Epic Real Estate Investing - When Will Appreciation Stop | HTH023 | 573

Episode Date: January 23, 2019

Today we are telling you how to take advantage of appreciation by making it a part of your business strategy instead of betting on it and losing everything, just like many did during the last financial crisis. Stay tuned and learn why appreciation should not be your strategy, how supply and demand influence it, and when it is going to stop. Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terrio Media. Don't wait for appreciation to buy real estate. Buy for cash flow and wait. In other words, Hold That House. Your host's Matt Andrews and Matt Terrio. Hey there, flipping houses can make you rich, holding them will make you wealthy. This is the Hold That House show.

I am Matt Terrio, and over there is Matt Andrews. Wendy, I can fly. And before we begin, we've got a free gift for you. Go to hold that house.com and download the four-hour work month. None of that four-hour work week stuff. Oh, four-hour work month. Way too much. Right?

The Ten Commandments to Managing Property Managers, the key ingredient to financial independence through real estate that they're not telling you about. And you can get that for free at hold that house.com. All righty. Another episode recording live from Tampa Bay, Muggy, Florida. Live on location. It looks pretty from here, though. Right. You don't know how hotter it is outside from the window.

It's dripping from the car to... 95 degrees with 95% humidity out there. Exactly. I love it. So... Good day to be you. The beach. Let's do the next one from the beach. We'll do the next one from the beach. All right, perfect.

All right. So today we're going to talk about something that we don't talk about very often. Because I think with Matt Andrews strategy and my strategy, we're both very much income investors. We're both very much cash flow investors. But properties do appreciate. and we see that as more as icing on the cake. At least I do. Sure. I mean, I'm not a speculator.

I don't look for markets that are going to appreciate and bank on that. I really want to make sure I have the income. And then if the appreciation comes, cool, all the better. But if the appreciation doesn't come, I'm still fine. And even if the market drops, I'm still fine. So that's my perspective on appreciation. Well, and you know that people are always going to need a place to live. Renters are always going to rent.

Those prices might fluctuate a little bit, but not like values. going to fluctuate up and down. So if we're depending on, you know, stability and long term, yeah, we're going to get some appreciation. You and I hold a lot of properties. We're going to hold them for a lot longer. We're going to get some appreciation, but we don't go into them with that being the strategy. Right. Like you said, it's gravy, baby. That's gravy. That's the good thing. But see, we're not naive. We know appreciation will happen. Sure. It always doesn't happen. Absolutely. Is it going to happen forever? As long as I'm alive, I know it is. Sure. And with the resounding, yes, I know it's going to happen. And where people get caught in a lot,

too, and we saw this a lot in 2007, 2008, when everybody got caught in Florida. I mean, you look right out here, you can see from that window that you're looking out right now, Matt, you can see condos that were built and overbuilt in Tampa. A lot of those condos, I knew people that had 10, 20 of those at a time because we were in this crazy appreciation market through 0405-06. And the problem there was they thought that kind of appreciation was going to last forever. And so they were buying stuff for 100,000, waiting six months. months and selling it for 150,000 because it was crazy, you know, and they were able to do that. Now we know what happened, right?

Those are right there. Those what you can see right there? The ones out here. God. He's over here. Yeah, absolutely. And those and millions more just like it literally, all through Florida because we just, we turned every apartment into condos.

We sold them all. Everyone bought, you know, four to stick in their back pocket, and no one knew what they're doing. And it was appreciating so much a year. I forget what the rates were at the time. It was obscene. How fastly, you know, how quickly it was. It was rising.

The loans were flowing. There was no dock, everything. And so people were buying like crazy. And I literally had some friends that were holding 10 of those. One individual, just a friend of mine, had 10 of those. When overnight in 2008, they went from a value of like 300,000 down to like 175, you know, almost like a period of a week or two. So appreciation, long-term, you know, and true wealth building.

Yeah, we're going to get appreciation. but going into a strategy like that, like my friend did then, in some kind of weird, you know, aberration of a crazy market, that's not why you go into that stuff. Now, I guarantee you, had his numbers been right on the rental side, you know, had he been going into it as a rental investment and they provided 10%. When that market tanked, whatever things were renting for $1,000 a month, they were only renting now for, you know, maybe like $900 a month, but that's still cash flow. You know, he didn't have that into his strategy at all. So at that same time, Not because I was a genius, but I was buying cash flow single-family homes. And then when the market tanked, those homes all took a hit. They were worth way less than they were just a few months before that. But my rents barely changed because in that time, rentals became even more valuable because people needed places to live as they were getting kicked out of their homes and stuff like that. So again, betting on cash flow, you can't lose.

Please stand by. We've got overhead to pay. We'll be right back. portfolio has seen better days. But this two shall pass. And the best for you is yet to come. Together, we'll get you there faster. We're turnkey allies.com.

And we'd like to share some information with you that will show you how you can take control of your financial future and accelerate its arrival. Go to turnkeyallies.com. More building, less waiting. Turnkeyallies.com. You're a little bit of a genius. No, no, no, no. Don't tell yourself so short. My wife is a genius. My wife is a genius.

That's what I'll take, I'll take credit for that. I have one of those too. I'm married well. We'll put it that way. Yeah, you do. You do have one of those. Absolutely. We definitely work that one right. I love it. Yeah, this is a great topic. She continues to appreciate. That's for sure. For sure. You can count on. That's one appreciation you can count on right there. Yeah. Right. So when we talk about appreciation, we're not really speaking of the peaks and valleys. Right. The peaks and valleys are going to happen. It's going to be a bumpy road. But over time, absolutely. real estate will continue to appreciate. And there's a couple reasons why. Well, actually, there's one main reason why. And that's just the concept of supply. Right. So let's talk about the supply. The famous Will Rogers quote, buy real estate. They're not making any more of the damn stuff. Something like that. Yeah. I think it's a little more crass than that. But that's,

you get the picture. Bill Rogers was awesome. They're not making any way. Yeah, something like that. Exactly. Except that one foot each year in Hawaii from the lava flow. What? Yeah. That's how they make more land out there in Hawaii. Oh, that's how they make it out there. That's how they make more land. Gotcha. Yeah, absolutely. That was a joke. I've walked on something. I tried to build a house out there. It didn't work.

It slid into the ocean. No, I got it. Now I got it. I'm slow. I'm slow today, but I got you. I'm like, ah, that was a good one wasted. So we've established they're not making any more real estate. Yeah.

Except for Hawaii. Right. And then we talk about if you take out all of the undeveloped land that's owned by the state and the federal government, and you focus just on privately on land, it's very minimal, actually. There's not a lot of it. Sure. when you consider when we talk about the next part of that equation is the demand. So we've talked about this.

We've kid about it recently a lot about, you know, until, you know, a roof goes out of trend. It looks like we're pretty safe. Yeah, right. And so that trend is not going anywhere. It's not a trend. It's one of the basic human needs and that's something that we can invest on. Sure. So the land is not increasing, but the need is the same or greater.

It's constant, right? Yeah. And it's greater and it's growing because. the population is growing. Sure. And there's a couple different ways that you can look at that. Each major portion of the, each generation is bigger than the previous. Right.

Does that make sense? Yeah. So each subsequent generation is getting bigger and bigger and bigger. I mean, in 2007, there are more babies born in that year than any other year in history. Wow. That amazing? I didn't hear that. So like right now, 2000s.

So they're eight or nine years old. So in 10 years, they'll be shopping for a house. So that's something that you can absolutely gamble on. Yeah. Or invest on. Sure. That way. Those are the kind of things of the big home builders.

Those are the kind of, I guess, demographics and psychographics that they study, right? Right. And then if you take into consideration the immigration rate, the birth and the death rate, I believe, is that we grow by $3 million a year. Wow. Let me see what that was. I had it right here. The population of the U.S. increases by roughly 3 million people each year, both through immigration and a positive birth to death rate ratio. Wow.

Okay. So 3 million a year. So real estate is safe. Real estate is safe. The demand isn't going anywhere. Right. Absolutely. What else?

Oh, and then the other part that kind of contributes to the supply is all of the major metropolitan areas are really trying to keep the expansion of those cities outwards. It's very expensive to go out and, you know, take your sewer out there and your electrical out there and all the plumbing and utilities and all stuff. So they're really focusing on infill. So they're building up instead of out is the primary focus. And so that makes the real estate and the deal. dirt, even that much more valuable. Because the more people building up there, the less infrastructure you actually need, which makes a city save millions and millions each year.

Yep, that makes sense. Right. But then you have, if you had a 10-story building, you've got 10 units sitting on one parcel of, you know, land. Right. But if you actually own the real estate, then all of a sudden, you know, if you times your value by 10 because you've got 10 people on top of it. Sure.

That's a good way to go. Yeah, absolutely. It just gave me an idea. Yeah. You know, it's like what I used to do when I first started my business, we would, we would find certain places that we could turn into multi-units sometimes too. And I don't do that a ton anymore, but early 2000s in Tampa, there were a lot of homes that were big enough to turn into two or three apartments.

And you could do that pretty easily if you chose the right kinds of parcels and knew how to work with the city to do that. And you made more out of it than what it was. So putting one unit or 10 units, you know, it's the same thing. And so it's in the city's interest to do that. And it makes sense. Right. So when is appreciation going to stop?

Great question. I mean, what time is it right now? What time is it today? I see. It's at 10 a.m. 10 a.m.? Okay, 10 a.m. Well, not today for sure.

Not today for sure. Yeah. Not in our lifetime, right? I don't think so. If you can hear our voice right now, the time that this is recorded, I would say not in your lifetime either. It hasn't yet. Since we've had records, right? Since we've had records.

And even like, you know, pre-actual property records, we have examples of, their land increasing from King Solomon till now. We see that. It's never changed. I don't think it's ever going to change. So what else can you say that about? Right.

So buy for cash flow is number one. And expect depreciation. Maybe it's going to happen in six months. Maybe it's six years. Maybe it's 60 years. But who cares? You're buying for cash flow anyway. Exactly.

Right? And that would bring us to our next subject or what we'll talk about next week. When to sell? When is the right time to sell? Sure. When do you know that? You want to time the bubble, the peaks and valleys, or when do you want to upgrade or, you know, when do you want to cash out?

When is the right time to sell? We'll talk about that next week. You know you want to buy, you know you want to hold, but when is that next step, right? Sounds good to me, man. Super. Well, that's it for today. Flipping houses can make you rich. Holding them will make you wealthy.

We'll be back next week. Until then, remember, don't wait to buy real estate. Buy real estate and wait. Hold that house. Contrary to popular belief, a lack of funding is not the biggest barrier to starting a business. It's excuses. But don't let a lack of funding be your excuse. We are Epic Fast Funding, and we'd like to fund your business with up to $150,000 in revolving credit lines.

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