BiggerPockets Real Estate Podcast - 766: Explosive Growth Could Be in Store for These Two Real Estate Markets w/Kim Meredith-Hampton and Victor Steffen

Episode Date: May 16, 2023

Two real estate markets still look like they’ve got room to grow in 2023, even as home prices face downward pressure for high mortgage rates and days on market begin to creep up. Markets like these two exploded in 2020-2022 and are still seeing strong demographic signs that more growth could be on the way. But, as two markets that have witnessed some of the most dramatic price appreciation in history, is now a worthwhile time to invest? In this episode, we’re doing a market deep dive into two hot housing markets, Tampa, Florida, and Dallas, Texas. These two metro areas saw population booms like never before, shooting their home prices high and keeping competition hot, even as rates rise. But are these two markets starting to see a slowdown in 2023, or are there surefire signs that another wave of buyer activity is about to take place? With so many Americans moving to Texas and Florida, could this be the appreciation play of a lifetime? We’re joined by Kim Meredith-Hampton and Victor Steffen, realtors in the Tampa and Dallas areas, respectively, to talk with David Greene and Dave Meyer about the potential of these two property markets. They’ll touch on how to find cash flow even with high home prices, the strategies they’re using today to lock in wealth-building buys for their clients, and why the days of bidding wars and buyer ferocity may be far from over. In This Episode We Cover: Updates on the Tampa and Dallas markets and whether or not there are still opportunities to buy Florida cash flow and whether or not the sunshine state has been tapped out of passive income  The Texas “BEAF” strategy wealthy investors are using to buy better properties  Short-term rental risk and regulations and what to do if your BnB gets banned  Out-of-state investing and which investors should put money into these property markets Mortgage rate impacts and what high home costs have done to buyer competition  And So Much More! Links from the Show Find an Agent Find a Lender BiggerPockets Youtube Channel BiggerPockets Forums BiggerPockets Pro Membership BiggerPockets Bookstore BiggerPockets Bootcamps BiggerPockets Podcast BiggerPockets Merch BPCON2023 Listen to All Your Favorite BiggerPockets Podcasts in One Place Learn About Real Estate, The Housing Market, and Money Management with The BiggerPockets Podcasts Get More Deals Done with The BiggerPockets Investing Tools Find a BiggerPockets Real Estate Meetup in Your Area Hear Dave on the “On the Market” Podcast Subscribe to the “On The Market” YouTube Channel David's BiggerPockets Profile David's Instagram David’s YouTube Channel Work with David Dave's BiggerPockets Profile Dave's Instagram Catch Up on The BiggerPockets Blog Articles Check Out Dave’s Dallas and Tampa Articles: Dallas Tampa Books Mentioned in the Show: Real Estate by Numbers by Dave Meyer  Connect with Kim and Victor: Kim's BiggerPockets Profile Kim's Email Victor's BiggerPockets Profile Victor's Website Click here to listen to the full episode: https://www.biggerpockets.com/blog/real-estate-766 Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Email [e-mail]. Learn more about your ad choices. Visit megaphone.fm/adchoices

This is the Bigger Pockets podcast show. 766. 2020, we were the top area at Tampa, MSA. We had a net migration of 1.9. Tourism is big, maritime industry, health care, big here. I look for population growth in a market. I look for median wage growth in a market. And I also look for employment growth.

And Dallas, Fort Worth has all three of those metrics going up into the right. What's going on, everyone? This is David Green, your host of the Bigger Pockets Real Estate podcast here today. with one of my favorite co-host, Dave Meyer. Dave, what's going on from Amsterdam? Not much, man. We're just like, it just hasn't stopped raining like all spring. It is very, it's a little bit depressing, to be honest.

Yeah, Amsterdam, that sucks. Yeah. Yeah, but hopefully we'll turn nice here. But all is well, other than that. Yeah, what doesn't suck is today's show. We have a humdinger. A humdinger. Humdinger.

Humdinger of a show. You are going to love this. Dave and I interview Victor and Kim, agents in the respective markets of Tampa Bay and Dallas, and we get into the nitty-gritty of how to make money in those markets, details about those markets. We talk about how to look at the metrics of who's moving there, what jobs are going there, what strategies work in markets, as well as different ways to look at real estate. And what's cool about this is if you understand the questions that we ask them,

you can ask these of anybody when figuring out a market. Dave, what were some of your favorite parts? To be honest, my favorite thing about this entire episode was the nickname you invented for me at the end of this episode, but that has nothing to do with real estate. So my actual favorite parts is when we talked about some of the metrics that help you as an investor understand not just like the long term strategies that and like prospects of an individual market, but also how to adjust your tactics for bidding and what strategies to you. and whether you should add value and some of the sort of short-term things you can do to adjust to market conditions based on some of the metrics that are honestly pretty easy to look up for any market. Before we bring in our guests, today's quick tip is head over to biggerpox.com slash

blog where you can read tons of articles about stuff you may not have thought about because you're only listening to the podcast. Dave, I believe you write articles for that blog. Is that correct? I write articles all the time on the blog and I'm offended. You don't read every single word of every one of them. I used to. I will admit I was a bigger pocket junkie. So I'd be working like graveyard as a cop and nothing would be going on and I'd be reading every single blog that anybody wrote. And I remember a lot of them. It's been a while since I've been on there. But you might be bringing me back because you asked such good questions today. I'm just kidding. But yes, I write for the bigger pockets blog a couple times a month, mostly about market conditions and any sort of economics or data trends that impact real estate investors. So definitely go check those. out. And I also love if you comment on any of the blog posts that I write about ideas that you

want, if there's like a topic or research-based thing that you want to understand better as it pertains to real estate investing, let me know on the Bigger Pockets website. I love hearing from everyone. We would love that. We'd also love if you would comment on the YouTube channel itself and let us know what you think about it. Specifically, what do you think about the nickname I came up with for Dave? All right, let's get to the show. Do you ever notice how every passive investment somehow turns into a very active lifestyle, active spreadsheets, active phone calls, active stress? Here's a better question.

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$100,000. With pricing under $500 and an average savings of over $25,000, it's just a no-brainer. What's more, audit support is included by the number one cost segregation company in the U.S., but you must complete it before the tax deadline. Go to costsegregation.com and use code tax deadline to get 10% off your first report. Don't overpay the IRS. Head to Costsegregation.com before April 15th. Victor and Kim, welcome to the Bigger Pockets podcast. So nice to have you guys here.

Let's get this thing kicked off by having each of you introduce yourselves. Kim, let's start with you. Sure, Kim Meredith Hampton. And I am in the St. Pete, Orlando, both those MSAs, two offices, and short-term rentals, long-term rentals, a couple of multiply families, and a couple of commercial building. And everybody wants to come to Florida. So look at bigger pockets slash featured agents. There you go.

They sure do. I've often said it's like someone took the United States and just tilted it down into the right and everything is slowly migrating. It's gravity. Yeah, it's like gravity. Settling right in there. Victor, how about you? Cool.

Thanks for having us on, guys. Really looking forward to it. Victor Stephan, I cover the Dallas-Fort Worth Market, active investor, active real estate and friendly agent. My wife and I, we own real estate in three different states, Pennsylvania, New York, Texas, a variety of asset types, similar to Kim, multi-family, single-family. We do rent by the room housing where it's appropriate, short-term rentals, long-term rentals, the gamut. So we try and walk to walk before we help investors do the same. Yeah, it looks like you do a little bit of everything. You've got.

48 doors across three states. So you're a long-distance investor. Way to go. We have that in common. And then you're also doing rent by the room, long-term rentals. It looks like whatever it takes to make that thing cash flow you're willing to do. Is that fair? If the market supports it, we're down to try it, you know. So that's it. Yep. Welcome to 2023. To be fair, though, a lot of those out-of-state ones in Pennsylvania and New York, it hasn't been all sunshine and rainbows, David. I don't know. You could probably attest to. It can be a little bit difficult on those out-of-state ones. So we've had some boots on the ground there for a long time. And I'm from that area. So it made it a little easier. Well, that's what I talked about in long

distance investing. You want to have a competitive advantage and having boots on the ground and people in the area is one of the things that does that. You know, Kim, you've got a pretty impressive portfolio as well. So you have, is it 50 units of short-term rentals? Yes. We have, we just did that. I've been there about a year, actually. Took three multis, repurpose, remodeled, and turned them into furnish flex leasing, basically. And was it difficult to work with zoning with the city to get that to happen? It wasn't because these were actually in DC2, which is allowed for like an Airbnb or B&B or anything like that.

So that was quite easy, just knowing what licenses you need and those types of things. And now they're getting ready to come and spec again. So, you know, they want your dollars. So in essence, you bought an apartment complex and you turned. it into several short-term rentals? Yes, the whole thing. Okay. And then you also have a property manager company as well?

Yeah, we have a long-term property management company with about a 3,000 units between Orlando and Tampa St. Pete, and those are long-term. And then we also have the Florida Nest, which manages the short and mid-term. All right. And it sounds like you do it all, right? Whatever an investor needs. We do. I like to say we own the full cycle of real estate.

And I love that. People love that they can come to us and we can help them with everything. And if we can't do it, we can get them in the right direction. So it sounds, Kim, like you've been involved in Florida real estate for a while now. What have you seen with the market shifting from 2020 to 2023? Believe it or not, we are still in a seller's market, but it is starting to tip a little bit. You're starting to see the breakage there happen. Instead of maybe having 10 offers, there's three to five. You know, And some of them were getting as a backup to that. So a lot better than just, no, we're done.

So all cash, you know, out of here. Days on market definitely are a lot longer. It's, I think, seven days. And now we're like at 39 right in there. So it's definitely changing. Price points have not went down yet. But you can ask for things. There you go.

Love that. So you're saying it's hot. It's strong, but it's not as hot as it was at the peak maybe. Yeah, very true. Very true. And what do you think is contributed to the, it's still strong, but it's slowed down some? Interest rates? I think the interest rates are usually the biggest ticket.

I sell a lot of multifamily and invest in it myself. And a lot of those numbers just don't work. If we can try to get maybe seller financing or something assumable, that's usually what we're trying to do. Okay. And then in your market, what are some of the long-term benefits that you see in Florida? There's no state income tax. The weather is gorgeous. You know, it's very cultural here, very artsy, and I think that's why you had a lot of people move here.

I think 2022 was, we were the top area, Tampa, MSA of new people moving here. We had a net migration of 1.9, and that hadn't happened here since 1957, which is crazy to even think that. But I always say our little St. Pete areas now reminds me, David, of like a little San Diego. And I think if you can get in here now, you're going to be better off in the long run to real estate. What do you think is driving this population growth? Most of it, I think, has come from the like California, New York, all of those things. And the area is growing in general. You know, with construction, you've got that.

the jobs are just absolutely wonderful. We're around 2.5% I think unemployment right now. Tourism is big. Maritime industry. Healthcare, big here. I think it's just a mixture of things. I can't pinpoint one thing on it. One of the things I see when I do analyses of different markets is that Florida tends to be

very polarizing. Like when you look at the top growing markets, they're in Florida. When you look at the lowest growing markets, they're also in Florida. So I feel like there's a lot of times you see both ends of the spectrum. So what do you think about, what is it that is different about Tampa? You said, you know, jobs, but are there anything else that, you know, set Tampa apart within the state of Florida that you think make it a unique housing market or opportunity for investors? I think for a long time, we were really under the radar and price points were lower than a lot of other. places, but just those cultural scenes, plus you have the water on all different sides here, that

Tampa and St. Pete really are one. There's just a bridge between them. So there's a lot of things that you can do and see and get to the beach, but you can go to the art cultural thing. You know, there's so many different things that it offers to people. And I think especially since COVID, they found that. And they're like, we're there now. We want to be there. So one of the things that I, as a somewhat experienced investor and real estate broker, have sort of settled on as one of the key metrics that I look at in any market to figure out the strength of it. And it's funny, it's not often talked about, is just days on market. If I can tell how long houses are sitting on the market, I can tell you so much about a market. Dave, curious if that made its way into your book, Real Estate by the Numbers.

Do you guys talk about that? No, it doesn't. Real estate by the numbers is more just like the math. There's less like market selection in there. It's more individual analysis. Yeah, it's like deal analysis less than market analysis. But I totally agree. I mean, I think days on market and active inventory are great because they measure both

supply and demand at the same time. It tells you not only how many things are available, but like how quickly they're coming off the market. And in terms of strategizing and determining how you're going to approach different deals, that's hugely important. Yes, exactly. And Kim, I'm curious, if I looked into the days on market in the Tampa State P area, what is the pattern that I would see over the last couple years? Last couple years, it started, you were probably about 45 days. Then it started to tighten up as we went through COVID. And then on the backside of that, you know, as we know, our crazy time over the

last two years, it was about seven days. Three to seven days was really what you're active. marketless, which was an insanity. And now it's gone to 39 days, which tells me we are headed back to our normal, whatever our normal is. But I think it's inching back that way. I think probably in another six months, you'll see that this will definitely be more of a buyer's market than it is right now. And what do you think's going to bring that about? I think you've got a lot of things, especially the rates. I guess they're going to probably go up again. I'm not sure after that, but we're just trying to hold on and get people things by buying down rates with mortgages and offering, you know, hey, can we have a concession of that type of thing? But I think that's really going to hurt us in the long run, are the high interest rates.

And so I think that's going to level off. Can you tell us a little bit about the rental market and what's going on with rents in Tampa? Our average rental price right now is about 2000. and that is even for a one bedroom. Wow. And so it has went up significantly. They went up around 22 to 25 percent over the last two years. And now I'm starting to see in the last two months a little bit of a softening on that.

So what's happening is now as renewals come back around, if we're going, oh, can't we raise it another $300? No. No, we've got to be careful on that because you don't want to occupancy is the great. thing. You don't want to have that vacancy in the property. So numbers, though, are still strong. Still need inventory. Kim, it sounds like you know your market. This is great. We're going to come back to you in a little bit to talk about what strategies are working there. But I've already learned more about Tampa St. Pete in the last 10 minutes than I probably have in my whole life before this. This is why I love talking about real estate. I nerd out over this kind of stuff. So thank you for that.

Victor, let's hear about your market. Where is it again? I cover the Dallas-Fort Worth Metroplex. Oh, that's not a hot market at all right now, just like Florida. Yeah, cooled off a lot, you know, no, I'm kidding. What have you seen with your market shifting from 2020 to now? So it follows a similar macro trend to what you've seen across a lot of the country, right? Middle of May 2022, you really saw almost like a peak. Middle of May down through the first to second week of February, there's a pretty significant decline in terms of the number of offers that we saw being accepted, or not so much being

accepted, but the number of properties going under contract, we saw almost all of our offers being accepted as investors during that time, but just because a lot of retail buyers started to pull out of the market when there's a lot of uncertainty. So February comes, I think we hit a little bit of a support level there because since then, we've actually seen an uptick in terms of buying pressure. We've seen days on market actually start to contract. We hit a 10-year peak in terms of days on market in February, it went up to about 39 days, since that peak has come all way back down to 21. So looking like we're coming into more of a neutral market environment, I think it's actually a very healthy place now. We're not red hot like we were before,

but you're not walking in 10% below this price on a lot of these offers like we were, say, November and December of 22. You know, something I was curious, I didn't ask you, Kim, so just briefly if you could weigh in this also. Have you each noticed, new construction ramping up as the market is heated up in your individual markets? Yes, very much so. I always say some of the things that Dallas and Fort Worth do best. We don't do a great job at building a lot of high-dad city housing. We do a great job at building very large single-family houses.

In our new construction inventory, we couldn't even touch through 2021 and 2022, the first half of 2022. It was just moving too quickly, and there was a lot of lately. this is something that a lot of our investors have been jumping into now that the market has softened because builders do have more excess inventory than they had through the peak of COVID and for the last probably two to three years. So that's a great asset type for our investors to jump into right now. Yeah, I was thinking about that because both of you have strong population influx people moving into the Dallas area, the Tampa area. And when you have too much population

but not enough new inventory hitting, you get that crazy, no contingencies, all cash, everything way over asking, 20 offers. It's kind of what we get in the Bay Area when we get hot. Because there isn't anywhere to build. They've already built everything out. Whereas Texas, and I haven't been there a lot, but I imagine sprawling land, just a lot of it everywhere. In Florida, same thing. Like, it was a swamp, and they've just started to build out there. So there's still space that they can build more housing, which means you're likely to see a strong, but still somewhat relatively speaking affordable market for the near future, because if it gets too crazy, they just build more homes. And then the increased supply kind of balances out the demand.

That's really a healthy market. That's what we'd like to see versus some of these other areas like a San Diego that there's nowhere else to build. They put all the houses they could fit inside San Diego already. It's hard to get enough supply to keep prices down. So we talked about new construction being a legit option out there in Texas. What are some of the long-term benefits to Dallas Fort Worth real estate. So I want to take one small step back into what we were talking about just a little bit ago. We love seeing these new supply new construction houses come online, but we've definitely seen if there's not a mix of zoning associated along with that development, those single family houses, they'll sit. For example, if you go to the east of Dallas,

there's a community called Forney. Forney has done an excellent job at bringing in commercial real estate as well as mixed-use real estate plus those large sprawling affordable housing developments. Whereas if you go toward other directions, for example, the far northeast side of Dallas toward Melissa, you don't have as diverse zoning, right? So you've got a lot of single-family houses that have been sitting. So I think as an investor, it's definitely important to look at multiple zoning types in those markets. Is the implication there that buyers just want access to the amenities that come with mixed zoning? 100%. If you have an H-EB go up anywhere in Texas, property values will double. No, I'm

kidding. They're not going to double. But that's a grocery store, right? Just for people listening who aren't familiar. Here, everything's better. Okay. So you got to get down to Texas, go to have and get yourself a barbecue sandwich. They're amazing. Now we're talking. Yeah. I'm in. So, all right, back to the original question. Whenever I talk to my clients about, hey, like, what direction are we going? Do you think that we have a long-term viable product here? I recommend that they invest the same that I invest. I look for population growth in a market. I look for median wage growth in a market. And I also look for employment growth. So where are jobs going? Where are people going and where are better quality jobs going? Not just a whole bunch of jobs that are paying minimum wage,

but, you know, engineer type of jobs and manufacturing jobs and stuff that's going to move the needle in terms of income. And Dallas, Fort Worth has all three of those metrics going up into the right. So we're really bullish on that market for the next foreseeable future. I was just going to You know, ask the same question. I asked Kim, like, why is it that Dallas's experience all those things? And I know you're going to say no state income tax, but Kim already said that. So you have to say something else. I already stole that one. Yeah, she got no state income tax. She also got the good weather. Although for the past couple of years, Dallas has been getting smacked with some ice storms, which has been interesting. Oh, don't complain about it. You're from Strand. You know what bad weather's like. I got soft moving south, I tell you. Goodness gracious. I used to be able to go and play football in the snow and sleet and rain and no sleeves and be all good to go. But now it's 40 degrees and I'm shivering. But I like to talk about midterm rentals and what draws people toward midterm rentals. And a lot of the reason that people would be attracted to a certain midterm rental market are the same reasons that give a certain market economic viability. For example, there's

six main midterm rental strategies or six main midterm rental attractions that we like to focus on. So you got major universities, military systems, so like, say, military bases, right? Large international airports, large corporate employers, so Fortune 500 companies. Downtown attractions or tourism attractions are another huge one. And then if you went in and looked at, say, like, entertainment districts, right? So if it was like a six flags or something like that. So if you have five or six or even down to three of those main attractions in close proximity, you're going to have a lot of good upward pressure in terms of price jobs and good quality

high paying jobs that are drive up median income in Texas, specifically DFW has all six of those industries in close proximity. What about price drops? Has there ever been a time out there in the last year so that you've seen prices come down? Is there anything like that happening now? Yeah, for sure. We had a beautiful little season, like I was saying a bit earlier, from the end of May

through the first week of February, when it was almost a. all of my investors' offers were getting accepted. And we were putting out offers eight, nine, sometimes 10% below the ask, and they were getting picked up. So as, even if you look at the data, the sale data I was coming through it a little bit this morning prior to this call, you'll see that there was a significant decline in median sale price, right? We definitely hit a floor around that middle of February and it's been climbing back since. There's still opportunity to go in and walk underneath fair market value. But you'll find that instead of picking up something for 95% of fair market value, now you're closer to 98%,

which is a lot better than 105% like we were in COVID or even 110%. And I know David out in California, you can attest to that. So there's still a little bit of discounts to be had, especially if you can throw out a volume of offers and take a couple of shots at some that have the concessions built in and lower purchase prices. What about inventory? This is a challenge in my market, is that rates are going up. Everyone's expecting prices to come down, but sellers don't want to put their house on the market because they have a 3% interest rate.

Yep. And they're probably going to have to pay the same for the next house that they sold theirs for, so they're just switching from a 3% to a 6.5 and they're not getting anything any cheaper. Is this a problem for you with just listings in general hitting the market? Yeah. This is something I actually wanted to touch on it.

It's super interesting. I know Dave Meyer, you're going to like this because you're a numbers guy. April of 2022, the April day that just came out, right? We had 8,619 sales. It spent over a decade since we've had in April with that few of sales. If you look at the number of homes that were on the market, even back in 2013 and 14 and 15, it's a quarter of the number that we have or the inventory that we have available now, and you're still seeing a huge reduction in terms of the number of properties that are moving.

And that's just reflective of a very, very, very tight inventory of supply. This is a great point. I want people listening to take note of this because there's a lot of headlines about how inventory is going up. And I actually pulled this before that inventory in Dallas has gone up 53%, which makes it sound crazy, right? Like people are like, oh, my God, it's going up. But I looked at March of 2023 compared to March of 2019.

you know, pre-pandemic, and it's, it's 40% of what it used to be. So we've seen a 40% decline, even though it went up 50%. Yeah. So just you have to like almost not throw out, but sort of not just look at year-over-year data or really compare current trends to the really unusual market that occurred from 2020 to 2022. And just recommend if you are listening to this and thinking about the, metrics for your own market, you should look beyond, you know, back past COVID into what was going

on 2018, 2019 to get a better sense of like where things are relatively. Well, here's another thing. Each one of these metrics, you can't look at them as like a standalone metric, right? I think if you look at everything all together, it paints a much clearer picture. But, you know, headlines don't like clear pictures. They like saying, hey, inventory is climbing or days on market is going through the roof and we're at the highest number of days on market in the past decade. You know, that's headlines. But if you take them all together, it looks like a much different picture. All right. Kim, switching back to you, Tampa, St. Pete, what was the other city that you mentioned? We do Orlando, too. Orlando, thank you. What strategies are working out there right now?

As far as getting deals under contract. Getting deals under contract or finding something that will cash flow. Can you find anything that you're not going to lose money on out there? Yes, you can. It's like a needle in a haystack, of course, still, because of lower inventory. But really, as I mentioned earlier, really trying to buy down the rate, trying to get a seller to give us closing cost. And also putting in escalation clauses are still a thing here. And we've got three, I think three separate ones last week because of our escalation clauses. So it's still alive and well here, as it was last year.

but that has really helped us going to garner some more deals than we probably would have. And most people that are looking at multifamily still difficult. I just picked up that office building, and I got a great deal on it, and I put some money into it, but now it's worth a heck of a lot more. So those are some things I think that people can look at, whether they want to do a JV on it or syndication, but looking at some other asset classes, too, in your mix of buying real estate. I'm curious, Kim, are you seeing any regulations come in in Tampa regarding short-term rentals?

There hasn't been anything on the short-term. They're definitely in Hillsborough County is a tennis boule of rights. And the same thing in St. Pete, they have that now. The only thing I've seen lately is over an Indian Rocks Beach. They didn't want more than 10 people in a home. and some of those houses fit like 20, you know, heads and beds, they call it. So, and you could not park on the street either. They only want them on the pavement, you know, at the garage area.

So little things like that. I do sit on public policy at the Pinellas County Board of Realtors, and we are on that constantly to try to keep those things out of play for our investors. So hard to say, but I think DeSantis also really helps with that. really wants to set the playing field at the government level, then rather than the municipality's doing that. So that's something that's going on right now, too. Okay, so it's very hard to get a cash on cash return. A lot of investors have been forced into short-term rentals when they didn't even want to be there.

And even that's becoming something that's being super hard to be able to turn to profit, especially with all the competition. So with the growing market like Tampa, what is the play in your opinion? What's the approach an investor should take to make money in that market? What we do because we only work with investors, when we send out properties, you know, we are, we have a total of nine agents. We're having extra 10 agents that are constantly sourcing every day. And before we send those out, we run the short term comps. We run the long term comps. What will the taxes be based on that? And just anything else we can garner from that. And that's what we're sending out. I want them to have that backup plan. What if the short term? term doesn't work and they do pass something for that municipality. What can they rent it for? So those are some key things or could we maybe look at some shorter midterm and they've got a long term. Maybe we could work it that way. And that's what's nice because we do have two different property management companies. It's like a great marriage here. And so we can try to figure out which way

would work best for them. So we're always trying to look ahead. Do you feel like it's an appreciation play? Do you feel like there's a value add element there? 100%. When we just got voted the St. Pete, the best place by Forbes magazine for vacation. I mean, how great is that put out there? But always, always, I'm looking on the backside. Is this an area that's gentrifying? Is there something different we can do?

Can we do some rehab to it, make it up, and then leave a little skin in the game for somebody else to do? So we're always looking at every little piece of it. It isn't just one thing. So do you think this is a good time for someone to invest in Tampa? I do, especially the St. Pete market, because I really do feel we are on the verge of being like a San Diego. And you know those prices better than I. And our average price right now is about 400. Oh, wow. That's low. You know, several years ago, it was, you know, two or three hundred, you know. So I mean,

you take a look at that. It's that woulda, coulda, shoulda. Hindsight's a great thing. So I think it's a great time to do that. So that, what you're saying is that area's landlocked. It's tough to build out there. Correct. Correct. You're just, there's, prices have nowhere to go but up. Exactly. So, yeah, I mean, I think that that's an interesting long-term point. But Kim, you mentioned in the beginning that you think it's shifting from a seller's market to a buyer's market. So how are you navigating that? I'm celebrating. Celebrating. Yeah, but if prices, if there's a risk of price declines, how are you, how are you strategizing accordingly? And actually, right now, I don't think that I see that. We've really never had that in Florida. And when you're talking about

this was, we had the 1.9% net migration over the last 12 months. You know, we have the best job market here. Those things all culminate together. I don't foresee in their future where we're going to go down and value. You know, it's not like an Ohio or, you know, Iowa or something like that. I mean, it's very different here. Yeah, but like year over year, the price. are pretty flat, right? Like now they're pretty close to flat. You're like 3% to 3% up from last year. But even if we're back to a normal market, that's typically 3 to 5% almost always ever since I've been over 20 years. Always kind of been that 3 to 5%. Yeah, that's a great point that it's typically been 3 to 5%, which it doesn't sound significant until you compounded over 5 years.

You're talking about 15 to 25%. And that's on the total price of the asset. So if it's a $500,000 property, 15% of that is going to be $65,000, right? But you probably only put 20% down, which say would be $100,000. So that's a 65% return over five years just on appreciation before you get into anything else, which is just one of the reasons that I love real estate and I can't stop talking about it. So last question about that market. what should investors look for in an investor-friendly agent? Oh, wow. This is a big question, and we get this a lot. My team, say we only work with investors. So I speak their language, and I will put 110% into it because I'm looking at it through my investor eyes. I know about cash flow, appreciation, cap rates, all these things that you go to a retail agent, they have absolutely no idea what you're talking about.

And when you really want to work with an investor-friendly agent, do your homework. That's the best I can say is that you definitely want someone like that on your side. What are some questions that someone should ask if they're trying to determine? Is this a, what's the cool word, a casual agent? Or is this a- Is that the term now? I've never heard that one. Calling someone a casual is an insult.

It's like calling them basic. Basic, okay. Maybe the phrase retail agent could work there. Retail agent. I say retail. Yeah, that's our version of calling somebody basic in this space. It's a big insult, but it's veiled in professional speak. So what are some questions someone can ask to reveal this?

I think a huge one is, do you own any real estate yourself? To me, that's huge. If you're doing this for a living, it blows my mind some of the people that do not own any type of real estate or even their own home. To me, that's the biggest question you can ask. I want to stamp that, second it. That is such a good point. And here's the reason that I just realized when you were talking, I've never said before.

When you own real estate yourself, you develop this sixth sense for what would be good and what would be bad in a property in a location, in an area, in a law that is very difficult to quantify. So if you do rent by the room, you look at a house and you get this feeling like this wouldn't work. And then when you play with it in your head, you're like, oh, there's not enough parking. or the bathrooms are in the wrong place, right? Like, the setup is not going to work for this versus, oh, this house would be great. Then you kind of got to think for a minute to articulate why you feel really good about this as a short-term rental or rent-by-or, whatever it is.

When you don't own real estate yourself as an agent, you don't have that sixth sense. You cannot guide your client. So to agents, I would tell them, get better at articulating what it is that you see in a property you like so people can enjoy it. And as the investor, I would say, just like you did, Kim, look for an agent that owns property themselves because they will have that gut feeling that will tell them, like, I wouldn't want to own it or I would. And then you made a great point to ask about their production. That's always a somewhat like awkward thing to talk about. If anybody who's good at anything does it a lot, there's no one who's really good at something that doesn't do it very often. And if you're an agent that sells two houses a year, you can be super nice.

You can answer your phone on the first ring. You can be really available and you're really bad. Well, it's easier to answer your phone on the first rake if no one's calling you. That's exactly right. Yes, exactly. That's exactly. That's exactly. I see really interesting things happen with retail.

I've called them retail agents. They have, I've seen where they've sold something in a subdivision and it's not allowed to have rentals. Those people have to sit there for a whole year on that. I've seen where in an association where they have to be married or sister, brother. and you sell it and you're like, they want to rent it to students because it's five minutes from UCF. You're like, what? I mean, just crazy little things like that.

Or they said, oh, you can do a short-term rental here and they buy all the furniture and they buy everything and they call me up and they go, is this true? I can't rent here. I go, no, you can't rent there. Yeah, it's just, it may seem so insignificant, but in the end, that's huge. Those are a lot of dollars you paid for that property. A lot of money out of your pocket. Don't you love it when the person use a different realtor?

and then they call you to say, is it true that I can't do this? Can you help me? It's always that feeling of when the girl chose another guy over you and then she wants to call you to complain about her new boyfriend. It's a very unique feeling when you're in the real estate space that a lot of people that are not realtors wouldn't understand. But yes, those are some great, great points. I think that that's one of the reasons that when I'm investing, I like to work with an agent that either owns a property management company themselves or owns real estate or some combination of the two for those exact reasons that you just mentioned, because the wise man and the wise woman learns from the mistakes of others rather than just their mistakes. Also, a good analogy for you,

you may get great service at a restaurant when you're the only person there. The waiter is like a super attentive like we were just saying, like, you know, they answer the phone on the first ring, but that usually means the food sucks if you're the only person in the restaurant. There's not a line to get in. That's not a good sign just because they have great service isn't the only reason you'd want to eat there. So keep that in mind when you're working with agents too. People love to call real estate passive income, which is interesting because most of the investors I know are very busy. Busy finding deals, busy managing teams, busy worrying they pick the wrong market. Rent to retirement flips that model. They help investors buy turnkey new construction

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and set custom roles in approval policies. There's even a dedicated bill inbox for each property to keep everything organized. Ready to simplify your workflow? book your free demo at bill.com slash bigger pockets and get a $100 Amazon gift card. That's bill.com slash bigger pockets. All right, Victor, turning back to you. What strategies are working in your market? Cool. There's two main ones. And I always tell my clients like, hey, we're not trying to fit a

square peg in a round hole. We're going to take what the market gives us. And what is the market given us right now, specifically in DFW? One is a beef style deal, B-E-A-F. And that was just an acronym I decided to use because I explained the same model so many times to so many different investors. It's break-even appreciation focused, right? So these are very heavily appreciation-based plays, but their assets that are going to go ahead and cover themselves, they're going to cover their debt service plus a little bit of yield on top as to cover your, to cover your pity payment. The other method that we're really liking in specific areas, specifically Irving, just to the northwest west side of Dallas is that midterm rental play and short-term rentals. Irving has a more favorable

STR and MTR market than Dallas. And there's been a lot of changes, a lot of regulations. I know STRs right now are the Wild West, but Irving has stood the test so far and they've been an attractive market. They've also got all six of those main macro drivers that we've kind of mentioned about before that are going to make a good a good mTR attraction type of a type of a deal so these beef style deals break even appreciation focused that's where the bulk of our investors have been trending toward these are relatively recently built assets they're mostly ranch style homes you're looking at stuff that's three four bedrooms 1800 plus square feet it doesn't need a lot of cap x you don't got to put a lot of cash into them um and you can you can't

can get these in B plus A grade areas that investors just didn't have access to before, you know, when assets were moving with 25 offers. So those types of deals are the ones that are really working well for our clients right now. The Dallas area is so big. You know, there's like multiple cities and so many different parts to it. I'm curious, do you have any other like insights about regions within the Dallas metro and particular things that work in different areas? 100%. So there's two main areas that are going to work the best. best for your beef style deal right now. Recently built, single story, three to four bedrooms, 1800 plus square feet below the median. Medium right now is just under 400,000 for the Metroplex.

So you want to be in something that's say 325 to 375 right in that range. The markets that have the highest concentration of that inventory are Aubrey, Texas, which is just to the north side of Frisco. Frisco is hot right now with a lot of short-term rental investors coming in because Universal Studios, you know, they're building out their new park there. So Aubrey, Texas, huge for this beef style strategy. And then if you go far east of Dallas toward a community called Forney, Forney has been an awesome market for us to find these beef style deals. So those two specific, very nuclear metros is where we point most of our clients to.

Did you invent the term beef style deals? Absolutely, Texas beef, baby. Come and get some. I've never heard that, but I'm using. it. Yeah, break even appreciation focus. And it's almost like what we were talking about before with just time on task and working with an investor-friendly agent. We have these same conversations day after day after day. And it's just a good way to describe a type of deal that we were selling a lot of and that we have a lot of investors interested in. So yeah, feel free to use that will. Maybe I should trademark it.

So if you're asking, where's the beef, the answer? Aubrey and Forney, that's it. There you go. So for those that just felt their sphincter titan, as you said, break-even appreciation focus, you're triggering a lot of people here about going into foreclosure. What advice do you have for the type of avatar or investor that should be looking for a deal like this? So most of our clients who are buying that type of inventory, they're putting 20 to 25% down. Most people are going to be either out of state or they are domestic, but this is not your cash flow heavy kind of a play. There are markets in Texas that will give you that heavy eight, nine, 10% cash on cash return, but this is not the market for it. So most of our clients are

going to be, you know, high W2 earner. It's going to be somebody who's got $50, $60,000, sitting in a bank account. They just sold a house. They're using 1031 funds, something like that. And they want that levered, that levered return like we talked about before when you can go ahead and put 20, 25% down on an asset that's appreciating by between 5% and 7% per year. That needs no CAPX and is going to lease quickly in a high quality area. You know, you hold it for five years and now you've got that 25 to 30, sometimes 40% IRA. So that's going to be our primary avatar for that beef style deal. All right.

Let me break this down for anyone who, I love your communication style. It's like the micro machine man, just dumping a bunch of information there. Did you get, did you ever get tease about that when you're younger as being like the fast talker that said a lot of smart stuff? I've never been teased about being a fast talker and having a lot of smart stuff. I think it comes out because we have these conversations every day with our investors. So, like, as you're saying, the question, it's like, this is what I'm going to say. You know, we just do what we talk to a lot of people.

It's not what I expect that as someone from Texas. You're supposed to be a slow talker with a drawl. Yeah, it's that northeast pattern. Yes, yes. And I get, I get in trouble with that with my in-laws. Not good. You don't sing Texas, son. All right.

So what I'm hearing you break down is that if your goal is cash on cash return, which is typically the return on investment that we use in real estate investing, that's what you're used to hearing if you're a listener. Really return on investment can be measured in many ways. Cash on cash return is the way that we look at the return on your money by cash flow. So ROI and cash on cash return have become synonymous in our world. They really shouldn't be because ROI is more of a concept than a specific formula. You may break even, you may even lose a little bit of money on some of these deals.

But you mentioned IRR, which stands for internal rate of return, which is a different way of measuring ROI. And that is taking into account all the ways that real estate makes money, or at least most of them. So you're going to be taking into account the loan paydown, the appreciation you're getting, if there is cash flow. If you earned a commission on the deal, like anywhere that money came in goes into that formula. And then if you sell it in five years and you make a profit, you divide it over five years and now you get a return on your investment for that year. The reason that this is worth bringing up, well, first off, that's how people evaluate larger deals like apartment complexes or multifamily properties when there are a lot of investors putting

money into it, like a syndication, because they're making money in more ways than just the cash flow of the apartment complex, although that is one way. When you're looking at it in a market that gets high appreciation, like you said, low-cap-x, I know why you mentioned that because that's something that can kill your return if you have to dump money into a property because it's 70 years old and things are breaking. Absolutely. The market is strong so people are still moving into it, right? You don't know what's going to happen, but it's reasonable to expect that it's going to continue growing the way that it has. You mentioned wages going up in that area as companies are moving out that way, which means

rents are likely to go increase overtime as well as how much someone can't afford to pay for the house. There's a lot of factors that make that a strong market that don't fit into a cash on cash return metric. That's right. There's a conversation we have often. It's like, There's nothing wrong with 0% cash on cash. And that's another like, I've been listening to this show for a long time. And if it was 10 years ago and I heard somebody say something like that, I would have been like, all right, delete. I'm not listening to this guy, 0% cash on cash.

But the more and more deals we've done, having invested in heavy, heavy cash yield markets, Midwestern, Rust Belt States, as well as heavy cash flow markets in Texas, there's a lot of good to be had when you focus on area and ask. type and quality in terms of your IR rather than just your COC, your cash on cash. Yeah, just let me make it clear. We are not saying cash on cash return doesn't matter. We are not saying cash flow doesn't matter. We are not saying to buy a place that bleeds 10 grand a month, just hoping it appreciates. That's right.

We are just saying, open your perspective, see all the ways that real estate makes money, take all of that into consideration, and then make an investment decision based on what's best for you. If you live paycheck to paycheck, you're barely getting by. You have $30,000 to invest. The beef strategy is not a great idea. That's right. Stick with some tuna and some chicken. You got a great W-2.

You have strong savings. You're making a lot of money. Maybe there's some tax benefits. You might say 40 grand in taxes doing a cost segregation study on this. That's a lot of money that you're saving, even if some, it does bleed a little bit of money every single month. But you're making a lot of money in other areas. This actually can be a very wise decision. Is that your same perspective?

I'd like to make one caveat here. So when we buy these beef style deals, most of our investors are very savvy. And they're going to come in and they're going to say, hey, you know, I'm not super comfortable on this. It is cash full of negative $250 a month. How we remedy that is, one, you're buying into a beef style market, break-even appreciation-focused. Appreciation does not just mean the asset price itself. That will also go ahead and correlate to rents in that area. you will also expect upward pressure.

Number two, if we're looking at something and we know for year one, it's going to go ahead and have $200 a month in negative yield, we'll go and we'll get that concession for $2,500 from the seller and make up for that upfront cash on the purchase, right? The money's made when you buy. We'll make sure that we alleviate that negative yield, that negative $2,500 or that negative $2,500 with concessions on the front end. That's usually a good way to help ease.

a negative yield at least for year one until you have a chance to go ahead and push your rents back up. Are you adjusting how you're advising investors in this market? Because, you know, rent growth is slowing down. Appreciation is slowing down. Are people still doing this? We definitely advise our clients based on what they're specifically looking for. We call it a perfect deal statement. For every single client that comes through, I jump on a call with them. We'll go through what exactly it is that they're looking for. And if it's a client who is really looking to replace their W2 income in the next three years, beef is not their, not their deal, right? We'll go ahead and we'll push them toward a higher cash flow market or management style, right? Maybe we will suggest going towards something that's more

short-term or mid-term rental friendly so they can increase that yield. If it's a client who comes in and they say, hey, I'm looking for, I've got a great W-2, I don't plan to leave anytime soon, I want to go ahead and have the highest levered return on my money as possible. I want something that's going to be headache-free because I live in Seattle or I live in California or I live in New York. We will push them toward this beef style deal even as we see a softening in terms of the up and to the right rental rates that we've been seeing. Kim, I'm going to throw back to you. What is the ideal avatar of investor that should be looking in your market? It's funny. We were talking about this earlier. And Victor and I are probably very same in that. We are very tailored to each individual investor, so we're not putting

them on some kind of auto feed. I find that that sends them a lot of junk. These people, they want to know for them, the perfect one is that they want to buy a duplex to a quad. They have at least 100,000 to put in, and they're not queasy as to some value add to the property and doesn't scare them. That's typically what my perfect avatar. is. Dave has written blogs on both of these markets, which you can find at biggerpox.com slash blogs. And if you'd like to find agents like Kim or Victor, we can help you with that too. Biggerpockes.com has an agent finder that is free that will put you in touch with agents. It can help you find analyze and close a deal that's right for you. All you have to do is go to the website, look for

the nav bar, find agent finder, search a market like Tampa or Dallas, enter your investment criteria and select the agent that you want to contact. Or you can just go to Biggerpox.com, agent finder and match with the market experts now. If you like this style of conversation where we're talking about local market conditions and you find it helpful to learn how to think about analyzing a market, interview potential, teammates or people who can help you with your investing, check out the other Bigger Pockets podcast on the market. I am the host of that one and we have these types of conversations regularly.

and I actually know a lot of these stats that we were talking about today because I was doing research for another market-based analysis show that we're going to be doing on the market in just the next couple of weeks here. All right. Kim, Victor, thank you so much for being on this show. We've loved having you. Kim, can you tell people where they can find out more about you? Sure.

Kim at Hampton and Hampton.com. And we're in Tampa and Orlando. Happy to help. Are you coming to the Bigger Pockets Conference? Are you going to be in Orlando? Yes, of course. Excellent. Great.

Victor? You can find me at Victor Stephan.com or on the Bigger Pockets Agent Finder tool and always happy to help. And that's V-I-C-T-O-R-S-T-E-F-E-N. That's right. Very easy to find. Not like Stefan Curry. All right. Well, thanks again for being here.

I've learned a ton about both of your markets. I also learned about the beef strategy, first time that I've ever heard about that and how to buy an apartment complex in a city and turn it into a short term rental specials. Yeah, I need me, one of them. Yes, absolutely. We all do. Good job on that, Kim. Thanks. This is David Green for Dave, my beefy co-host, Meyer. That might be the best one yet. Do you ever notice how every passive investment somehow turns into a very active lifestyle, active spreadsheets, active phone calls, active stress? Here's a better question. What if you could buy brand new construction homes, 10% below market value, and the best markets across the country,

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