Afford Anything - Are We Due For Another Housing Market Crash?

Episode Date: April 3, 2021

#309: Are we in a housing bubble? Are we going to see a repeat of 2006 all over again? Are there any good investment deals to be found right now? These are the questions playing on many people's minds, and we seek to explore the answers in today's First Friday bonus episode. We start by exploring some of the forces that are at play in today's real estate market. What separates the market of 2006 from the market of today? In the second half of the episode, Paula explains how and why she chose to buy a duplex in Indianapolis, despite it being a seller's market. There are deals to be had if you know where to look and what to look for. Enjoy! For more information, visit the show notes at https://affordanything.com/episode309  Learn more about your ad choices. Visit podcastchoices.com/adchoices

You can afford anything, but not everything. Every choice that you make is a trade-off against something else, and that doesn't just apply to the way that you spend and invest your money. That applies to the way that you spend and invest, your time, your focus, your energy, your attention, to any limited resource that you need to manage. And that opens up two questions. First, what matters most?

Second, how do you align your decision-making with that which matters most? Answering those two questions is a lifetime practice, and that is what this podcast is here to explore and to facilitate. My name is Paula Pant. I am the host of the Afford Anything podcast. On the first Friday of every month, we host a first Friday bonus episode. This is an extra episode that we do outside of our normal weekly routine, and so welcome to the April 2021 first Friday bonus episode. In today's episode, I'm going to be discussing real estate in the context of 2021, how to buy a home in a hot market. I just closed on a duplex in Indianapolis. So it's an out-of-state duplex prior to January 2021. I never set foot in this location.

And so from a distance, as an out-of-state landlord, I learned the city, made an offer, bought a duplex, and I did it all in a very hot market. And I understand that that is just one single anecdotal case study, of course. But in today's episode, I'll share the story of how I approached this and also contextualize that with a deeper understanding of some of the forces that are at play in the real estate market right now. Today's episode, of course, is going to be very real estate focused. So if that's a topic that you're interested in, keep listening. And if it's not a topic that appeals to you, that's cool.

This is a bonus episode. So we'll catch you in our normal weekly regular shows. Let's begin by discussing the overall market. Let's start wide and then we'll go narrow. First, if you have listened to me for any length of time, you probably know that I've long been a believer that there is no such thing as the national real estate market. There are only many, many local markets. And what happens in Topeka, Kansas is very different than what's happening.

happening in Daytona Beach, Florida, which is different from Cordelaine, Idaho, which is different from Fitchburg, Massachusetts. And so I hesitate to have any conversations about the, quote, real estate market, because I am a believer that the national market does not exist. The Cincinnati market exists. The Cleveland market exists. But to try to talk about real estate in a way in which you're lumping Oklahoma City together with San Francisco seems to me to be more misleading than helpful. That being said, we do have data about mortgages, financing, foreclosures, supply costs, material shortages. We do have data about those factors, and that data is typically expressed in terms of national percentages. You know, what are foreclosures nationwide? What type of supply chain

disruptions have we seen nationwide? That data is expressed nationally, and that's part of the reason that in mainstream media, it's common to hear conversation about the national market. But before we launch into some of that data, which we're about to do, I want to give the disclaimer that even in that context, the foreclosure rate in a given city will be different than the foreclosure rate in a different city. And similarly, when it comes to housing inventory and supply, or the number of new construction permits that have been issued, or renovation permits that have been issued, or construction costs per square foot, as they relate to labor. costs in that area, those are going to have a lot of local variation. So with that disclaimer

out of the way, let's take a look at where we are now. The big question on people's minds is, is this another 2006? Given that housing prices have been going up so dramatically, will housing prices continue to rise or will what goes up must come down? Are we currently living through the next 2006, which means that the next 2008 is imminent? While we never know the future, evidence points towards the fact that we are not in another 2006 and that prices will continue to hold and or climb. They may not climb as rapidly, so the rate of growth, price growth, may not be as fast in the future as it is today, but prices are unlikely to drop.

And we are unlikely to find ourselves living in another 2006. We're unlikely to see the housing market decline. As a slight tangent, that is the reason that even though we're in a seller's market, I bought a duplex in March. I closed two weeks ago because is it more expensive than it was five years ago? Absolutely. But is it cheaper right now than what I anticipate it will be in the future? Yes. To the best of my ability to make an educated guess about what the future may hold.

Yes, I'm confident enough in the strength of the housing market that I decided to be a buyer. Now, what is the source of that confidence? There are a few reasons. Number one, the tight inventory that we are seeing, which is causing a lot of the price increase, supply demand, when supply is tight, when supply has dwindled, and demand exceeds supply, you get higher prices. And the supply crunch that we've seen is a trend that started many years ago. This precedes the pandemic. So between April 2019 through April 2020, available homes for sale nationwide declined 25% year over year. In April 2019, there were one million homes listed for sale. In April 2020, there were only 750,000 homes.

What were the reasons for that? There are many. One was that the cost per square foot of new construction is prohibitively expensive in many high cost of living areas, which squeezes margins so tight that many builders have decided it's not worthwhile to construct new homes in those. areas. As a result, new home construction has trailed household growth and new household formation every year since the end of the Great Recession, which means that steadily throughout the last decade, supply has drastically shrunk while demand has steadily risen. There's more household formation, less housing supply. And so that trend existed since the end of the Great Recession.

That trend has gone on for a decade. And it was so bad that in February of 2020, pre-pandemic, Freddie Mac stated that the United States, quote, suffers from a severe housing shortage. And they called this, quote, a major challenge. So pre-pandemic, they were already warning about this, and they estimated that we would have a shortfall of 2.5 million new housing units that would be needed to bridge the gap between supply and demand. The pandemic, of course, only accelerated and exacerbated a supply problem that already is. existed. And the pandemic did that in two ways. One was supply chain disruptions, so materials were harder to acquire. As a result, the cost of lumber right now is significantly higher than it has been for the last decade. We have a huge spike in lumber costs as well as a spike in costs of a lot

of other construction materials, which makes the cost of new construction even more prohibitively expensive, as well as the cost of renovations. And on top of that, you have over the past year the very real safety problem of having workers on site. And yes, construction workers are essential workers, but there are still liability issues. There's still enhanced safety protocols that need to be met. And to put it simply, the pandemic didn't exactly spur employment in this arena. Now, there's a metric that real estate analysts use in order to track the rate of price growth. And it's called months of supply. Months of supply is a measure of how many months it will take for the current inventory of homes that are on the market to sell at the current pace of sales.

And historically, moderate price growth comes from six months of housing supply. When we have fewer than six months of supply, that tends to correlate historically with skyrocketing home values. That's when we get into situations where sellers receive multiple offers, comparable sales figures climb, and the average days on market for properties shrinks. we were already in that situation prior to the pandemic. And I want to emphasize that point. This trend did not begin with the onset of COVID-19.

Tight housing supply has been a major issue ever since the Great Recession ended. It's been a major issue for a decade, and the pandemic only accelerated that trend. Now, at the start of the pandemic, the working hypothesis that many people shared, myself included, was that the decline in demand would match or exceed the decline in supply. And at the very beginning of the pandemic, at this time one year ago, that was where all of the evidence was pointing. The volume of visits to home buying websites like Zillow and Trulia dropped 40%. Their web visits dropped 40%.

And the first week of April 2020, pending home sales, fell 54% year over year. So if you think back to where we were a year ago at this time, you think back to March or April of 2020 when the shutdowns had just begun. Nobody wanted to buy homes at that time. And for understandable reason, the world was changing so rapidly. Everything from employment to health was impacted by this global pandemic that none of us had anticipated. And so March, April of 2020, that was a time when people were very unlikely to be. to make voluntary major life transitions like moving to another home. And if they were going to move, they would be far more interested in Airbnb or renting

or just moving in with family and friends. Very few people in the first week of April of 2020 wanted to buy a home, given that they didn't even know if they were going to be employed. And so when the pandemic began, it seemed as though a decline in demand would meet or exceed that decline in supply. But as 2020 unfolded, that is not what happened. Instead, as this became, quote unquote, our new normal, and people adjusted their lives to coronavirus conditions, the demand for homes in many markets, particularly low cost of living

areas, areas where bigger homes with bigger yards are available, the demand for homes in those markets increased. Knowledge workers needed more space to be able to accommodate working remotely. and population growth in many mid to low cost of living areas, particularly in the sunbelt, increased. And as a result, the supply demand imbalance that had already existed prior to the pandemic was only exacerbated in those markets. Now again, this hasn't happened everywhere. And that's why I started this with the disclaimer that there's no such thing as a national market that there are only many local markets. Because when you look at population growth in a place

like Tampa, the Tampa St. Pete Clearwater area, you see very rapid accelerated population growth. When you look at Manhattan, you see a very different story. But here's the bottom line. Going back to the original question of, are we living in another 2006? In 2006, home prices were climbing due to speculation. Home prices were climbing because home prices were climbing, not because of economic underlying fundamentals. Today, home prices are climbing because of fundamentals. The supply demand fundamentals are causing the increase in price, not speculation. And that's the reason that the increase in prices today is unlike the increase in prices that we saw in 2006.

These are different up markets fueled by different underlying factors. And that is one of the reasons why I am bullish on. residential real estate to the point where even though it's a seller's market, even though there's limited supply, I'm in that pool of buyers competing to buy homes and who just closed on a duplex. It's because of that understanding that this is not a speculative bubble, but rather a price increase based on fundamentals. That's one of the reasons. The second reason relates to debt and leverage. The borrowers of today are far more qualified than the borrowers of 2008. Prior to the Great Recession, between 70 to 80% of new mortgage originations were given to people with

less than excellent credit, which is defined as a credit score of 759 or less. By the time the COVID-19 shutdown started, that situation had nearly reversed. Almost 66% of new mortgage originations went to borrowers with excellent credit scores. Now, in addition to that, a greater percentage of homes were owned free and clear. At the beginning of the Great Recession, only third 32% of homeowners owned their homes free and clear. By the beginning of the COVID-19 pandemic, 38% of homeowners owned their homes free and clear. 38% that's nearly 4 out of 10, own their homes free and clear.

On top of that, among people who do carry loans, today the vast majority are carrying only a primary home loan. They're carrying only their original home loan and not a cash out refinance or financing against their home equity. They're not typically carrying second home loans. And if you recall, the number of borrowers with second home loans was a huge factor that contributed to the bursting of the leverage bubble that resulted in the 2008 crash. Remember how I said that in 2006, home prices were rising because home prices were rising.

It was fueled by a speculative bubble. Well, when that happened, people saw how quickly home prices were arising, and so they would take a cash out refinance against their primary residence and spend this money on discretionary home upgrades like building a backyard patio, installing a home theater system, putting in a swimming pool, under the advice that this would boost their home value. Well, what happened was when the bubble popped, they couldn't liquidate those discretionary purchases. Their home value was nothing more than some theoretical number on paper. it wasn't for a primary residence, it wasn't providing a stream of income. And so when the speculative bubble popped back in 2008, people found themselves underwater, and that accelerated a rash of foreclosures. And by the way, I am not blaming the homeowners.

Many of those homeowners were misled by lenders who painted an unduly rosy picture of what it means to have, quote, unquote, enhanced equity in your primary residence, and who downplayed the risks of over borrowing and over-leverage. It's exactly why I caution people to be. very, very cautious about who your teachers are, particularly whenever debt or leverage is involved. But fast forward to today, after the Great Recession, cash out refinanced loans dropped by 75% and remained low for the following decade. And so to summarize what I've just said, today's housing market features highly qualified borrowers who are taking out smaller loans

and who are taking out predominantly primary loans and not second loans. And on top of all of that, fewer people in general have loans. More homeowners own their home free and clear. So we've talked about tight housing supply and how today's rise in prices are a result of underlying supply demand fundamentals rather than speculation. We've talked about both the qualification of borrowers, how today's borrowers are more highly qualified, and we've also talked about the fact that fewer people are borrowing to buy houses today as compared to 2006, that more people own their homes free and clear, statistically speaking.

Those are two out of three reasons why we are not living in another 2006 and why I believe that home prices will stay stable or they will go up. I do not believe that we are headed for any type of crash like what we saw in 2008. The third reason is that the demand that we are seeing is in part sustained by, among knowledge workers at least, sustained by wage growth and high investment returns that have been generated over the span of the last decade. We are enjoying the benefits of an 11-year bull run. And rewind to this time a year ago, March of 2020, we saw the market plummet. And surprise, surprise, the market plummeted at precisely the same time that, you know,

demand for homes also plummeted because when people see depressed values in their 401k, when people see that their investments have been slashed by 40 percent, people are not really in a mood to spend. So if, in a hypothetical world, the stock market throughout 2020 had stayed low, if the Dow Jones in September or October of 2020, in a hypothetical world, if that would have been at about the same level that it was at in March of 2020. I don't know if we'd be seeing this kind of demand. But what we saw was that in 2020, in March, the stock market plummeted 40%, immediately rebounded and ended the year at record highs. And currently still, as of the time of this recording, which is April 2021, continues to be at record highs. And in a bull market where people have had the benefit

of wage growth as well as investment portfolio growth, and that growth has accumulated over the span of a decade, people are far more likely to, number one, have the consumer confidence to go out and spend, and that includes buying housing, as well as all of the furnishings and ancillary costs that are associated with housing, as well as, number two, harness some of those profits in order to be able to come up with the down payment and the other cash needed in order to get into these homes. So to recap, tight housing supply, more qualified borrowers, and wage and investment growth that's accumulated from the last decade, those are three factors that are causing home values to stay strong and to rise quickly. And all of those are based on strong economic fundamentals.

The housing boom that we are seeing today is not a repeat of 2006. And I believe that strongly enough that I am putting my money where my mouth is, and I am buying properties, well, property singular, I bought a duplex at today's rates, because I do not expect the price of properties to go down. Now, do I think it will continue to rise as rapidly as it currently is? Probably not. If homes in a given area have risen 8% year over year, every local market is different, But if in a given hypothetical local market, the price of homes or the home values rose will say 8% from 2020 through 2021, do I think it will continue to rise by another 8%? No, I mean, again, every market is local.

But assuming that some of the upstream supply chain disruptions are solved, assuming that the price of lumber comes down, assuming that those underlying material costs come down, and that we have more supply, that, fuels new construction, I don't necessarily expect the pace of growth to continue to be as strong as it is today. And that's why whenever I am evaluating a property, I make it a very, very conservative assumption that that property will rise at pace with inflation and nothing more. That's an extremely conservative assumption. Historically, properties nationwide have risen about 200 basis points, i.e. 2% higher than the rate of inflation. I don't even like making that assumption. I like to be

even more conservative and just say, all right, it's going to keep pace with inflation, nothing else. That way I am pleasantly surprised if it does better. But all of that is a very long way of saying, I certainly don't expect home values to backtrack. And I certainly would not stay up at night worried that we're due for another housing bubble crash because there's no evidence that this is a bubble. This is pure supply and demand and it is a trend that has been going on for a decade. So now that I've said that, we'll take a quick break to hear a word from our sponsors. And when we come back, I'll tell you about this purchase that I just made and some of the factors that went into my thought process behind it. So stick around. The holidays are right

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But they also have the fintech hustle that got them named one of America's most innovative companies by Fortune magazine. That's what being a fifth third better is all about. It's about not being just one thing, but many things for our customers. Big Bank Muscle, FinTech Hustle. That's your commercial payments, a fifth, third better. Welcome back in the second half of today's bonus first Friday episode. I want to talk about the deal that I just did because there were many attributes about it that were unusual. First of all, I did this deal in a place that I, prior to January of 2021, I knew absolutely nothing about this location.

Let me walk you through the store. Now, for a few years, I've known that I've wanted to invest in a rental property. I want to add to my portfolio. But I wasn't totally sure where. I looked at Alabama. I looked at both Birmingham and Montgomery. And both of them are excellent rental markets. But for some reason, I couldn't put my finger on it, but I just wasn't getting motivated

to take action there. And as we talk about on this podcast, oftentimes your actions can be revelatory of about how you feel. You know, there's the thought, behavior, emotion, triangle, and tugging on any one of the corners of that triangle changes the other two. And sometimes, you know, all behaviors communication. And so sometimes I'll observe my own behavior and wonder what my own behavior is communicating to me about myself, perhaps about some thought or emotion that I didn't even necessarily recognize. And so all of that is to say that I looked very closely at both Birmingham and Montgomery. Between the two, I liked Birmingham better personally, although I think they're both

great rental markets. But for some reason, I never took action. And how that began to change started at the end of 2020. And it started when I was having a conversation with rental property investor Rich Carey, who was a guest on this podcast, a former guest on this podcast. Now, Rich is an investor in Montgomery, and he built the bulk of his rental portfolio when he was, stationed overseas with the military. When he was first in Germany and then later in South Korea, from the military base in South Korea, he was buying these properties back in Montgomery, Alabama, completely sight unseen. At the end of 2020, he and I were talking, and both of us were feeling like we wanted to invest in some rental market, but we didn't quite know where. And this is

a question that a lot of the students in my course, your first rental property, also have. A lot of the students in that course are out-of-state investors or aspiring out-of-state investors. They live in high cost of living areas. They know that it doesn't make sense to invest in their backyard. And they want to go where the money is. They want to go where their returns are. Not literally go there, but they want to put their money there. But how do you even begin to choose?

How do you choose between Birmingham versus Topeka versus Oklahoma City versus Pittsburgh? We spend a lot of time in the course answering that question, covering that question. And so I knew, as we teach in the course, that there is this hierarchy of boots on the ground. The easiest place to invest, if you are going to be an out-of-state investor, is ideally a low-cost-of-living area where you have previously lived. In my case, I grew up in Cincinnati. So that would be the easiest place for me, given that I already know the neighborhoods. I know the area. I'm generally familiar with the city by virtue of having grown up there.

I also know that the second easiest place in terms of this hierarchy of boots on the ground is an area where there is someone or some ones, such as family or friends, who you know, like and trust. And they don't necessarily have to be involved with your real estate dealings. In fact, arguably it's better if they're not. But if you are motivated to go to a given city, because you know that your sister lives there and you'd love to have lunch with her while you're there, You fly there at breakfast, you fly back at dinner, but you can have lunch with your sister while you're there. It increases your motivation. And when it comes to investing, motivation is a big part of it.

So in terms of that hierarchy of boots on the ground, that's number two. And in the course, there's a much more elaborate hierarchy. I won't go through all of it right now. But I knew based on that hierarchy that unless I wanted to invest in Cincinnati, there was nowhere, really, that met those other criteria. When I think about where most of my friends live, most of my friends live, most of my friends friends live in high cost of living areas. And so in terms of the question, where do you have people? Where do you have connections? I knew that I was going to be facing a more difficult challenge. I knew that I would be starting from scratch. Again, when it comes to that hierarchy, the only

place that meets that criteria for me is Cincinnati. And I think Cincinnati is also a great rental market. But honestly, I kind of wanted the challenge of going outside of my comfort zone. So Rich and I were talking and we were like, all right, let's just discuss great rental markets where we have no knowledge. and no connections. Let's see what we can do. We talked about a handful of places, but there's been a lot of interest in the past few years in Indianapolis. It is a city that has a strong economic moat. It's got a wide variety of industries. It's not overly reliant on just one industry or worse, just one employer. It's a large enough city with a large enough population that you've got a city with a lot of economic diversity and you've got access to an airport and major highways.

It's a city that's in that regard very plugged in, a city with great present and future potential. The economic moat that it has that I've just described gives it stability. And when thinking about making a 20-year or 30-year or 40-year investment, that stability becomes a very important consideration. So Rich and I decided that we were going to take a weekend scouting trip to Indianapolis. We got there on a Friday. We stayed until Sunday. Now, again, neither of us had connections there. We don't have friends or family there.

But in advance of the trip, we lined up a handful of meetings with real estate agents and property managers and local investors, many of whom came from the course from your first rental property and broadly from the FinCon community. So we tapped into these online communities and established some connections with people that we had never previously met. We also both separately did a lot of online research in advance around different neighborhoods in the city. What are the class A, B, and C neighborhoods? What neighborhoods have come up the most in the past five years? Which ones have not come up yet, but have the potential to do so. So we head out to Indianapolis.

We tour these neighborhoods that have been on the list. We have the meetings with the agents and the property managers and the local investors. And by the end of that visit, I was all about it. I made an offer on an eight unit property. It did not get accepted. But, you know, I made that first offer. And oftentimes that's critically important. Again, so much of this is behavioral.

Just getting the wheels in motion, going from the analysis stage to the action stage. So making that first offer, despite the fact that I made a lowball offer and the sellers basically just laughed in my face, that's fine. I at least made the offer and that's what got the gears going. And from that point forward, primarily text messaging with an agent that I never even met in person during that initial visit, I from a distance just started making offer after offer, mostly lowball offers, on properties. And of course, as we've just talked about, this is a seller's market. This is not a market that is appropriate for low ball offers. But going through the remainder of January and February and the beginning of March, going through that time period, making lots of of low-ball offers gave me, number one, the courage to make those offers. Number two, a greater degree of experience with deeply looking at the neighborhoods in which I was making those offers, deeply looking every day at what's on the market in these areas. How long have these properties been on the market?

When did they get listed? When did they go under contract? How long have they been under contract? Have they been in and out of being under contract multiple times? How quickly do they sell? I narrowed my search to a few neighborhoods, and by virtue of spending two and a half months that January, February, March, making offers on lots of properties in this very constrained geographic area, I was able to get a very clear sense of what was happening in the market, in those areas at this time. And during this time period, there was one duplex that I went under contract on. My offer was accepted. I went under contract, and it was after I went under contract that I flew out there. I organized for two different contractors and an inspector, made all of those arrangements from a distance, and I flew out there to take a look at the property, got some repair estimates, did a bunch of number crunching,

and realized the cost of repairing this property is greater than what I had anticipated it to be. And so I terminated that contract. I actually placed that phone call when I was at the airport leaving Indianapolis. I made a quick trip just to walk through the property after I was. was under contract and went back to the airport, called my agent from the airport and said, hey, I'm terminating the contract. We're going back to the drawing board. And when that happened, you know, I posted about it on Instagram and I talked about it with the students in the course. And a lot of people almost acted like it was a sad thing. You know, they were like, oh, I'm so sorry to hear that. You know, do you feel as though you've wasted your time? And I was actually surprised

by that reaction. Like, there's no sunk cost fallacy here. This is part of the process. going under contract on a property and doing deep due diligence on that property, that's part of the process. Having an inspector go there or having contractors go there once you're under contract on it and then reevaluating whether you want to amend the contract or whether you want to terminate the contract or whether you want to offer the seller choice between the two, that is part of the process. And so when the students in my course were like, oh, I'm so sorry to hear that you did all of this work for a property that you didn't even close on, That's how it goes. That's part of the game.

And I'm not just referring to Indianapolis, but in general, I've spent thousands and thousands and thousands of dollars on inspections for properties that I've never purchased. Because in my view, not buying the wrong property is a big piece of your success as a rental property investor. It is arguably more important to avoid buying the wrong property than it is to make sure you absolutely buy the best possible one, which there is no such thing as best. But not buying the wrong property is critical to success. And that's why that deep due diligence is just part of what it is. So I continued making offers from a distance. For the second time, I had an offer accepted,

and I wanted a contract. And I flew to Indianapolis for one day. It was a same day return. I didn't even pack a suitcase. I just, I brought my purse with a wallet, a phone, a tube of chapstick, and my AirPods. That's it easiest going through security at the airport ever. I flew there at breakfast time and I flew home in time for a late dinner. And during that one afternoon that I was there, I took a look at this property. And then again, from a distance, after I returned back home, from a distance of thousands of miles away, I coordinated with my agent, with inspectors, with contractors, I read through the inspection report. I used the spreadsheet that we use inside of the course to crunch all of the numbers. And I knew that this was the property to buy. So I closed the deal.

So we closed the deal about two weeks ago, set up a new business. I now have an LLC in Indiana. I onboarded the tenants. Yesterday was the first of the month. So we just went through the new rent payment process with me for the first time. And it's basically smooth sailing from here on out. The big takeaway, if there's any lesson from this single anecdotal case study, I guess two big takeaways. Number one is don't let distance be an obstacle. There are many, many markets across the United States, particularly in the Midwest and the South, that are fantastic rental markets. And if you happen to live thousands of miles away, that's okay. So do a lot of other investors. So I know, especially if you're a new investor, the idea of that can be a little intimidating or a little

scary, but part of the support that you receive from inside of this community and the knowledge that you gain, I think, from this community, those two factors, that knowledge and that support both play a role in helping you to develop the confidence that you need to get over that initial intimidation factor because that's where you grow. You push yourself to the edge of your comfort zone, and that's where the returns are, that's where the passive income is, that's where the cash flow is. And of course, I'm not saying that everybody needs to invest in real estate generally. I mean, you can live a perfectly wonderful life, never investing in real estate. But if this is something that you want to do, don't let your fear hold you back.

That's one of the takeaways. And then the second takeaway is if you want to learn how to be a good real estate investor, that skill set is applicable in all markets, hot markets, cold markets, sellers markets, buyers markets. If you want to learn the fundamental skill set of how to analyze deals, how to find great deals, how to finance those deals, how to renovate those deals, how to plan that renovation, how to plan a scope of work, and hire and fire contractors and build a team, particularly how to build a team remotely, that is a skill set that you will have for life.

And those are skills that you can use in any type of market, in any kind of market, in any type of environment. It doesn't matter if we're living in 2014 versus 2021. You can use these skills, no matter what the broad macroeconomic conditions are, because the fundamental skill set, the underlying skill set, knowing how to think like an investor and how to approach the property analysis and property search like an investor, that's something that experienced investors, and that can be you, are able to do no matter what the condition. conditions are. So yeah, it's a seller's market. Even in Indianapolis, houses in Indianapolis, many houses are sold on the day that they're listing or they're put under contract on the day

that they're listed at or above asking price. That's happening in Indianapolis too, just like it's happening in many other parts of the country. But as long as you know what you're doing, then you can do that anywhere. Zooming out a bit. The core message of that is that a skill set is not context dependent, a skill set is a skill set, and you can use that in many contexts. The way that you execute those skills is going to look different depending on the context, but the underlying skill remains. It's kind of like if you think about stock market investing, you know, there's that expression in a bull market everyone thinks they're a genius. And what they mean by that is that people who don't know anything about stocks, you know,

in a bull market, they can blindfold themselves through a dart at a list of stocks and whatever company name they land on, invest in that, and their portfolio is likely to rise. And that's why in a bull market, lots of unskilled people think that they are stock investing geniuses. And it's only, not to mix metaphors, but I'm going to mix metaphors here, when the tide goes out that you are able to see who's swimming naked. That's another famous expression in the world of, I think it's Warren Buffett who said that in the world of investing. So once that bull market is over and the tide goes out, that's when you're able to see who just got lucky, who just got carried by the rising tide versus who truly knows what they're doing. And in real estate right now, you know,

if you can be in a seller's market, in a hot market, and still create great deals by knowing how to search for and analyze properties, well, then that means that you can do something that those who just got lucky when the headwinds were in their favor cannot. So that is my personal story about buying a duplex in Indianapolis, a city that I had never set foot in prior to January 2021, and a city that I didn't know anybody in prior to January 2021. I hope that was helpful. And for more specifics on rental investing, of course, you can go to afford anything.com. We have a free ebook called seven expensive mistakes that rental property investors make. You can download that ebook for free at afford anything.com slash mistakes.

So afford anything.com slash mistakes. It's totally free. And we also have a course on rental property investing. This course is only available twice a year, once in the spring, once in the fall. The spring semester is about to open for enrollment on April 12th. So from the week of April 12th through April 19, 2021, we open our doors for enrollment for the spring semester. This is the last time ever that we will be offering the course at our current tuition rate after April, 20, 2021, the tuition will go up. It will rise by a few hundred dollars and it will rise forever. It's never going to go back down. If you do want to get in, this is a good time. That being said, if it's going to create a financial hardship on you, please do not do it. I never, ever,

ever want anyone to enroll in the course if it's going to create any type of financial hardship on you. So if you have high interest credit card debt, focus on paying off your credit card debt first. If you don't have an emergency fund, make sure that you have a personal emergency fund for first. Focus on the basics and we'll be here when you're ready. If you want to learn more about the course, download that free ebook that I was talking about. That will put you on the VIP list. And our VIP list is where you will get lots of free information. You've got a free newsletter series that you'll also get about real estate investing. And we'll also send you updates on the course. So again, afford anything.com slash mistakes. That gets you all the info that you need.

Affordanthing.com slash mistakes. Thank you so much for tuning. in, this is the first Friday bonus episode of the Afford Anything podcast. If you enjoy today's episode, make sure that you hit subscribe or follow in whatever podcast player you're using to listen to this show so that you don't miss any of our awesome upcoming episodes. Thanks again for tuning in and being part of the community. My name is Paula Pant. This is the Afford Anything podcast, and I will catch you in the next episode.