Soft Market - Episode 55

Podcast Transcription

Melina: Welcome to Flippin’ Off, a purpose-driven podcast about flipping houses and making a difference.

All right. Hey, everybody. I don't know if you could hear us laughing in the beginning of the podcast, but never mind. We're never going to tell you what we were talking about. So welcome to the Flippin’ Off Podcast. Today in the studio, I have with me... Well I am Melina Boswell, co-founder of New Wealth Advisors Club, and today I have all of my dudes in the studio with me. So I have John Slater.

John: Good morning.

Melina: I have Frank Luna.

Frank: Good morning.

Melina: Tim Wilkinson.

Tim: Good morning.

Frank: Hi, Tim.

Melina: Oscar Solares.

Oscar: Good morning.

Melina: And David Boswell.

David: Hey.

Melina: And Andrew Boswell.

Andrew: Hello.

Melina: All right. So we are talking today about what's happening in the market. There's been lots and lots and lots of conversation in media and articles and gloom and doom and opportunities flailing, and we really felt like today was a great time and an opportunity to discuss what's actually happening in the market based on real conversations that we have inside of our office. Right? So we were talking about, "Hey, the market's shifting. I'm seeing it softening."

So for me personally, what I'm noticing inside the market right now is that it's soft. And, you know, if you think about the real estate market, what it does is cyclical. And over the last, historically, 200 years at least that we've been tracking our market, it goes up and it goes down. That's what it does. And everybody gets freaked out when the market goes up and down and we forget that's what it's supposed to do. That's actually how we make money, and California specifically is the leader in the market, which is, you know, good and bad.

So, I was talking to the guy saying, "Hey, I am absolutely seeing the softening of the market." And I've been concerned about this for the last two years. I actually believed by 2018 the market was going to be...we were going to be out of a seller's market and going into a buyer's market. And I'm now actually starting to see it in my business. Whereas even a year ago, the numbers, like all of the data and the statistics and things that I was reading, said, "Oh no, the market's doing great."

And my sense was, "No, it's not." And as often as I would say that, you know, I didn't have anything to back it up except for my gut feeling, which is funny because most of the market is driven by the way people feel. It has a lot to do with mindset and what people are experiencing or feeling and that drives the market. And people don't really know that. So one of my biggest concerns about our market in California has been this. We've watched values of real estate go up, up, up. But what I haven't experienced specifically in Southern California is an incline with income.

So income has not been commensurate with real estate prices, and I have not quite understood that. So I pose this question all the time to my students. I always ask them, "So, why is the market going up? Like if you all know that you're not making more money and jobs, people are employed, but people are not making good enough money to be able to buy, so what does that mean in our market?" And so who wants to answer that? Who wants to talk about, like, why is it that...who are the buyers in the market right now?

Because if we say, "Well, we still have a lot of people in foreclosure. We have people that are not making the same amount of income," who are the buyers then? Why do we have a shortage of inventory? In other words, that means we have more buyers than we do sellers and we have more buyers than we have inventory. So who wants to talk about that? Frank? Thanks.

Frank: Yeah. Before we decided to do this podcast, we've been talking about the market, what strategies we're going to implement, how are we going to change. Do we have to change anything? Well, you know, in 2009, when I got into this, a year after you had introduced me to real estate and I was thinking about it, it was a great opportunity. Prices were down. Next thing we know, interest rates started dropping. From 2009 to about a couple years ago, the interest rates were super low.

Melina: Right.

Frank: People who normally wouldn't be able to afford a house at today's interest rates of 4.5% were able to buy a house at 2%. They had a 2% interest rate, 3% interest rate.

Melina: Isn't that crazy?

Frank: Yeah. And then we had money coming from outside of the country. There were foreign buyers buying rental properties. We even had hedge funds buying all these rental properties. They were looking like 10%, 12% return. And as those prices started going up, they were outbidding us at the auction. They were buying everything, renting it out. They were making, you know, 8%, 9%, 10%. And something happened.

I guess it was probably like two years ago where they started to...what I was hearing that they were making was 7%. And that's their cap. They have to make 7%. I imagine if they have a hedge fund and they're paying 5%, they want to make 2%. I'm just guessing, looking at the numbers.

Melina: Sure.

Frank: So we had all these hedge funds buying at the auction and even buying off of the MLS. We're bidding against foreign money and these hedge funds, the same hedge funds that were backing the mortgage-backed securities to begin with. So they're losing money here but they're making it up because they're buying all these foreclosures. And we see the real estate market price completely rebound, to0. And you're a blue collar, you know. You're somebody with a W2 job. Their wages increased, but they didn't keep pace with the prices. And interest rates are now 4.5%.

Melina: Exactly.

Frank: So people aren't qualifying for these homes that we want to sell them at, you know, today's prices or two months ago. So what we're seeing is all these properties, Days on Market increasing, price drops. I'm experiencing that myself. And, I mean, the research, what the economists are saying is that there is no way that the market's not going to adjust.

Melina: Sure.

Frank: So what do we do?

Melina: Right.

Frank: I mean, and I think for at least, I don't know, five years we've been talking about this.

Melina: Yep.

Frank: So with it, there comes a little bit of anxiety and then on the other side there's some excitement because what we know is when those prices are coming down, that's when we as investors, we want to start picking up all of these properties. And there's a bigger opportunity now that we didn't have before or we didn't realize. The Airbnb, the vacation rental properties. And before we're looking at, you know, your family renting out a house and...

Melina: Like long-term rentals.

Frank: Yeah. And then we have these normal cap rates, but we can experience these awesome returns on these Airbnb, you know.

Melina: Short-term rentals.

Frank: Yeah. So I was doing a lot of research on all of that stuff and then listening to it for at least 12 hours. And, you know, for the last six months I've been doing a little bit of research, but I've just...I knew we were going to do this podcast. I was like, I heard all of these things, and I wanted to listen to it like all the way through and put everything together. And it's obvious that we have to diversify what we're doing. And it's funny that we were talking about it and then we just realized, "Well, we're going to be doing a podcast. Why don't we have that conversation and talk through what our strategy is going to be?"

Melina: Right. Exactly.

Frank: So here we are.

Melina: Yeah, here we are.

Frank: And I know we haven't made a complete decision on what that's gonna look like. I mean, I just downloaded this play-by-play book on how to make money in Airbnb. It seems simple enough, but there's all these strategies.

Melina: For sure.

Frank: There's guys that are pros at this. So I'm just soaking up all that information personally to learn as much as I can.

Melina: That's great. That's great. Yeah, we're definitely moving into that market in terms of, you know, short-term rentals, which has created so many opportunities. I think it was Tim who said the other day we were talking about it, like, "Hey, you know, we're really, really good at creating real estate deals." So Dave used to say, he told us all the time, "Deals are not found, they are created." And so we've gotten very good at creating deals, but now with this market the way it is, it's opened up other opportunities for us where before we would maybe pass on it."

Frank: Right.

Melina: Right. Tim, so why don't you talk a little bit about what you were, you know, speaking about in that?

Tim: I think I was just talking about the fact that we're really good at creating real estate deals where we can purchase, we can buy properties at a deep enough discount. We can get creative enough with the actual acquisition so that the purchase of the property and the running of business actually makes sense where it used to not.

Melina: Yes.

Tim: For instance, right, if I was to buy a house here in Riverside and buy it at today's market, I would have a mortgage payment, call it $2,000 a month, $2,400 a month, and I can only rent it for maybe 1800 bucks a month if I rented it to a family.

Melina: Okay. Wait, is that a good business model?

Tim: No. No.

Melina: Okay. Well, because I say that, I say it somewhat sarcastically, but the truth is there are gurus out there who teach people that that is a good strategy to utilize, and we disagree with that.

Tim: Absolutely, especially in today's market. I mean, in 2009, that might've been okay to go negative cash flow for a few months and experience the upswing, especially back in, you know, the early 2000's doing that. But that just doesn't work now. But at the same time, that same $2,400 a month payment is easily absorbed by some other business model.

Melina: Right.

Tim: Like an Airbnb, they can afford to pay $2,400 a month for that house and let that business buy that house for us at today's market. And there are countless other businesses that we're stumbling into that, frankly, I had no idea about up until about six months ago and maybe a year ago when we started talking about things where there's countless other businesses that we can do inside these properties and allow these businesses to buy properties for us and just pay them off.

Melina: Yeah. So, you know, I was just thinking as you were speaking, you know, my feeling has been, in my experience, I just work with so many people, and so I feel like I keep on saying, "Income is not the same. Income is not the same." So we started really looking at stats to see that is the truth. Here's what's interesting. Like, there's some facts. We're producing more people, right? We keep procreating. So that's the first thing.

And the second thing is there's not that much building going on. So I was thinking like we're actually in the perfect storm for this type of rental in that the market is going up, which means you still have a shortage of inventory, but you don't have a shortage of people. What you have is a shortage of income.

So it actually makes perfect sense that we have to create a business where people can afford to rent because rentals right now, like, people are on long waiting lists to get into a rental that is decent. Meaning, decent in a decent area at a decent price. So you have to be able to get really creative with... It's actually, I mean, if we're being honest, it's putting more people in more houses or in shorter periods of time to create more income.

Tim: Right.

Melina: So it's the idea of heads in beds. It's really what we're talking about, right, is there's a lot of opportunity to put different heads in beds and more heads in Beds.

Frank: I was listening to something, and they were saying for the last 20 years, building new affordable homes for people to live in has not kept pace with the population growth and the need. For 20 years, it hasn't kept up.

Melina: Wow. Twenty years. That's interesting.

Frank: And the stat is 31% of the cost of putting up a building is in regulation. It goes to government entities. Thirty-one percent is what they're saying.

Melina: Wow.

Frank: And I was like, "Wow, that's huge."

Melina: Yeah. So that leaves very little room for, like, actual operating costs, let alone profit.

Frank: Yeah. And when I heard that, I kept replaying it over and over. So I looked it up and like, "Yeah, it's 31%." And I know when we were looking at building something, we were looking at all the fees. And I never added it up and then did the math and said, "Oh, this was like 30% of what it's gonna cost to build this thing." So the government regulations are completely restricting that building.

And if you look at the cities around here, most of the government, they don't want to increase, or city government, they don't want to increase the density in their city. So they make it very expensive and at the same time it means that there's not enough housing for the amount of people that are needing it. And that's taken place for 20 years.

Melina: We know it's interesting. Yeah, that's really interesting. I just recently learned this. In San Bernardino County, do you know that you cannot rent a property that is under 650 square feet? You're not allowed to rent it out.

Tim: Really?

Melina: Yeah. That's been a law that's been on the books forever. And so there is a movement to change that law, but that's like a really big thing when you start to... How do you do that? And if a property was less than 650 square feet, you could not have any type of kitchen in it. So doesn't that kind of blow up the idea of tiny houses?

Tim: Right.

Melina: Yeah. I understand it's probably going to be changing in January of 2019, but I don't know that for sure. That's my understanding. But I thought, "What an interesting concept." And if you don't have that information, how that could truly ruin a business opportunity that you're thinking about.

Tim: Right.

Melina: Yeah.

Tim: What you just said, does that include renting a room for less than 650 square feet?

Melina: I don't know. I don't know that it does. I think that it does. I think that it technically does.

Tim: Just by the...

Melina: By the very definition.

Tim: Yeah. I'm wondering if it's like that vague where it would ruin that idea.

Melina: Yeah. Well, we're seeing a couple of things happening right now in the market, which is we're seeing multiple families or, I'm sorry, multiple generations of families living together, which 50 years ago was the norm. Right? So you'd have three generations. You'd have grandparents, parents, and grandchildren all living together. And I know for me personally in my life, that's what I'm experiencing right now. And I actually think it's really great. I think that Americans missed the opportunity of the real culture and the real value that grandparents can bring.

You know, having three generations living together, it was wonderful. I happened to be really blessed. I get to live with my son and my daughter-in-law and my grandchildren. And for me it's fantastic because I don't have to parent them, right? Because, you know, their parents parent them, but I get to be the grandmother, which means I get to, you know, provide wisdom. I get to cuddle and maybe spoil a little bit, and then, you know, I can send them away. I know Dave is like, "Mm-hmm. There's that."

Tim: A little bit?

Melina: But I think that it's a wonderful way to live, and it's been very traditional in most of the world. And Americans became so anti, "Oh, we need our own space and you have to go out and do your own thing." And I actually don't even believe that. I now realize that there is so much value in being together like that all the time. And so I know Oscar, kind of you're experiencing that too actually, now that I think about it.

Oscar: Yeah, I definitely have a different mindset.

Melina: So, tell me.

Oscar: I'm all about my space and all that, and it's good. I mean, I enjoy having them around, but I also enjoy having my space. So I spend time at the office. I'm good.

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Oscar: The economy right now isn't bad. It's doing really well. But to your point, the income isn't. It hasn't really changed. So it's still a dual or more income for a household. Right?

Melina: Right.

Oscar: So it's two, three, four incomes that have to support a household. So from that perspective, when you look at that...and I was reading something this morning where it said that...because we saw earlier that in 2016 it was 460-ish, 1,000, was the median home price.

Melina: Right. Four hundred sixty thousand. And that's in all of California?

Oscar: Yes. And this morning I was reading that in June of this year it was actually $565,000.

Melina: Wow.

Oscar: So over the course of two years, it went up 50 grand a year. So now when you have a median income per household of 70,000, 75,000...

Melina: Yeah, per household. So that's dual income?

Oscar: That's already dual income. Right.

Melina: Right.

Oscar: So mathematically that doesn't work.

Melina: There we go.

Oscar: Like, there's a challenge there. Going back to your earlier comments about who's our buyer, well, it's definitely going to be a mixed generation buyer and there's going to be most likely three incomes, unless they're higher end employees and so forth. But no matter what, it's still a money conversation.

Melina: Right.

Oscar: So, yeah, you have to get creative. You have to do other things and you have to be able to put yourself in a position to take advantage of what's happening in the market and leverage what's happening. Right?

Melina: Right.

Oscar: So like Frank was saying, well, it does create some anxiety because what's the market doing? But the opportunity that's coming our way, it's kind of ridiculous, right because you're in a position to acquire more, like Tim said, right? Just acquire more and be creative in how you acquire it. And now we're in a position to not pass up on opportunities that we passed up on in previous years where maybe the margins were really thin. Well, now, that thin margin doesn't matter because there's other ways to creatively generate the income and money coming through that property.

Melina: Absolutely. And so, you know, your traditional, right, fix and flip, maybe isn't... I was thinking back to 10 years ago, and one of the things I loved about our business model was that we would take, you know, a property that was falling down. It was a mess. And we would fix it up, make it beautiful, make it safe, and then so that a family, right, could come in with their FHA loan, buy the property and have a great home. That was our business model, you know, 10 years ago. And I loved that because I really felt like we were bringing value to the community.

And now I see in 10 years how much it's changed. And so now we're being much more strategic in the way that we are acquiring property, both with our acquisition and with our exit. So, to your point, you know, one of the exit strategies I think that we're utilizing a lot now is more heads in beds and then also the idea that you have multigenerational families living together. So if you're looking at a fix and flip, what do you do? How do you accommodate that end buyer thinking about, "Okay, who is my end buyer?"

Well, if I'm going to have grandparents...and it doesn't mean that people are poor, by the way. It means that people are just being smarter. And maybe the idea of just the culture that's allowed to be involved. But also to your point, we need our time and our space. So I know in my life I have my own master bedroom and truly I can shut my door and lock it and I can't hear anything. That's like the best thing.

So that is the next strategy. So, as a matter of fact, we're working on this right now. We just acquired a property in Santa Ana, and it's in a great area but we're watching the market soften. So the conversation was, "What do we do with this house? You know, knowing, looking, you know, forecasting ahead six or seven months when we're going to be ready to take it to the market, who is our end buyer going to be?"

So we made a very strategic decision to not only rehab it, to bring it current and modernize it, but to also add square footage to it. So, Oscar, why don't you talk about, like, what our plan is on that? Because this is exactly one of the, I think, key strategies moving forward in our market.

Oscar: Sure. So we decided to add a downstairs. We're expanding it probably about 500, 600 square feet, but we're also going up and adding a second master suite upstairs. And so total we're adding roughly about 900, a 1,000 square feet. But it's in a neighborhood in Santa Ana that's kind of... Santa Ana North Tustin if you guys know Southern California. It's a pretty decent area.

And what's happening in that area is, really, the older homes can no longer be small, right, for today's market, again, to the point of multi-generations coming in. So the idea became, "How do we create a home that is open enough so that it's modern, but at the same time creates the space necessary to house multiple generations?" Right? So now we know that grandma and grandpa probably can't be in the upstairs master suite, but the son and wife can, or a daughter and a husband can.

So they have the upstairs master suite. Grandparents can have the downstairs master suite and the kids are downstairs with the grandparents. So it kind of works out for the parents I guess huh?

Melina: Well, theoretically, they're carrying most of the financial burden anyway.

Oscar: Right.

Melina: So that's the idea.

Oscar: And it's going to have a great entertainment area. The room is going to be ginormous for the family room, right? We did a lot of things that are very strategic for that property too to make it more appealing. We changed the driveway. We changed the landscape. We changed all kinds of things in that property. But it's taken some time too because now we're talking to architectural. We're talking to engineering, soil samples. Right? There's a lot of things that go into that.

So it's not something that you can just step into one day, and so you wake up and say, "I'm going to flip this house and I'm going to go do this." It takes time to get to that point of being able to take on a project like that.

Melina: Exactly. Go ahead, Tim.

Tim: Well, he has just made me think of the other property we have here that kind of the same thing, we acquired it, we were going to flip it. We're in a position right now to flip it and make good money on it. If we put it on the market right now, we'd sell it and based on where we're at, we likely wouldn't sell it for what we thought we would when we acquired it.

Melina: Okay. So stop there because that's so much that you just said. Like, what I heard is... Right? That's what I heard. Because you said, "Right now we wouldn't be able to sell it for what we thought we could sell it for, and that is because..."

Tim: Because the market has been going down. The market's at least softening, like you said, which Days on Market are there. Only a few months ago, if you listed a property for call it $300,000, it would sell for $320, 000 immediately.

Melina: Right.

Tim: And now if you sell that same property for $300,000 you're going to get offers around to $280,000, $290,000. So we're not seeing overbidding anymore. We're seeing buyers come in and make more, frankly, from a buyer's perspective, smart offers.

Melina: Absolutely.

Tim: And we're still in a great, great, great position on that property regardless, you know. Instead of making well over a 150 grand on that property, if we flipped it today, we would make around 120 maybe.

Melina: Right.

Tim: And at the same time, we decided that we want to go in this new direction. And in adding an ADU in the back, structuring it in a way without giving away too many details I guess, structuring it in a way to where you can maybe have outside access from multiple areas of the house. So grandma and grandpa could be in one area and have their own space, their own access to the house, then you've got, you know, the rest. And, yeah, I feel like I'm kinda talking vaguely because the deal is not done yet completely. But at the end of the day, we're structuring it in a way for multiple families.

Melina: Right. Because that is what is happening in our market. And I think there was a couple of things I really wanted to make sure that we got across to our audience today and that is this. That is that real estate, like, we always say it's local. Real estate is local and I know that a lot of people do not agree with that statement, but I am a firm believer that real estate is local. And especially when you are in a market getting ready to shift, when you're seeing the market getting ready to shift, which is where we are right now, it is so important to know your market and to understand.

And even in Southern California, the difference between something in Los Angeles County, Orange County, or Riverside County, completely different. You're going to have a different experience, and you need to know exactly what that is.

Tim: Right.

Melina: One of the things that I wanted you to hit on a little bit, would you talk about what an ADU is? Because that's a... It's a good thing to know. Why don't you talk about what an ADU is?

Tim: I believe it stands for Accessory Dwelling Unit, and it basically is an additional unit in the back of the house, not necessarily connected to the house but could be. And it's there for additional family members essentially. If a homeowner was to move out, we would have to tear out the kitchens and stuff like that, but basically it's additional square footage for living space on the property.

Melina: Right.

Oscar: Yeah. And, typically, the way ADUs are set up or the idea behind the laws that were passed across ADUs is that it's converting the garage into living space and then possibly adding square footage to that. Right? So in our situation, we're looking at a 395-square foot garage that currently has dirt for a floor.

Melina: My favorite. Because it was a carriage.

Oscar: Yeah, it was a carriage house.

Melina: Which is great. What do you think about that, John?

John: That's old. That's really...

Melina: Does that sound like England kind of old?

John: Yeah, it sounds like Wild West kind of old.

Melina: Yeah, the house was built in 1900.

John: Right.

Oscar: It's a historical property. So converting that 395 square feet now and adding 800 square feet to that, so now we ended up with about 1,195 square feet, which is great because you can build a three-bed, two-bath back there as an ADU and it's perfectly legal. The city will bless it, everything is fine. It's just getting, again, the plans and the engineering done right and all the other stuff.

Melina: And, you know, it's like the ADU, that is the answer to all the garage conversions. Like, how many houses have we bought? I'm thinking about all the houses that we bought in the past where you get into it and the garage is converted, and we have to do what?

Frank: Demo.

Tim: Tear it out.

Melina: We have to tear it out and return it to a garage, and now we don't have to do that.

Oscar: You just have to apply. And a lot of the cities have their own rules and regulations and all that. Right? But the statewide law is that it's absolutely doable and it will be approved. But the cities have some very specific things, right? Like Riverside specifically says, "If you do that 395 square foot, cool. You have no school fees. If you go above that, you've got to pay us some school fees." Right? So there's just little things, nuances.

Tim: So just to make sure we're clear, the 395 isn't a set rule. The 395 is because that's the existing size of the garage. Is that right?

Oscar: No, actually the rule is that anything in excess of 500 square feet, you have to pay school fees.

Tim: Five hundred. Right. Okay.

Melina: Yeah. Because theoretically...

Oscar: And that's specific to Riverside, right.

Melina: And it's because the theory behind it is that if you're adding more than 500 square feet onto a property for an additional living unit, you're going to have children.

Oscar: Obviously going to school.

Melina: There is obviously going to be kids coming in there. But the great thing about that is that you get to take a property that is not zoned for two properties. Like, I don't know if everybody really gets that. That is such a big deal. Whereas in the past, we couldn't add an additional 1,000 square feet onto a house without it being zoned, what we would call R2. And now what we're seeing is, "Oh, well, you actually can, and if your garage is detached and you can add square footage, I mean, you're just going to pay fees." That's huge.

Oscar: And this case is interesting, right? Because it was originally, there was a city overlay for the plan to make it an R3. And so you put three dwellings on it. And then the historical overlay came in and said, "No, that's out." So everybody's grandfathered before that. But the loophole becomes the ADU.

Melina: Isn't that the best? I love loopholes. Loopholes are great because it creates so much opportunity for you, right? For each one of us. So, I think, Frank, did you want to add something else? It's so funny. I'm watching Frank right now. I don't know if you guys can, if you're watching this on video, it's hilarious because he's researching on his phone right now. Are you reading about the market? What are you reading about, Frank? Or you're just on Facebook scrolling? Which one is it?

Frank: No, I've been reading about the market specifically for the last 12 hours constantly.

Melina: Does it mean you didn't sleep?

Frank: I just have to say something. I don't know. I think I tapped you back at 4:00 AM, so I don't know if you saw that. Yeah, I was up just looking at stuff. Because I know, you know, we run a real estate investing club, and I get a lot of questions. And I don't like it when I don't have the answers. I'm like, "Well, I don't know. We're flipping houses. I guess, yeah, the market's doing something. You're right. Let me get all this information. Let me talk with everybody," when we have meetings every week about everything that we're doing in the market.

So being a coach and talking to people, we should always be equipped. We should know what's going on in the market. We should know interest rates. We should know all of these things. And even like looking ahead with things that we don't need to know but we're gonna know, we're gonna need to know, we should be preparing ourselves for those things. So I feel like I can never get enough information about what's happening, different opportunities, the ADU, the Accessory Dwelling Unit, granny flats, all of those things.

Yeah. I mean, if you have a single family home, you couldn't have added something that put somebody in there before. Now you're a multifamily unit. That's a duplex. You can't do that, sir. And it's not zoned for it more specifically. You have to change the zoning of your house, but not with the state passed law on the ADU.

Melina: Yeah. Which, if you think about that, that is our government actually being aware of what's happening, you know, with us as people, you know. How we are becoming, you know, more multigenerational living together, and it makes more sense.

Frank: Well, they partially rolled back Dodd-Frank, right?

Melina: Yep.

Frank: And there was another incentive that have [SP] passed for multifamily units for people to be able to afford, to be able to buy those at a better rate.

Melina: A better interest rate.

Frank: Yes. I'm working on a duplex right now.

Melina: Yes, you are. Which could be a quad.

Frank: It could be a quad. It's two and a half acres and we went to the city several times. And it looks like we could put a total of, I think it was 10 units on the two and a half acres. So it's five units per acre, right? So that other half acre...or is it four? It's 10 units [inaudible 00:33:13] on there. And I guess because of that, I'm recounting and reconsidering because there's laws that have just recently been passed that changes or broadens what I could possibly do with that property. So we were going to sit down and talk about that.

Melina: Oh, that's good. That was his poke.

Tim: Nice.

Oscar: And there's businesses that could take advantage of that land, too.

John: Absolutely.

Oscar: And the [SP] additional structures and so forth. So there's a lot of different opportunities. I think it all still goes back to acquiring the properties correctly. Right? It's always the acquisition. So I mean, I know you acquired that property, like, great. No different than the Riverside property. No different than the Santa Ana property. It's all about how you get into them and the amount that you pay for it that's gonna allow you to do multiple things, right, the trifecta, if you will.

You can either rent it out. You can wholesale it, you can rehab it. You can rehab it and hold it. I mean, there's so many different things now that you can do with it, but it's still about the acquisition like [inaudible 00:34:14].

Melina: Yeah. There's nothing new under the sun, right? You make your money in your acquisition.

Frank: Well, we can talk about another thing, but that was really interesting. I thought I bought an acre and a quarter. That's what I did my evaluation at and that's what was on title. It said, "1.25 acres."

Melina: Right.

Frank: But it turns out it's 2.5 acres.

Melina: Whoops.

Frank: So that was good. I got a double-sized lot. That was a surprise.

Tim: Nice little gifts.

Melina: When does that happen? When do you get a woopsie [SP] in your favor?

Tim: Two hundred dollars bank error, right?

Melina: Oh, yeah. For monopoly. That's good. That never happens.

David: Apparently it does.

Melina: Yeah. All right, so some takeaways from today. Who wants to give a takeaway or maybe one word of advice about the market? Somebody just give me something. Johnny, we haven't heard from you much. What's the one thing you'd want to say to people about the market today or maybe with what you're experiencing right now? Because I'm watching you and you're like taking everything in and...

John: Yeah. I mean, you know, I've only been in real estate for five years, so I haven't seen the shift in the market so much. You know, I came in 2013. The market was recovering, you know. I've been able to experience, you know, seeing that increase in property prices, but it's still very new for me. You know, the idea of, "Well, what is gonna happen, you know? And how do those strategies change?"

You know, for somebody like yourself that got into real estate, I mean, even before you got into the investing side, you know, being in the long business and seeing where the market was going and then reacting to it, creating the club and seeing that dramatic change. So right now I'm starting to listen and bouncing around on these conversations thinking, "Actually, I don't know very much about what's going to happen."

Melina: Great.

John: You know, so I think it's good for me to say that because, for a lot of newer students that are listening to this, some of them may have experienced the market change. You know, and when the market crashed back in '08, '09, I was renting and it made no difference to me whatsoever. I didn't feel any effects of it. I saw it on the news, but that was as much as I realized, you know.

So I don't know. It's kind of exciting to see how it's going to go. It's exciting to see change because it's going to create different opportunities. And what those opportunities look like, I don't know, you know. Is it, you know, this buy and hold and this Airbnb, this income generating properties? Is that the answer or... I don't know. Let's see where the market goes.

Melina: That's exciting. I think that's great. I know this. I know that when the market did shift, when the market... Before, when the market was really, really up in 2005, by 2005, early 2006, I was like I was afraid of the market. And I started feeling like that around 2016. I knew in 2013, I remember saying to Dave, "This feels like 2003 to me." Right? That's what it felt like. And I was thinking back to 2003, 2004 and that's when, you know, the market was up and everything was fantastic and I said, "It means 2008 is coming."

It just seemed like a no-brainer to me, and I think we're absolutely experiencing it now. So the whole point is, you know, I've been telling people, my students for the last, I was thinking, two years, "Get in, get out, get paid. Get in, get out, get paid as quickly as you possibly can." And now I'm saying, "Be really, really careful about how you get in." Really, really careful. And make sure that all strategies for your exit you can still utilize. Right?

So, stay tuned, guys, because I think our next podcast, we're going to start talking about actual strategies that you utilize when the market changes and how do you make those shifts.

Oscar: Yeah. Diversification. How do you diversify your strategies?

Melina: Diversification, yup, exactly. Okay. So, I think that's good for today, you guys. This is Melina Boswell, Flippin Off, and flipping out, and see you guys later.

I'm Melina Boswell, your host of the Flippin Off Podcast. I really hope you enjoyed it. If you did, we'd love for you to subscribe, give us a five-star rating and tell your friends all about us. You can find more episodes of the Flippin Off Podcast on Apple Podcasts, Spotify, Google Podcasts, Stitcher, or wherever else you like to listen to awesome podcasts like this. If you like what you've heard, we'd really appreciate it if you'd follow us on Facebook and Instagram and tell us the stories that you'd like to hear.