’s just like you have to run a business, but hopefully you already knew that. If you’re going to get into real estate investing, it’s not buying a bond. It’s not buying stuff.

David Greene:
Yes. And the people listening to us right now, they’re fine. Those people shouldn’t be worried. It’s people that don’t know about podcasts, don’t know about YouTube, don’t read books, don’t follow what’s going on. The ones that aren’t hearing this message, that are actually going to be the ones that are at the disadvantage.

Dave Meyer:
Yes. Absolutely. All right. Well, those are all the headlines I got for you. I thought you did a great job putting these together.

David Greene:
Thank you. The production team.

Dave Meyer:
Well, yes. This was all Kalin and Eric, but I thank you. It was really helpful hearing your opinions on all this, and hopefully everyone listening to this got a lot out of it. We’d love to hear your feedback on it. If you like this, please give us a five star review, or you can hit up either David or me on Instagram or wherever to give us feedback. I am at the Data Deli.

David Greene:
I am at David Greene 24.

Dave Meyer:
All right. Well, thanks a lot, man.

David Greene:
Yes, thank you. And if you guys like this show, leave us a comment on YouTube. Tell us what you liked about it. Maybe we missed a headline that you want to hear about. Put that in there. We will look at that, and we will add that in the next show. We really do look at your feedback, we look at your comments, and we incorporate that into the shows we’re doing to make them as good as possible. So thanks for joining me, Dave. I’ll see you on the next one.

Dave Meyer:
All right. Great.

John Kim, analyst at BMO Capital Markets, joins Jon Fortt and the ‘CNBC Special: Taking Stock’ to discuss the all-time high vacancy rate for office buildings, which sits at 12.9 percent.

There can come a time for many established businesses when processes become overwhelming, projects start running off track and tech stacks can get too complicated to function cohesively. All of these signs point to a need for simplification—a “decluttering” of the business and its systems. Taking the time to review what’s no longer necessary, keeping only what adds value to the business, is essential if you want to streamline your processes—but where should you begin?

Below, the members of Young Entrepreneur Council offer a few suggestions about where you can start as well as what you might want to get rid of or reconsider this year and beyond.

1. Take An In-Depth Look At Your Expenses

An in-depth look at your profit and loss statement is often a great place to start. Carve out time to review expenses incurred over a few months and you may be surprised at how many subscriptions and services you no longer use but are still paying for. You may also find that platform fees have increased unexpectedly, prompting further investigation and cost-cutting opportunities. – Jack Perkins, CFO Hub

2. Cut Unnecessary Meetings

Cutting unnecessary meetings is a great way to declutter business operations. We’ve just audited our meeting calendar and identified several recurring meetings that didn’t need to happen or didn’t need to be as frequent. By eliminating meetings that weren’t offering enough value, my team has more time to do focused work. As a result, we’re already seeing more progress in our projects this year! – Diana Goodwin, MarketBox

3. Restructure How You Spend Your Time

In our experience, the most effective “decluttering” isn’t paring back business services or subscriptions you don’t really need but restructuring how you spend your time. We use S.M.A.R.T. goals (Specific, Measurable, Attainable, Relevant, Time-bound) to guide our work. It’s an easy way to prioritize, but even more fundamentally, it helps you understand what’s important and what’s not. – Andrew Schrage, Money Crashers Personal Finance

4. Review Your Company’s Knowledge-Sharing System

One important place to declutter is your company wiki or knowledge-sharing system. Archive old documents or processes that are no longer active. Revise and clean up old project files and delete videos and other outdated marketing materials. This saves space, which you’re often paying for, and makes it easier for employees to find what they need, thus saving time and money. – Nathalie Lussier, AccessAlly

5. Determine Which Projects Generate Low ROI

Cut projects and initiatives that generate low ROI. Passive business leaders continue to expend resources on anything that produces a profit. However, there is an opportunity cost with all resources you deploy. Look at things that have a low ROI and reallocate that labor and budget toward projects that are more likely to generate a higher return. – Firas Kittaneh, Amerisleep Mattress

6. Discuss Obstacles With Your Team

Start by asking your team what unnecessary hurdles they face in their daily operations that prevent them from performing at peak efficiency. As a leader, you may be so removed from the day-to-day that you aren’t aware of bottlenecks, unnecessary meetings and clunky processes. Your teams, however, are acutely aware—and likely have already done the work of brainstorming solutions. – Samuel Saxton, ConsumerRating.org

7. Reduce Your Paper Use

Paper is not your friend. Businesses get so much of it and need so little of it. The first thing to do is purge all physical files. You must keep banking and tax records for seven years but can get rid of all those pamphlets other vendors left you last year that you never considered. You may also want to consider getting rid of old electronics. – Baruch Labunski, Rank Secure

8. Evaluate Your Tech Tools

With the rapid emergence of new tech apps in the business world, I recommend conducting semi-annual evaluations of your company’s tech tools. This will allow you to identify and eliminate redundant or ineffective tools and assess the tools’ compatibility, leading to a more streamlined process and minimizing company expenses. – Samuel Thimothy, OneIMS

9. Simplify Your Processes

To declutter business operations this year, try eliminating unnecessary complications. For this, you should consider fine-tuning workflows and removing unnecessary steps to get the job done. To attain operational excellence, business leaders should pursue simplification. So, it’s best to remove tasks or activities that serve as more of a hindrance than facilitate attaining the set goals. – Stephanie Wells, Formidable Forms

Dave:
Hey everyone. Welcome to On The Market. I’m your host, Dave Meyer. Joined today by Jamil Damji, Kathy Fettke, Henry Washington. What’s going on everyone?

Henry:
Yo! What’s up?

Kathy:
Ooh, excited for a debate today.

Dave:
Yeah. This one’s going to be fun.

Jamil:
I like debates because the last time we did one, I won.

Dave:
You did. We don’t have point, or maybe I’ll sign some points here. I don’t know. Last time was at BP Con and Jamil famously destroyed everyone else and won the right to plan episode of On The Market.
I don’t think we have stakes for this one, but I am still looking forward to a spirited debate, because we have a topic that is definitely controversial right now.
And we’re going to be talking about whether or not we are in a recession right now. If we are going into a recession. We’re also going to talk about whether or not we were in a recession last year. And I am looking forward to this conversation. I have no idea how any of you feel about this, so I think it’s going to be fun to talk about this.

Kathy:
What happens if we all agree?

Dave:
I will pretend I disagree with you to make some drama.

Kathy:
Perfect.

Dave:
Well, unless, maybe I will naturally disagree.

Jamil:
He’ll play devil’s advocate.

Dave:
Yeah, exactly. So that is what we got on tap for you guys. Just so you know, that the reason that this is a debate in the first place is because the way a recession is defined in the United States is by a government entity called the National Bureau of Economic Research, and they do it retroactively. So they basically wait until well after the economic turmoil has happened, and then they say, like, “Okay, this is when the recession started. This is when it ended.” But it could be years after it started.
In the Great Recession, things started falling apart in 2007, 2008. It wasn’t until 2009 that they said the recession started back in 2007, for example. And I know some people believe that this has changed over time and that the government has changed the way that recessions are defined. That is not true. This is the way it’s been defined since 2000 and or back into the 1970s.
But I will just say that, because the way that we define recession is sort of confusing and retroactive. Most people use the definition of two consecutive quarters of GDP declines. That is what most people talk about. And so we’re going to talk about today, whether we think that is an appropriate definition of a recession, and if so, are we in one? Are we not in one? And get into all that.
So this will be a really fun conversation. I think we’ll learn about lot. We’re going to talk about what indicators everyone follows to track if we’re in a recession or not. So we’re going to get into that in just a second, but first we’re going to take a quick break.
Okay, let’s jump into this topic. Before we get into talking about today, let’s talk about last year, because as I said at the top of the show, the traditional sort of commonly used definition of recession, two consecutive quarters of GDP declines, which we saw in 2022. First and second quarter, we saw real GDP declines, but to date we have not heard from the National Bureau of Economic Research that we were in a recession. They still could do that retroactively. Haven’t said it yet.
So Kathy, let’s start with you. What do you think? Were we in a recession last year?

Kathy:
We might look back and say that, that was the recession that everybody was panicking about. We really don’t know, and I think we will look back and it’ll be crystal clear at some point.
But I would say that there were certainly industries in recession. Real estate, one of them. Real estate sales, definitely in a recession, but not everything else. I mean, job growth still strong and we had two consecutive positive GDPs right afterwards.

Dave:
Yeah. It’s very, very strange. Last year was a very weird time because some markets were, I guess we’re going to say that a lot probably over the course of this episode, but we did see those two consecutive quarters of GDP growth. And I should probably say, if you don’t know, GDP stands for gross domestic product. It is basically a measurement of the total economic output of the entire country.
And so we saw in the first two quarters of 2022 that GDP fell on a real basis, which means that it’s actually growing. But when you accounted for inflation, it was actually declining due to the inflation. So that’s what happened last year, but curious to hear from Henry. What do you think? Was that considered a recession?

Henry:
Yeah. So first, let me caveat this. I am no economist. So everything that I think is based on what I see and how I feel. Well, that’s pretty much how I run my life anyway. But when I look back at 2022, I think, so how I judge a recession in my mind is like, “How are people responding to the negative impacts that are happening because of this, quote, unquote, “recession?””
And when I think about 2022, the thing I think about is like, “Well, consumer spending would definitely go down in a recession.” Because people are holding onto their dollars a little tighter, inflation was starting to rise, and so that money means more to people. And it’s more about spending money on the things that you have to spend money on, to feed your family and provide shelter.
So consumer spending typically goes down, but when I looked at consumer spending in 2022, it was up. It was up 5.9% year over year. We went from 141 billion to 142 billion in consumer spending. So if that tells me that if we were in a recession because we had the two negative quarters of GDP, that the news didn’t get to people yet or that people weren’t as impacted yet, or the impact was to come in the future. And if you look at consumer spending now, it’s down just a little bit, but it doesn’t feel like a recession. So I would say no.

Dave:
All right. I think we should all caveat that we are not economists. We’re just playing one on this podcast, but we do, I think, follow it closely enough that our opinions are at least well-informed, I hope. Jamil, what about you? What do you think?

Jamil:
Well, it’s interesting that Henry is using indicators that I think actually matter. How do things feel? What does it look like and what does it feel like? Because I’m 45 years old, just turned 45, and I’ve been through a few recessions. And I can tell you that the ones that I can remember, I actually felt them.
I felt them, regardless of whether I was an entrepreneur or I was in a W2 situation, I felt the recession. I understood that, “Oh, things are different right now.” We’re tightening up. We’re not spending. Life has adjusted and we are making adjustments through it. And so I really do think that we have to look at these types of conversations and take into consideration how the broader country or how we’re feeling as a nation with respect to our economics.
And so the fact that we had two declining GDP quarters consecutively, which is the definition of recession, and yet we have a failure to call it. It’s an interesting thing. Why not just call it? So if this is the indicator, call it. You saw it. It happened. Call it. It’s okay. It’s okay to say the things, right? So the reason I bring this up is because I want to propose new indicators, because if we’re not going to say that two declining GDP quarters are consecutively declining, GDP quarters are a recession, then I propose new indicators.
I propose that you go to a major metropolitan city, you get 10 miles away from the airport, and then you look at the number of UberXs and the number of Uber Blacks that are available at 8:00 AM in the morning. If the number of UberXs is less than the number of Uber Blacks, then we are in a recession.

Kathy:
Yeah. And you could add to that, if you can get a reservation at the restaurant you want to go to.

Dave:
Oh, I see, okay.

Jamil:
Yes. Because it’s about feelings, right? If I can get an Uber Black a lot easier than I can get an UberX, then I know that people are spending money because we got the black cars out there. So how can it be a recession?

Dave:
There’s this very funny recession indicator, I don’t know, it’s historical performance, but it’s men’s underwear, that you could predict recession by men’s underwear. Because men just don’t want to buy new underwear ever, and they, well basically only do it during really good economic times when they’re feeling flushed, unlike every other time, they’re just like, “Wear the same men’s underwear.”

Jamil:
So wait, are we in a recession if you go commando? Is that what it is? “All the men are commando. We are in a recession.”

Dave:
Yes. Basically, yes.

Jamil:
I think you’re on the summer hols with the number of holes in your underwear are the reflection of whether-

Henry:
I think you’re onto something. I only buy my undies when I’m in a good mood, typically financially, because them Duluth Trading underwear ain’t cheap, man. You got to go, you spend $25 on a pair of underwear, you got to be feeling good about life.

Dave:
Whoa.

Jamil:
Damn. Those are some expensive chuddies you got.

Henry:
Yeah, man. Only the best.

Kathy:
And with women, it’s just when Victoria’s Secret is having a sale, that’s when you buy your undies.

Dave:
Yes. Women are more like civilized people who will continue to buy the clothes they need despite the economic situation. Men are like, “You know what? I can cut back on underwear.”

Kathy:
Well, some people, I don’t know if you guys have heard this, but some people are calling this the white-collar recession or the Patagonia Vest recession. Have you heard that?

Dave:
No, but I’m wearing a Patagonia sweatshirt right now, so doesn’t bother.

Kathy:
Obviously people that got hurt or a lot of people have been affected by the rising interest rates and the attempt to create a recession by the Federal Reserve. And so a lot of people have lost, or their net worth has gone down in the stock market, certainly in crypto and short-term rentals, income has gone down. And so they’re saying it’s really affecting those who, the net worth of those who had a higher net worth last year.

Dave:
It kind of makes sense if you just look at the high profile layoffs that have been coming through the economy over the last couple months, they’re tend to be really high paying jobs in sectors like finance and tech are sort of leading the way.
And if you look at the recent jobs report, which we’ll get into in a little bit, there’s actually a pretty strong job growth across the board, but particularly robust in things like hospitality and service sectors that are not traditionally as high paying.

Kathy:
Yeah. So I think the bottom line is you’re feeling a recession. If you lost your job, that’s going to feel recessionary. And we probably know a lot of people who have, who are in the tech space, and certainly again in industries where higher interest rates are affected, and that would be real estate. Anyone in real estate sales is affected.
I have a close friend who just someone we know just lost their job. And that is why we love real estate. The more income producing assets you have, the less you worry about losing your job.

Dave:
That’s for sure. The one thing I do want to say about last year before we get into current stuff is, I’m more current. I keep thinking about this fact that the first half of 2022 is when we saw GDP declines, which a lot of people believe, would say that, “That is a recession. That’s how a lot of people define it.” But economic optimism was still pretty high then, and then it sort of switched.
GDP started growing again in Q3, in Q4 of 2022, but everyone got really pessimistic and really upset about it. So I’m just curious. It’s just this weird thing where it doesn’t seem like people’s sentiment and the data about the economy are actually lined up right now. I’m just curious if any of you have any thoughts about that?

Jamil:
I think, honestly, that’s one of the most perplexing things that we have about this, and probably why we haven’t called it anyways, is that sentiment, optimism has been strong and we’ve all felt that. Even though typically real estate feels a recession first, so it’s first in first out, we feel it, we’re the industry that feels it immediately, and we typically feel it when we’re coming out faster because of mortgage rates declining in an uptick in housing activity.
And so it’s one of these interesting dichotomies is that, again, back to what Henry is talking about, sentiment, the overall feeling. Even though we were losing money in the same quarters that GDP was declining, and I can tell you that and looking back at our P&Ls like, “Oh wow, we lost money on this flip. We lost money on this flip.” Meanwhile, the sentiment out there was still very strong and there were more Uber Blacks available than there were UberXs.

Dave:
All right. Well, along those lines I’m curious, now, it seems to me that sentiment is very low. I think, I feel it, I feel my sentiment has really declined over the last year just about the economy in general.
What do you think, Jamil, are you feeling the economy today is in a recession or are we heading towards a recession, or what are you thinking about the future?

Jamil:
Interestingly enough, I’m again going to defer back to our beautiful friend Henry here and say, I’m starting to feel optimism again. I had the pessimism, I felt this, I felt that, oh my god, especially going into the holidays and two months prior to that from Thanksgiving to Christmas, it’s been miserable in the housing market.
And again, if you’re got flips on the market or you’re selling, you felt that, you felt a lot of pressure. You felt just, “Where is everybody? How come there’s just not a lot of activity?” And maybe I’m just myopic because I’m talking about a market like Phoenix where we really felt that more than say, how Henry felt in northwest Arkansas.
However, after the Christmas holiday, I have not seen as much or felt as much strong investor activity, strong buying optimism. I mean, pendings are spiking. We can’t keep inventory. We just can’t keep inventory on our books. We pick up a house, we sell a house, we pick up a house, we sell a house, and it’s like, “Oh, wow, okay.” I thought we were going to kind of loosen our tighten things up around here, but it looks like we’re putting out more money and taking in more opportunities.
And it’s also interesting that I have friends in the vehicle industry. And so they had situations where their car lots were just swollen full of inventory because they had overbought, because there was a shortage of vehicles for a time, and so dealers were overpaying and buying. And anyone who bought a car last year understands what I’m talking about right now. We very likely overpaid for our vehicle if you bought last year.
Well, I am talking to my friends that are in the car industry and they’re also saying, “Right now, Jamil, we can’t keep inventory on our lots. We just can’t.” And right before the holidays from Thanksgiving to Christmas, we were all tremendously worried and we had no idea what was going to happen if we were going to go bankrupt, if we were needed to get more credit. We were all worried. And after the holiday, things have just exploded.
So right now I’m like, Henry said, I’m optimistic. My sentiment right now, it’s pretty good. I feel things are picking up and housing should be, we were first in, I felt it. We’re first out, I feel it.

Dave:
All right. Well, yeah, by those two indicators, housing and the car market, there’s definitely a pickup in activity over the last couple of months.
Henry, what about you? Are there any indicators or data points that you look at to try and assess the current economic condition?

Henry:
Well, yeah. So there’s the general indicators that everybody looks at. GDP, 2.9%, right? That’s up. Unemployment 3.4%, right? That’s good.

Dave:
Historic lows.

Henry:
Yeah, historic lows, right? January, you got job claims at 183,000, so that’s a nine-month low. So those indicators are telling us, “No, we’re not in a recession.” There are some indicators that may be telling us, “Yes, we are.” But those are the key indicators people look at.
But again, feelings. So not only how I feel, because I feel exactly how Jamil feels. But if you look at how other people feel, if you look at consumer confidence, consumer confidence is super high right now. And part of the reason that that’s super high is if you’ve been paying attention to the stock market over the past few weeks, these earnings reports have been coming out and a lot of companies are reporting beating earnings. You have somewhat, 69% of the companies that have actually reported earnings above their targets.
So that is going to make not only people feel more confident in the economy, but it’s going to make companies feel more confident in the economy. And if companies are feeling confident, then they’re going to go out and continue to spend money. They’re going to invest in new projects and new technologies. They’re going to go out and invest in new jobs in hiring people that are going to help them hit their goals for the next quarter.
So if they’re feeling confident, people feel confident. People feel confident, people spend money. If people spend money, it’s a benefit for us in the real estate space.

Dave:
Well said. Kathy, what do you think?

Kathy:
We are an opposite land. It’s such a strange time to look at the data that we get and be concerned about it. And that data, by that data, I mean 517,000 new jobs created. This beat expectations by double, even triple by some economists. And this is after almost a full year of the Fed trying to slow things down and raising interest rates in an unprecedented way.
So no, you can’t be in a recession when you’re creating that many new jobs when businesses are hiring that many new people and not laying off people. And then retail sales up to 3% in January. So people, they’re spending money and you see it, at least for me, when I go out, and again, I was serious trying to get a reservation, and at certain restaurants you can’t get in, you can’t get in.
So this would normally be great news, but people are panicked by news like this, by good economic news because that means that the Fed may continue to raise rates. But what I want to say about that, is they already said they were going to do that, so don’t panic. The Fed has been pretty clear about what their plans are, which is to get the overnight, the Fed fund rate, the overnight lending rate above 5%. It’s not there yet. We’re four and a half to four and three quarters percent.
They already told us that they’re going to keep raising, so don’t be shocked, they are planning to continue to raise rates and to hold them there. I’ve heard lots of people say, “Oh, as soon as they get to 2023, they’re going to start reversing and lowering rates because it’s going to slow things down.” And that’s not what they’re saying.
They’ve been pretty accurate about what they forecast. They tell people what they’re going to do. And generally, investors certainly stock market investors, listen, and we have a ways to go. They’re going to raise rates a few more times and most likely hold it there for the rest of the year, and especially after these massive, massive economic numbers that have come in, showing that the economy is strong.
So no, I don’t see, we couldn’t possibly be in a recession if the Feds raising rates and we’re having job growth and people are spending money.

Jamil:
Kathy, do you think that there may be just some possibility that we, people are starting to listen to what the Fed’s saying and trust them at their word? And so do you think that there may be just this increase in activity because people are just trying to beat lending costs getting even more expensive, or is this activity real and not just artificially motivated?

Kathy:
Well, rates, if we’re talking about housing and what you’re feeling in your industry and our industry, is rates did go down over December and January, and I think that’s what we felt. At our business at Real Wealth we’re booming again. People flocking. We do one webinar and everything sells, so it’s like, “Yeah, we’re back.” But that was because rates went down and numbers started to make sense again.
Now, they’re going back up again because the feedback we’re getting on the economy is, it’s booming. And generally people get out, investors start to invest back in this stock market and out of bonds. And if they’re buying bonds, rates come down. If they’re not buying bonds, rates go up, and that’s where we’re at.
So we could feel that and we could be having a different conversation next month in terms of real estate going, “Oh, things slowed again because rates went up a bit.” But that’s just our industry, that’s not America.

Jamil:
That’s not the economy overall.

Kathy:
Yeah.

Dave:
I think, Kathy, you made a good point that we’re in this weird situation where good economic news is felt like bad economic news, because it means that the Fed is going to continue to raise rates, and then there’s this pending economic downturn that’s just always sort of six to 12 months ahead of us. At least that’s what it’s felt like for the last…

Jamil:
Do you all feel like we’re being gaslighted a little bit?

Henry:
Man. Yes.

Kathy:
I just think everybody’s panicking. Everybody’s afraid of losing everything. Nobody wants another 2008, no one wants to start over again and lose everything. So there’s been people predicting recessions and housing crashes for the past 10 years. It’s nothing new.

Henry:
Look, I’m with conspiracy theory Jamil on this one. You create the fear, people start panicking, they start panic selling, and then the wealthy take advantage, man. They go out and scoop stuff up, but it just-

Jamil:
We’re just gaslighting everybody playing games to come in and gain.

Henry:
Yeah. Yeah.

Dave:
Well, I think there is truth to that because… Well, I don’t know if it’s conspiracy theory, I have no idea. But I think there is some element that the Fed and the government wants people to stop spending money.
They want you to be afraid, not necessarily because it benefits rich people, maybe it does. But they definitely want that because that will help inflation. If people are afraid and stop spending as much money, then that would help curb inflation and the Fed would be delighted with that to happen.

Henry:
Sorry, I have to go. There’s people with black suits at my door.

Dave:
But I also want to get back to something you said Jamil was like, I do think there is, they call it the dead cat bounce. I do think there is a pretty good chance that Q1 of this year for the housing market looks pretty good and then it slows down again because inflation data came out this week. It was down a little bit, but it was not a very good inflation report generally speaking, and it’s that combined with what Kathy was talking about with the jobs report. It’s just basically giving the Fed a green light to keep raising rates aggressively.
And so we were seeing mortgage rates start to slide on these recessionary fears. But now, I think there’s a good chance the terminal rate, what the Fed goes up to is going to be higher than five and what could be five and a half, and I think there’s a good chance that we see mortgage rates now go up to somewhere near seven, seven and a half over the course of this year, or we go into recession, it goes the other way.
It’s just super hard to tell. And my read on this is when it’s all said and done, if we’re looking back at this five years from now, they’re going to call this whole thing, I don’t know if they’re going to call it recession, but from 2022 to through 2024 is just going to be this weird half recession, half not recession, where some parts of the economy are doing really well and some parts are doing really poorly.
And we’re not going to ever have this, quote, unquote, “recession” where you feel it, like you were talking about Jamil, where everything goes down. It’s going to be this sort of whack-a-mole situation where jobs are up, housing’s down, housing’s down, cars are good. Where we just have this weird thing.

Jamil:
Yeah. It’s a recession mullet, from the front party in the back.

Dave:
I don’t even know what to say, but I like that idea. Do you think that makes sense? Am I off base?

Jamil:
Not at all.

Dave:
It just feels like-

Jamil:
I don’t think you’re off base at all.

Dave:
… we’re all trying to call it a, “recession,” quote, unquote, but the economic situation we’re in defies normal words for it. No one’s calling it a recession because it’s just different than any other economic situation we’ve ever been in.
That doesn’t mean it’s not bad, it doesn’t mean it’s not painful. It is bad and painful. It doesn’t, but there are also good parts of it, so it’s just really hard to fit this situation into our conventional definitions of economic cycles.

Kathy:
I mean, if you boil it all down to what is so different and weird this time around, besides the fact that we had a global pandemic that none of us have experienced before, is that the Fed created over $3 trillion in a matter of eight, what, 13 months? And that is a huge shock to the system, I suppose in a good way, where money went to the people.
And a lot, we talk about the stimulus checks, but those PPP loans, those loans that went to businesses sometimes were in the millions, and it was sometimes to businesses that maybe didn’t need that money, but they got that money and that’s extra and that, where did that go? Usually when there’s profits, it goes to the owners or the shareholders, and then that goes out into the economy.
Generally, people spend it or they invest it, so we’re still in the hangover of that. That was a lot of money that perhaps was spent on buying all cash properties or buying things that without debt. We know that homeowners are in a really, really good position right now because many of them have high, lot of equity still. They have high equity and super low payments.
So that’s just another example of so much money that was easy to get, and if you were borrowing it, it was low debt that people are just not, and when I say people, I don’t want to say all people, but a lot of people still have money. Whether it’s in savings or they have the things that they wanted and bought with cash at the time.
So it’s going to take a while, I think, for that amount of stimulus to trickle down and to trickle out of the economy. And the Fed doesn’t want to talk about that part of it. Nobody seems to want to talk about that part of it, the over stimulus.

Jamil:
Well, I think what’s interesting, Kathy, is that in 10 years they’re going to have a report and it’s going to be all of the things that were bought with PPP loans.

Dave:
Oh, did you see that one recently?

Jamil:
No, I didn’t even know this existed yet.

Dave:
There are some. The government is starting to go after people for fraud, and one of them was an influencer. This woman who was an influencer got plastic surgery with a PPP loan because her business was her…

Jamil:
Is she a stripper or something?

Dave:
I don’t know. I didn’t look into it that much but it was kind of like her business is her appearance. So she basically got a-

Jamil:
Like Henry.

Dave:
Yeah. Yeah. But he doesn’t need money for it. That’s all natural.

Henry:
So you did no market research on that, right? That’s what we’re…

Dave:
Not that I’m willing to talk about on the show. I’m not going to tell you how I know about this story Henry.

Jamil:
Were there Lamborghinis, were there luxury mansions? What got bought with the PPP? You know what I mean?

Dave:
Yes. Yeah. There’s definitely going to be a reckoning for that and a few rap songs, I bet.

Jamil:
Yeah. Yes, probably.

Dave:
Well, so I’m curious how, given, are we all in agreement that I don’t know, I guess my feeling is I don’t know if they’re ever going to call it a recession or not, that’s out of my hands, but I do think this economic uncertainty that we’re all experiencing is at least all of 2023 and probably into next year. I don’t know. Do you guys feel differently about that?

Jamil:
I hope I don’t. I mean, again, as I mentioned earlier, it could be the dead cat bounce or it could just be a return to normality in housing, but I’m optimistic. I truly believe that 2023 isn’t going to be as bad as we had expected it to be.
If I’m looking back at the last two quarters of 2022, I had some definite anxiety about what 2023 was going to look like, and that anxiety is beginning to soften.

Dave:
Well that’s good. I like your optimism. I mean, just by the fact that how wrong economic projections tend to be. The fact that most economists believe that there will be a recession probably just by default piece, that there probably won’t be.
Except I am a believer in the yield curve. I don’t know how much you guys follow this, but that is the most reliable predictor of recessions that we have pretty much, and that does point to a recession. So that one, every time I start to feel some optimism about the economy, I look back at that. I’m like, “Oh, no, we’re screwed.”

Henry:
I think the big caveat there is exactly what Kathy mentioned. I mean, the indicators that we’re using are the indicators we’ve used historically, but historically we haven’t had this pandemic, which created its own problems.
And then yes, we created, the Fed created money, and in order to help people. I don’t want to say that the stimulus was bad or PPP was bad. It was created for a reason. There were people who absolutely needed those stimulus, right?

Dave:
Absolutely. Yes.

Henry:
We’re very fortunate here that we didn’t need those things. But when the pandemic first hit, I remember seeing people at the grocery store, I paid for a lady’s gas who was in tears because she didn’t know how she was going to be able to keep gas at her car. And so the money was created, I think, for the right reasons. And there were tons and tons of people, tons and tons of small businesses who needed PPP funds.
Does that mean people didn’t take advantage of it? Of course, people did. But I think it was created for the right reasons. But that’s this big caveat, I think that’s causing a lot of these, what you call it, whack-a-mole of the economy, industries up and down. We’ve had this huge outlier of a recession.
So yeah, I don’t think we’re going to be in a recession. I don’t think it’s as bad as people think it’s going to be. And who knows, maybe I’m terribly wrong, but I don’t know, it’s hard to believe or follow the indicators when this historically hasn’t happened before.

Kathy:
And here’s where the debate part will come in. I do think that, well, first of all, it’s nearly impossible to predict anything anymore, because we don’t really know what the Fed is going to do or how quickly they’re going to move given the very, very strong economic data.
If they do what they’ve said they’re going to do, they would raise rates throughout 2023 gradually, at quarter percent hikes, which is a lot better than three-quarter percent hikes, until they get to five or five and a quarter percent. So that would be several more quarter percent hikes this year and then holding it.
What we don’t know is how that’s going to impact what appears to be a pretty strong economy from all that money. I’m going to say the economy strong because if you or I took out a $3 trillion credit line, we’d probably be looking pretty good too. And that’s where we’re at. It’s just a still a lot of money circulating out there because of all that stimulus.
So will being at 5% Fed fund rate stabilize things or send us into recession? It doesn’t look like. And most people, most economists are now not predicting it for 2023. That it will be just flat, just a GDP of just kind of maybe half a percent or something like that over 2023, which is great. If we just hold, that would be wonderful.
The question is, what will 2024 be like and is that something that we should worry about? And that’s what we’re going to see in the headlines is, “Okay, this year’s going to be okay, but just wait till 2024.” And that’s the unknown.
So we’re not out of it yet. The recession headlines are going to be with us. How do you deal with it? That’s really the question, is how do you deal with it? How’s it going to affect you? It’s probably not going to be a 2008 type of collapse, although there’s people out there saying it will be, but there’s always people out there saying it will be. So that question mark will always be there, says, “How do you operate and live with that hanging over your head for another year too?”

Dave:
Totally. Yeah. I don’t wish for a recession or want anyone to lose their job, but it almost in some ways would be better if it just got over with, because it’s just dragging this out for a long time. This economic uncertainty and fear that everyone, myself included has, and I just want to say the scenario you’re describing, Kathy, which I think is a reasonable scenario, is probably the worst case scenario for housing prices.
If interest rates go up, but we do not go into a recession, in my mind, is the most likely scenario that could actually lead to a housing crash, because then interest rates are going up that puts upward pressure on mortgage rates. But without the recession to help, just so everyone knows, a recession usually pulls down mortgage rates.
So if interest rates go up, but there’s no recession, that puts the most of all the scenarios I can see happening, that’s probably the one that has the most upward pressure to mortgage rates, which would probably send the housing market down further than I have been expecting over the last couple of six months.
So just everyone knows, that scenario is good for the economy, but could be pretty bad for home values. I know some people are hoping for home values to go down so they can buy cheaper, but that’s just something I wanted to call out.
And then the last thing, the second thing I wanted to say is that what Kathy’s describing, what we’re all describing, what we’re trying to do here is just talking about different scenarios that can happen. I just want to reiterate that none of us know, and we’re just trying to play out and sort of game what different things could happen so that you can think through some of how you would react to these things.
So generally speaking, Jamil, given the uncertainty and these different scenarios that we’re all positing that could happen, how do you react with your own investing, your own money? How are you operating in this uncertainty?

Jamil:
Great question, Dave. I’m operating the way that I would normally operate when I’m, as I’d said on previous shows, I am still very, very bullish on the fact that our inventory numbers that real estate in general is not, whatever we’re experiencing right now is engineered. This isn’t normal market cycles, and we are lacking inventory across the country. So I am going to continue to buy, I’m going to do what I would normally do. I’m just buying everything deeper. I’m doing what I would normally do, but more aggressively right now.
And actually, funny enough, I’m historically known as somebody who doesn’t hold a lot. I’m a wholesaler, so I like to flip paper and generate cash that way. But this last six months, I’ve been buying and holding property because I’m getting stuff at such steep discounts right now and I’m watching inventory and I can see what’s coming around the corner, at least maybe not next year, maybe not two years from now, but 3, 4, 5 years from now. The inventory that I buy today, I’m going to be able to take massive, massive gains on, and I did this back in 2010.
I bought $800,000 worth of property in 2010 that I exited in 2019 for 8 million bucks. I mean, and that was one of the things that tipped the scales of my life, was being able to have that situation occur for me. So I’m trying to bet on that happening again. I’m holding, I’m buying, I’m buying aggressively. I’m going to hold really, really, really, really great assets at great prices, and I’m going to wait five years and see what happens with it.

Dave:
All right. Well, great. That’s very good advice. Henry, I’m sure you’re doing something radically different than what you normally do.

Henry:
Absitively, posilutely not. We are doing exactly what we’ve been doing. I couldn’t mirror Jamil anymore. We talked about it before on another show, but when we talk about investing in real estate, people obviously want to buy low, so that they can either hold and build wealth and get wealth through appreciation and equity.
Cash flow is great, but the real wealth is built through appreciation and equity or they’re looking to buy low and then add value to it and then sell high. And so if this is what you’re in the real estate space for, this is the time that’s for you, because you can buy deep discounts right now.
If you’re in the real estate space because you want to be able to buy and sell, maybe the timeframe that you’re going to look to maximize your sell is longer, like Jamil saying, he’s buying some, he’s holding them for the short-term, but his plan is to sell them when their value is at it’s, quote, unquote, “peak.” When their value starts to go up tremendously.
Also, if you’re in a place where you’re saying, “Hey, I don’t know where to start, but I know I want to get into large scale multifamily, I want to get into a space that takes a lot of capital to get into.” Well, phenomenally you could do exactly what Jamil’s doing. You could buy at discounts right now. You can hold them, which increases your net worth. You’re going to get the appreciation and the debt pay down over the next five years, but then you can leverage that.
Increase your buying power to buy larger assets, then still sell those properties that you bought five years ago at a profit. So it’s one way for you to get in now, where you’re going to get in deep and use that leverage to start to scale.
And then also for us, man, that we are getting such great discounts that we are able to do both. We are able to buy and hold and cash flow very well because we’re buying at a deep discount. Even though the interest rates are higher, we’re still cash flowing because of the depth of which we can buy, but also it’s still profitable doing flips. I’m going to do my first two flips that we’re going to sell here in 2023, are going to be triple digit flips, no pun intended there.

Jamil:
Yeah. Ding, ding, ding, ding, ding, ding, ding, ding. Let’s go.

Henry:
But put to caveat that, these are six-figure net profit flip.

Dave:
So, you’re going to make a hundred dollars, triple-

Henry:
Yes. Yes.

Jamil:
You know how many messages I get on the internet, just game laughing at us for that title. But no, he means hundreds of thousands of dollars.

Dave:
I had never thought about that. Someone else said it to me. I might have read it in one of your comments or something, I was like, “Yeah, okay. I guess there’s a point.” But I knew what you meant.

Henry:
So when you talk about a triple digit flip, we’re talking about a market in Arkansas where the spreads aren’t as big as in a market like Phoenix. And so that’s a big deal in this mid-tier market, especially with interest rates where they are, and with home prices starting to come down across the country, we’re still getting very, very high returns.
I’m turning down projects, that it would typically net like 30K because my time is better spent on the deals that are going to net me 50, 60, 70, 80, and they’re still widely available. I just turned one down yesterday and the wholesaler was shocked that I didn’t want to take the deal because I was going to only make a $30,000 profit. So there are plenty of opportunities still out there, and so our strategy hasn’t changed, but our underwriting is different.

Dave:
That’s awesome. Thank you. I mean, that’s super good advice. And Henry, you’re always just smooth and steady, always doing the same thing. I like that.
Kathy, what about you? Is there anything you’re doing differently or thinking about just in terms of managing your investments right now?

Kathy:
No. I mean, I will speak from the perspective of somebody who doesn’t do business where I live. I live in California, the regulations are ridiculous. The cash flow doesn’t exist. Prices are still extremely high. I know some people invest here, but I don’t.
So I speak from the perspective of me and our members who have to invest somewhere else to make the numbers work. And looking at where that is today, they’re over the last couple of years, it was really hard for us because you’re trying to compete, but you’re not in the market and you need somebody local there, but they’ve got 50 other clients, and how do you get that deal when you don’t live there and you’re kind of relying on somebody else?
And for many of us who invest out of state and not in the area where we live, we like to, I’ll speak again for myself and for people I represent, is something a little newer because you’re not there and so something newer or at least completely renovated is feels safer. You kind of know what you’re getting and you can rely on, this is everything’s already been fixed. I’m not going to have a lot of repairs, most likely on this property.
And that type of property, sort of A, B class property was almost impossible to get, over the last couple of years. And new builders, I started investing with new builds and new builders didn’t want anything to do with investors. So why would I sell to an investor when I can sell to the retail market for more and not have a bunch of rentals in my subdivision?
Well, all of that has changed. So from a perspective of somebody investing not where I live and helping other people build a portfolio, not where they live, this is an incredible time. This is so much better than what we’ve been dealing with over the last couple of years. Now, builders want to work with us and they’re giving us discounts and they’re paying down our mortgage.
So it’s like we’re in the money. This is why we’re so busy right now, because finally, investors like me, out-of-state investors who already have jobs and already are working and they can’t be as awesome as Henry and Jamil. We can’t do what you guys are doing because we’re not there.
So the opportunities for us are so much better, and so I’m optimistic from that perspective that this is the time that I can now get back in and build my portfolio and still get pretty good rates because like I said, you could negotiate, you could negotiate for the seller to help pay down your pay points, to pay down your mortgage.

Dave:
Awesome. That is also great advice, and I think that’s reflected across a lot of other experiences that we’ve been hearing about. People we’ve been interviewing on this show all seem to be, think that there’s great opportunities out there. There’s also a lot of crap out there, I will say. So it really is about finding good stuff.
I will say that for me, I am actually doing a few things differently. I am starting to get into lending because interest rates are really high right now and it’s a good market to be in lending. And the second thing I’m doing, just generally speaking is looking for to put some money into short-term opportunities right now because as if you listen to the show, no, I mostly invest passively in commercial real estate, and I do think commercial real estate is going to be taking a hit in terms of valuations and there’s going to be really good opportunities.
I know, I always say don’t try and time the market, but I’m not listening to my own advice. I’m going to try and time the market a little bit with commercial real estate, but I’m still investing my money for now looking into shorter term opportunities that I can still earn a really good yield for six months, 12 months, and then trying to see what happens.
Just as we’ve been talking about this whole episode, no one knows what’s going to happen, so I’m trying to buy some flexibility with my money so it can take advantage of even better opportunities if they come over the course of the year.

Jamil:
I just want to say that I want to be the first to call Dave the hardest, hard moneylender on the market.

Dave:
Thank you. I don’t really know what that means.

Henry:
The amount of people that are going to DM you asking for money.

Dave:
I should have, that’s a good point, Henry. Sorry. Now, people are going to ask me for money for sure. I don’t have a lot of it, so don’t ask me for that much. You’re better off asking someone else or ask James. He lends out a lot of money.
All right. Well, thank you all for being here. This was a lot of fun. I hope you all enjoyed this debate. As you can see, everyone’s just trying to figure out what’s going on. Hopefully, this helps you understand some of the indicators to look at, some of the sentiment that is occurring in the market right now and how you can prepare yourself for the weird, whatever you want to call it.
You want to call it recession, go for it. You want to call it something else. Whatever it is. It’s weird, the weird economy that we are in right now.

Jamil:
The mullet. Yeah, the mullet economy.

Dave:
The mullet. Exactly. The mullet economy.

Kathy:
The mullet economy. I hope that too soft.

Dave:
I feel like we [inaudible 00:49:02] a graphic for that. All right. The mullet economy. All right. Well, let’s just do a little round of where to find you guys. If you want to learn more about the mullet economy and Jamil, where should people contact you?

Jamil:
You can follow me on Instagram @jdamji. Also, I have a pretty fun and entertaining YouTube channel where I teach people how to wholesale real estate and can crack you up a couple of times, so you can find me on youtube.com/jamildamji.

Henry:
It is funny because you can find a video of Jamil and I in pajamas doing interviews about real estate on that channel.

Jamil:
It was a great interview. People loved our jammy jams.

Dave:
That sounds awesome. I haven’t seen that. I haven’t seen that. Well, Henry, what about you? Where can people find more about you and your pajamas?

Henry:
Yeah. Instagram, best place for me. I’m @thehenrywashington on Instagram or check me out of my website, henrywashington.com.

Dave:
All right, great. And Kathy?

Kathy:
I was going to say Instagram too @kathyfettke, but make sure it’s two Ts because there’s somebody trying to be me and don’t listen to them with one T. It’s two Ts, Fettke. And then probably a safer way is realwealth.com where nobody’s trying to impersonate me there. I don’t think. I don’t think.

Dave:
Kathy impersonators are unbearable on Instagram. It’s ridiculous.

Kathy:
It’s ridiculous. And they’re asking for money, so that’s not me. I’m not asking anybody for money.

Henry:
Kathy, I heard you mentioned a couple of times that you were having trouble getting a reservation for dinner. Did you tell them that you were Kathy Fettke of Real Wealth?

Kathy:
Oh, no. I didn’t use that.

Jamil:
No. Because they thought it was Kathy Fettke with one T.

Henry:
They thought you were… [inaudible 00:50:46]

Dave:
It was the fifth Kathy Fettke that had contacted the restaurant that day.

Henry:
You cannot have a reservation and you cannot pay with Bitcoin.

Dave:
Yeah, they asked, Kathy called the restaurant and asked how their crypto trading was going.

Kathy:
And I’ll help you. If you just give me five grand, I’ll invest it for you.

Dave:
Seriously though, if you are listening to it’s just public service announcement, if someone, any personal finance person, if the four of us, anyone else contacts you and asks you to trade with them, particularly Bitcoin or Forex, read very carefully the username of the person who is asking you, because it is very likely to be a scam. Please report them.
I know, I think I speak for all of us, that we report all the people who impersonate us, but Instagram and Meta is very, very slow to remove them. So-

Jamil:
I wonder why.

Dave:
… just be careful. If you ever see that.

Henry:
Be careful.

Dave:
Oh, I know why. Because there’s stock prices down 70% and they don’t want to reduce engagement even more.

Henry:
Oh, now the people with black suits are at Dave’s store.

Jamil:
Now I’m the conspiracy theorist, right, Henry?

Henry:
Yeah.

Dave:
I mean, I don’t know about that, man. It would be so easy to write an algorithm to stop them for doing that, and they just don’t do it.

Jamil:
A hundred percent.

Dave:
But it’s the same thing, right? Isn’t that what Elon Musk sued Twitter about, right? Was that so much of the engagement is bots.

Henry:
Yep.

Dave:
But they’re just like, “We don’t know what’s going on.” Because then they don’t have to report it to their investors. Anyway, don’t shadow-ban me Instagram.

Kathy:
It’s a love-hate relationship.

Henry:
So good.

Dave:
All right. We’re going to get out of here. See you all next week. Thank you all for listening. We’ll see you for the next episode of On The Market.
On The Market is created by me, Dave Meyer and Kailyn Bennett, produced by Kailyn 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.

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Every business is bound to face challenges at some point. The way your team handles such trials reveals whether they’re prone to succumb or overcome. Your team may experience unexpected delays in the supply chain that make it harder to meet deadlines. Or internal conflict may arise due to differences in personalities or varying opinions on how to get things done.

Whatever the difficulties may be, savvy business owners know team resilience is key to overcoming setbacks and meeting expectations. Often, the difference between success and failure comes down to the tools you carry in your proverbial toolbelt. Here are four ways you can equip your team with one of the most powerful coping tools available: resilience.

1. Own Mistakes

Resilience is not just about surviving tough times and coming out a winner on the other side. It’s also about owning and learning from mistakes so you can avoid making them again. If your team members immediately blame others for their missteps, they’ll never become resilient.

Owning up to mistakes and learning from them is a critical skill that’s tied to resilience. One could argue that it’s impossible to develop resilience without experiencing failure first. People who can roll with the punches tend to view failure as an invaluable source of feedback. Though setbacks are frustrating, a resilient person can learn from them and forge a more successful path in the future.

To develop a team that can bounce back, foster a culture of admitting to mistakes. Discuss the actions that led to those errors and how they can be prevented going forward. In some cases, setbacks may be totally outside of your team’s control. That’s why it’s so important to take things on a case-by-case basis when determining whether performance improvement measures are necessary. If you deal with employees fairly, they will find it easier to take ownership of their actions and thus become more resilient.

2. Build a Team Connection

Resilience is so much easier to achieve when you know you have a team of capable people supporting you. Some of the most talented and impactful teams aren’t necessarily composed of the most brilliant people on the planet. Rather, they’re made up of individuals who trust each other and know how to cooperate effectively.

Too often, members of the same team feel like they’re pitted against each other. This may happen due to competition for similar promotions or opportunities. It may also occur when employees want to gain favor in the eyes of management. It’s important to pay attention to how your team members interact with each other. If they seem distrustful of one another, it’s time to strengthen the team connection.

Don’t worry, you don’t have to line your employees up and have them do trust falls all day. There are much more effective (and fun) ways to build resilience and camaraderie. Regular team lunch-and-learns, happy hours and awards ceremonies are great for building a sense of connection. As your employees get to know and trust one another, collaboration will come more naturally. You’ll also notice that your team is better able to handle and deal with setbacks when the members work together.

3. Encourage Resourcefulness

The Predictive 6-Factor Resilience Scale lists resourcefulness among the reasoning skills that factor into an individual’s overall degree of resilience. Other character traits associated with resilience include tenacity, collaboration and vision. While there’s (probably) no college class that teaches resourcefulness, you can help instill this trait in your team.

The first step is to build a resourcefulness infrastructure. One way to do this is to provide the resources—it’s right there in the name—that enable employees to answer their own questions. Project management systems let employees know who’s doing what and who needs a project deliverable when they’re through with it. Knowledge bases make subject matter knowledge widely available. Cloud-based file-sharing systems give employees access to required documents without needing to request them from a colleague.

Not that employees have to solve every problem on their own—you can further encourage resourcefulness by making it normal to ask for help. Resourcefulness doesn’t always mean relying on oneself for answers. Often, the most resourceful people are those who lean on the knowledge of more experienced people to overcome a pressing challenge.

The best environment for resourcefulness encourages creativity and gives employees flexibility in how they resolve issues. Give your teams clear goals and objectives, but let them determine the best ways to achieve those goals.

4. Watch for Burnout

Too often, the idea of resilience is tied to unrealistic, superhuman-like expectations. But everyone has a limit, regardless of how resilient they may be. If your employees are pushed past their limits, they’ll eventually become physically, mentally and emotionally exhausted. Burnout is a phenomenon that can cost both your employees and your business dearly.

Burnout impairs job performance and often leads to major losses for employers. These losses may come in the form of increased healthcare costs, more employee sick days and loss of productivity. Burnout can also cause employee morale to plummet. Common signs of team burnout include disengagement, decreased work quality and increased complaining. If you notice these behaviors, take note.

There are several things you can do to improve resilience and avoid team burnout. One of the most important is to keep the lines of communication open. Ask team members how things are going and if they need more support for large projects. Welcoming feedback and addressing employee concerns can go a long way toward minimizing or eliminating burnout altogether. You should also encourage employees to take vacation time so they can relax and refill their energy stores.

The more resilient your team is, the less likely they are to get overwhelmed by the challenges they’ll inevitably face. A resilient team knows how to take failures and turn them into future wins. Incorporate the strategies above into your managing approach and watch your team become stronger and more effective.

David:
This is the BiggerPockets Podcast, show 735.
The reality is, every property I’ve ever seen in my career is not up to code. Okay? Most cities in the Bay Area where I live require you to get permits, if you change the flooring, if you change the faucet, if you change your landscaping in the yard. If you actually look at what the city requires you to get permits for, it’s everything.
Even homes that are built like new home construction are not up to code with every single thing. Now, that does not mean it’s okay to not get permits. It just means it’s not a deal breaker immediately because something isn’t permitted.
What’s going on everyone? My name is David Greene, and if you don’t know, now you know. This is the best, the biggest and the baddest real estate podcast on the planet, and we are here to talk with you. In today’s episode, a Seeing Greene style show, I take questions from you, the BiggerPockets community, and I answer them for everyone to hear, and boy is it fun.
We get into some tough stuff that doesn’t get asked very often, and I had a very fun time answering some challenging questions. These included topics like, “How much of the money that I am making in savings should I be investing? Is there a formula that I should be following?” “Should I pay off the existing properties that I have right now or should I continue to expand? I’m not sure what the right road is for me.” And, “I’m buying a property, but it’s not all permitted. Should I go forward with it or should I not? How do I know what to make of this?” All that and more on today’s show.
Before we get into it, I have a quick tip for you. This is very near and dear to my heart, and I hope all of you listen closely.
Wealth building is about more than just buying property. I know you are here to learn about real estate investing and that’s what this show is. But it would be wrong not to tell you that if you want to build wealth, you also need to save money. Now, this is like telling you that you need to eat your vegetables. I understand no one likes it, but pay attention to where your money is going.
Tracking your expenses is incredibly frustrating, but incredibly fruitful. I’ve been sharing this within the communities that I run, all of the people that are following me, I’m telling everybody, we have a recession coming down the road. Every dollar you make needs to be protected. There are people that want to take it from you. Get serious about saving your money so that when the right deal comes, you’re in a position to take it down. All right, let’s get to our first question.

Matthew:
David pilf study Greene, thank you so much for taking my question. My name is Matthew Van Horn. I’m from Memphis, Tennessee. I have a small portfolio. I own three short-term rentals here in Memphis, and I have a side business managing short-term rentals for other folks. By the way, if people don’t understand the pilf study reference, they need to listen to episode 674 with Ashley Hamilton. It is informative and very, very funny, I thought.
David, my question is this, how often should I invest relative to my savings rate? I hope that makes sense. Just to throw out an example, let’s say that I’m able to accumulate $5,000 per month, whether that be from job, business, real estate income. Let’s say I can accumulate $5,000 per month that can be reinvested toward future deals. Is there any formula or some sort of rule of thumb that says how often I should invest that?
Is there kind of a rule of thumb that says you should invest once per year, so I should invest when I have that 60K after a year? Does it make sense to invest just simply as often as I can no matter how small the deals are? Am I asking a dumb question? Just hoping you can help me out with this, David, I appreciate you.

David:
All right, thank you, Matthew. I appreciate seeing you again and yes, that was a hilarious episode with Ashley Hamilton. I highly recommend everybody who likes to laugh to go listen to that one. It was very fun as well as inspiring.
All right, let’s talk about your question. I’m going to do what I normally do. I’m going to start with a broad take on it and then slowly get more narrow. My personal opinion, this is just David Greene talking right now. I’m not representing everyone at BiggerPockets or everybody in the world.
Is that it doesn’t work to frame the question the way that you did, but yet we all want to do that, okay? So people will say, “What percentage of money should I set aside for repairs or emergencies?” People will say, like you, “What percentage of my income should I be investing?” There’s this comfort that comes from clear, concise formulas. If I can put it in a spreadsheet, it makes me feel like I’m being safe and I’m doing the right thing.
The danger in this, is that life does not work according to these rules that we create. A lot of these rules, if I’m being completely frank, come from financial advisors that are selling people like you that are listening to this, on methods that come with the inherit comfort, but they’re not real, okay?
So when Suze Orman or Dave Ramsey or whoever the stock trader person that you’re listening to is talking, they have to package the information in a way that your brain can receive it and say, “That makes sense. I will do that.” They’re trying to get you to take action, which is not inherently wrong. It just becomes dangerous when you think life works in a spreadsheet because it really doesn’t. Okay? And it actually becomes constricting for your own growth when you think this way.
I had to go through the same little thing where you are, where Morpheus is holding out the red pill and the blue pill and he is like, “You could take the blue pill and you could wake up and you could go right back to how you thought before, or you could take the red pill and you could accept the truth, but it’s going to be very discomforting.” And so I can’t tell everybody when they need to take that pill or if they should. You have have to make that decision for yourself. Okay?
So I don’t want to make it sound like I’m insulting you, Matthew, because I’m not. You’re asking a great question that applies to so many people. I’m just trying to give some background that you’re not going to hear in other places. The reality of real estate is you don’t know when the thing’s going to go wrong. Okay?
I’m going through a process right now where I was kind of forced into it by someone stealing title to my properties and me having to sell and going into a 1031 and buying a whole bunch of real estate in a very short period of time, and then the perfect storm hit me. I can’t get cities to approve permits. I can’t get architects to drop plans. I can’t get contractors to finish jobs. I’ve got eight vacant multimillion dollar properties that are bleeding right now, and there is nothing I can do to get out of this mess. I did not see this coming because I didn’t realize how bad the permit process would be.
If I didn’t have wildly big reserves because I’m extra conservative, this could tank me. I’ll be fine because of the reserves, but it doesn’t feel good. It sucks in the short-term. And if I set it up where I have six months of reserves for every single property and I put it in a spreadsheet and this is the way that it works, I’d be screwed right now.
I take a different approach. When I took that red pill, which is not to be confused with political stuff, just that understanding that it’s not going to work in a spreadsheet with real estate, I realize that there are three pillars that I need to focus on and excel at, that actually work, whereas the spreadsheet approach doesn’t.
The first pillar is defense. I have a challenge every day. What percentage of my money can I save? Can I avoid buying the Ferrari? Can I avoid spending money extravagantly just because I have a lot of it? When I travel and I go to a hotel, do I upgrade to the presidential suite just because I want to look cool and I have the money to do it or do I stay disciplined and not do it? When I travel, do I make sure that my assistant is still looking for the cheapest flight, not just taking the shortest road of, “Oh, David’s got plenty of money. I’ll just book him on this flight.” That’s losing at defense and defense wins championships, so I’m always keeping my spending low.
That doesn’t mean I’m depriving myself, but I don’t spend money just to spend it. You will never see me, I hope, pouring out champagne from a bottle that’s expensive. Just so everyone knows I have so much money I can burn in. I think that’s wildly disrespectful to the finance gods when you live that way.
The next pillar is offense. Am I making as much money as I possibly can? You’re saying, you’re making five grand a month. I would much rather have you asking a different question, “David, how can I make more than five grand a month? How can I double the amount of money I’m able to make and save?” Rather than, “At what rate should I be investing the money that I am making?” It’s just a better question to ask. If we’re all keeping our pedal to the metal with offense, we’re making as much money as we can. We’re growing personally. We’re looking for ways to challenge ourselves. We’re getting out of our comfort zone.
And the third pillar is investing. How do I invest as prudently as I can? Now, this is, you’re sort of asking me a question in Spanish and I’m answering it in French. I understand this can be confusing. I’m just saying, I don’t think I can answer the question you’re asking because the world does not work that way. It works that way if it’s like, “I’m going to invest in stocks, they’re going to get me a 7% return and I can calculate that in the next 40 years of time, if I invested a 7% return, I can expect to have X amount of money.” The reason that doesn’t work is because inflation is higher than 7%, not just CPI inflation, but how much money is being printed.
Those predictable strategies that are comforting will cause you to lose. You cannot keep up with how much money is being printed doing that. The only way you win now is by excelling at the three pillars. Saving as much as you can, making as much as you can, investing the difference.
Now, when it comes to investing, I’m not going to say every month you should be spending 5,000 or investing it, or when you get to 60,000, you should spend 40,000 of it, okay? What I’m going to say is you should be looking to excel in the pillar of investing, which means finding the best deal that you can.
You might not buy a house at all for three years, and at the end of those three years, you come across two deals that you can buy for 400,000 that will have an ARV of 600,000 and will be great short-term rentals that will cash flow incredibly strong and you got to buy them both. That’s more realistic for how things work out.
You might put your attention on offense and make more money and in the process of taking on more investors and managing their houses for them, challenging yourself in that way, a couple of them are like, “We don’t want to own these anymore. Do you want to just buy them from me?” And you get great deals that you’re like, “Oh, if I wouldn’t have spent all my money on mediocre deals because I was supposed to spend it at a certain rate, I would be able to buy these amazing deals.” That’s much more my style.
I might not buy much real estate over a three or four year period and then go buy a whole bunch of them at one time when I see the market open up. I might buy a lot of one asset type and then switch and move into another one and make big moves in these moments, because I’m not asking to live life in this predictable way that you’re saying.
Now, Suze Orman could answer this question. There are absolutely financial people that could, they’re probably not real estate investors. Because real estate investors got to jump on the deal when it comes. I would much rather have you say, “I buy great deals. I’m looking for great deals. I will be ready and liquid to pounce when I see a great deal. I have all tools in my toolbox that I can use.” Like seller financing or whatever it is that you can excel at to get those great deals. But you don’t control when a great deal comes. What you can control is how much money you’re spending, how much money you’re saving, and how much money you’re making.
So I want you to come back, go to biggerpocketes.com/david, send me another video, and I want you to say, “Thank you, David. I’m a little upset you didn’t answer my question, but I’m going to forgive you. What advice do you have for me, for how I can make or save more than $5,000 a month? Here’s what my business looks like.” And we will take the question from that angle.
For everyone who’s listening, I hope this made some sense, okay? You got to look at money differently if you want to be able to accumulate it like the wealthy people do. Wealthy people don’t ask questions like that. You’re not going to see the people that are really, really good with money saying, “How much of my money am I supposed to spend out or invest out of the month?” You hear them saying, “Where are my opportunities? How do I take advantage of them, and how do I push myself to be a better version of me tomorrow than I was today?” Our next video clip comes from Branco in Raleigh, North Carolina.

Branco:
Hey, David, what’s up man, it’s Branco with eXp here in Raleigh, North Carolina? I’ll be brief. Thanks for everything you do, man. My wife and I we’re both 29 years old, make about $250,000 a year, have four homes, three house hacks, and one off-market deal.
For the sake of this question, we would just pay off the three house hacks, and that’s basically the question. Plan A, pay off. Plan B, don’t pay off. And the reason we even think about plan A paying off is because after paying off the $750,000 worth of mortgages, we would fund the great life, which is about 10 grand, 11 grand, cash flow, and that would still play around with HELOCs from those properties and still look for other deals, which is fun for me.
Plan B, would be to keep doing what we’re doing and buying a house like a year, house every year and a half, two years maybe, and I know that plan B financially makes more sense because we would have more properties obviously, but I don’t know. It’s just since it’s already funding the life, it’s just is enough, enough and I don’t know. I would still look for deals, so it’s tempting to pay it off.
We, again, I’m an agent. Maybe I’m thinking about it because market’s kind of slowing down. I don’t know. Any advice, wisdom would be greatly appreciated. Take care, man. Bye-bye.

David:
All right, Branco. This is a good question and I appreciate your transparency. This is going to be the last question. We’re going to have to break it down a little bit deeper. I can’t just give you your answer.
There are merits to both approaches, paying off your real estate, living off the cash flow, not trying to be a multi, multi, multimillionaire, just living a good life or using leverage, using the skills you have as an agent, using the knowledge you’re getting on BiggerPockets, using the skillset that will continue to increase every year to get better and better deals and build a bigger life. Okay?
I can’t tell you which is the right road for you and you know that. Here’s what I can tell you. The approach to paying off your real estate made much more sense when interest rates were really high. It also made much more sense when we weren’t printing money like we are right now. That doesn’t mean that I’m telling you the other option of continue to scale is better for you. I’m saying that the scales are tipped in the favor of the people that are growing because of all the money that we printed. Let me give an example.
I remember very clearly a certain point in my life, I was probably 28 years old. I had just bought my house in Discovery Bay, California. It was a foreclosure. I paid, I believe I paid 272 for it. I bought it at an auction, used an FHA loan to get it, and I put three and a half percent down, but I was at a point where I really wanted one of the new Corvette’s. They were like the Stingray model had come back. They were super cool.
I had probably seven rental properties, a couple in California and a couple in Arizona. I hadn’t gone out to Florida yet, and I had talked with Tim Rhode, who we’ve had on the podcast several times about my future, and he’s like, “Figure out how much money you need to retire, work to that number, stop when you get there.” So I was like, “All right, if I got five grand a month coming in for rental properties and I got five grand a month coming in for my retirement as a cop, oh my god, 10 grand.” That’s way more money than I would ever need. And if I pay off my house, I could drop my mortgage by another, it was $900 or something like that.
Here’s what’s crazy. When I was 28 years old, 10 grand was significantly more money than what it is right now. So my plan was I talked to another police officer, Shane Caduti, and he’s like, “Why do you care so much about money? You don’t need it. Buy yourself a Corvette and enjoy life.” And I actually had planned on hanging it up like, “Okay, I got my rentals. I don’t need to worry about this stuff anymore. I’m just going to buy that Corvette. I’m going to keep a little lump sum in the bank to cover me, and then I’m just going to live an easy life.” Something did not sit right with me.
It was not greed, it was not ambition. I didn’t have to prove anything. It was this little still voice that was like, “This is a huge mistake if you do this, don’t do it.” And I actually went a different route. I told somebody about my dilemma, they connected me with the Bank of North Florida. I got a line of credits to start buying rentals. I learned the BRRRR method. I sold one of my Arizona houses. I went and bought about 10 or 11 more properties in Florida with the same 80 grand that I just kept recycling through BRRRR.
I got way better at understanding construction, finding deals. I negotiated because I was doing this so often, I grew that to probably 40 properties or so in Florida, plus my other ones. I got better. I wrote a book called Long Distance Real Estate Investing. I got involved in BiggerPockets, here I am today teaching this stuff at a high level as a business owner that owns different companies and I can influence a lot of people.
Real estate did so much more for me, than just gave me five grand a month to live a life. And here’s the scary thing, when I look back at where I was, if I’d hung it up, I would still be working as a cop. I would only have five grand a month of passive income, maybe with rent bumps. It might be like 6,500 or something right now.
But living in the Bay Area, Northern California, that is not, I don’t want to make it sound like I’m elitist because I definitely love a modest lifestyle. It’s not a lot of money. You can live like that, but you can’t travel anytime you want. I wouldn’t be able to just go to Hawaii to go see Brandon. I would have to budget when I actually can travel. I would not own the condos that I own in Hawaii that I’m able to send family members to business associates to close friends I have.
One of my favorite things is when a couple that’s close to me is going through marital problems, I could just send them to my Hawaii condos and be like, “Listen, I’m taking care of everything. I’m paying for your plane. I’m paying for a babysitter. I’m paying for the condo. You’re going to go and you’re going to have a good time.” Or I can send family members that love it. My mom loves visiting those places, Hawaii is her favorite thing.
I could not do that if I didn’t have those properties and I absolutely would not have them if I had retired earlier. I’m not trying to sway you in any direction. I’m just being honest about this idea that I had, that if I just stopped growing and I stay where I am, was wrong, I would not have stayed where I was.
Inflation, things probably cost a legit three times as much as what they, at that time in my life, I could probably buy a steak at Safeway for eight bucks. That same steak is like $25 right now. It is. Everything is so much more money. That car that I was driving eventually is going to wear down. I bought that thing. It was a brand new Camry and I bought it for 22 grand. It was so cheap by today’s standards. Now, that same car might be 40, 50 grand or more for just a normal base model car.
Well, I’d be screwed when my stuff wore out and I had to go buy another one. The repair is on the house I live and the house payment is the same, but everything costs more money to me to fix up because of inflation. And I realized that the world isn’t going to stop growing just because we stop growing or we stop working. You’re always in a uphill battle. Things become more expensive with time.
So I would encourage you to strongly consider continuing to work as an agent, continuing to invest in real estate, continuing to house hack every year, continuing to make decisions that will make the version of you 10, 20, 30 years down the road happy, and not take the assumption that everything’s hunky-dory. That everything will be fine, that you’ll pay off your properties and you’ll be fine.
That money that you could get from paying off your properties could very well not be enough to live on. You might have another kid, you might get a sick family member. The market for real estate agents might change and commissions go away. You can’t make a living like that anymore, and you find yourself having to go back to work in a factory not liking your life because we cannot predict what’s going to happen.
I think it’s a big mistake when we assume the best. The world’s going to get easier, it’s going to get better. We can just stop. You don’t know what’s going to happen. What if you get sick or you end up dying and your family is left without their breadwinner? If you have a bunch of real estate they can sell, that’s some money that they can live off of. If you’re gone, it’s not the same case.
So you could tell that I’m leaning more towards. You’re a young guy, you’re ambitious, you’re working as an agent, you’re well-spoken, you have skills. Freaking use them. I would never tell someone that was really into fitness, “Go win a fitness competition and then retire and never exercise again. You don’t need to.” It’s true you don’t have to, but why would you want to get unhealthier? Once you’ve learned fitness and you’re good at exercise and you’re good at eating good, you don’t have to compete at the highest level ever, but why would you throw that away? It’s easier for you to exceed at these things than it would be for other people.
So if the genesis of your question is coming from maybe shame or guilt, like, “I shouldn’t be this ambitious. I don’t need this much.” Don’t buy into that. I had to face that same battle, and I never became a greedy a-hole. I never became the person that was buying Bugattis and McLarens with all my money. I never bought a private jet. I still live in that same house, believe it or not. I never went and bought a Big Baller property. I don’t need to. I don’t have a family right now. That property is fine. In fact, I could probably downgrade.
I could move into one of the units of the short-term rentals that I’m developing and sell that house, and I might end up doing that. I don’t need a humongous property. I didn’t assume that everything would go better. I knew it could go worse, and I am so glad. I am so glad that I built the businesses and I kept expanding that I kept moving forward because money is now becoming an issue for more and more people, and the more of it I have, the more I’ll be able to help.
So hope that helps answer your question. If there’s any further clarity I can give, please send us another video. Let me know. “Okay, David, I heard what you’re thinking. Here’s my question about what I should do. I’d love to follow up with you and thank you for being vulnerable and showing us all the question that many people in your boat are all facing.” Our next question is a video submission from JD Mims.

JD:
Hi, David. My question is about real estate agents. So I am looking for a property here for my personal residence in California in Sacramento, and I found a place that checked all of the boxes. The only issue I had was there was some work that was done to turn it into a duplex that was not permitted.
Now, I asked the agent about the permits because I haven’t actually bought property here in California, so I thought perhaps it works differently by state, and so I said, “This is my concern. The work hasn’t been permitted. I’m worried about what will happen if I try to sell it and if I put a renter once I move out.” The agent is a newer agent, so he asked his boss. His boss says, “Well, as long as the work is done in a workman-like manner, then you’re fine as long as the appraiser comes in and it passes the appraisal.” I reached out to the city and they said that, that is not true.
So my question is should this be a deal breaker or is there some type of a gray area that I’m not understanding? Because I feel like the answer that I was given was just to pacify me, because we’ve been looking for a while and the market is very difficult and they just wanted me to buy something and move on.
But my feeling is that it should be a big deal, but I don’t know if I’m making it bigger than what it really should be, because I feel like as an agent you should be looking out for me and give me correct information, but I don’t know, maybe there’s a gray area. Maybe I’m making it a bigger deal than it needs to be, so I would love your feedback on this. Thank you.

David:
All right, JD, sounds good. Let’s break down this situation because you’re not the only one who’s here. Man, there’s so many angles to tackle with this.
First off, when you’re saying, “Is this a big deal?” We have to define what big deal is. There’s many different angles to approach this. So the analogy I’m going to give is when we talk about there is free speech in America. Okay? This is something you deal with a lot when you’re in law enforcement or if you’re following what’s going on with social media.
There is free speech in America. The problem is when somebody says something offensive and then people get mad at them or they lose their job or they get kicked off of a platform or something like that, the response is always, “Well, I have free speech. You can’t do this to me.” It’s just they’re applying it in the wrong way. In the arena of other people liking you or the job you’re holding or the rules of whatever that social media platform are, you can’t just say anything. They have their own rules.
In the arena of the penal code, you do have freedoms. You can’t go to jail for saying, “I don’t like the president.” But you can lose your job, I suppose for saying something like that. Private companies are allowed to have their own set of rules whether you agree with them or not.
The protection of free speech does not apply to everything. It just applies to the government being able to punish you. You can’t get an infraction or get a citation for saying something unpopular. And when people get confused about that, then they don’t know what to make of it because they’re like, “Well, isn’t there laws to protect my free speech?” They’re like, “Yeah, but that doesn’t mean that you can do certain things in certain environments without consequences.” Okay? This applies to your permitting situation.
Is it a big deal? Well, if you call the city and say, “Does it need to be permitted?” A hundred percent of the time they’re going to say yes. They have to say yes. This would be like when I was in law enforcement, and someone walks up to me and they say, “Hey, I want a jaywalk right now. Am I allowed to do it?” I am not allowed to say, “Yeah, go ahead and jaywalk.” Because if you get hit by a car, I’m going to be responsible for that. So I can’t say, “Yes. Go jaywalk.”
On the other hand, does it mean that I chased down every single person I saw across the street without using a crosswalk? No, I probably didn’t care unless it was a super busy intersection and they were causing a big deal. That’s the best example I can give for permitting situations.
The reality is, every property I’ve ever seen in my career is not up to code. Okay? Most cities in the Bay Area where I live require you to get permits, if you change the flooring, if you change the faucet, if you change your landscaping in the yard. If you actually look at what the city requires you to get permits for, it’s everything.
Even homes that are built like new home construction are not up to code with every single thing. Now, that does not mean it’s okay to not get permits. It just means it’s not a deal breaker immediately because something isn’t permitted.
Also, I’m going to tell you, and everyone was going to tell you, always get it permitted, but that’s because people have to tell you that. It just isn’t practical that everyone’s going to do that. Now, if you’re trying to figure out, “Will this get me in trouble?” It depends on what the stuff is.
When you say work was done without permits, you didn’t give me enough specifics on what happened. If they put up some drywall or some sheetrock or something and they didn’t get a permit, they turned one living room into two bedrooms. I’ve never seen in my career, it doesn’t mean it can’t happen. I’ve just never seen, the city get involved and say, “You put up drywall without a permit, you’re in huge trouble, we’re going to put you in jail.”
But what if the property is in an area that is zoned for single-family properties and they are operating it as a duplex? The zoning situation could become a big deal. If you’re not allowed to have more than one door in that neighborhood and you’re working in it as two doors, they could shut you down. The city could go in there and say, “Hey, this isn’t going to work.”
Now, California, because you mentioned you’re in Sacramento, does have laws that prohibit municipalities from not letting you put an ADU in your property. So this is one work-around when the city tries to say, “You can’t have a second unit, you can’t make it a duplex.” Where you can come in and say, “You can’t stop me from doing it. I’m allowed to have an ADU.” The city can come back and say, “Does this unit that you are calling an ADU meet the requirements that we have spelled out as an ADU?” That’s the one of the ways I would take your question to your agent or the city.
“Hey, this property had work that was done. It’s now a duplex. Will the second unit count as an ADU?” And I’d get information on that to see if maybe you’re going to be covered there. I might also say if I buy the property and the work wasn’t permitted, what are the consequences that could cut? Maybe the city says, “We have no idea. If nobody complains, we’re not going to care.”
Maybe the city says, “Oh, we would send an inspector immediately and make you fix the work.” But I think JD, you got to do a little bit of legwork to figure out what is actually going to happen. The vibe I’m getting, is you’re wanting your agent to do this legwork for you and tell you this is a big deal, and then possibly go to the seller and get the seller to drop their price or get the permit work done, and you want everyone to be like, “Oh, we cannot let this stand.” And that’s where your frustration might be coming from.
The seller’s probably not going to care because the seller knows that nobody has work done with permits. That there’s another buyer that will buy the property and they might not care about it whatsoever. The permit thing is such a hot button topic because there is no clear line in the sand that we can navigate these situations with, which is what we want. It’s more comforting when it is clear what should be done and what shouldn’t be done.
I can’t give you a more direct answer because I don’t have any more information, but what I can say is I wouldn’t be mad at your agent for the response they’re giving you, because this is what every agent everywhere is going to say. I’ll also say it’s not immediate, it’s not permitted, so don’t buy it because almost every property, probably every property I’ve ever seen has some form of work done that was not permitted. But I don’t know the type of work.
If they took a single-family home and they put this, they literally built an extended, the square footage of it and they didn’t get any permits and you don’t know if it was done safely, that’s a huge deal. You can’t just build onto a house with, maybe the contractors didn’t do it. Maybe the homeowner built it himself.
But maybe they just took an area of the home and they walled it off from the rest of it, and even though they didn’t tell the city the work was still done up to code and still done safely, and it’s perfectly fine. I think you need to get some more specifics on the situation before you make your decision on if you should purchase the property or not, and unfortunately I didn’t get those, so I can’t give you a more direct answer. Hopefully, the advice that I have given you does help with the decision you have to make.
All right. We’re moving on to the part of the show where I get to share the comments from previous shows on YouTube, and I love this. I want to encourage you guys to please leave more comments for me to read. The funnier, the more insightful. The more clever, the better. And even if it’s something that you don’t agree with or you want more clarity on why I said what I said or you’re confused or you have a topic you want us to talk about more, tell us in the comments. We read them for every single show and we incorporate them into future shows.
Our first comment comes from John Conrady. “David, you are a boss and have been so helpful in my journey. Just want to say you explained things super clear and keep up the good work.” Thank you, John.
That’s probably the hardest part of the job. It’s not always knowing what to tell everybody. It’s, how do I say this clearly without leaving out anything that could get somebody in trouble without taking too long where I lose their attention. This is always where my stress levels come from when I’m talking is like, “Did I leave anything out or did I say too much and how do I find that perfect balance?”
Zachary Hitchcock says, “I love the podcast and it has helped changed my behavior from paycheck to paycheck to being on my path to long-term generational wealth.” Zachary, that warms my heart. Love hearing that.
He goes on to say, “Question. I’ve learned quite a bit from these podcasts as well as books about negotiation. What is the best way to go about utilizing this knowledge while having to negotiate through agents? Is it taboo to speak to a seller agent directly or is it best to focus energy to strategize with my agent?”
Yeah, that’s tough. I’m tempted sometimes to go around my agent and also, and I’m an experienced person. In general, you don’t want to do that. What you probably want to find is you want to choose an agent that is receptive to your advice. So when you say, “Hey, I want you to go say this.” You want the agent that actually listens to you and says, “Okay, I’ll go say it that way.” Or pushes back and says, “I don’t want to do it that way.” You want to get the impression the agent cares about how they’re negotiating, okay?
What most agents do, they’re not very good, is they say, “I don’t want to do that. Let’s just write them something. Let’s just put it in writing and send it over there.” But they don’t think about presenting it in the right way. It is tricky. The problem with you talking to the listing agent directly is you’re still, you want to be talking to the seller. You go talk to the seller’s agent and then your words get put through their filter as it comes to the seller and it still isn’t going to be what you want.
It’s very difficult to negotiate the way that I describe when it’s through agents. You just want to make sure you pick an agent that has some skill in this area, and when you communicate with them, the better that they’re able to sell you, it’s very likely that they’re able to sell the other agent in the same way.
These comments come from episode 717, by the way, if you guys want to go check that one out. The next one comes from Joe Chavez, “Golden Girls. Blanche Devereaux was the original house hacker and who wouldn’t want Sophia as a tenant? Picture it. Sicily, 1925 looking for a BRRRR.” This is hilarious because we talked about Golden Girls on that episode and yes, I suppose Blanche was a house hacker, having all the other girls living with her. “House hacking before and had a name goes right back to Golden Girls.” Well done, Joe. That’s hilarious.
Steve Borowski says, “Wow, hold on there, David. People were stealing titles to your property and you just glazed over it. I get that you don’t want to go into personal detail about the issue, but I would love it if you could talk a little bit about how to protect yourself from such things. In my mind, I’m thinking if it can happen to David G, it could happen to me and how do I avoid it?” Yeah. I’m trying to not become a target of that more in the future and the way that this worked out, it could not have been avoided, unfortunately.
So I’m restructuring things to make it so that this can’t happen again, but title theft is very real and it is caused a cascade of problems for me. It forced me into a 1031. I bought more properties at one time than I wanted to. The city permits have come in and they’ve screwed things up. I’ve had all kinds of issues with trying to get stuff approved.
I had people on my team that were managing my portfolio that had to quit from this. It’s been absolutely horrible and it’s put me into a place where I’m trying to claw my way out of the disaster, but that create, but that happens with real estate. That happens with life. You can’t turn yourself into a victim just because you got dealt a raw deal. And in my experience, when you continue to do the right things, God, the universe fate, however you want to look at it, will work this around for my benefit in some way.
So the reason I’m not sharing more details about that how that happened is I don’t don’t want to dangle it out there for more people to learn how they could go do the same thing. I think there’s a lot more predators out there looking to steal other people’s stuff than we’re aware of, but if you would send me a message, I do talk about it in a private group that I run. If you’re in that group, you could hear more about it there, so thank you.
All right, everybody. That is our show for today. I hope you enjoyed listening to that as much as I enjoyed making it. I also hope you’re enjoying these Seeing Greene episodes. Again, if you want to be featured on here, go to biggerpockets.com/david and submit your question. I would love to answer it and please continue to engage in the YouTube comments.
Lastly, if you are liking this and you liked it, you don’t have to pay for it. All I would ask that you would do is go to wherever you listen to your podcast, Apple Podcast, Spotify, whatever it is, and leave us a five star review and just tell people why you like the show. That helps a ton.
If you want to know more about me, you want to see what I got going on, you want to want to kind of like peek the curtain and see what is going on in Greeneland, you can follow me @davidgreene24 on all social media.
You can also check out my new website, davidgreene24.com, and then DM me or let me know what you think of the website. I had to pay a lot of money to get this thing made. It is launching very soon or probably should be out by the time this is there, so please give me some feedback on that.
And lastly, if you have some time, watch another video, listen to another podcast, educate yourself further, and if you don’t, I’ll see you on the next episode. Love ya. Appreciate you. I know you can be getting your information from anywhere, and so I appreciate that your attention, the most valuable commodity you have is on us at BiggerPockets.
Check out the BiggerPockets website with the forums if you want to learn more, and you don’t want to have to do so by listening, if you like reading, I’ll see you guys on the next show.

John Kim, real estate analyst at BMO Capital Markets, joins ‘The Exchange’ to discuss the state of the REIT market as well as companies rethinking office investments.

I recently got introduced to Alyssa Hitaka at TopTierStartups.com, a new content site rich with startup related news, tips and interviews with startup founders. I was curious what her startup founders were seeing, in terms of the best marketing strategies they are successfully using today. Alyssa was kind enough to interview ten of her founders, to get those learnings. And, we are both pleased to share those learnings with all of you, to help you with your own marketing efforts. Here is the list:

1. Katja Kaine at The Novel Company: Word of mouth and great customer service

Word of mouth is one of the most important ways a founder can get the word out about their products or services. Katja Kaine, founder of The Novel Company, has focused on slow and organic growth of her innovative writing technology, gradually building up a strong reputation among customers. Katja also emphasizes the importance of engaging with customers personally—she responds to all emails herself, which indicates to users that the company truly listens and cares, further boosting loyalty.

2. Robert Brüll at FibreCoat: LinkedIn and startup awards

LinkedIn is a must for just about any modern-day professional, and Robert Brüll, founder of high-performance materials startup FibreCoat, encourages fellow entrepreneurs to make the most of the platform to market their brands. His company also regularly participates in startup award contests, and winning awards helps his business build its reputation, secure positive feedback, and gain traction among the target demographic. When paired with FibreCoat’s powerful LinkedIn presence, these awards stretch even further and help drive more traffic at live events, which further boost the company’s reputation among consumers.

3. Vita Valka at Camperguru: Connecting with consumers in real life

These days, a lot of brands rely on digital media to promote their products and services, and Vita Valka’s Camperguru has also leveraged the algorithms at Facebook and Pinterest to evoke interest and familiarity with the target demographic. What gives the innovative camping app its edge, however, is the connections its team of ambassadors make with campers on the ground. Camperguru’s team of passionate campers tour some of Europe’s best campgrounds and, in the perfect locations with highly concentrated groups of avid campers, spread the word about the app in person.

4. Wolfgang Rückerl at Entity: High-quality content and interactivity

Content marketing is a major growth driver for a lot of businesses today, and Wolfgang Rückerl affirms its powerful role in growing his blockchain startup Entity. Focusing on valuable information, crisp graphics, and thorough explanations of the company’s more technical aspects, Robert has built up a solid community of users for his app. An important addition to his marketing strategy is engagement and interactivity on social media, with Entity regularly designing contests, games, and events for users and prospective users to participate in. Robert credits this interactive marketing approach to strengthening trust with followers and driving growth of the platform.

5. Stefanie Palomino at ROOM: Maintaining a holistic approach

There’s a lot involved in promoting your new startup, with many ways to approach marketing and many factors to consider throughout your company’s continued interaction with consumers. Stefanie Palomino, founder of innovative telecommunications application ROOM, stresses the importance of adopting a holistic approach to marketing. She encourages entrepreneurs to consider the full user journey, from their first acquaintance with your brand to their continued use of your service or product. The data you collect from existing customers—both quantitative and qualitative—can help inform your precise marketing strategy, building lasting relationships and trust with loyal users.

6. Deanna Visperas at GoVirtuals: Influential staff as a marketing strategy

The staff of a company define its aura and atmosphere, and how a company feels can have a major impact on prospective customers. Deanna Visperas, who founded virtual assistant company GoVirtuals, firmly believes that her marketing success is rooted in the influential individuals who staff her team. According to Deanna, thought leadership and employee advocacy are key to building a brand’s reputation and cultivating trust among consumers, so fostering your employees’ talents and influence is a great way to grow your business. Happy employees can lead to happy customers.

7. Mark Brouwers at Nocto: Collaboration with similar brands

The startup world is big, and while similar companies are conventionally viewed as competitors, Mark Brouwers reveals why it’s often better to see them as partners. Mark has built up his unique hospitality connector platform, Nocto, through collaboration with similar businesses who share goals and target demographics with his company. Designing win-win strategies help both companies grow, and as an added bonus, collaboration generally means you save time, money, and effort. This marketing strategy will also allow you to forge meaningful relationships with other professionals in the industry, which can open all sorts of new doors for your brand.

8. Siebe van Mensfoort at Simbeyond: Leveraging industry events

Though online marketing makes up a huge portion of modern-day companies’ promotional efforts, offline marketing can be just as powerful, if not more. Siebe van Mensfoort, founder of Simbeyond—a startup that creates software tools for the development of high-tech devices—regularly partakes in industry events to boost his brand. This marketing strategy takes him all over the world, to conference presentations and exhibitions alike, and has allowed all sorts of interested prospective customers to discover Simbeyond. As a bonus, regular participation in industry events gives Siebe a solid grasp of the latest market innovations.

9. Sam Kynman-Cole at topVIEW: Google Ads and direct calls

Sometimes, the simplest marketing approaches are also the most effective. Sam Kynman-Cole from topVIEW, a digital startup that allows businesses to create virtual 3D tours of their indoor spaces, recommends Google Ads as an effective strategy for B2B companies. However, he highlights directly reaching out to potentially interested parties as his number-one marketing approach. Phone calls are the best, Sam advises, but a personalized email is also effective for less urgent situations. He also praises LinkedIn as a great way to make direct connections with specific people, much like personalized emails.

10. Joe Menninger at Startuprad.io: SEO and media exchanges

Search engine optimization (SEO) is a major buzzword in content marketing, and for good reason—it boosts your rank in search engines, helping prospective consumers find your brand. Joe Menninger, founder of Startuprad.io, an English-language podcast covering startup news in the German-speaking world, highlights how crucial it is to create transcripts of podcast episodes. For each episode, he generates a transcript and a detailed blog post, which allows him to deliver high-quality audio content to listeners while still tapping into search engine algorithms. Joe also collaborates with other podcasts, creating a win-win scenario that boosts the followers of both shows.

So, hopefully, there are some useful “nuggets” here for you all to use in your businesses. Thanks again to Alyssa for her research and helping me create this post.

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George Deeb is a Partner at Red Rocket Ventures and author of 101 Startup Lessons-An Entrepreneur’s Handbook.