Explosive Growth Could Be in Store for These 2 RE Markets

David Greene:
This is the BiggerPockets Podcast show, 766.

Kim Meredith-Hampton:
2022, we were the top area, Tampa MSA. We had a net migration of 1.9. Tourism is big, maritime industry, healthcare big here.

Victor Steffen:
I look for population growth in a market. I look for median wage growth in a market, and I also look for employment growth. And Dallas-Fort Worth has all three of those metrics going up into the right.

David Greene:
What’s going on everyone? This is David Greene, your host of the BiggerPockets Real Estate Podcast here today with one of my favorite co-hosts, Dave Meyer. Dave, what’s going on from Amsterdam?

Dave Meyer:
Not much, man. It just hasn’t stopped raining all spring. It’s a little bit depressing to be honest.

David Greene:
Yeah, Amsterdam, that sucks.

Dave Meyer:
Yeah. But hopefully it will turn nice here, but all is well other than that.

David Greene:
Yeah. What doesn’t suck is today’s show. We have a humdinger.

Dave Meyer:
A humdinger?

David Greene:
Humdinger of a show. You are going to love this. Dave and I interview Victor and Kim, agents in their respective markets of Tampa Bay and Dallas, and we get into the nitty-gritty of how to make money in those markets, details about those markets. We talk about how to look at the metrics of who’s moving there, what jobs are going there, what strategies work in markets, as well as different ways to look at real estate. And what’s cool about this is, if you understand the questions that we asked them, you can ask these of anybody when figuring out a market. Dave, what were some of your favorite parts?

Dave Meyer:
To be honest, my favorite thing about this entire episode was the nickname you invented for me at the end of this episode, but that has nothing to do with real estate. So my actual favorite parts is when we talked about some of the metrics that help you as an investor understand not just the long-term strategies and prospects of an individual market, but also how to adjust your tactics for bidding and what strategies to use and whether you should add value, and some of the short-term things you can do to adjust to market conditions based on some of the metrics that are honestly pretty easy to look up for any market.

David Greene:
Before we bring in our guests, today’s quick tip is, head over to biggerpockets.com/blog where you can read tons of articles about stuff you may not have thought about because you’re only listening to the podcast. Dave, I believe you write articles for that blog. Is that correct?

Dave Meyer:
I write articles all the time on the blog and I’m offended you don’t read every single word of every one of them.

David Greene:
I used to. I will admit, I was a BiggerPockets junkie, so I’d be working like graveyard as a cop and nothing would be going on and I’d be reading every single blog that anybody wrote and I remember a lot of them. It’s been a while since I’ve been on there, but you might be bringing me back because you asked such good questions today.

Dave Meyer:
I’m just kidding. But yes, I write for the BiggerPockets blog a couple of times a month, mostly about market conditions and any economics or data trends that impact real estate investors. So definitely go check those out. And I also love if you comment on any of the blog posts that I write about ideas that you want, if there’s a topic or research-based thing that you want to understand better as it pertains to real estate investing, let me know on the BiggerPockets website. I love hearing from everyone.

David Greene:
We would love that. We’d also love if you would comment on the YouTube channel itself and let us know what you think about it, and specifically, what do you think about the nickname I came up with for Dave? All right, let’s get to the show. Victor and Kim, welcome to the BiggerPockets podcast. So nice to have you guys here. Let’s get this thing kicked off by having each of you introduce yourselves. Kim, let’s start with you.

Kim Meredith-Hampton:
Sure. Kim Meredith-Hampton and I am in the St. Pete, Orlando, both those MSAs, two offices, and own short-term rentals, long-term rentals, couple of multi-families and a couple of commercial building and everybody wants to come to Florida, so look me up, BiggerPockets/featuredagents. There you go.

David Greene:
They sure do. I’ve often said, it’s like someone took the United States and just tilted it down into the right and everything is slowly migrating.

Dave Meyer:
It’s gravity. It’s like gravity.

David Greene:
Settling right in there. Victor, how about you?

Victor Steffen:
Cool. Thanks for having us on guys. Really looking forward to it. Victor Steffen. I cover the Dallas-Fort Worth market. Active investor, active real estate and friendly agent. My wife and I, we own real estate in three different states, Pennsylvania, New York, Texas, a variety of asset types similar to Kim, multi-family, single family. We do rent by the room housing where it’s appropriate, short-term rentals, long-term rentals, the gamut. So we try and walk the walk before we help investors do the same.

David Greene:
Yeah. It looks like you do a little bit of everything. You’ve got 48 doors across three states, so you’re a long distance investor. Way to go. We have that in common. And then you’re also doing rent by the room, long-term rentals. It looks like whatever it takes to make that thing cashflow you’re willing to do. Is that fair?

Victor Steffen:
If the market supports it, we’re down to try it. So, that’s it.

David Greene:
Yep. Welcome to 2023.

Victor Steffen:
To be fair, though, a lot of those out-of-state ones in Pennsylvania and New York, it hasn’t been all sunshine and rainbows, David. I know you could probably attest to. It can be a little bit difficult on those out-of-state ones. So we’ve had some boots on the ground there for a long time and I’m from that area, so it made it a little easier.

David Greene:
Well, that’s what I talk about on long-distance investing. You want to have a competitive advantage and having boots on the ground and people in the area, it’s one of the things that does that. Kim, you’ve got a pretty impressive portfolio as well. So you have, is it 50 units of short-term rentals?

Kim Meredith-Hampton:
Yes, we just did that. Been there about a year, actually. Took three multis, repurposed, remodeled and turned them into furnished flex leasing basically.

David Greene:
And was it difficult to work with zoning with the city to get that to happen?

Kim Meredith-Hampton:
It wasn’t because these were actually in D.C., too, which is allowed for like an Airbnb or B&B, or anything like that. So that was quite easy, just knowing what licenses you need and those types of things. And now they’re getting ready to come inspect again so, you know, they want your dollars.

David Greene:
So in essence, you bought an apartment complex and you turned it into several short-term rentals?

Kim Meredith-Hampton:
Yes, the whole thing.

David Greene:
Okay. And then you also have a property management company as well?

Kim Meredith-Hampton:
Yeah, we have a long-term property management company with about 3,000 units between Orlando and Tampa, St. Pete, and those are long-term. And then we also have the Florida Nest, which manages the short and midterm.

David Greene:
All right. And it sounds like you do it all, right? Whatever an investor needs.

Kim Meredith-Hampton:
We do. I like to say we own the full cycle of real estate and I love that people, love that they can come to us and we can help them with everything. And if we can’t do it, we can get them in the right direction.

David Greene:
It sounds, Kim, like you’ve been involved in Florida real estate for a while now. What have you seen with the market shifting from 2020 to 2023?

Kim Meredith-Hampton:
Believe it or not, we are still in a seller’s market, but it is starting to tip a little bit. You’re starting to see the breakage there happen. Instead of maybe having 10 offers, there’s three to five and some of them were getting as a backup to that. So a lot better than just, “No, we’re done. It’s all cash, out of here.” Days on market definitely are a lot longer. I think seven days now we’re at 39 right in there. So it’s definitely changing. Price points have not went down yet, but you can ask for things.

Dave Meyer:
There you go. Love that.

David Greene:
So you’re saying, it’s hot, it’s strong, but it’s not as hot as it was at the peak maybe?

Kim Meredith-Hampton:
Yeah, very true. Very true.

David Greene:
And what do you think has contributed to the, it’s still strong but it’s slowed down some? Interest rates?

Kim Meredith-Hampton:
I think the interest rates are usually the biggest ticket. I sell a lot of multi-family and invest in it myself and a lot of those numbers just don’t work. If we can try to get maybe seller financing or something assumable, that’s usually what we’re trying to do.

David Greene:
Okay. And then in your market, what are some of the long-term benefits that you see in Florida?

Kim Meredith-Hampton:
There’s no state income tax. The weather is gorgeous. It’s very cultural here, very artsy, and I think that’s why you had a lot of people move here. I think 2022, we were the top area, Tampa MSA of new people moving here. We had a net migration of 1.9 and that hadn’t happened here since 1957, which is crazy to even think that, but I always say our little St. Pete area reminds me, David, of a little San Diego. I think if you can get in here now you’re still going to be better off in the long run to real estate.

David Greene:
What do you think is driving this population growth?

Kim Meredith-Hampton:
Most of it I think has come from California, New York, all of those things, and the area’s growing in general. With construction, you’ve got that. The jobs are just absolutely wonderful. We’re around 2.5% I think unemployment right now. Tourism is big, maritime industry, healthcare big here. I think it’s just a mixture of things. I can’t pinpoint one thing on it.

Dave Meyer:
One of the things I see when I do analyses of different markets is that Florida tends to be very polarizing. When you look at the top growing markets, they’re in Florida. When you look at the lowest growing markets, they’re also in Florida. So I feel like there’s a lot of times you see both ends of the spectrum. So what is it that is different about Tampa? You said jobs, but are there anything else that set Tampa apart within the state of Florida that you think make it a unique housing market or opportunity for investors?

Kim Meredith-Hampton:
I think for a long time we were really under the radar and price points were lower than a lot of other places, but just those cultural things, plus you have the water on all different sides here that Tampa and St. Pete really are one. There’s just a bridge between them, so there’s a lot of things that you can do and see and get to the beach, but you can go to the art cultural thing. There’s so many different things that it offers to people and I think especially since COVID they found that and they’re like, “We’re there now. We want to be there.”

David Greene:
So one of the things that I, as a somewhat experienced investor and real estate broker, have settled on as one of the key metrics that I look at in any market to figure out the strength of it, and it’s funny, it’s not often talked about, is just days on market. If I can tell how long houses are sitting on the market, I can tell you so much about a market. Dave, curious if that made its way into your book, Real Estate by the Numbers? Did you guys talk about that?

Dave Meyer:
No, it doesn’t. Real Estate by the Numbers is more just like the math. There’s less market selection in there.

David Greene:
It’s more individual analysis?

Dave Meyer:
Yeah, it’s like deal analysis, less than market analysis. But I totally agree. I mean, I think days on market and active inventory are great because they measure both supply and demand at the same time. It tells you not only how many things are available but how quickly they’re coming off the market. And in terms of strategizing and determining how you’re going to approach different deals, that’s hugely important.

David Greene:
Yes, exactly. And Kim, I’m curious, if I looked into the days on market in the Tampa St. Pete area, what is the pattern that I would see over the last couple of years?

Kim Meredith-Hampton:
Last couple of years it started, you were probably about 45 days, then it started to tighten up as we went through COVID. And then on the backside of that, as we know, our crazy time over the last two years, it was about seven days. Three to seven days was really what your active market was, which was an insanity. And now it’s gone to 39 days, which tells me we are headed back to our normal, whatever our normal is, but I think it’s inching back that way. I think probably in another six months you’ll see that this will definitely be more of a buyer’s market than it is right now.

David Greene:
And what do you think is going to bring that about?

Kim Meredith-Hampton:
I think you got a lot of things, especially the rates. I guess they’re going to probably go up again. I’m not sure after that, but we’re just trying to hold on and get people things by buying down rates with mortgages and offering, “Hey, can we have a concession,” or that type of thing. But I think that’s really going to hurt us in the long run, are the high interest rates. And so I think that’s going to level off.

Dave Meyer:
Can you tell us a little bit about the rental market and what’s going on with rents in Tampa?

Kim Meredith-Hampton:
Our average rental price right now is about 2,000 and that is even for a one bedroom.

Dave Meyer:
Wow.

Kim Meredith-Hampton:
And so it has went up significantly. They went up around 22 to 25% over the last two years, and now I’m starting to see, in the last two months, a little bit of a softening on that. So what’s happening is now, as renewals come back around, people are going, “Oh, can’t we raise it another $300?” No. No, we’ve got to be careful on that because you don’t want to… Occupancy is the great thing. You don’t want to have that vacancy in the property. Numbers, though, are still strong. Still need inventory.

David Greene:
Kim, it sounds like you know your market. This is great. We’re going to come back to you in a little bit to talk about what strategies are working there, but I’ve already learned more about Tampa St. Pete in the last 10 minutes than I probably have in my whole life before this. This is why I love talking about real estate. I nerd out over this kind of stuff. So thank you for that. Victor, let’s hear about your market. Where is it again?

Victor Steffen:
I cover the Dallas-Fort Worth metroplex.

David Greene:
Oh, that’s not a hot market at all right now, just like Florida.

Victor Steffen:
Yeah. Cooled off a lot. No, I’m kidding.

David Greene:
What have you seen with your market shifting from 2020 to now?

Victor Steffen:
It follows a similar macro trend to what we’ve seen across a lot of the country. Middle of May, 2022, you really saw almost like a peak. Middle of May, down through the first to second week of February, there was a pretty significant decline in terms of the number of offers that we saw being accepted, or not so much being accepted, but the number of properties going under contract. We saw almost all of our offers being accepted as investors during that time just because a lot of retail buyers started to pull out of the market when there’s a lot of uncertainty.
So February comes, I think we hit a little bit of a support level there because since then we’ve actually seen an uptick in terms of buying pressure. We’ve seen days on market actually start to contract. We hit a 10-year peak in terms of days on market in February. It went up to about 39 days. Since that peak has come all the way back down to 21. So, looking like we’re coming into more of a neutral market environment. I think it’s actually a very healthy place now. We’re not red-hot like we were before, but you’re not walking in 10% below this price on a lot of these offers like we were, say, November and December of ’22.

David Greene:
Something I was curious, I didn’t ask you Kim, so just briefly if you could weigh in this also, have you each noticed new construction ramping up as the market has heated up in your individual markets?

Kim Meredith-Hampton:
Yes, very much so.

Victor Steffen:
I always say, some of the things that Dallas and Fort Worth do best, we don’t do a great job at building a lot of high density housing. We do a great job at building very large single family houses. In our new construction inventory we couldn’t even touch through 2021 and 2022, the first half of 2022. It was just moving too quickly and there was a lot of wait lists. This is something that a lot of our investors have been jumping into now that the market has softened because builders do have more excess inventory than they had through the peak of COVID and for the last, probably, two to three years. So that’s a great asset type for our investors to jump into right now.

David Greene:
Yeah, I was thinking about that because both of you have strong population influx, people moving into the Tampa area, and when you have too much population but not enough new inventory hitting, you get that crazy, no contingencies, all cash, everything way over asking 20 offers. It’s kind of what we get in the Bay Area when we get hot because there isn’t anywhere to build. They’ve already built everything out. Whereas Texas, and I haven’t been there a lot, but I imagine sprawling land. Just a lot of it everywhere. And Florida, same thing.
It was a swamp and they’ve just started to build out there, so there’s still space that they can build more housing, which means you’re likely to see a strong but still somewhat, relatively speaking, affordable market for the near future because if it gets too crazy, they just build more homes and then the increased supply kind of balances out the demand. That’s really a healthy market. That’s what we’d like to see versus some of these other areas like San Diego that there’s nowhere else to build. They put all the houses they could fit inside San Diego already. It’s hard to get enough supply to keep prices down. So we talked about new construction being a legit option out there in Texas. What are some of the long-term benefits to Dallas-Fort Worth real estate?

Victor Steffen:
I want to take one small step back into what we were talking about just a little bit ago. We love seeing these new supply, new construction houses come online, but we’ve definitely seen, if there’s not a mix of zoning associated along with that development, those single family houses, they’ll sit. For example, if you go to the east of Dallas there’s a community called Forney. Forney has done an excellent job at bringing in commercial real estate as well as mixed use real estate, plus those large, sprawling affordable housing developments. Whereas if you go toward other directions, for example the far northeast side of Dallas toward Melissa, you don’t have as diverse zoning. So you’ve got a lot of single family houses that have been sitting. So I think as an investor it’s definitely important to look at those multiple zoning types in those markets.

Dave Meyer:
Is the implication there that buyers just want access to the amenities that come with mixed zoning?

Victor Steffen:
100%. If you have an HEB you go up anywhere in Texas, property values will double. No, I’m kidding. They’re not going to double. But-

Dave Meyer:
That’s a grocery store, right? Just for people listening who aren’t familiar.

Victor Steffen:
Here, everything’s better.

Dave Meyer:
Yeah.

Victor Steffen:
Okay, so you got to get down to Texas, go to Heaven and get yourself a barbecue sandwich. They’re amazing.

Dave Meyer:
Now we’re talking. I’m in.

Victor Steffen:
So, all right, back to the original question. Whenever I talk to my clients about, “Hey, what direction are we going? Do you think that we have a long-term viable product here?” I recommend that they invest the same way that I invest. I look for population growth in a market. I look for median wage growth in a market, and I also look for employment growth. So where are jobs going, where are people going, and where are better quality jobs going, not just a whole bunch of jobs that are paying minimum wage, but engineer-type of jobs and manufacturing jobs and stuff that’s going to move the needle in terms of income. And Dallas-Fort Worth has all three of those metrics going up and to the right, so we’re really bullish on that market for the next foreseeable future.

Dave Meyer:
I was just going to ask the same question, ask Kim, why is it that Dallas has experienced all those things? And I know you’re going to say, “No state income tax,” but Kim already said that, so you have to say something else.

Kim Meredith-Hampton:
I already stole that one.

Victor Steffen:
Yeah, she got no state income tax. She also got the good weather. Although, for the past couple of years, Dallas has been getting smacked with some ice storms, which has been interesting.

Dave Meyer:
Oh, don’t complain about. You are from Scranton.

Victor Steffen:
I know. I know. I know.

Dave Meyer:
You know what bad weather’s like.

Victor Steffen:
I got soft moving south, I tell you. Goodness gracious. I used to be able to go and play football in the snow and sleet and rain and no sleeves and be all good to go, but now it’s 40 degrees and I’m shivering. But I like to talk about midterm rentals and what draws people toward midterm rentals. And a lot of the reason that people would be attracted to a certain midterm rental market are the same reasons that give a certain market economic viability. For example, there’s six main midterm rental strategies or six main midterm rental attractions that we like to focus on. So you got major universities, military systems, so say military bases, right?
Large international airports, large corporate employers, so Fortune 500 companies. Downtown attractions or tourism attractions are another huge one. And then if you went in and looked at, say, entertainment districts, so if it was like a Six Flags or something like that. So if you have five or six or even down to three of those main attractions in close proximity, you’re going to have a lot of good upward pressure in terms of price, jobs and good quality high-paying jobs that drive up median income in Texas. Specifically DFW has all six of those industries in close proximity.

David Greene:
What about price drops? Has there ever been a time out there in the last year or so that you’ve seen prices come down? Is there anything like that happening now?

Victor Steffen:
Yeah, for sure. We had a beautiful little season, like I was saying a bit earlier, from the end of May through the first week of February when it was, almost all of my investors’ offers were getting accepted and we were putting out offers eight, nine, sometimes 10% below the ask and they were getting picked up. Even if you look at the data, the sale data, I was combing through it a little bit this morning prior to this call, you’ll see that there was a significant decline in median sale price. We definitely hit a floor around that middle of February and it’s been climbing back since.
There’s still opportunity to go in and walk underneath fair market value, but you’ll find that instead of picking up something for 95% of fair market value, now you’re closer to 98%, which is a lot better than 105% like we were in COVID, or even 110%. And I know David out in California, you can attest to that. So there’s still a little bit of discounts to be had, especially if you can throw out a volume of offers and take a couple of shots at some that have the concessions built in and lower purchase prices.

David Greene:
What about inventory? This is a challenge in my market, is that rates are going up, everyone’s expecting prices to come down, but sellers don’t want to put their house on the market because they have a 3% interest rate and they’re probably going to have to pay the same for the next house that they sold theirs for, so they’re just switching from a 3% to a six-and-a-half and they’re not getting anything any cheaper. Is this a problem for you with just listings in general hitting the market?

Victor Steffen:
Yeah. This is something I actually wanted to touch on and it’s super interesting. I know Dave Meyer, you’re going to like this because you’re a numbers guy. April of 2022, the April data just came out. We had 8,619 sales. It’s been over a decade since we’ve had it in April with that few of sales. If you look at the number of homes that were on the market even back in 2013 and ’14 and ’15, it’s a quarter of the inventory that we have available now, and you’re still seeing a huge reduction in terms of the number of properties that are moving. And that’s just reflective of a very, very, very tight inventory of supply.

Dave Meyer:
This is a great point. I want people listening to take note of this because there’s a lot of headlines about how inventory is going up. I actually pulled this before that inventory in Dallas has gone up 53%, which makes it sound crazy. People are like, “Oh, my God, it’s going up.” But I looked at March of 2023 compared to March of 2019, pre-pandemic, and it’s 60% of what it used to be. So we’ve seen a 40% decline even though it went up 50%. So you have to almost not throw out, but sort of not just look at year-over-year data or really compare current trends to the really unusual market that occurred from 2020 to 2022, and just recommend, if you are listening to this and thinking about these metrics for your own market, you should look beyond, back past COVID into what was going on in 2018, 2019 to get a better sense of where things are relatively.

Victor Steffen:
Well, here’s another thing. Each one of these metrics, you can’t look at them as a stand-alone metric. I think if you look at everything altogether, it paints a much clearer picture, but headlines don’t like clear pictures. They like saying, “Hey, inventory is climbing,” or, “Days on market is going through the roof and we’re at the highest number of days on market in the past decade.” That’s headlines. But if you take them all together, it looks like a much different picture.

David Greene:
All right. Kim, switching back to you. Tampa, St. Pete, what was the other city that you mentioned?

Kim Meredith-Hampton:
We do Orlando, too.

David Greene:
Orlando. Thank you. What strategies are working out there right now?

Kim Meredith-Hampton:
As far as getting deals under contract?

David Greene:
Of getting deals under contract or finding something that will cash flow? Can you find anything that you’re not going to lose money on out there?

Kim Meredith-Hampton:
Yes, you can. It’s like a needle and a haystack, of course, still, because of lower inventory, but really, as I mentioned earlier, really trying to buy down the rate, trying to get seller to give us closing cost and also putting in escalation clauses, are still a thing here. And we’ve got, I think, three separate ones last week because of our escalation clauses. So it’s still alive and well here as it was last year, but that has really helped us garner some more deals than we probably would have.
And most people that are looking at multi-family, still difficult. I just picked up that office building and I got a great deal on it and I put some money into it, but now it’s worth a heck of a lot more. So those are some things I think that people can look at whether they want to do a JV on it or syndication, but looking at some other asset classes, too, in your mix of buying real estate.

Dave Meyer:
I’m curious, Kim. Are you seeing any regulations come in in Tampa regarding short-term rentals?

Kim Meredith-Hampton:
There hasn’t been anything on the short-term. They’re definitely in Hillsborough County is a Tenants Bill of Rights, and the same thing in St. Pete. They have that now. The only thing I’ve seen lately is over in Indian Rocks Beach. They didn’t want more than 10 people in a home and some of those houses fit like 20 heads-in-beds they call it, and you could not park on the street either. They only want them on the pavement, you know, the garage area, so little things like that. I do sit on public policy at the Pinellas County Board of Realtors, and we are on that constantly to try to keep those things out of play for our investors. So, hard to say, but I think DeSantis also really helps with that. He really wants to set the playing field at the government level rather than the municipalities doing that, so that’s something that’s going on right now, too.

David Greene:
Okay. So, it’s very hard to get a cash-on-cash return. A lot of investors have been forced into short-term rentals when they didn’t even want to be there, and even that’s becoming something that’s being super hard to be able to turn a profit, especially with all the competition. So, with a growing market like Tampa, what is the play in your opinion? What’s the approach an investor should take to make money in that market?

Kim Meredith-Hampton:
What we do, because we only work with investors, when we send out properties, we have a total of nine agents. We’re having extra 10 agents that are constantly sourcing every day. And before we send those out we run the short-term comps, we run the long-term comps, what will the taxes be based on that, and just anything else we can garner from that, and that’s what we’re sending out. I want them to have that backup plan.
What if the short-term doesn’t work and they do pass something for that municipality? What can they rent it for? So those are some key things, or could we maybe look at some shorter midterm and they’ve got a long-term, maybe we could work it that way. And that’s what’s nice because we do have two different property management companies. It’s like a great marriage here and so we can try to figure out which way would work best for them. So we’re always trying to look ahead.

David Greene:
Do you feel like it’s an appreciation play? Do you feel like there’s a value-add element there?

Kim Meredith-Hampton:
100%. I mean, we just got voted, St. Pete, the Best Place by Forbes Magazine for a vacation. I mean, how great is that put out there? But always, always, I’m looking on the backside. Is this an area that’s gentrifying? Is there something different we can do? Can we do some rehab to it, make it up and then leave a little skin in the game for somebody else to do? So we’re always looking at every little piece of it. It isn’t just one thing.

David Greene:
Do you think this is a good time for someone to invest in Tampa?

Kim Meredith-Hampton:
I do, especially the St. Pete market because I really do feel we are on the verge of being like a San Diego, and you know those prices better than I. Our average price right now is about 400.

David Greene:
Oh, wow. That’s low.

Kim Meredith-Hampton:
St. Pete, years ago, it was two or 300. So, I mean, you take a look at that. It’s that woulda, coulda, shoulda. Hindsight’s a great thing, so I think it’s a great time to do that.

David Greene:
So what you’re saying is, that area’s landlocked, it’s tough to build out there, so-

Kim Meredith-Hampton:
Correct.

David Greene:
… the prices have nowhere to go but up.

Kim Meredith-Hampton:
Exactly.

Dave Meyer:
So, yeah, I mean, I think that’s an interesting long-term point, but Kim, you mentioned in the beginning that you think it’s shifting from a seller’s market to a buyer’s market. How are you navigating that?

Kim Meredith-Hampton:
I’m celebrating. Celebrating.

Dave Meyer:
But if there’s a risk of price declines, how are you strategizing accordingly?

Kim Meredith-Hampton:
And actually right now, I don’t think that I see that. We’ve really never had that in Florida. And when you’re talking about… We had the 1.9% net migration over the last 12 months. We had the best job market here. Those things all culminate together. I don’t foresee in the near future where we’re going to go down in value. It’s not like in Ohio or Iowa or something like that. I mean, it’s very different here.

Dave Meyer:
Yeah, but year-over-year the prices are pretty flat, right? Now they’re pretty close to flat.

Kim Meredith-Hampton:
They’re like 3%, two or 3% up from last year. But even if we’re back to a normal market, that’s typically three to 5% almost always, ever since I’ve been over 20 years, it’s always been that three to 5%.

David Greene:
Yeah, that’s a great point that it’s typically been three to 5%, which, it doesn’t sound significant until you compound it over five years.

Kim Meredith-Hampton:
Yes.

David Greene:
You’re talking about 15 to 25% and that’s on the total price of the asset. So if it’s a $500,000 property, 15% of that is going to be $65,000, but you probably only put 20% down, which, say, would be 100,000. That’s a 65% return over five years just on appreciation before you get into anything else, which is just one of the reasons that I love real estate and I can’t stop talking about it. So, last question about that market. What should investors look for in an investor-friendly agent?

Kim Meredith-Hampton:
Oh, wow. This is a big question and we get this a lot. My team say, we only work with investors, so I speak their language and I will put 110% into it because I’m looking at it through my investor eyes. I know about cash flow, appreciation, cap rates, all these things that you go to a retail agent, they have absolutely no idea what you’re talking about. And when you really want to work with an investor-friendly agent, do your homework. The best I can say is that you definitely want someone like that on your side.

David Greene:
What are some questions that someone should ask if they’re trying to determine, is this a… What’s the cool word, a casual agent, or is this a…

Kim Meredith-Hampton:
Is that the term now? I’ve never heard that one. Casual.

David Greene:
Calling someone a casual is an insult. It’s like calling them basic.

Kim Meredith-Hampton:
Basic. Okay.

Victor Steffen:
Maybe the phrase retail agent could work there.

David Greene:
Retail agent. Okay.

Kim Meredith-Hampton:
I say retail. Yeah.

David Greene:
Okay. That’s our version of calling somebody basic in this space. It’s a big insult, but it’s veiled in professional speak. So what are some questions someone can ask to reveal this?

Kim Meredith-Hampton:
I think a huge one is, do you own any real estate yourself? To me, that’s huge. If you’re doing this for a living, it blows my mind some of the people that do not own any type of real estate or even their own home. To me, that’s the biggest question you can ask.

David Greene:
I want to stamp that, second it. That is such a good point. And here’s the reason that I just realized when you were talking, I’ve never said before. When you own real estate yourself, you develop this sixth sense for what would be good and what would be bad in a property, in a location, in an area, in a law, that is very difficult to quantify. So if you do rent by the room, you look at a house and you get this feeling like this wouldn’t work. And then when you play with it in your head you’re like, “Oh, there’s not enough parking,” or, “The bathrooms are in the wrong place,” right? “The setup is not going to work for this,” versus, “Oh, this house would be great.” Then you got to think for a minute to articulate why you feel really good about this as a short-term rental, or rent by… Whatever it is.
When you don’t own real estate yourself, as an agent, you don’t have that sixth sense. You cannot guide your clients. So to agents I would tell them, get better at articulating what it is that you see in a proper you like so people can enjoy it. And as the investor, I would say, just like you did Kim, look for an agent that owns property themselves because they will have that gut feeling that will tell them, like, “I wouldn’t want to own it,” or, “I would.” And then you made a great point, too, ask about their production. That’s always a somewhat awkward thing to talk about. If anybody who’s good at anything does it a lot, there’s no one who’s really good at something that doesn’t do it very often, and if you’re an agent that sells two houses a year, you can be super nice, you can answer your phone on the first ring, you can be really available, and you’re really bad.

Dave Meyer:
Well, it’s easier to answer your phone on the first ring if no one’s calling you.

David Greene:
That’s exactly right.

Kim Meredith-Hampton:
Yes, exactly.

David Greene:
That’s exactly right.

Kim Meredith-Hampton:
I’ve seen really interesting things happen with retail. I call them retail agents. I’ve seen where they’ve sold something in a subdivision and there’s not allowed to have rentals, which people had to sit there for a whole year on that. I’ve seen in an association where they have to be married, or sister or brother, and you sell it and you’re like, “They want to rent it to students because it’s five minutes from UCF.” You’re like, “What?” I mean, just crazy little things like that. Or they said, “Oh, you can do a short-term rental here,” and they buy all the furniture and they buy everything and they call me up and they go, “Is this true? I can’t rent here?” I go, “No, you can’t rent there.” Yeah, it may seem so insignificant, but in the end that’s huge. Those are a lot of dollars you paid for that property. It’s a lot of money out of your pocket.

David Greene:
Don’t you love it when the person use a different realtor and then they call you to say, “Is it true that I can’t do this? Can you help me?” It’s always that feeling of when the girl chose another guy over you and then she wants to call you to complain about her new boyfriend. It’s a very unique feeling when you’re in the real estate space that a lot of people that are not realtors wouldn’t understand. But, yes, those are some great, great points. I think that’s one of the reasons that, when I’m investing, I like to work with an agent that either owns a property management company themselves, or owns real estate or some combination of the two for those exact reasons that you just mentioned because the wise man and the wise woman learns from the mistakes of others rather than just their mistakes.
Also, a good analogy for you. You may get great service at a restaurant when you’re the only person there. The waiter is super attentive, like we were just saying. They answer the phone on the first ring, but that usually means the food sucks, if you’re the only person in the restaurant. There’s not a line to get in, that’s not a good sign. Just because they have great service isn’t the only reason you’d want to eat there. So, keep that in mind when you’re working with agents, too. All right, Victor, turning back to you, what strategies are working in your market?

Victor Steffen:
Cool. There’s two main ones, and I always tell my clients, like, “Hey, we’re not trying to fit a square peg in a round hole. We’re going to take what the market gives us, and what is the market giving us right now, specifically in DFW?” One is a BEAF-style deal, BEAF, and that was just an acronym I decided to use because I explain the same model so many times to so many different investors. It’s Break Even Appreciation Focused. So these are very heavily appreciation based plays, but they’re assets that are going to go ahead and cover themselves. They’re going to cover their debt service plus a little bit of yield on top to cover your PITI payment.
The other method that we’re really liking in specific areas, specifically Irving, just to the northwest side of Dallas, is that midterm rental play and short-term rentals, Irving has a more favorable STR and MTR market than Dallas, and there’s been a lot of changes, a lot of regulations. I know STRs right now are the Wild West, but Irving has stood the test so far and they’ve been an attractive market. They’ve also got all six of those main macro drivers that we’ve mentioned about before that are going to make a good MTR attraction type of a deal.
So these BEAF-style deals, Break Even Appreciation Focused, that’s where the bulk of our investors have been trending toward. These are relatively recently built assets. They’re mostly ranch-style homes. You’re looking at stuff that’s three, four bedrooms, 1,800 plus square feet. It doesn’t need a lot of CapEx. You don’t got to put a lot of cash into them, and you can get these in B plus A grade areas that investors just didn’t have access to before when assets were moving with 25 offers. So those types of deals are the ones that are really working well for our clients right now.

Dave Meyer:
The Dallas area is so big, there’s multiple cities and so many different parts to it. I’m curious, do you have any other insights about regions within the Dallas Metro and particular things that work in different areas?

Victor Steffen:
100%. So there’s two main areas that are going to work the best for your BEAF-style deal right now. Recently built, single story, three to four bedrooms, 1,800 plus square feet below the median. The median right now is just under 400,000 for the metroplex. So you want to be in something that’s, say, 325 to 375, right in that range. The markets there that have the highest concentration of that inventory are Aubrey, Texas, which is just to the north side of Frisco. Frisco is hot right now with a lot of short-term rental investors coming in because Universal Studios, they’re building out their new park there. So Aubrey, Texas, huge for this BEAF-style strategy. And then if you go far east of Dallas toward a community called Forney. Forney has been an awesome market for us to find these BEAF-style deals. So those two specific, very nuclear metros is where we point most of our clients to.

Dave Meyer:
Did you invent the term BEAF-style deals?

Victor Steffen:
Absolutely. Texas BEAF, baby. Come and get some.

Dave Meyer:
I’ve never heard that, but I’m using it. I like it.

Victor Steffen:
Yeah, Break Even Appreciation Focus. And it’s almost like what we were talking about before with just time on task and working with an investor-friendly agent. We have these same conversations day after day after day, and it’s just a good way to describe a type of deal that we were selling a lot of, and that we have a lot of investors interested in. So, yeah, feel free to use that. Well, maybe I should trademark it.

David Greene:
So if you’re asking, where’s the beef, the answer-

Victor Steffen:
Aubrey and Forney. That’s it.

David Greene:
It’s Dallas.

Victor Steffen:
There you go.

David Greene:
So, for those that just felt their sphincter tighten, as you said, Break Even Appreciation Focused.

Victor Steffen:
Yes, yes.

David Greene:
You’re triggering a lot of people here-

Victor Steffen:
I am.

David Greene:
… about going into foreclosure. What advice do you have for the type of avatar or investor that should be looking for a deal like this?

Victor Steffen:
Most of our clients who are buying that type of inventory, they’re putting 20 to 25% down. Most people are going to be either out of state or they are domestic, but this is not your cash flow heavy kind of a play. There are markets in Texas that will give you that heavy eight, nine, 10% cash-on-cash return, but this is not the market for it. So most of our clients are going to be high W-2 earner. It’s going to be somebody who’s got 50, 60, $70,000 sitting in a bank account.
They just sold a house, they’re using 1031 funds, something like that, and they want that levered return like we talked about before, when you can go ahead and put 20, 25% down on an asset that’s appreciating by between five and 7% per year that needs no CapEx and is going to lease quickly in a high quality area. You hold it for five years and now you’ve got that 25 to 30, sometimes 40% IRR. So that’s going to be our primary avatar for that BEAF-style deal.

David Greene:
All right. Let me break this down for anyone who… I love your communication style. It’s like the micro-machine man just dumping a bunch of information there. Did you ever get teased about that when you were younger as being the fast talker that said a lot of smart stuff?

Victor Steffen:
I’ve never been teased about being a fast talker and having a lot of smart stuff. I think it comes out because we have these conversations every day with our investors, so as you’re saying the question, it’s like, “This is what I’m going to say.” We talk to a lot of people.

David Greene:
It’s not what I expect out of someone from Texas. You’re supposed to be a slow talker with a drawl.

Dave Meyer:
Yeah. It’s that northeast pattern.

Victor Steffen:
Yes, yes. And I get in trouble with that with my in-laws. Not good.

David Greene:
“You don’t seem Texas, son.” All right. So what I’m hearing you break down is that if your goal is cash-on-cash return, which is typically the return on investment that we use in real estate investing, that’s what you’re used to hearing, if you’re a listener. Really, return on investment can be measured in many ways. Cash-on-cash return is the way that we look at the return on your money by cash flow. So ROI, cash-on-cash return have become synonymous in our world. They really shouldn’t be because ROI is more of a concept than a specific formula. You may break even, you may even lose a little bit of money on some of these deals.
But you mentioned IRR, which stands for Internal Rate of Return, which is a different way of measuring ROI, and that is taking into account all the ways that real estate makes money, or at least most of them. So you’re going to be taking into account the loan paydown, the appreciation you’re getting, if there is cash flow, if you earned a commission on the deal. Anywhere that money came in goes into that formula, and then if you sell it in five years and you make a profit, you divide it over five years and now you get a return on your investment for that year.
The reason that this is worth bringing up, well, first off, that’s how people evaluate larger deals like apartment complexes or multi-family properties when there are a lot of investors putting money into it like a syndication, because they’re making money in more ways than just the cash flow of the apartment complex, although that is one way. When you’re looking at a market that gets high appreciation, like you said, low CapEx, I know why you mentioned that because that’s something that can kill your return if you have to dump money into a property because it’s 70 years old and things are breaking.

Victor Steffen:
Absolutely.

David Greene:
The market is strong, so people are still moving into it, right? You don’t know what’s going to happen, but it’s reasonable to expect that it’s going to continue growing the way that it has. You mentioned wages going up in that area as companies are moving out that way, which means rents are likely to increase overtime as well as how much someone can’t afford to pay for the house. There’s a lot of factors that make that a strong market that don’t fit into a cash-on-cash return matrix.

Victor Steffen:
That’s right. There’s a conversation we have often and it’s like, “There’s nothing wrong with 0% cash-on-cash.” And that’s another, like, I’ve been listening to this show for a long time and if it was 10 years ago and I heard somebody say something like that, I would’ve been like, “All right, delete. I’m not listening to this guy. 0% cash-on-cash.” But the more and more deals we’ve done having invested in heavy, heavy cash yield markets, Midwestern Rust Belt states as well as heavy cash flow markets in Texas, there’s a lot of good to be had when you focus on area and asset type and quality in terms of your IRR rather than just your COC, your cash-on-cash.

David Greene:
Yeah. And just let me make it clear, we are not saying cash-on-cash return doesn’t matter. We are not saying cash flow doesn’t matter. We are not saying to buy a place that bleeds 10 grand a month just hoping it appreciates.

Victor Steffen:
That’s right.

David Greene:
We are just saying, open your perspective. See all the ways that real estate makes money, take all of that into consideration, and then make an investment decision based on what’s best for you. If you live paycheck to paycheck, you’re barely getting by, you have $30,000 to invest, the BEAF strategy is not a great idea.

Victor Steffen:
That’s right.

David Greene:
Okay? Stick with some tuna and some chicken, but you got a great W-2, you have strong savings, you’re making a lot of money. Maybe there’s some tax benefits. You might save 40 grand in taxes doing cost aggregation study on this. That’s a lot of money that you’re saving, even if some, it does bleed a little bit of money every single month, but you’re making a lot of money in other areas. This actually can be a very wise decision. Is that your same perspective?

Victor Steffen:
I’d like to make one caveat here. So, when we buy these BEAF-style deals, most of our investors are very savvy and they’re going to come in and they’re going to say, “Hey, I’m not super comfortable on this. It is cash flow negative, $250 a month.” How we remedy that is, one, you’re buying into a BEAF-style market. Break Even Appreciation Focused. Appreciation does not just mean the asset price itself. That will also go ahead and correlate to rents in that area. You will also expect upward pressure.
Number two, if we’re looking at something and we know for year one it’s going to go ahead and have $200 a month in negative yield, we’ll go and we’ll get that concession for $2,500 from the seller and make up for that upfront cash on the purchase, right? The money’s made when you buy. We’ll make sure that we alleviate that negative yield, that negative $2,500 with concessions on the front-end. That’s usually a good way to help ease the negative yield at least for year one until you have a chance to go ahead and push your rents back up.

Dave Meyer:
Are you adjusting how you’re advising investors in this market? Because rent growth is slowing down, appreciation is slowing down. Are people still doing this?

Victor Steffen:
We definitely advise our clients based on what they’re specifically looking for. We call it a perfect deal statement. For every single client that comes through, I jump on a call with them. We’ll go through what exactly it is that they’re looking for, and if it’s a client who is really looking to replace their W-2 income in the next three years, BEAF is not their deal, right? We’ll go ahead and we’ll push them toward a higher cash flow market or management style. Maybe we will suggest going towards something that’s more short-term or midterm rental friendly so they can increase that yield.
If it’s a client who comes in and they say, “Hey, I’ve got a great W-2. I don’t plan to leave anytime soon. I want to go ahead and have the highest levered return on my money as possible. I want something that’s going to be headache-free because I live in Seattle, or I live in California, or I live in New York.” We will push them toward this BEAF-style deal even as we see a softening in terms of the up and to the right rental rates that we’ve been seeing.

David Greene:
Kim, I’m going to throw back to you. What is the ideal avatar of investor that should be looking in your market?

Kim Meredith-Hampton:
It’s funny, we were talking about this earlier, and Victor and I are probably very same in that. We are very tailored to each individual investor, so we’re not putting them on some kind of auto feed. I find that that sent them a lot of junk. These people, they want to know, for them, the perfect one is that they want to buy a duplex to a quad. They have at least 100,000 to put in, and they’re not queasy as to some value-add to the property and doesn’t scare them. That’s typically what my perfect avatar is.

David Greene:
Dave has written blogs on both of these markets, which you could find at biggerpockets.com/blogs. And if you’d like to find agents like Kim or Victor, we can help you with that, too. Biggerpockets.com has an agent finder that is free that will put you in touch with agents that can help you find, analyze, and close a deal that’s right for you. All you have to do is go to the website, look for the nav bar, find agent finder, search a market like Tampa or Dallas, enter your investment criteria and select the agent that you want to contact. Or, you can just go to biggerpockets.com/agentfinder and match with the market experts now.

Dave Meyer:
If you like this style of conversation where we’re talking about local market conditions and you find it helpful to learn how to think about analyzing a market, interview potential teammates or people who can help you with your investing, check out the other BiggerPockets podcast on the market. I am the host of that one and we have these types of conversations regularly and I actually know a lot of these stats that we were talking about today because I was doing research for another market-based analysis show that we’re going to be doing on the market in just the next couple of weeks here.

David Greene:
All right, Kim, Victor, thank you so much for being on the show. We’ve loved having you. Kim, can you tell people where they can find out more about you?

Kim Meredith-Hampton:
Sure. [email protected], and we’re in Tampa and Orlando. Happy to help.

Dave Meyer:
Are you coming to the BiggerPockets conference? Are you going to be in Orlando?

Kim Meredith-Hampton:
Yes, of course.

Dave Meyer:
Excellent. Great.

David Greene:
Victor?

Victor Steffen:
You can find me at victorsteffen.com or on the BiggerPockets agent finder tool and always happy to help.

David Greene:
And that’s V-I-C-T-O-R S-T-E-F-F-E-N.

Victor Steffen:
That’s right. Very easy to find.

David Greene:
Not like Stephen Curry. All right. Well, thanks again for being here. I’ve learned a ton about both of your markets. I also learned about the BEAF-strategy. First time that I’ve ever heard about that, and how to buy an apartment complex in a city and turn it into a short-term rental specialist.

Victor Steffen:
Yeah, we need one of them.

David Greene:
Yes, we all do. Good job on that, Kim.

Kim Meredith-Hampton:
Thanks.

David Greene:
This is David Green for Dave, my beefy co-host, Meyer.

Dave Meyer:
That might be the best one yet.