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Mayuresh Patole and Tejas Gawande are on a mission. The founders of Chronicle, which is today announcing a $7.5 million seed funding round, believe the world needs a new way to tell stories. “We are in an epidemic of bad information design,” says Patole. “The tools we currently use to create presentations just make it far too easy to make bad ones.”

The way people approach presentations – from students delivering class projects to huge enterprises publishing critical business information – is rooted in the analogue world, Chronicle argues. “The slide format was created in the 1980s with the advent of the overhead projector,” says Gawande. “Now, 40 years later, the way we work has completely transformed but our presentation tools are still stuck with the same concept.”

Chronicle has therefore developed something different. Its tools help users to create presentations using “blocks” – pre-designed elements that can simply be dropped in and moved around, much like you move the apps on your iPhone screen. The aim is to provide a multitude of new and interesting ways to present information – and to make it easy for users to take advantage of this functionality.

Chronicle-enabled presentations are also far more interactive, enabling consumers to zoom in and out of each area, rather than proceeding through in a completely linear fashion. “We want to enable everyone to create high-quality, inspiring presentations in a new format that is far more engaging and interactive,” says Patole. “Users shouldn’t have to face design challenges they don’t feel equipped for; using our pre-designed blocks they can concentrate on telling their story.”

It’s an aim that will resonate with those familiar with the idea of “death by Powerpoint”; in a world where Microsoft research suggests attention spans may have shrunk by as much as a third over the past two decades, audiences simply no longer have the appetite for lengthy one-dimensional presentations. Some studies suggest 10 minutes of information in its current form is as much as most people can manage to stay focused for.

“I’ve actually got nothing against tools such as Powerpoint,” says Patole. “It’s just that you need to do a lot of work to use tools like it really well; we need to get to a point where users can create visually stunning stories in seconds or minutes, rather than hours.”

Naturally, the proof is in the pudding. Chronicle hopes it has created a new way to build presentations with an intuitive feel that will support adoption. But the founders are realistic that when people have been doing something the same way for so long, persuading them to do it differently will be challenging. “It will take time to change people’s behaviours,” says Gawande. “But we want Chronicle to be the tool of choice for any presentation use case.”

The company’s backers clearly believe Chronicle can follow through on that ambition. Today’s funding round is led by Accel and Square Peg, and supported by a number of business angels from roles at leading technology firms including Apple, Google, Meta, Slack, Stripe, Superhuman, OnDeck, and Adobe.

Shekhar Kirani, a partner at Accel, thinks Chronicle has the determination and imagination to deliver. “Chronicle is re-imagining storytelling,” he says. “The team is obsessed with fixing the problem and making the experience of crafting impactful stories not just bearable but joyful.”

It’s a view echoed by Paul Bassat, founder at Square Peg, who points to Patole’s long-held obsession with developing better presentations. Patole’s interest in the theme began at university, where he spent hours helping fellow students to build their presentations, and has continued through a series of consultancy roles in which he was continually bombarded with poor-quality decks, and dedicated to creating better ones.

“It is rare to find a founder who has such a special connection with the problem,” says Bassat. “Mayuresh is absolutely obsessed and uniquely skilled to craft a new storytelling medium. When he showed us what he means by a new format, it was immediately clear that the opportunity is huge and they are thinking about this very differently.”

Still, the company is some way off commercialising its innovation. It’s currently in a closed beta phase, testing and refining the product with a handful of key clients, with the company’s new financing providing the means with which to build out and accelerate development.

Eventually, the founders envisage moving to a fremium model. Users such as students would access a limited set of tools for free, with larger organisations paying a monthly subscription to use the full range of Chronicle’s functionality. “This is ultimately going to be an enterprise solution,” says Gawande.

Chronicle itself offers evidence of the impact that better story-telling can have – its pitch deck to investors was built using its own tools, helping to convince them to back the company. But the challenge has only just begun; now the company must persuade everyone else to ditch the same old slide decks in favour of a new approach.

David:
This is the BiggerPockets Podcast, show 730.

Rob:
I think this is a very important topic because there is this misconception that you need a lot of money to get started in real estate, and that’s not true. A lot of times you can get started at real estate with low to no money down, but I think $10,000 is a really good achievement for most people because I think it’s an achievable amount that someone can save over time, if they put in some work, if they have a couple of side hustles, if they save their income that they’re making at work, and with that $10,000, I think you can deploy this so many different ways and actually build wealth through real estate.

David:
What’s going on everyone? This is David Greene, host of the BiggerPockets Real Estate Podcast, joined today by both of my co-hosts on the main show, Henry Washington and Rob Abasolo, and we’ve got a treat for you. Today’s show we are talking about what we would do if we had $10,000 to invest and what you could too. We go through several strategies, give a little brief overview of what each of them looks like, then we each pick a strategy and throw it against each other in a Rock ‘Em Sock ‘Em style debate over how to spend $10,000. Before we get into the show a quick tip for you. When it comes to how to spend $10,000 to invest in real estate, there’s ways you can do it for free, and that means valuing your education. Biggerpockets.com has tons of resources to help you do that, including the best forum on the planet for real estate investors. You can also follow my awesome friends here, Henry Washington and Rob Abasolo on social media. Guys, throw your handles out there real quick.

Rob:
Robuilt, R-O-B-U-I-L-T. I did it.

Henry:
TheHenryWashington.

David:
And they give you free content, free information just like BiggerPockets does. Guys, you love education. It’s one of the best ways to invest in yourselves. Do it with the people that you got right here. We also talk about ways that we have saved $10,000 ourselves that people can use to get to that first 10 K. If you’re not there right now, buckle your seatbelts, get ready for a great show. Let’s do it. All right, today we have a special show. We are going to start with the list of all the ways that we can think of to get into real estate with just $10,000. We’re each going to pick one of those strategies and then we’re going to deep dive into the strategy that each of us picked, how we would use them, what we would avoid, and how we would maximize the use of that $10,000, looking out for pitfalls and the kind of returns and timeline that we would expect. Really paint a picture for everybody of how we would invest that $10,000.

Rob:
Yeah, I think this is a very important topic because there is this misconception that you need a lot of money to get started in real estate, and that’s not true. A lot of times you can get started in real estate with low to no money down, but I think $10,000 is a really good achievement for most people, because I think it’s an achievable amount that someone can save over time if they put in some work, if they have a couple of side hustles, if they save their income that they’re making at work. And with that $10,000, I think you can deploy this so many different ways and actually build wealth through real estate. I started with I think… No, no, $7,000. So I think this is a good milestone for most people to hit to actually get started.

Henry:
Yeah, I agree with you and you’re right, there are plenty of ways to get started in real estate with little to no money, but it is going to take some money at some level, especially if you’re going to buy and hold, because having some sort of a cushion, safety net way to pay for things that break is also helpful. So getting to that $10,000 point is a milestone, so I don’t want people to think, “All right, I don’t have to go save money to do this.” You should, it’s a great time with technology to be able to make money and then also think about if you can get in with no little to no money, that 10 K can go a long way towards helping you have that cushion and provide you that safety net as you continue to invest.

David:
Yeah, so on the topic of how you would get 10,000, each of you, what do you recommend? Do you think that there’s a side hustle that you should use to save an extra 10 K? Would you look for a different job? Is there things within the jobs people are working? If someone’s just saying, “Well, I don’t even have 10 K, how am I going to get there?” What advice do you have? Rob, I’ll start with you.

Rob:
Ooh, there’s a lot of things. I mean, for me, my side hustle, when I was getting started in real estate, I built furniture. So it was back when pipe furniture was very popular and I remember looking on Etsy and all these pipe coffee tables, the industrial kind of rustic look. I would look them up and these tables were like 800 bucks, and I remember being like, “Whoa, that’s crazy. $800 for this little coffee table. I can make this on my own.” So I did, and it cost me, I don’t know, a hundred bucks to do. So I was like, “Whoa, what if I built this for a hundred dollars and I sold it to people for 800 or a thousand dollars?”
So I actually started a little furniture building business for about two years, and I was glued to my basement for those two years. I’d be in there up until 4:00 AM at night building custom tables and benches and not a lot of skill went into it. It was a very easy trade for me to pick up. Naturally I’m a little handy, but I was able to learn. I mean, I was able to learn the woodworking craft and make thousands of dollars every single month. Now at that time, I think it was like $8,000 a year that I was making on the side, but to me that was monumental for where I was financially, so I think if you have a trade that you’re good at, figure out how to monetize that trade.

Henry:
I did something very similar, Rob. For my side hustle, unfortunately I didn’t put the money to use in into real estate, but needless to say I did have a side hustle that helped me make about 10 grand. So I would look for places where I could buy Amazon, Walmart, online store returns for pennies on the dollar. So a lot of the times when people return these items to Amazon or walmart.com, they just end up selling those things super cheap wholesale to these auction companies, and these auction companies will then auction them off sometimes for pennies on the dollar to the general public. So I would literally buy all kinds of stuff.
And what I found… I would keep the spreadsheet of what I bought, what I paid for it, and then what I was able to sell it for. I would turn around and sell the stuff on Craigslist or Facebook marketplace. And the thing that generated the most income for me with the least amount of effort was always furniture, specifically kitchen tables, because all you had to do to put them together was screw four legs in. So I would buy them 10, 20, 30 bucks, sell them for a 100, 200, 300, 400 bucks depending on the table. So I flipped a lot of kitchen tables, but lots of Amazon return furniture, not really electronics because that’s kind of hit or miss when you’re doing returns, but furniture was pretty easy to do. So yeah.

Rob:
Maybe we’ll do an episode on this where we bring in people that are very good at side hustles that make $10,000 so that people can maybe learn how to do this and actually start in real estate with that $10,000. That could be a fun series, I think. David, what were your side hustles when you were getting into real estate? I know you were obviously working as a police officer for a long time. But did you have anything that was making you extra income on the side?

David:
Not massive. I would always maximize whatever I was doing to make as much money as I could. So when I worked in restaurants, I would stay and pick up the last tables at the end of the night. You could usually increase your income by 30, 40, sometimes 50% just working another hour or two because normally they trade tables between servers. At the end of the night they want to get everybody off the floor so they can clean up and go home and stop paying them. So they give all the tables the one person. So instead of I get one out of every four or five tables, I get every single table until I can’t handle it anymore. So I would often double the amount of money that I could make just staying late.
Or I’d pick up a shift if I didn’t have anything going on. If I got done with the class or I’d done my homework, and man, there’s nothing happening tonight. My first thought wasn’t how do I go get drunk? And it was like, who would let me work their shift? Sometimes I’d pay them 20 bucks to let me go work instead, and I’d give him 20 bucks and I’d go make 140. And it was still worth it to me. And then when I became a police officer, it was just overtime. I could figure out ways to always have overtime, and I became the person that all the sergeants would call first when there was overtime. I think this is important before we get into how to invest $10,000, because for a long time in the real estate community, we have told people you can make money through real estate. You don’t have to have a job. And I see you guys are smiling where I’m going with this. And for a long time that was true. There was not as much competition for these assets. It was actually a feasible thing to get into.
And I’m not saying you cannot do it. There’s always a way that it can be done. It is incredibly more difficult to do now than it ever was before. Even if someone handed you a house for free and said, “Here you go, you don’t have to pay anything,” you still need money because things break with that house and tenants leave, and there are expenses associated with real estate that you need money, and I think it is a healthier overall financial picture, especially when you’re getting started to make money with real estate and make money with your job and look for ways to make more money and maybe start a business and do some stuff from there within the world of real estate.
Rather than saying, “I’m going to build my financial empire on one pillar, I’m going to have a table with just one leg and I’m going to hope that it never gets knocked off balance, and I’m going to rely on that completely.” So as we go through these strategies, keep in mind these are not replacements for hard work, financial discipline, doing a good job, looking for self-improvement. They are a supplement to it. You guys agree?

Rob:
Oh yeah, 100%. It’s so hard. I mean, it’s still hard work. It’s not just like, “Oh yeah, I did it. I got my first property, I’m going to go to sleep now.” It’s like, “Eh, you’re going to need to sleep less than you’ve ever slept before.” And that’s okay, that’s part of getting into real estate.

David:
Yeah, it’s kind of like I hear people say, “I’m going to get married so that we stop fighting all the time in our relationship,” and I don’t know any married couples that fight less after they got married. You’re not going to stop having conflict when you get a relationship, you’re just going to have a better, deeper relationship. So this get into strategy number one, I will start. The first thing we’re going to talk about is cheap real estate markets. Now most of the time that’s where people’s mind goes when they’re like, “I don’t have a lot of money, so let me just go invest in a cheap market where I don’t need as much money.” Some of the pros of that are, it’s true, you usually won’t need as much money.
There’s often less competition per property. I think that makes it a little bit easier to get into. You’re not going in there against 10 other buyers as often as you’re going to if you’re trying to buy into the best markets that are maybe going to be more expensive. And getting approved for loans can also be a little bit easier because if the house is only a hundred thousand dollars, your debt to income does not need to be as high to get approved for that as if the house is a million dollars. Now, there’s many cons and we can talk about those also. I think the biggest ones with that is that overall, when you’re looking at the big picture, I don’t know that anybody that I’ve met that made really good money in real estate did it in a cheap market. It is often where you go with your training wheels, this is how you learn how to invest, but even if you’re investing in a cheap market and you’re going to keep maybe a Midwest investor, you still move into the better neighborhoods or the better assets within the Midwest.
None of the people I know that do well stayed as bottom feeders trying to make these really cheap deals work because the problem is you don’t get appreciation in cash flow, you don’t get appreciation in the value of the property, and all the money that you think you keeps getting dumped back into it when it needs a new roof, when it needs a new air conditioner, when one of your tenants leave and the cost of repainting and reflooring one of these houses is exactly the same whether the house costs a million dollars or $50,000, but the percentage of your revenue is much higher in cheap houses than it is with expensive houses. And that’s something people forget, that it becomes a much higher chunk of the money that you’re making when you have to go accomplish a turn, get a property ready for the next tenant, and it’s only worth 50 grand. You guys have any different opinions? I know you guys aren’t supposed to be the experts in this, but I’m just curious if you guys have an alternate point of view or if this is what you’ve seen to also.

Rob:
No, I mean it’s a fine line. My first house that I bought was a primary residence in Kansas City and I bought it right before Kansas City exploded. I think the cost of that house was like 159 K, and three years later it was worth 215. So there was some appreciation there, but obviously for me, when we sold it, it was life changing money. It was like 40 grand or something like that, but that’s because Kansas City happened to explode at that time. If I had bought that house a couple years before that, it would’ve been very little appreciation. So I definitely understand the sentiment behind these cheaper markets, cheaper houses kind of thing, because the appreciation’s probably not going to be quite so juicy.

Henry:
I do see people who can be and are very successful in inexpensive markets, but typically what I see when that happens is that they’re pretty diligent about redeploying gains from either flipping properties or gains from the cash flow they are making into paying these properties off because they’re so inexpensive. And then when the assets are completely paid off, they do cash flow extremely well, and you can get to that payoff point a whole lot easier. Obviously in a cheaper market, yes, you’re paying more in expenses, but when you can get those properties paid off, I think there is some absolute huge benefits to being able to do that in inexpensive market.

David:
All right, Henry, if you want to go ahead and jump into the next strategy.

Henry:
Absolutely. Another strategy to think about is partnering. Everybody says, “If you can’t do it on your own, just bring in a partner. That’ll make it all better.” And it can, it can help you when you bring in a partner. I think a lot of the times what we don’t have honest conversations about is when you are new, what are you bringing to the table to an experienced investor to want to partner with you on a deal? There are some rare occasions when somebody just wants to take you under their wing and give you 50% of one of their deals, but that’s very few and far between. So partnering can help you get into deals, it can help you learn the business, but the catch is you have to be able to provide some level of value.
So whether that’s you go and you drive for dollars, and if you’re out and about every day going to work, going to your nine to five, driving for dollars, tagging distressed homes, then that’s a list you now have that you can take to an experienced investor and say, “Hey, if you market to this list, if you get a deal on this list, maybe I can shadow you, maybe I can get a finder’s fee, maybe I can partner with you on that deal,” but at least you brought some value. I think risks obviously to partnering, you can’t just partner with anybody. I think sometimes people get themselves into quite a bit of trouble when they partner with people who don’t have the same core values as them. It’s like a marriage and a partnership. If you’re not aligned on the big core values, then you could see yourself getting into some trouble.
And if you don’t have the infrastructure or the money that some of these other people do, you could find yourself in a world of hurt getting into these partnerships with people you’re not on the same level as. So yeah, you got to be careful with who you partner with and you have to make sure that you provide value, and I think partnerships can be beneficial, but if you’re not going to be able to bring value, it’s going to be a very difficult path for you to find that perfect partner.

Rob:
I think one thing that most people don’t think about doing, because they’re just getting started when they partner a lot of the times, is get a lawyer involved as soon as possible and have them draft up the LLC with you, the actual operating agreement, because me and my partners talked about everything. We were like, “Oh, this is what’s going to happen. If I get divorced, here’s how this works. If I die…” I mean, not to get too morbid, but you have to cover all those things. And we thought we had covered everything, but once we brought our lawyer in, our lawyer was like, “Well, what about these 50 things? Have y’all talked about all of this?” And we’re like, “Oh, no, we haven’t.” So a lawyer was actually someone who… And it cost us money, it cost us about 500 bucks, but they helped define exactly what the vision was and all of the nuclear scenarios that could happen, and I’ve had very successful partnerships as a result.

David:
All right, Rob, what do you think for the next strategy?

Rob:
For 10,000 bucks, I mean, I always tell people these days, maybe consider getting into rental arbitrage. So a very quick explanation of what it is, is you basically go to a landlord who is renting one of their properties on, let’s say, Zillow, Redfin, Trulia, and you basically tell them that you intend to rent their property on Airbnb, and that the way that you make your money is on the delta between the rent that they’re charging you and the rent that you can charge on Airbnb. So let’s say you have a landlord that’s renting a two bedroom, two bath for 1,500 bucks. You are then going to furnish it and you are then going to list it on short-term rental platforms like Airbnb, Vrbo, booking.com, and the idea is that $1,500 a month comes out to about $50 a night. You’re going to have to charge more than $50 a night to turn a profit on that property.
This is actually the very first thing that I did when I was getting into the short-term rental game, and kind of happened by accident, but it was something that I really… I’m very grateful for this accident because it was an accident that was making me one to $2,000 profit every single month. So pros and cons here. Pro, it’s very high cash flow. It allows you to get into a property that you don’t own, you don’t have to worry about the maintenance, and you can cash flow. And anytime that there are issues with the property, like you talked about with the cheap markets, the landlord or the apartment building has to take care of that. Low cash to get in. $10,000, very feasible to get into a rental arbitrage deal for that amount. I think my first rental arbitrage deal was about $3,000, because I really hustled and went to Craigslist free and let go, and I was getting furniture for 10 bucks and it didn’t match and it wasn’t good, but I was just getting started.
The cons of rental arbitrage, I’d say the biggest one is it’s very hard to get a landlord to agree to this, and there are a lot of people that execute this strategy incorrectly, where they don’t tell the landlord about it and then the landlord finds out and what do you think happens? Things hit the fan, landlord wants to evict them. It’s not a good thing. So you definitely want to make sure that you’re very honest with your landlord, you’re going to get 100 nos for every yes. The other big con to rental arbitrage is that there is no ownership of that property and because there’s no ownership, you get no equity, you get no tax benefits, other than typical deductions that you might be able to do furniture deductions and stuff like that.
And then you also have other small risks, like a landlord might want to sell their property after a year and you’ve invested all this time and money and you’re starting to hit your groove and now you’ve got to basically exit that apartment or that home because the landlord has decided to sell. And then there’s always regulation with Airbnb that might hinder your business too. So those are kind of the pros and cons there.

David:
Yep, one of my favorite strategies, next one up is house hacking, this is basically buying a house or the primary residence loan and then renting out parts of the house or most of the house to other people to generate income. The best reason to do this is it takes less money and you get all the benefits of ownership and you of learn how to do real estate investing, but still get into the right neighborhoods, the right areas, the right asset classes. You’re not forced into any of the risks that I don’t like. So you can usually use an FHA loan, which requires 3.5% down or even conventional loans with 5% down, and you can end up owning a house with very little money.
Another one is a REIT or a real estate investment trust. So this is basically, if you consider, it’s very similar to buying stocks that are just based on real estate. So when you buy a stock, you’re getting a share of a company. When you buy a REIT, you are getting a share of a real estate portfolio and you don’t have to do any work. It’s passive, you buy it, the cash flows and the appreciation of that actual portfolio get paid back to the people that bought shares of it, and it can be a very easy way if you want to invest in real estate but you don’t want it to take over your life.

Rob:
Awesome. Yeah. Another strategy here, glamping, glamorous camping. I’ve talked about it every so often, and I really like this for people getting in with not a lot of money as well, because there are so many ways that you can break into glamping for a relatively low cost. So you can buy a tent for $3,000 and go and put that on your land if you have land, or go and rent land from somebody and put it on their land. I know people that have bought Airstreams and they financed them and they went and rented out spots at RV parks. I know a guy that had about 40 Airstreams all around the country. He would go to beach RV resorts and say, “Hey, can I rent the front spot for $500 a month and I’m going to Airbnb.” And they’re like, “Yeah, sure.” So he was always just printing cash that way.
If you already own a home, this is a very creative way to get into it, it’s kind of like a house hat glamping thing. One time I stayed at an Airbnb that was in this Silver Bullet and it was actually behind someone’s house in a neighborhood, so they craned in this Airstream in the backyard, and we stayed in that for a hundred bucks a night or something like that, and they said that it paid their mortgage. So the pros here are that you can get in for less than $10,000. It’s not necessarily going to be easy. You do have to be very stringent with your budget. And then the pros are also that people pay a lot of money to stay in glamping type setups because they don’t want to camp. Typically with camping, you’re freezing outside and you don’t necessarily want to do that. Glamping, it’s a little bit more insulated. You can put a cast iron stove in. There’s just so many ways to do it.
Cons are that a lot of these glamping units are not necessarily built for the elements a lot of the times too. So if there’s extreme weather, you’re always going to have whiny guests or a guest that didn’t read the description. That was actually my biggest con is that I would really lay out what the experience people were getting and they never read any of that. So they would show up and be like, “It’s five degrees outside.” And we’re like, “Yeah, we told you it was. Build a fire.” And then they’re like, “We don’t know how to build a fire.” So you’re going to get a lot of guests that are very temperamental depending on the actual climate. So good and bad here, but ultimately high cash flow, potentially low cost to get into, under the $10,000 if you do it right.

Henry:
I think I stayed at one of your glamping sites.

Rob:
Yeah, yeah, probably.

Henry:
Oh man. Another strategy is lead generation, wholesale, bird dog. It’s had lots of names. But the idea is that you hustle your tail off to find as many under market value leads as you possibly can and then either make money by monetizing those leads by either putting under a contract and assigning that contract to an investor who will close on that deal or passing that lead onto another investor in exchange for a finder’s fee. It is a good strategy to be able to make money if it’s done properly and in accordance with the law, depending on the state that you’re in. But some of the… So the pros are, yeah, you can make really good money doing this. You can range from anywhere making a few hundred bucks to thousands of dollars on a single deal. It just depends on the market that you’re in and the quality of deals that you find.
The cons with this are volume. The amount of volume that you would need to find as far as leads go is going to be quite high. And time. You’re going to analyze hundreds of deals and maybe get one or two that could be viable, especially if you’re doing it on a very limited or no budget to generate those leads. So the amount of discipline that it would take in order for it to produce results is really high. So not a lot of people are willing to put in that type of work or spend that type of money, which results in people typically not getting great results with this type of strategy.

Rob:
And one other thing I wanted to toss out there, and very good news for this one, is that education. And what I like about this is that education doesn’t have to cost 10,000, although it can. Education can literally be free. You can listen to the BiggerPockets Podcast and learn how to get started in the world of real estate. You can go to the BiggerPockets forums, you can go on YouTube University. There’s a lot of free content out there. You can also buy a book. You can buy David Greene’s upcoming book Scale, which is going to be a banger, and that’s like, I don’t know, less than $20 probably. And you can learn how to scale and optimize your business.
You can join a course for under $1,000 You can join a mastermind for under $10,000. So it really depends on what you want, how much you want to invest, but I think investing in yourself will ultimately put you in a network of people that are like-minded, that have also made that investment, that want exactly what you want. And I think you can find partners, I think you can learn at an accelerated rate. And like I said, sky’s the limit. I mean, there’s so much free education out there that you can get started for a lot less than 10,000 bucks.

Henry:
Yeah, absolutely, man. On the topic of masterminds, that is a strategy within itself, investing in a mastermind. So a little different than typical education. Education is you’re learning some particular skill that maybe somebody’s created some course around or there’s some content on the internet around. Mastermind is you getting into a group of other people who are either at the same level or above, hopefully more people above the level that you’re at, and it’s you putting your brain power together, your business resources together. So you’re able to see other people doing what you’re doing at a higher scale, or maybe they’re better at different parts of the business that you’re not great at, and because you are surrounded by these people, either virtually or in person, you’re able to leverage the resources that they have because you’ve all paid to be a part of this same mastermind.
And part of that comes with being able to access other people’s skills, resources, teams, and tools. So there’s a lot that needs to happen within your real estate business for you to get to your goals, and being a part of a mastermind will help you shorten that timeframe because you can just leverage somebody else’s resources or their business practice that helped them generate those resources, and you didn’t have to go spend all that time or money trying to figure out what works and what doesn’t.

David:
A really good point. That’s why I started my mastermind. There’s a lot of people that will say, “I need to find a mentor. I need to find a person who’s going to help me with this.” And they just look for a random stranger who they don’t know and they have nothing in common with, and they try to force a relationship, versus you join a mastermind or a group of people or you make a friends at a meetup or something, and now you don’t have to go ask them to be your mentor. There’s a connection that you already have that makes them want to share what they’re doing. You get a lot of the benefits of that relationship much easier. So let’s recap what we’ve gone through. We’ve got cheap markets, partnering with somebody else, the arbitrage model, house hacking, investing in REITs, glamping, lead gen, wholesale, bird dogging, basically the elbow grease methods, education, and then masterminds.
Now each of these has a risk profile that comes with it, so just be aware. There’s no perfect strategy. It’s not listening to a podcast like this. You’re going to be like, “Well, I got educated and I found the strategy with all upside and no downside.” It’s not like that. You’re learning about the upsides and downsides of each one to figure out which one might work best for the situation that you’re in. So let’s talk about very quickly for each of these strategies, just risk. I’ll start with cheap markets and I will say cheap markets are probably very risky. I don’t know many people that pull this off. Even Rob’s example, I don’t know if I would call it that, a cheap market. It appreciated from 150 to 220. That’s like a 50, 60% increase over that period of time. I mean that was a cheaper than normal market, but when I say cheap markets, I’m talking maybe $80,000 and below. Very, very risky. Rob’s is an entry level market. That is not quite as risky as what we’re talking about. Next up is partnering. What do you think? How risky is that, Henry?

Henry:
Man, I think partnering is a pretty high risk. I don’t think people talk about the high risk of partnerships enough.

Rob:
Interesting.

Henry:
Yeah, everything in life comes to an end, guys, and I think when people are talking about partnerships, they do not, even partnerships that they did a lot of due diligence on the front side, not a lot of people talk about what does it look like when we dissolve or when this partnership ends. And lots of partnerships end poorly, bitterly, and people get burned. So even the best, well-intentioned partnerships don’t do well, but when we’re talking about this strategy where you’re probably somebody new partnering with somebody experienced, man, that’s a big risk in my opinion.

Rob:
Fair, fair. Okay, and then we got arbitrage. This is a tough one. I think if you do arbitrage correctly and you negotiate with your landlord and they’re in on it, I actually think it’s a low risk. If you don’t negotiate with your landlord and you try to hide them, like a lot of people would go out there, a lot of gurus out there, they say to do that kind of thing, that’s a very high risk. But I actually would probably place it on the lower end of the spectrum because if a landlord’s with it and you’ve negotiated and it’s all in your lease and you’ve patted everything, I see really no huge risks, in my opinion.

David:
All right. When it comes to house hacking, I think this is actually low risk, and that’s one of the reasons that I really like it, frankly. It’s probably the lowest risk way I know of in general to get into real estate, and that’s why you’ll frequently hear me saying, I wrote BRRRR, I wrote Long Distance Investing, I do a lot of stuff. I still tell everyone it doesn’t matter. You should house hack one house every single year, everybody. And then REITs is also relatively low risk. That’s another reason I think that I like it, is you’ve got professionals that are very good at managing real estate that do this for a living, that are making decisions and have a lot of capital to be investing in to cover the downside. So I think risks are also probably a little bit lower on the reward scale, but they’re definitely lower risk.

Rob:
And then we got glamping, glamorous camping. I would probably put this at medium to high risk, mostly because the cheaper end, like the $3,000 tents or an Airstream that you get that you need to renovate for under $10,000, they tend to require a lot of work and maintenance and they can break down on you very quickly. Or if you have a tent, like I used to, have out in the desert where it snows, that snow can really cause that tent to buckle, and that’s a very risky thing. So because of the amount of maintenance and costs that go into maintaining it, I’m probably going to go medium to high.

Henry:
Lead gen wholesale I would call low risk, maybe medium depending on the market that you’re in. But the real risk here is the time you’re going to put into it, and if you don’t stick with it… Because let’s be honest, real estate has been around for decades and decades. People have been finding under market value deals and buying them, so it works. It’s just are you going to be able to spend the amount of money or put in the proper amount of time for it to work? So the real risk is just not sticking it out.

Rob:
Then we have education. I’m going to go zero risk. There is zero risk to making yourself smarter. There is only upside on that. Fight me.

Henry:
Masterminds. In all honesty, I think masterminds are a low risk. I think you’ll hear some horror stories or people saying, “I spent $5,000 on this mastermind and I just didn’t get anything.” A lot of it is you have to put in the effort and you are going to get out of masterminds what you put into them. I think a lot of the times people feel like, “I spent money and all the stuff should just come to me and I should have all this value that just comes to me and then I will be super successful.” No, you still got to go apply what you learn and do the work. And if you do that, I think you have very low risk with masterminds.

Rob:
Yeah, you are the biggest risk in a mastermind. If you do not put in the time into it, if you don’t go through all the resources, if you don’t connect with people, if you don’t use what you’ve learned out in the real world, then you can’t succeed. You have to actually go out there and apply the stuff, just like you said. So I think the only risk there is how hard are you willing to work in a mastermind?

David:
And how much do you expect it to just happen for you. Man, if anyone can take anything out of this episode, please just hear that. There is no strategy, there is no mastermind, there is no group, there is no book, there is no nothing that brings real estate and places it on your table and says, here you go, a cash selling property at 70% of ARV, all for you because you took a course. You still got to go out there and take what you want. These courses, these strategies we’re talking about, they just are ways that you can go and do that, but every one of them will always have that in common.
All right, we have gone through all the strategies that we can think of. We’ve talked about the pros and cons of each. Now we are going to choose the strategy that we each like the most and we are going to compare them in a bit of a royal rumble here to see who comes out on top. My strategy, since I’m the host and I get to pick first, I’m probably the oldest, too, is going to be house hacking. This is my favorite strategy. That’s the one I’m going to defend. Rob?

Rob:
I’m going to go with the arbitrage just because that’s how I got started, so why not?

Henry:
I like lead gen, only because David took house hacking.

David:
That’s why I like to go first. Sorry. Sorry Henry, I’m sure you’ll do a very good job with lead gen on its own. The funny thing is you probably could, as we talk about these, combine all three. You could lead gen for a house hack and then arbitrage it as a short term rental. I guess you couldn’t arbitrage your own property, so maybe Rob’s went through a little bit of a kink in there, but many of these strategies can be combined, so remember that also. You don’t have to pick one out of the 10. You can look for ways to work four of these together with your $10,000.
All right, I will go first with my strategy, house hacking, the timeline is relatively short to execute this. So you basically are going to go to a loan officer, you’re going to get pre-approved. They’re going to tell you this is how expensive of a single family you can buy. This is how expensive of a duplex you can buy. And this is how expensive of a triplex or a fourplex you can buy. And now you go to a real estate agent and say, “I need to see homes that are within this price range and multi-family of these sizes that are within this price range,” and you start looking at emails that come in. You can also get on some of the portals and you can start looking on Zillow or realtor.com and trying to see what is out there? You then have your realtors start showing you homes. You see what you think. You see if they’re in a place that you’d want to live, and if the floor plan of the property would work for having several people in there.
Now, there’s lots of ways to house hack. You can rent out the bedrooms, you can rent out parts of the property. You can turn the garage into the house and live there and rent out the house. You can add an ADU in the backyard and the basement downstairs and then rent the rooms out in the main house and end up with six different tenants if you want. This is one of the things that makes it cool is it’s very creative and it allows you to learn the fundamentals of real estate in a low risk way. And then you’re writing offers. So from contacting a loan officer to closing on a deal could be 90 days or less if you find the deal very quickly and you move forward. Or you could take as long as you need to feel comfortable. But there isn’t like pressure. It’s not like you spent all this money and you got to get a return back on your capital. You don’t really spend any money until you buy the house.
The way you mitigate risk with house hacking is by finding ways to get as many good tenants in that property as you can. So there’s a spectrum with house hacking between profitability and comfort, and the further you move away from comfort, the higher of a profitability that you can expect. So do any of the three of us want to be living in a six bedroom house renting a room from ourselves and renting to five other tenants? Probably not. That’s not very comfortable. We’re not going to enjoy that. However, that would be the most profitable way to do house hacking and it would be the lowest risk way as well. Now the other way could be you get a big house and you get to be comfortable and you live in it, you just rent out a ADU in the backyard. That’s going to be more comfortable but less profitable. The cool thing is you get to choose where on that spectrum that you want to be.
And the way that you get your money back is after you spend that $10,000 on your house hack and you live there for a year or two or three, the property will likely appreciate, you don’t know when it’s going to happen, but you know it will happen. It’s much like a jack in the box. When you’re just turning that wheel… You don’t know when it’s going to pop, just like Will Ferrell in Elf, but you know it is going to pop at some point. So whether you got to wait one year, you got to wait five years, you got to wait 10 years, at some point you get appreciation. You can refinance that house, you can sell it, you can move out of it and go into another property. You can house hack another property the next year if you just save $10,000. So you are basically guaranteed to get that money back at some point.

Rob:
Well, okay, so a couple things you said here. I think there is actually a decent amount of risk with the house hack, and I’ve house hacked several times. But you’re talking like, okay, if you have a house with six bedrooms and you live in one of those rooms, the chances of you living peacefully with five other people are very, very, very low. And I think that there is some risk there with the social community management of managing tenants that you may or may not like within your household and making sure that they all like each other too. So I do think that there is that aspect of risk to consider as well.

Henry:
I think some of the risk that comes with house hacking that people don’t talk about is oftentimes people are just buying any deal and not necessarily a good deal and not considering that they’re not going to live there forever. This is especially risky when they’re house hacking in very, very expensive markets. So when you’re still not covering your entire mortgage by house hacking, you’re still paying a large chunk of it and then always assuming that somebody is going to be there to cover part of that mortgage. That doesn’t always happen and you could get stuck with a very large payment that maybe you can’t afford to pay, but you were able to get approved for that loan because of the income that property does generate when it is rented. So I think people substitute due diligence for just getting into house hacking sometimes and needs to understand that it’s not always going to be perfect. And can you carry this note if you had to?

David:
That’s a very good point. I like that. I also like the fact that you pointed out there is risk. I’m not saying there’s no risk. There isn’t a real estate strategy that is no risk. You will never find anything that is no risk. What is the risk and are you suited as a person and in a financial situation to mitigate that risk? And then is the upside worth the downside? I feel like in house hacking the upside is absolutely worth the downside, which is why I’m such a proponent of it. So let’s move on. Rob, it’s your turn. Throw your fighter into the ring.

Rob:
Yeah, so I’m, again, arbitrage. So this is the idea of rerenting something that you’ve rented from a landlord on short-term rental platforms or whatever OTA, online travel agency, you’d like. So with this strategy the timeline to execute really depends on your hustle and how fast you’re willing to do this thing. I have set up Airbnbs in a weekend, but that required me working every single hour of the day to assemble beds and get couches in place and hang photos and deflate mattresses and oh my goodness, I got so much PTSD just talking about it. But let’s just say that you were like, “Hey, I want to get started. Walk me through the process.”
Well, I’ve already told you that you’re going to be negotiating with landlords and you’re going to hear a hundred nos for every yes. So I think locating the deal is probably the aspect that’s going to take you the longest amount of time, and there are a couple ways you can do this, but let’s just say that you went on Zillow and you found property that fit your buy box or your criteria, I guess your rent box or your criteria. You have to start making phone calls to landlords over and over and over again. “Hi, my name is Rob. Here’s what I do. I’m looking to rent this place for my short-term rental business. Is this something you’d be interested in?” And you really have to coach a lot of these very flighty landlords who think that you’re basically going to be throwing ragers at their house every single day when that’s not how it works kind of thing.
So I would say to locate a deal, it could easily take you a minimum of two weeks and a maximum of four weeks. But as soon as you land on that deal, as fast as you can get furniture, you can launch. So nowadays, I kind of coach people to try to get their Airbnb set up within two weeks. I don’t really necessarily tell people to do the weekend thing anymore, because it’s very hard on the soul. A lot of gray hairs on my head from those times. So I would say if it takes you four weeks to locate your deal, it’s going to take you two weeks to buy all your furniture, set it up, assemble it, stage, and get photography, and then you can launch within six weeks of finding your first deal.
I personally think you could do it within the same month if you’re really hustling, but a lot of the times people are calling Zillow and that’s how they’re finding their leads. I’ve actually found success by going to different real estate meetups and talking to other multifamily investors and telling them what I did, and they didn’t know who I was in this instance. And they were like, “Oh, Airbnb, tell me about that.” And it was a lot easier, because we’d already established rapport, for me to pitch them on the idea of renting their units on arbitrage. So mitigating risk is a big one. How do you actually get everything in a way that’s not going to make your business suffer?
And I think at least addendums are really the biggest way you’re going to do this. So I talked about the seller selling their property or the landlord selling their property. We typically negotiate with our landlords for a two year lease in place, and then if regulation were to hit, we also negotiate within the lease that we’re allowed to break the lease at any time. If the city regulates the short-term rentals in that market, we’re allowed to exit that lease. Basically, if we negotiate with the seller to give them more rent in order for them to let us Airbnb their property, we write that all in the lease. So mitigating risk really comes down to just documenting everything that you’ve agreed upon with the landlord in writing as you should. By doing that, we’ve had very, very little issues.
And then how to repeat, build cash back up, and snowball from there. I mean, for me, when I’m looking at rental arbitrage deals, I’m looking to make a minimum of one to $2,000 a month in profit. So we’ll just call it 1,500 bucks. That’s $18,000 a year that you can make from one property. The best way you can snowball is to not spend your money, and this is what I tell people who are starting in real estate, those first few years are very lonely in the bank account. You should not be touching that money. You should be reinvesting it. So theoretically, with $18,000, it’s possible that you could start two more rental arbitrage apartments with that $18,000. So if you add those two to your three, you’re now making $18,000 on each property, and if you save that, then you can do it over and over and over again. So really the way to snowball this is discipline and living like you don’t make money in real estate and then using all the funds that you make to basically get into your next arbitrage unit. And scene.

Henry:
Very nice. I don’t have an arbitrage rebuttal. I’ve been asked as a landlord would I let somebody arbitrage and I just said no, only not to give it the brain power. Now albeit they didn’t have a very good pitch either. I think your pitch is probably a big deal when you’re trying to find a place to arbitrage.

Rob:
It is. It is. And it’s also about concessions. Henry, if you’re like, “Well, why would I rent to you when I can make the same amount of money with the long term rental?” I’ll say, “Okay, that’s fair. You’re making $1,600. What if I gave you $1,800 a month?” “Okay, yeah, well why would I do that if I could just have someone in place with the stability for 12 months?” I’ll be, “All right. What if I gave you a 24 month lease?” “Yeah, but what about the maintenance and the wear and tear?” Then I come in, I say, “Well hey, what if I cover all maintenance up to 200 bucks a month? You’ll never hear from me unless it’s like a major system fail.” So the idea is for me to be non-existent in your life, I’m the easiest tenant you’ve ever had. Because if the place isn’t nice and well kept, I don’t make money, so it doesn’t behoove me to make sure that it’s falling apart. So I think there’s more of a partnership there, I don’t know, than a business relationship in some senses.

Henry:
See, that’s a good pitch.

Rob:
Thank you, thank you. Hey, will you rent me one of your apartments?

Henry:
Absolutely not. Is it my turn? Can I go now?

David:
That’s you, man.

Henry:
Awesome, awesome. Yeah, so I love lead gen as a strategy. The main reason I love lead gen as a strategy is because this is a way that’s going to teach you several skills that are vital to you as a real estate investor in general. It’s also going to get you focused on finding good deals, and good deals are the common denominator amongst almost every real estate exit strategy. You have to have some level of equity in a deal for it to be able to be monetized. So part of the reason why I love this is because you can make a profit on that 10 grand without having to spend a whole lot of that 10 grand. There’s plenty of ways for you to hustle and generate free leads for distressed properties. We’ve talked about driving for dollars, but it’s more about can you get your line in the water in enough places where people are actually looking to sell at a discount?
And if you can get your line in enough places and be relentlessly consistent in your pursuit of those leads, and I think that’s where people fail when they’re trying to find that first deal through generating leads themselves, is the relentless consistency isn’t there. They try one way and they try it at enough volume or they don’t leverage enough other people to help them with that. So what I say about that, if it was me, if I was going to lead gen right now, starting from scratch, I would be on Craigslist marketplace and Facebook every single day scouring the real estate sections, both the for sale and the four rent sections, contacting as many owners as possible and asking if they’d be ready for an offer. I would be also generating niche lists that I could then cold call or hire someone to cold call.
And there are so many third party services out there right now that you can pay someone who they already have people trained to talk about real estate investing to sellers that you can pay maybe a thousand bucks a month and they can call for you, filter you the good leads. And you also can hustle, do some of those calls yourself. There’s very inexpensive ways to talk to a lot of sellers. I think what people don’t realize is that you have to talk to so many sellers in order for you to find that deal. So people don’t do it. And that’s what gives you the advantage if you are willing to make lead gen your job. You go to your nine to five because that’s what you need to do to make money to pay your mortgage and to live so that you can do your job, which is lead gen to find you that deal, which is going to springboard you into real estate investing.
So you can spend a fraction of that money, a third of that money doing different strategies relentlessly, consistently, and then turn that deal into money. Or you can actually buy that deal because there are ways for you to get deals financed if you’re buying a really deeply discounted deal. And trust me, when you get a really deeply discounted deal on the hook, you will be very motivated to go figure out those ways to do it and to get that deal financed. The problem is people want to figure out the financing beforehand, so they get scared. They don’t want to do… And lenders don’t want to talk to you if you don’t have something for them to look at. So getting that good deal and finding that lead is going to help springboard you into real estate investing and you can monetize it because trust me, David, if somebody brought you a phenomenal deal tomorrow in a market you were interested in, chances are you would probably buy it. So it’s about can you put in the relentless consistent effort in order to generate those leads.

David:
Which comes down to can you have a strong work ethic? Do you really want this? If you can’t get into real estate to get around work ethic, “I don’t like working hard, so let me get into real estate instead,” you’re just going to have a hard time here. You had a hard time. The hard work in this definitely pays better, but you still have to do hard work. So to recap here, my method is house hacking. I like that because it’s low risk and I feel like it’s relatively high reward. Rob’s was arbitrage. That’s lower-ish risk with still a pretty high reward. And Henry’s was lead gen wholesaling, which is a low to medium risk. Really, I think probably arbitrage and lead gen are the lowest risk of all because they might require no money. There’s a chance you could get into those and still keep your $10,000 for something different.
But as you notice, there’s always a spectrum. The lower the risk goes, either lower the profit goes or the higher the work goes, and the less work you want to put into it, the lower the return goes and the higher the risk goes. There’s always, always a trade off. And that’s what I’m trying to get at because so many gurus will pitch you on real estate investing strategy and only highlight the high points and not tell you about the low points and then people don’t take action and it doesn’t work. Okay, last question, Henry and Rob, would either of you switch your preferred method after hearing somebody else’s pitch?

Rob:
Not really. I mean, maybe house hacking only because I’ve done it and I love it and I think the faster you can get out of paying your mortgage, the faster you can build wealth. There’s a little soft spot in my heart for house hacks. I would definitely not ever be… That’s honestly probably what I would recommend to most people first, but you got to choose first, so I had to choose a different method.

David:
Does it make you feel, Rob, like when we’re doing the intro and I say all the best parts of the show and say, “What did you like, Rob,” and you’ve got nothing to pick from?

Rob:
And I’m like, “Uh, real estate?”

David:
How about you, Henry?

Henry:
Man, I totally agree. I house hacked and it changed my life and often when I’m talking to new investors, I tell them, “You should buy a multifamily on a low down payment loan every year forever and ever until your spouse tells you I will never live in another multifamily again.” That’s just what you should do.

David:
I love that. I mean honestly rock that thing… It’s like that Honda Civic that you bought in 1989 and is still running. Rock that thing as long as you possibly can, it’s the best way to go. So thank you guys very much. I appreciate your contributions here. And listeners, if you enjoyed this, please consider giving us a five star review wherever you listen to your podcasts, apple Podcasts, Spotify, Stitcher, whatever it is. Those help us a lot. Before we get out of here, Henry, where can people find out more about you?

Henry:
Yeah, best place to find me is on Instagram. I’m @TheHenryWashington on Instagram.

David:
Rob?

Rob:
You can find me over at YouTube or Instagram on @Robuilt, R-O-B-U-I-L-T. Like Rob built it, but one B.

David:
Robuilt, not Robuilt. That’s a very pet peeve of his. When he hears that, his quaff starts to go at an angle. He looks like a dimetrodon, one of those dinosaurs and he gets pissed. Don’t turn him into the dimetrodon. You can find me also @DavidGreene24 on YouTube, Instagram, and all the other social medias, and it’s not like you can mess up my name. I didn’t do a confusing one like Rob, that everyone’s like, “Well, wouldn’t there be two Bs if it was Rob, built, it should be Robuilt.”

Henry:
But you have the E at the end, so-

David:
That’s true. That’s a very good point. Some other imposter out there without the E is probably soaking up all my follows right now. All right, I’ll let you guys get out of here. This is David Greene for Henry “the bird dog” Washington and Rob “dimetrodon” Abasolo, signing off.

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

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

Why is shiny object syndrome a problem?

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

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

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

What constitutes a shiny object?

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

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

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

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

How to avoid shiny object syndrome

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

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

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

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

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

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

Shiny object syndrome: tread carefully

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

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

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

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

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

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

Henry:
No, I didn’t.

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

Henry:
Uh-oh.

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

Henry:
[inaudible 00:01:53].

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

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

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

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

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

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

Dave:
Still bought houses.

Henry:
Still bought houses.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Jay:
At least 30%.

Dave:
Wow.

Henry:
Pretty substantial.

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

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

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

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

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

Jay:
True that.

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

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

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

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

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

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

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

Henry:
Oh, wow.

Dave:
Okay.

Henry:
That’s insane.

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

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

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

Dave:
Wow.

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

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

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

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

Jay:
Yeah, bungalow.

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

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

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

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

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

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

Dave:
That’s crazy, wow.

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

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

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

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

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

Henry:
It depends on how much rent is.

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

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

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

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

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

Jay:
No problem.

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

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

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

Henry:
But, gorgeous.

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

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

Dave:
No.

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

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

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

Dave:
Ooh, nice.

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

Dave:
Oh God, that sounds not that-

Henry:
Not my favorite place to live.

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

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

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

Henry:
Did your neighbors come?

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

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

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

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

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

Henry:
That’s correct.

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

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

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

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

Engage Consumers Via Email

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

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

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

Become a Go-To Resource

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

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

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

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

Reward Loyal Customers

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

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

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

Form Partnerships With Industry Thought Leaders

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

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

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

Growing a Recession-Proof Business

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

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

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

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

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

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

Dave:
You got lucky.

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

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

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

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

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

Dave:
I am.

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

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

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

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

David:
Tennessee.

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

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

Dave:
You’re not adapted to the cold.

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

Dave:
Hopefully those people listen to you.

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

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

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

Dave:
400,000.

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

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

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

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

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

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

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

Dave:
That’s true.

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

Dave:
They’ll make so much money.

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

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

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

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

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

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

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

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

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

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

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

Dave:
Not the safest.

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

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

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

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

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

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

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

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

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

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

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

Of course, customer service isn’t what it used to be. It’s gone from a bank of telephones connecting one human to the next to a smorgasbord of communication channels connecting customers to chatbots, automated responses, and, every once in a while, a human.

If you’re uncertain which customer service channels to invest in, here are a few suggestions to keep up with the expectations of consumers a quarter into the 21st century.

Set Up a Chatbot

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

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

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

Provide Expert Lifelines

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

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

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

Utilize Social Media

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

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

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

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

Building the Right Customer Service Support Network

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

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

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