What does a dead cat in the ductwork have to do with real estate investing success? As it turns out, quite a lot about perseverance and education in the school of hard knocks.
Corey sits down with commercial underwriter Kolten Van Elzen for a fascinating exploration of economic trends and their impact on real estate investment strategy. Their conversation ranges from practical horror stories (like Colton's first flip of a 30-cat hoarder house) to sophisticated economic forecasting techniques that can give investors a competitive edge.
The duo dives deep into what's really happening with interest rates, explaining the critical difference between Fed actions and mortgage rates in clear, accessible terms. They break down why watching unemployment claims might be more important than following Federal Reserve announcements and provide specific resources investors can use to track economic indicators themselves.
Perhaps most reassuringly for investors nervous about current market conditions, Colton shares an eye-opening statistic: real estate prices have only declined twice in the last 40 years. With current inventory levels at just a quarter of what they were during the 2008 housing crisis, the fundamentals simply don't support predictions of a market crash in most regions.
Beyond market analysis, listeners will gain practical insights on building stronger banking relationships, creating a comprehensive "lender folder," and why maintaining multiple lender connections is crucial as bank appetites shift. The episode concludes with both hosts emphasizing that periods of market uncertainty often create the greatest opportunities for prepared investors.
Ready to gain an edge in your real estate investing journey? Subscribe to the Wisconsin Investor Podcast for more strategic insights and practical advice to help you navigate today's complex markets with confidence.
To get in to the data discussed on the episode google CME Fed Watch Group and Redfin Data Center.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Everybody, welcome back to another episode of the
Wisconsin Investor Podcast.
I am your host, corey Raymond,and I'm excited today because,
again, I always try to bring youguys amazing guests, and I have
another one lined up for youtoday.
We're going to get into somereally juicy stuff today that I
nerd out on, and I love talkingabout this kind of stuff.
But I'm going to save that fora second because, as I do
usually, I'm going to do alittle commercial for Wisconsin
(00:22):
Discount Properties, whosponsors the show.
I think I talked about this ona different episode, but I'm
going to talk about a deal thatI picked up, actually from
Wisconsin Discount Properties inthe Oshkosh area, so this is
one that was out to the list.
If you're not on the buyer'slist, you can get on there by
going towisconsindiscountpropertiescom
and putting your information in.
We'd sent an email out.
(00:43):
It's a trailer house in Oshkoshon about a half acre with an
attached garage.
It's not a normal foundation,so it's not like somebody can
come just pick this baby up andmove it, but nobody wanted it,
nobody offered on it, and sothat's usually what happens.
If I'm picking up a deal, it'susually because we ran it
through our process and nobodywanted it.
So now I snatched it up andI'll tell you what this deal end
(01:03):
up being.
It's going to be a phenomenaldeal.
We got it for, I believe, 50 or55,000, um, headed out to the
list for a little higher.
You know, as the boss, I get alittle discount on some of these
things, uh, but regardless itwould have worked either way.
We've got about 5,000 into theinto the property and we just
signed a lease for 121,295 onthis bad boy.
(01:25):
So I'm going to be all into itfor about $60,000, maybe less,
and it's going to rent foralmost $1,300 a month.
Now, not the sexiest property inthe world.
You look at it from the outside, doesn't look great, but it
gets the job done, it's bringingthe rent in and it's going to
cashflow like crazy.
So imagine adding 10 of thoseto your portfolio, what that
(01:47):
could do for you.
If you're missing out on thesedeals, you're not making offers.
You can do that again.
Go towisconsindiscountpropertiescom,
plug your information in and getadded to the buyer's list and
start getting deals like thissent to your inbox every Monday
morning 6 AM.
With that, let's get intotoday's episode.
I got my brother from anothermother, colton Van Elzen here,
buddy.
What's going on, colton?
Speaker 2 (02:06):
What's up?
Corey Glad to be here.
Speaker 1 (02:07):
I'm excited to have you.
Yes, Colton and I met actuallythrough church years ago and you
were still in high school,right?
Speaker 2 (02:15):
That is correct.
I was going to wonder if youremember I vividly remember how
we met was through the GuatemalaMission Trail.
Yes met was through the uhguatemala mission.
Yes, oh yeah, I don't know ifyou care.
You remember this, but thereason you guys got to go on
there is because there was alittle cow that plotted on your
uh spot oh yeah, I remember thatvividly.
Speaker 1 (02:35):
I tell people about that story all the time.
Yep, yep, that was uh, the togive our audience a little
background on that.
So wisconsin this is one of thethings I love about wisconsin.
There was a charity, uhfundraiser.
I donated 50 to uh, I think itwas juvenile arthritis,
something or another forsomebody in one of my networking
(02:56):
groups and, um, I forgot allabout it and it was for the big
ox plop bingo.
So what happens here and somecharity fundraisers is they mark
off these different squares andthen they release these cows.
I believe I've never actuallyseen it, but I this is what I'm
told.
And if the cow poops in yoursquare, you win what it said
(03:21):
prize, right.
So for the 50 prize, thewinnings were $12,500.
And at the time this was 2016,.
I think Colton is that when wewent, yeah, it's 2016, 2017.
Yeah, Somewhere in that ballpark.
We didn't have.
We didn't have a lot of money,and so we had signed up to do
this missions trip that Coltonand I went on together and
that's how we met and we didn'thave enough money to go on it.
(03:43):
But you know, you tithe, or bigbelievers in tithing, and God
shows up and provides inmysterious ways and boom, big
plot, ox plot, bingo was one wayGod was.
I was kind of laughing.
I'm like you're funny, god,that's it.
I guess we're going on this trip.
Thank you, sir.
So we went on the mission tripwe had, Uh, so we went on the in
(04:10):
this mission trip.
Speaker 2 (04:11):
We had a great time.
We got to build some wells inGuatemala together in about 110
degree heat and humidity.
Speaker 1 (04:14):
I think Right.
So it sounded about right.
Yeah, we uh, we worked ourbutts off.
We sure did.
We got not one well, but twowells.
We were overachievers,overachievers, and then we
brought that work ethic back andtoday we apply it in real
estate investing right.
Exactly, yeah, and the we applyit in real estate, investing
right, exactly.
Speaker 2 (04:26):
You know, the funny thing is that was when you guys
were just getting intowholesaling or like you guys
were just starting your business, and I remember we were you
know the many van rides whereyou got hours to just sit and
chit chat and you're talkinglike, yeah, I'm going to call
these people and door knock onthem, I'm going to sign a
contract and I'm just going tosell these contracts.
I was like that sounds illegal,it doesn't seem right.
(04:47):
Like my parents had a buildingbackground.
I'm like, no, you do thetraditional list with your agent
and do all this P's and Q'sthat you know we're told about
and you know you you've donewell with it.
So yeah.
Speaker 1 (04:59):
Yeah, that was crazy.
That was, yeah, you're right.
That was like right when wewere starting up in 2016.
So it's been a fun ride since.
And let's talk a little bitabout you, though, Colton.
So you also have some realestate investing that you do but
you're also a underwriter forCapital Credit Union on the
business, commercial side,correct?
Speaker 2 (05:17):
That is correct.
So yeah, a little bit about me.
I'm born and raised in greenbay, so true wisconsinite, uh
slight traitor in me.
I went out to the university ofminnesota so I studied out
there, got my degree at gopherum, and uh loyal viking fan now
you know being converted whenwhoa whoa.
Speaker 1 (05:38):
You might have to end this podcast in the background
here, but yeah, wow.
That's gotta just be hard tolook at every day now, since
you're purple people hereexactly, uh, get, get the inside
information you know, send itback to the.
Speaker 2 (05:55):
That's right now.
Uh, studied finance accounting,got my degree out there, came
back my wife's from here, so wedid the traditional house
hacking route.
That's how we kind of got intoreal estate and kind of done
networking and all that andtrying to learn more.
Um, did our first flip lastyear, so you know that was fun,
man.
Um, a lot of learning lessons.
And then, uh, yeah, been incommercial underwriting for the
(06:18):
last three years three and ahalf years so get to see all of
the other experienced realestate investors and business
owners, kind of come through andsee how they do operations and
a lot of good learnings fromthere as well.
Speaker 1 (06:31):
That's awesome, man.
That is so cool.
We got a lot we can unpacktoday and I'm excited to talk
about it because you presentedfor the REI Success Club, which
is a little club that we host in.
Green Bay and you brought I mean, you had just like some amazing
information is what thefeedback was.
I was down here in Florida, sounfortunately I wasn't able to
attend, but I said, man, I gotto get Colton on here because I
(06:52):
love talking about the economyand what's happening and I
always like to try to figure outwhere's the puck going.
Right, like that's one of thethings I want to.
I don't want to know where apuck is at today.
I want to look ahead and saywhere is this thing going the
next six months or 12 months,and so we're going to get into
some of that a little bit.
Talk about the flip, though.
How did you, how did you guysend up doing on the flip?
Speaker 2 (07:10):
so it was a three bat , two bath ranch in green bay um
bought it off anotherwholesaler.
Speaker 1 (07:16):
Sorry, I know, I know this guy's a trader all around
man going out of minnesota.
Speaker 2 (07:22):
He's cheating on me with other wholesalers benedict
arnold man oh my goodness butyeah, it was uh one of those
hoarder houses.
They uh, supposedly, per theneighbor, had 30 cats in this
house, 30.
It smelled like it.
It smelled like it, um, andthey were the people that were
leaving were so generous, theyleft us a, a cat.
Speaker 1 (07:43):
Wow, that was really nice of them.
Speaker 2 (07:45):
Yeah, we couldn't find it, but they left it.
Oh wow, they said here's somefood and let us know if you find
it.
Here's our number.
Uh yeah, and so the great storyof it was we found the cat
three months later and the duckwork.
No dead not not alive anymore.
(08:08):
Yeah, as I say, that's, that'sin the middle of summer.
So, oh yeah, our house smelledeven better.
Wow, it was quite in, uh, quitea learning experience there, my
goodness.
But nothing a little killscan't uh cover and remove the
smell from.
And we cleaned it up, fixed itup really nice, um, and we uh
got it ready.
And you know one of the thingsyou use when you get these
projects you're like, oh, it'sgoing to go boom, boom, boom,
(08:30):
we're going to be done in andout of here in two, three months
.
And you know, six months laterwe were at the closing table and
getting it sold.
But we made a small profit.
You know, I wrote my parentsinto it and if it wasn't for
them, I don't think we wouldhave profited, because you know
my dad's skillset and being ableto figure out the problems and
not have to pay the highercontractor fees.
(08:51):
Uh, we were able to save somemoney, but the dollar per hour
wasn't good.
But hopefully the education onthe backend for future flips is
kind of where the payoff willhopefully be.
Speaker 1 (09:01):
Dude, if you did a hoarder cat house right out of
the gates with a dead cat inyour duck work buddy, you got
your education for sure and youdidn't lose on it.
I mean, that's a hell of a,that's a win all the way around,
right there.
Speaker 2 (09:13):
Exactly.
Might've lost on the dollar perhour timeframe, but you know
that's.
That's just the price you paysometimes.
Speaker 1 (09:18):
That's it, man.
I'll tell you what the firstcouple.
Like my brother I had him onthe podcast early on and, yeah,
he always talks about his firstflip he lost, I think, like 16
or 20,000 bucks or something onthe first one.
But you know, colton, how muchwas it to go to UW Minnesota?
Speaker 2 (09:34):
It was about 15, 20 K granted.
I joined the national guard, soI'm in the army currently.
You know.
Speaker 1 (09:39):
Thanks for your service.
But uh, yeah, I mean that wasprobably a 60 80 000 education.
There you go 60 to 80 g's rightdown the tubes.
Now you're making a littleincome thanks to that now with
the old capital credit unionthere, but to make a few bucks.
Could you imagine getting paida few bucks to go to college and
learn a little little thing ortwo and get out with a heck of
an education you know I think itwould uh reshape a lot of how
(10:04):
people think about money and theeconomy, and you know where
they spend their time.
So yeah, absolutely my kids,like we, just we they're.
I'm so proud of these kids.
They they sold some water andseashells on the bike trail
behind our house most likelyillegally, I think.
I don't think you can sellthings on the trail, but they
did it and I was.
I was out there helping, soI've, I'm part of the crime.
(10:26):
Yeah, I'm culpable.
They made about 130 bucks inlike four hours out there, which
was awesome.
Yeah, like people were justgiving them like $10, 20 bucks.
And then they were like, hey,we should do this for the
homeless.
And I was like this is awesome.
You guys are such good kidsLike they could have either way.
I was proud of them.
Like your entrepreneurs may takethe money, but then they
started advertising to peoplethey were doing for the homeless
(10:47):
.
I'm like, well, now you got togive it to the homeless.
You can't just you can't changeyour mind after you start
saying that, right, so they madethese little packs.
They went to Walmart.
I took them to Walmart.
They bought these little packsof like you know, little kits of
(11:08):
like grooming kits and someother stuff and Bibles and these
other things, and so we'releaving florida tomorrow and
yesterday we went to thishomeless shelter to just we
couldn't find enough homelesspeople, so we just went to the
shelter to give them, to them todistribute, and they kept.
The lady up there was so likeoh, you guys are great kids, you
know all this stuff.
She's like where are you gonnago to college?
You gotta go to college.
and I'm like I don't know if youdo.
I don't think you do.
I think you could do a flip andget a couple of cats in your
ducks and you could get a heckof an education.
If that's the direction youwant to go, you don't really
need the college degree, butthat's a whole nother podcast
(11:30):
topic that you and I could getinto.
Talk about the cat thing,because I want to stay on this
for a minute.
We have a lot of economy stuffwe want to get into, but the cat
smell out of there, cause thatdeters a lot of people animal
smells.
Speaker 2 (11:50):
Yeah for sure.
So the first thing is, when youhave a property right that
usually has a smell to it is yougot to figure out where's the
smell coming from, where is itlocated Right.
And so in this property it waslocated everywhere, you know.
It was located everywhere, youknow when you you got 30 cats
that they're not missing a spot,you know.
So the first thing we did waswe tore everything out that you
could remove right all thecarpet, all the flooring.
(12:12):
We had to remove all thecabinetry, a lot of the woodwork
that was stained with the p thesubfloor yeah, okay, got rid of
the subfloor and again, thatsounds scary but a lot of it was
.
You're just taking the saw,cutting out the bad spots,
putting in the new stuff, layingin the new OSB, and you were
(12:32):
fine.
And so the stuff that wasn'treally visible and you could
still smell it we applied whatwe called kills.
There's other stuff like brinprimer, so it's like a primer
paint that you can buy at yourlocal lowe's home depot.
It's about 150 dollars for fivegallons and it covers pretty
(12:54):
well.
And so we basically tookrollers and we rolled it over
the entire floor and even someof the wall areas.
You know the lower wall areaswere kind of peek and splash up.
Even some of the wall areas,you know the lower wall areas
were kind of peak and splash up.
And we did about one to twocoats of that through the entire
house and it was time consumingbut it was well worth the
investment because afterwards itsmelled like a brand new you
(13:15):
know house in a sense.
Right, yeah, you didn't havethat odor lingering.
We put some air fresheners inand some other stuff you know in
the paint to help you know,once we did the painting of it
to help get it even freshersmell, but yeah, yeah, I think
that's one of the great point onthis.
Speaker 1 (13:34):
And one reason I want to talk about this, colton, is
I I hear this a lot from buyers.
It's like oh, there's a.
You know, with our process wetry to notate if there's a pet
order, cause we don't we don'tlet people walk through them
until prior to closing.
Once you're under contract,within three days prior to
closing, you can walk throughthe properties.
But we try to tell people, hey,there's a pet smell.
Or we have our inspectors notehey, strong pet odor or
something.
So you can kind of budget forthat.
So if you have a house you'regoing to the point here that I
(13:56):
think that you just made, that Iwant to emphasize if you get a
house, that's a hoarder houseand you're going to replace a
lot of stuff anyway, the catstuff is like budget a little
bit extra for the kills and youknow some subfloor and some
other stuff, but it really isn'tgoing to be that much more than
what you're going to already doto the house to flip it anyway.
Now, if you have a strong petodor and the house is pretty
nice, like pretty turnkey,that's where it can become a
(14:18):
little bit more expensive.
Like we have one right now.
We just closed on and, uh,we're gonna just do a light
remodel on it and put it on themarket.
But it has some carpet andthere's a little bit of a dog
odor in there, so we're gonnaget the ductworks clean.
We're gonna get the ductworkclean and we're gonna replace
the carpet and we might throwsome kills underneath the on the
subfloor just to make sure wegot it all and that's it, you
(14:38):
know, and and then we're gonnaturn it around.
Speaker 2 (14:40):
So not that big of a deal yeah, and I mean the other
thing too, with orders, right,is you just have to remove the
source of order too?
Right, that's huge.
Right, like removing all thecats, having them out of there,
right, we still had a cat livingthere, yeah, p like we were
killsing, and there was p on topof the kills no way yeah,
because we didn't know wherethis cat was.
It was a skittish cat, it was upin the ductwork.
(15:02):
Like you can't see it, right,you'd occasionally think you
hear something.
But you know, when you'reworking in a property by
yourself late at night, you'relike, yeah, that's just you know
.
Sure, the friendly neighborhoodghost you know come to say yeah
, it's just one of those thingsyou just don't know until you
know.
And it's a solvable and, likeyou said, it's not as expensive
(15:22):
as people think.
Right, yeah, you could could belooking at $500 in materials
and then your labor.
If you hire it out, you know afew thousand dollars in paying
fees.
Speaker 1 (15:30):
Yeah, not that big of a deal for sure.
Well, good, I'm glad you guysmade a couple bucks on that.
You got a house, you got a flipunder your belt.
Now the sky's the limit for youguys.
What's the goal for you?
What are you guys seeing in thenext few years as far as what
you guys want to do personallyin the real estate space?
Speaker 2 (15:45):
That's a great question, you know.
I would love to continue to addand acquire.
You know, I think most realestate investors see right the
power of being able to buy realestate, hold it for a long
period of time.
You know, the one thing wedon't talk about is and we'll
get to hit on today but theamazing part of real estate is
you can leverage it right.
Speaker 1 (16:04):
You know as an underwriter.
Speaker 2 (16:05):
I'm supposed to hate leverage, right, you know it's
the bane of these real estateinvestors.
But when you look at thecalculation of a 20-year
amortization or 25-yearamortization, you know, and only
having 20 or 30% down,traditionally right, your
minimum return is still like 6%or 7%.
That's not even an appreciation, that's just you breaking even,
(16:27):
paying that loan back andbasically turning that 20% into,
you know, having that propertyfree and clear.
So the just power of that is tocontinue to focus there.
But I say in the short term,the next one to two years is
purely income.
Got to focus on raising theincome level because the reality
is real real estate costs a lotof money.
It's not cheap business to runand operate in and so that's
(16:49):
kind of the focus is trying todevelop some more income.
Speaker 1 (16:52):
So nice You're going to do that through some more
flips, yeah, okay.
Speaker 2 (16:55):
Yeah, I said more flips and hopefully maybe I try
one or two wholesales.
But you know, you know thatgame's hard.
It's a lot of time, a lot ofinvestment there.
So there's no free dinner outthere.
Speaker 1 (17:07):
No, that's one thing I hope people understand.
I get calls a lot from peoplewho are like I'm going to get
into real estate, I'm gonnastart with wholesaling.
I'm like you know you'restarting with probably the
hardest part of real estate.
Like the easiest one to start,in my opinion, is all that stuff
which, like you said, you hadyour dad helping you.
(17:27):
But if you didn't have your dadhelping you, you got to go find
all these people to do all thisstuff.
And that can be a challenge inany market, but especially in
the last few years, that'sprobably one of the bigger
challenges is finding peoplethat are reliable, reasonable,
to do the work for you.
Or you get a propertymanagement company.
They've got hundreds ofproperties, they could leverage
that workload to get a moreaffordable pricing for you and
(17:48):
they can manage it all.
All you got to do is find thedeals and find the money you get
into flips it's a little morechallenging because now you got
to build a contractor base, butwhen you do wholesaling, you got
to find, a the property belowwhat any flipper has to buy it
at, and then B you got to findthe buyers to be able to buy it
at, and then B, you got to findthe buyers to be able to buy it.
So you have like really twobusinesses that you're starting.
When you start a wholesalebusiness, you got to find the
(18:09):
acquisition side and then yougot to also find the disposition
or the buyers to sell it to.
And people are like, oh, it'llbe easy Get a good deal.
It's like it's not as easy asyou think.
Right, everybody's got theirlittle buy box, their little
preferences of what they want,little neighborhoods they want.
You know it's.
It can be a grind.
Speaker 2 (18:24):
So, and given this market right, Northeast
Wisconsin is probably one of themost competitive, at least in
Wisconsin, because there's not alot of inventory and there's a
lot of sophisticated people thatare looking to jump in and make
a buck.
Speaker 1 (18:38):
So absolutely Absolutely.
Well, let's talk a little bitabout the economy.
Let's transition now.
So, as an underwriter, I'minterested.
What are you looking at in yourposition?
So, if I'm coming to you for aloan, how are you involved in
the economics of what the bankis doing?
Do you get involved in that atall?
Or is that at differentpositions and they just kind of
say, hey, Colton, here's whatwe're looking for as a bank
(18:58):
right now.
We want you to do this, this orthis and underwrite it this way
.
How does that happen?
Speaker 2 (19:04):
So for most institutions the direction of
the commercial portfolio isusually headed by the chief
financial officer, chief creditofficer, so it kind of it's up
to their discretion.
So they get a goal from the CEOand that says, hey, we want to
grow by X amount, and so theyhand that to the chief credit
officer and then their goal isto figure out how.
(19:24):
And so they hand that to thechief credit officer and then
their goal is to figure out how,how they reach that.
And so capital credit union.
I would say we were reallyinvestor friendly to real estate
folks two to four years ago andwe've transitioned more towards
manufacturing and so it's kindof the preference of what that
(19:46):
lead person has and kind oftheir experience.
So, like a lot of localcommunity banks you know, a lot
of the ones that you guysmentioned are great for real
estate investors because that'stheir bread and butter.
They get a lot of folks to comethrough, they can continue to
grow their loan portfolio fromthat.
And even the credit unions Imean we do still quite a bit of
real estate ourselves, and sothe focus is just kind of what
(20:13):
is the goal of growth?
You know, with rates kind ofbeing higher.
The cash flow is a lot tighterand so I would say that's kind
of where people may have seenthat some of the banks and stuff
have kind of walked back alittle bit on real estate or
it's a little bit tighter ontrying to get money on the
commercial side.
But you know there's still moneyout there if the deal's right.
I always tell people you knowyou can get the best deal if you
(20:34):
run your numbers right.
You know if your DS, if yourproperty's cash flowing and you
have good equity position, likeyou're going to get a loan and
it's going to be approvable, youknow where it gets.
Tricky is people come in, theproperty doesn't cashflow, they
didn't run their numbers right.
They're trying to get a loan.
You know max loan to value.
You know 80% and it can bedifficult when you just don't
(20:57):
run those numbers beforehand.
Speaker 1 (20:58):
Yeah, yeah for sure.
And I think what I love whatyou just said there's capitals,
you know, switch tomanufacturing a little bit more.
They want that in theirportfolio a little bit more.
And this is a point I make to alot of people too is, you know,
it's really important to have alot of lines in the water with
different lenders, because theappetites change.
Like you said, the goal changesfor the bank.
You're like, hey, well, buddy,we just did, you know, last
(21:30):
three years we were doing this,and they're like, yeah, but our
appetite changed now.
And then you're like, crap, nowI got to go start all of these
relationships over again, whereyou got to go give a lot of the
banks the same information.
Anyway, when you go try to getpre-approved, you might as well
just get pre-approved by a bunchof them and then just maintain
that relationship andcontinually check in on like,
hey, how are you guys doing onrates, what's your appetite for
(21:51):
real estate right now?
And just stay up to breath,like, and then you just kind of
use them as chess pieces foreach deal and sometimes they you
know, I found some banks reallylike a certain type of deal, so
if I bring them a certain assetclass within real estate.
They might be like, oh yeah, wereally want this one.
We'll give you this rate orthis.
Or they might be like, ah, yourrate's going to be here.
You go to another bank, they'rea percent less.
(22:13):
You're like, oh great, let's goover here.
And just maintaining a lot oflines in the water I found has
really been helpful for us overthe years.
Speaker 2 (22:22):
No, that's huge.
And my big piece of advice topeople is have a lender folder.
(22:51):
So have a PFS, which is apersonal financial statement.
Have that filled out.
So all you got to do is changethe date, change a couple of the
numbers.
You can send that off rightaway.
Have three years of taxes, yourbusiness and personal all in
this lender folder.
And then another separator iswhen you're bringing a deal.
Have a proposal, have a factsheet of what the deal looks
(23:12):
like, what you're going to bedoing to it, what your end goal
of the deal is right.
So say, if you bought it from awholesaler, okay, talk about
the price you bought it at.
Talk about the condition it was.
Talk about the condition it istoday.
Show that level of competencythat you're able to operate
these deals and you're able tomake the numbers work.
And then show them hey, this isthe goal is to continue to grow
(23:35):
.
This you know.
Show that you have an appetiteof wanting to grow and you want
to build that relationship withthem.
That's valuable.
And then the other thing thatany business is communication.
If you can communicate, respondtimely to your lenders like
they're not asking questionsjust to make your life hard.
They're trying to figure outinformation so that they feel
secure in the transaction.
Yeah, remember the lendinginstitutions holding 80 of the
(23:59):
money to buy this property.
Right, like they have more skinin the game.
Right to make deals work, likethey don't want to lose money
either.
You show you're competent.
You show them this lenderfolder.
You communicate clearly, like,right there, you're ahead of the
game.
Speaker 1 (24:15):
Yeah, my guess is Colton.
That's such good nuggets.
I hope everybody goes back andlistens to that.
That's looking, you know, toget lending going from
institutions and hard moneylenders are going to want the
same thing.
So like, even though it's morerelationship based in the hard
money lending and it's kind ofthere's no real standard there,
I guess every hard money lenderis a little bit different on
what they want, they still wanta few things.
They want communication.
All of them do.
(24:35):
They want competency.
Right, those are like two majorthings.
They want to know you got yourcrap together and you know what
you're doing.
That's all there is to it.
And if you're brand new and youdon't know, find a mentor,
somebody who knows and has beenthere before, and just talk to
them about what should I do onthis property and then to
communicate that to your lendersafter talking to your mentor on
those types of things.
But I think that's reallyreally important communication
(24:58):
and competency.
Like the bar's pretty low outthere right now.
Guys, if you can do thosecouple things and I'm talking
not even lenders, just ingeneral you're going to stand
out above the crowd and peoplearen't going to want to do
business with you because notmany people do those very basic
things.
Speaker 2 (25:15):
No, and this is the thing too.
It's like everyone thinks it'spurely numbers.
Right, I would say half of aloan approval decision is
literally can we trust thisperson to repay us?
And how do you build that trust?
It's stuff I would just mentionearlier.
Have your documentations ready,have the clear communications,
answer the questions before theyeven have to be asked.
You know that's the one thingis.
(25:39):
You see, sometimes peopletrying to hide stuff.
You know like, oh, I'm notgoing to mention this, but we're
looking through everything,right, we're that says an
underwriter.
We're trying to unearth, dig upany pieces of information, get
ahead of the curve.
You know it's not going to hurtyou.
Speaker 1 (25:55):
Yep, yep, for sure, yep.
It's always better to just letpeople know what's going on and
be upfront and transparent aboutit, if you can, before they
have to find out and ask youabout it.
Right, yep, yep, for sure,colton, let's get into the
economy a little bit, brother.
So what are you seeing rightnow?
I mean right now, as we'rerecording this, it's mid-April,
right, we just had some tariffsgo out, big, big tariff.
Every time I tie Any problem.
Now that joke in our family islike why did my kid do that?
(26:17):
That's probably tariffs.
That's probably why they'reacting up.
It's probably the tariff.
But seriously, like the tariffswent in, then they're paused,
except for China, and there's alot of turbulence going on.
I saw the 10-year treasury wentfrom 4.3, 4.4, down into threes
, then back to 4.4, which maybeyou could talk a little bit
about that.
I don't know exactly what thatmeans, but I don't imagine
(26:38):
that's probably healthy for mostthings.
But what are you seeing overallas far as it relates to the
economy?
And let's talk a little bitmore about Wisconsin and maybe
even Northeast Wisconsin, sincethat's where you're based on
what you're seeing on theeconomic side of things as the
underwriter and the lender here.
Speaker 2 (26:55):
For sure.
We'll touch on the tariff partreal quick.
The best meme I've seen for itis if you ever watch Karate Kid.
Tariff's on, tariff's off.
Tariff's on tar tear us offright.
Speaker 1 (27:08):
Oh, that's awesome.
I haven't seen that one yet.
Speaker 2 (27:11):
It's just back and forth, back and forth, you know.
So what the terrorists havedone and you kind of talked
about it is they've created alot of uncertainty.
So you can kind of see that inall of the Fed surveys.
The University of Michigansurvey that came out last Friday
was the lowest in three years,four years, like depths of the
(27:32):
COVID pandemic, like level oflack of confidence was from
these tariffs.
What does that actually mean?
Nobody knows.
So that's the best part abouteconomics is like there's a lot
of forward looking indicatorsand right now, to be honest,
those look horrible.
You know the CEO surveys, justnot a lot of confidence.
(27:56):
United Airlines just came outwith their earnings on Friday
and they said we have guidancefor a recession and we have
guidance for normal state, butwe don't know which way we're
going.
Wow, so like even majorcorporations do not know where
we're headed.
So that level of uncertaintycauses the 10 year to go up.
(28:16):
Uh, cause interest rates to goup because the bond market they
want to be paid a premium forthat uncertainty, they want to
be.
So the tariff front, who knows?
We'll see three, six monthsfrom now what actually happened.
What did the administrationstrike a deal on and not strike
(28:37):
a deal on, and we can kind ofpick up the pieces that are left
over from that.
Hopefully I'm of the mindsethopefully they cut deals and
they figure this out quickerthan you know, quicker than they
haven't you know, and we canmove forward.
Because the reality is we allwant to operate on a certain
level playing field.
We want to kind of know whatthe rules of the game are, and
(28:58):
when the rules of the game areshifting, it's tough to operate.
Speaker 1 (29:01):
Yeah, I think, uh to to touch on that a little bit,
one thing we've seen over thelast year and a half or so is
everybody just got used to likehere's where the rates are and
that's the.
That's the game we're playing,and so I can effectively run my
numbers now based off of what Ithink I'm going to be able to
get an interest rate at.
And I think what you justtalked about is, when we have
uncertainty, it starts to createpeople to pull back a little
(29:24):
bit and they start going, whichusually what I've and you tell
me if I'm crazy on this Coltonbut when I see people pull back,
typically I run into it.
I'm like, ooh, good, moreopportunity for me, sweet, and
then I'll acquire a bunch ofproperties and everybody else
sits on the sidelines Causethey're like I don't know what
you know, and especially likeyou talked about your goals, you
want to buy and hold moreassets.
We all realize the buy and holdgame is how you build true
(29:47):
wealth in this, in this world,and like these next three to six
to 12 months, if there's a lotof uncertainty and I can pick up
some deals because of that,because the people are shedding
properties a little bit cheaperand I don't know what my
interest rate is going to be.
But I don't care, because I'lljust refinance that sucker when
interest rates go down in twoyears or three years or four
(30:07):
years or whatever it is.
Any comment on that?
Anything you want to touch onthere?
Speaker 2 (30:13):
Yeah, I mean A.
You got to buy a property,right the interest you're buying
the house, not the interestrate, and that's a good realtor
term.
And the reality is is interestrates fluctuate.
They go up and down, and thegreat part of the country we
live in is you can get 30 yearfixed rate debt on that right
when you know typical one tofour, you know multifamily, and
(30:37):
so when the time comes whenrates are lower, you can
refinance that and make thatcash flow, you know, just
skyrocket and you know one ofthe things that we can kind of
see is rates are expected to godown.
So, even with this uncertainty,if the economy were to go in
the worst case scenario and thisis a good segue to just kind of
real estate pricing if we gointo a recession, interest rates
(31:00):
come down.
It's just the Federal Reserveis not going to let the economy
flounder, they're not going tolet everyone lose their job.
They're going to cut ratesfaster than you can think, right
, think of COVID, think of 2008.
The Fed will backstop theeconomy, right, and so that's
kind of the term right now.
It's labor overinflation is theterminology that they're using
(31:22):
the market for cutting interestrates.
So we had a little bit of datacome out today.
It's called the initialunemployment claims.
Every Thursday at 7.30 amCentral Time, these numbers come
out.
You know, this month was like219,000 or this week was 219,000
.
Not a lot.
If you see that number climbingabove 250 into 300s each week,
(31:46):
then you're like oh, we're,we're, we're going into
recession.
That was what was happeningback in September and August of
last year and when that's whenyou saw interest rates at its
lowest point in the last fouryears Okay, Got it.
So labor is going to be theprimary driver of where we go
with the rates.
But if rates go lower, you'regoing to be able to refi, you're
(32:08):
gonna be able to get in, getthat property refinanced and
capital is gonna be better.
So it's, you just gotta go inand bite the bullet, underwrite
a little more conservative, havea little more reserves.
You know, I don't thinkanyone's gonna go broke if you
have that six to 12 months ofreserves.
Speaker 1 (32:29):
Right.
Speaker 2 (32:30):
So just having that cushion and you know what, maybe
you're not buying 10 properties, but you could buy eight.
Right yeah, just don't sit onthe sidelines.
Speaker 1 (32:39):
Exactly, dollar cost to average it.
That's all there is to it.
Yep, now interest rates if theFed.
Correct me if I'm wrong here,cole, but if the interest rates
from the Fed drop, that doesn'tnecessarily mean that we're
going to see a drop on ourmortgage rates, correct?
Speaker 2 (32:55):
Yep, so there's two separate categories.
So the Federal Reserve theycontrol what we call a picture
of a yield curve.
So a little thing.
So the yield curve the Fedcontrols the short end of the
yield curve.
The long end of the yield curveis controlled by the market.
You know, the bond market andsimilar things influence both
(33:16):
right, inflation, right.
When inflation was running hightwo, three years ago, like you
know, eight, 9% both ends of theyield curve were higher because
the market and the Fed wasraising rates to compensate for
the higher inflation.
So when the Fed cuts the shortend of the yield curve, the
federal funds rate is what it'scalled that lowers the
(33:39):
three-month, two-year and thatwill follow.
So what that would affect isyour prime rate, so your line of
credits.
You'll see a quarter percentkind of come on there.
You'll see auto loans usuallyfollowed lower as well with the
Fed.
But the 30 year mortgage ratethat we're talking about, that's
(34:00):
purely tied to the 10 yeartreasury, and so there's a great
chart on it.
If you just Google what makes upmy 10-year treasury or my
30-year mortgage, there's the10-year treasury and then you
have basically what the bank orthe lending institution needs to
make on that.
So that's another 1% to 2%.
(34:21):
And then you have the marketwhoever you're selling these
loans off.
So most loans if people didn'tknow this on the 30-year side
get sold off to the market.
So you go to your local bankcredit union, you take out your
application, you get that loanon your house.
The bank will then turn aroundand sell that out to a bigger,
(34:42):
more liquid player, because thebank doesn't want to service
that.
They don't make their moneythere, and so that is influenced
by a few different factors, butit's primarily the 10-year
treasury.
And how is that influenced?
We can go down that rabbit holeof.
It's basically what we weretalking about earlier inflation
(35:02):
and the labor market.
Speaker 1 (35:04):
So those are the two major things.
If I'm like, hey, what's the?
What's going to happen withmortgage rates?
Yes, I can look at 10 yeartreasury.
But if I want to go a littlebit more granular, I'm going to,
I'm going to be following thatreport every Thursday morning on
the labor statistics.
And so if the labor, ifunemployment rises, then we
should start to see some drop inthe mortgage rate.
Speaker 2 (35:24):
Yeah, you will see a drop in the 10-year right, and
so the reason why I go back tothe 10-year, because it's more
purely correlated to the dataright.
So if the 10-year drops, the30-year will follow it.
But sometimes it doesn't followthe 10-year perfectly, and
that's because what we weretalking about earlier is
uncertainty.
(35:44):
So when there's a higher levelof uncertainty in the market,
the difference between the30-year and the 10-year can kind
of fluctuate, right.
So the 10-year could go downand your 30-year stays a little
bit the same, because we don'tknow what's going on in the
economy.
Both will come down, but theyjust might not come down at the
same rate.
Speaker 1 (36:03):
Ah, okay, got it.
That makes sense.
Oh, might have lost you herefor a second.
(36:27):
So, cole, we just talked aboutthe 30-year fixed rate.
Uh, for more people, like, ifyou're flipping, that's really
important for who's going to buyyour house, right?
What about, like, for me as theinvestor on the commercial side
(36:50):
?
How does any of this stuffaffect rates on the commercial
side of things?
Speaker 2 (36:55):
yep.
So you know, as we talked right, the fed, federal funds, right,
it's kind of on that shorterend of the yield curve and you
know the Fed funds affectseverything in the sense that
it's just kind of the baselineinterest rate that the
government's willing to pay onthe money.
And for the commercial side,what it really ties to each
institution is a little bitdifferent, but it ties heavily
(37:17):
to the.
They call it the five year FHLB.
It's similar to the 10 year.
It's just another market bondrate, but this is more based on
the five-year and that's becausemost institutions do a three to
five-year arm.
Yeah, they call it right, and sothat's why they kind of base it
on a little bit of the shorterend of the curve, sure, and the
commercial side what they do isthey do a spread.
(37:39):
So because most institutionsthey keep the loan in-house
right Capital Credit Union givesyou a loan, we keep it right.
Community First gives you aloan they keep it right on the
commercial side of things.
They're not turning around andselling it on the back end like
they do with the traditionalthird-year mortgage product and
so because of that they have aspread that they need to make on
(38:03):
that to be able to stay inbusiness and roughly that's
between 250 basis points and 350basis points.
Speaker 1 (38:11):
Okay.
Speaker 2 (38:12):
Depending on your relationship, it can fluctuate
by a good 1%.
So for those who in theaudience who don't know what a
basis point is, it's basicallyone, one hundredth of a percent,
right, so it's.
You know.
Point zero zero one is you knowone basis point or point zero
one.
So it's basically 100 basispoints equals one percent.
(38:34):
So one basis point is pointzero one percent.
Speaker 1 (38:38):
So when we refer to that, that makes sense and so is
that.
Is is the five-year.
If I watch the, say, the10-year treasury and I see that
going down right, then I'm like,oh cool, 30-year rates are
probably gonna come down at somepoint.
To follow that Is that similarLike is the 10-year, then is
that an indicator I could watchand say, oh, the five-year is
(39:07):
probably going down too.
Or what are the factors youmentioned earlier?
The labor over inflation is thething to be watching, is that?
Speaker 2 (39:10):
similar to the five year or are there different
things to be watching for thatfive year?
So it's similar.
If the economy is going into arecession the short end of the
yield curve as they call it thefederal funds rate to the two
year treasury it'll start todrop.
So the numbers came up todayearlier.
The two year kind of stayedrelatively the same because they
(39:32):
weren't good, they weren't bad,didn't really change anything.
But if the numbers were bad,you would see a 10 basis point
drop, which is prettysignificant in the low end and
that starts to price in kind ofwhat they think the market
thinks the fed will do.
Yeah and so yeah, it's reallyjust kind of watching what the
labor market does and how that,you know, starts to trend.
(39:53):
Uh, the market will front runany recession, so they'll know
beforehand.
Um, like, if you see the bondmarket, right now there's the
10-year and the 2-year.
They call it the 10-2 spread.
Right now it's 50 basis points.
So right now the 2-yeartreasury is, let's just say it's
3.5% and the 10-year treasuryis at 4%.
(40:14):
So there's a 50 basis pointspread and that usually
indicates when you sit at thatlevel there's some bad stuff
going on in the economy orthere's a recession kind of
coming here.
That's usually when stuff tipsoff.
But yeah, for the averageinvestor.
If you just look at the weeklyunemployment claims and you just
kind of see the trend right,not one report is going to
(40:35):
change anything.
It's the trend of the report.
So they call it Jobs Friday.
It's the first Friday of themonth.
Typically the jobs report forthe prior month comes out.
Okay, and same thing.
The federal reserve wants tosee a trend of these data points
before they make any decisionson what they're going to be
doing.
Okay, and that's what affects,kind of the market rate.
Speaker 1 (40:57):
So one, one bad month isn't going to do anything.
One great month isn't going todo anything.
It's going to be what's thepattern that we're seeing, and
then their Fed's going to dosomething based off the pattern
or hold it based off the pattern.
Speaker 2 (41:08):
Exactly.
And that's the same thing withthe commercial loan rates, right
, you see the five-year could befluctuating, right, it's not
just flatline, it goes up anddown.
Your commercial lender is notgoing to just follow that to the
T.
That's why you see, most peoplequote around 7% and that's kind
of been that way for the lastsix to seven months or almost
(41:30):
even a year.
It's been that seven to sevenand a half percent.
And the reason why it kind ofstays there is just because it's
hard to fluctuate with themarket.
You know it's up and down everyday.
So you want to have some levelof consistency and some
investors would have saw thatpricing was a little bit better,
probably back in last AugustSeptember.
Timeframe commercial loans Ifyou were getting a quote, you
(41:50):
know it can affect the market,especially when you know
institutions are trying to grow.
They can be more aggressivewhen the five years lower, but
typically they'll try and keepit steady.
So like, if the Fed cuts, whichis projected in June is the
next 25 basis point cut, youknow you'll see overall the
market come down a little bit,at least 25 basis points.
(42:12):
So you know you said of sevenyou'll be at six and three
quarters.
Speaker 1 (42:17):
Okay, okay, very cool , very cool.
Well, that is good to know, man.
What about just as we kind ofget of get to wrap here, colton?
What about overall economics?
You know, before we got on hereyou were showing me a pretty
cool site and if you want totalk a little bit about that and
then how people could use it todo their own research, as time
goes on, so if you're listeningto this, say, three months from
now, everything we're talkingabout might be irrelevant other
(42:39):
than this point right that we'retalking about here of how
somebody could maybe do some oftheir own research and stay up
to snuff on different markettrends in your market, whether
that's Northeast Wisconsin,madison, Wausau, whatever the
case is, if you want to justtouch on a little bit of what
this data is and how somebodycould really use it to benefit
(42:59):
themselves as a real estateinvestor, For sure.
Speaker 2 (43:07):
So I'm going to plug.
One thing is for the if youwant to know where the Federal
Reserve is going, or at leastwhat the market thinks, it's
called the CME FedWatch group.
You type that in, or FedWatch.
If you type that into yourwhatever browser Google you
should click the first link andyou slide over to your screen.
There'll be a thing that saysprobabilities.
You click on that.
It'll show you for the next 12to 18 months of where the market
(43:30):
anticipates the federal fundsrate will be, and that can give
you an anticipation of whereinterest rates will be six to 12
months from now.
It changes every day.
It changes when the datareleases, but right now the
market's predicting basicallyfive to six rate cuts over the
next year and a half.
Wow, so it's about one to oneand a half percent.
Wow.
(43:50):
So, that's the first-.
Speaker 1 (43:52):
What was it called CME?
Speaker 2 (43:54):
CME FedWatch Group FedWatch Group.
Type that in, I'll put that inthe notes.
Speaker 1 (43:58):
I'll put that in the notes.
I'll put that in the show notes.
Fed watch group.
Speaker 2 (44:02):
Okay, yep, so great, great plug there.
Just say, cause people ask thelenders like, hey, where are
interest rates going?
Right, you know we work inbanking.
We don't know.
Yeah, you know, you pointedthis like this is the most
(44:23):
accurate.
So that's that one.
The one that Corey here istalking about.
It's called the Redfin DataCenter, and so you go to that.
You type in Redfin data center,google, you scroll down, you'll
see something that kind ofcomes up called Redfin Weekly
Housing Market Data, and there'sa whole list of options that we
can touch on here.
But then, for those of you arein Green Bay, you go to the
(44:44):
region name where it'll say allRedfin metros.
You type in Green Bay andyou'll get your local metro data
.
So for us it's Green Bay.
Speaker 1 (44:54):
Yeah, and what I struggled when we were on here
prior Colton.
So for those of you guyslistening, you go to the website
, you go down, you have to likekind of look to the right side
of your page off the right ofthe graphs, and then it's like
the second little dropdown.
You'll see a little dropdownthing.
You click on that where it saysall metros and then you can
type in Green Bay, madison,milwaukee, wherever, wherever
you're listening to this, andyou can get just really a ton
(45:15):
you could nerd out for a longtime on this website.
Speaker 2 (45:22):
Yeah, it's really cool.
It's got like three to fouryears of prior data so you can
kind of see what are the trendsin your market, see what's going
on.
And I think that's the pointthat you know you're going to go
with here is, if you go toGreen Bay and you type in right,
we're doing this kind of liveright now and you type it in,
you go, you can do a four weekor 12 week average.
I personally like the 12 weekaverage.
It kind of smooths out the dataa little bit, gives you a more
(45:44):
clear picture of the trend.
And you just go to new listings.
Median price and this is whatthe real estate investors here
are going to love to hear andsee is prices up, are up 10%
year over year.
Right, our median listing pricein green Bay right now, per
Redfin data as of let's see, asof let's see, as of april 13,
(46:07):
it's over 340 000.
That's the listing median price.
Right, a year ago that pricewas 313 000 so buy and hold
investors.
Speaker 1 (46:16):
Your, your assets went up over the last year,
right, right, good for you.
For those of you flipping, Iwould say for me that what that
tells me as a flipper is like ifI can stay around the median
for my list price or under, I'mgoing to have a lot of buyers
that can afford that house,right?
Is that what you would say fromthat as a banker, colton?
Speaker 2 (46:38):
I totally concur and you know this is.
You know you've talked torealtors in the area that
anything over to that three 2330marker that median number.
It's tough out there.
It's longer days on the market,you're going to have a little
bit less competition, butanything under that it's flying
off the shelf.
You're still getting multipleoffers and that was one of the
(47:01):
conversations we had is just ifyou can get a lower price
property and fix it up, you knowthere's a buyer pool there for
you.
Speaker 1 (47:09):
That's amazing.
So I love this stuff.
Man, I could nerd on this typeof stuff all day, so I'll put
that in the show notes as well.
Guys, the Red Bin Data Center.
So you guys could go nerd onthat as well If you're into
nerding on things like that.
But that's just a goodindicator.
Like in 12 months, look at howmuch that's changed the median.
So if you're buy box, if you'regoing to use this to help
develop your buy box right Oflike, hey, where do I?
(47:31):
If I'm flipping properties,where do I want to be?
I want to be at the medianprice or below right For my ARV.
Well, now that's going tochange.
So you want to be checking thaton a regular basis.
Or you're going to be missingout on deals because you're
stuck at 313 and your ARV islike ah, this one's at 325.
I don't want to go over BoomNow you just missed out on a
great opportunity to get oneright in the hot price point
(47:52):
there.
Speaker 2 (47:53):
Yeah, and the other point too, right, if you want to
go to this and kind of seewhat's going on in your market,
is you can track what's the newlistings data, right?
There's a lot of doomers outthere.
They call it doom porn orthey're just like oh, the
housing market's going to crash.
The housing market's going tocrash.
And you look at the newlistings, just in green bed
we're on track for 2024 numbersLike we're in the same trend.
(48:15):
There's nothing abnormal rightnow that's going on in the
market.
There's low inventory, there'sa lot of demand still, and so
those factors haven't changed.
And the other thing too isthere's another great chart If
you just look up year over yearreal estate prices.
Just even in the country,there's been two periods, two
periods in the last 40 yearswhere real estate prices have
(48:37):
gone down.
It was 1995 and then 2008 to2011.
That was the only time wherereal or like nominal housing
prices went down.
Every other year, prices havegone up in recession or not
recession.
And that's kind of that pointwhere we were talking about
earlier.
If interest rates come downduring a recession, guess what
(48:58):
that does?
That opens up your buyer pool,right.
That opens up demand, becausemost people make their purchase
based on the monthly paymentthat they can afford, and when
interest rates go down, guesswhat?
That monthly payment opens upyour entire aperture what they
can pay for a property.
And so yeah.
Speaker 1 (49:18):
It's so interesting.
People don't buy on price, theybuy on payment.
Speaker 2 (49:21):
Yep.
Speaker 1 (49:22):
So yeah, and right now, if prices are still going
up over the last three years,when interest rates have gone to
the highest they've been, sincewhat?
Since the 80s, maybe, or maybethe 2000s, I think mid-.
Speaker 2 (49:36):
Early 2000s Unaffordability of housing is as
bad as it was in the 80s, wheninterest rates are at 20% Wow.
Speaker 1 (49:44):
So if prices are still going up in this, can you
imagine what the price of yourasset is going to do when the
interest rates drop?
It's going to go up.
So if you're sitting on thesidelines, this is my take on it
.
Colton, you tell me if I'mcrazy on this.
Speaker 2 (50:06):
If you're sitting on the sidelines waiting for
interest rates to go down, whatyou're basically doing is just
waiting to pay a higher pricefor that same property.
That's what history goes toshow you, and inventory levels
are still historically low.
There's another great chart ofnationally.
If you just look up nationalinventory levels, we're roughly
at 1.3 million right now.
If you go pre-COVID, you'reroughly at 2 million.
You go at peak recession 2008,.
(50:27):
Great financial crisis, realestate bubble we're at 4 million
.
So we're at a quarter of whatthe great financial crisis was.
We're at almost half of what wewere pre-COVID.
So it just goes to show you thecurrent dynamics aren't there
for a big housing crash.
And the only areas where yousee prices going down are Texas
and Florida.
(50:48):
And that's because the newbuild construction there is
heavy and so it's a supply anddemand thing, and every other
metro area in NortheastWisconsin.
We're just not building enoughand it's just hard, it's
expensive to.
You know, builders don't wantto lose money right in
construction.
Speaker 1 (51:05):
I just read something this morning, actually kind of
preparing for this and some ofthe economic stuff I get every
day in my inbox, and they weretalking about builder confidence
is really really low right nowbecause of the uncertainty they
don't know where prices aregoing to be on the materials and
all this other stuff, sothey're pulling back on building
new stuff again, which is justgoing to create a bigger housing
issue, which, again, dependingon what side of the fence you're
(51:28):
on, the best time to plant thetree was 20 years ago.
Second best time is today, andit's not prices, aren't, in my
humble opinion.
I'm no Robert Kiyosaki here orsome other financial gurus, but
in my opinion I don't seehousing prices coming down for a
long, long time, like you said,twice in the last 40 years.
Pretty safe bet.
I think I did a solo episode awhile back with a chart that
(51:52):
shows the losses in real estateand I think six out of the last
76 years I think it's somethinglike that We've either had zero
growth or loss.
So pretty safe bet.
Speaker 2 (52:05):
And four of those years was from 08 to, basically,
2012.
That was again a wholedifferent dynamic.
You had ninja loans wherepeople could qualify for
anything.
The builders were building leftand right.
We don't have those dynamics.
Speaker 1 (52:19):
Lending's tighter, building's a lot less, yeah
absolutely Well, cole, we got towrap here.
Buddy, I know you actually havea real job that you have to go
do, so we'll let you get to thatman.
Before we wrap, though, wealways ask a little fun question
here, and part of the reason wedo this is I have people
outside of Wisconsin that arelike, hey, I might want to
invest in Wisconsin.
What is Wisconsin all about?
About what's your favoritewisconsin tradition or place to
(52:42):
visit here in the great state sofavorite tradition?
Speaker 2 (52:47):
I was thinking about this.
I love a good supper club.
I know a good friday fish fry.
You go to the supper club.
You go to your a nice salad bar, get the salad, you have your
double drinks, you know fromthat five to seven happy hour,
and then you get a good fish fry.
Uh, it's a little clam chowder.
Speaker 1 (53:04):
Absolutely, man, that's.
That's been a real popular oneon the on the show the old
Friday.
You know supper clubs andwhat's funny is I just grew up
thinking everybody has these andit's really like a Wisconsin up
maybe Minnesota thing, butoutside of that it's not very
popular outside of here.
Speaker 2 (53:21):
So very traditional Midwest Wisconsin.
And cheese curds, that'sanother one.
Uh, you gotta plug cheese curdsin Wisconsin, culver's great
Wisconsin brand.
I know they're expandedelsewhere but can't beat either
of those.
As far as the location, I'llanswer that second part.
I haven't heard this one much,but I love the North woods,
minocqua so pretty Um and theMinocqua Tomahawk area, all the
(53:44):
lakes up there.
It's gorgeous.
Speaker 1 (53:47):
Yeah, I'm a door County in which that comes up
once in a while now.
Um, but I love, I still preferbeing in the North woods, like
if I, if our family was likecloser that way, I would move up
to the North woods of Wisconsin.
There's like nothing like itthat I travel all over the place
and I still love the northwoods of wisconsin, so I'm right
there with you, buddy.
Speaker 2 (54:04):
That's probably my favorite spot in the state too
yeah, door kind of gets a lot oflove, so I want to give the
northwood some love.
You know, it's a lot lesstraveled, a little bit more
rustic yes, yes, absolutely alot more lakes.
Speaker 1 (54:15):
I like the inland lake.
I love, I love, I love livingby the bay, but it's so.
The water is so dang cold.
It's like by maybe mid July Ican actually get in there, and
then that lasts all of two weeks.
Before August, cold nights kickin and then I'm like dang well,
that was fun.
It lasted, you know exactly.
Well, Colt man, this has beenawesome.
Dude, this is one of myfavorite episodes we've recorded
(54:36):
so far.
I love talking about all this,this kind of economic stuff.
I'd love to have you back on.
You know, as the yearprogresses and you know, things
start to shake out a little bit.
If you're up for that, man, ohfor sure.
Speaker 2 (54:46):
Yeah, I love providing data and value.
You know, the end of the day iswe can all be our own resource.
You know, use the Redford DanceCenter, use the other links and
just stay aware.
But, as Corey always says, takeaction because at the end of
the day, that's what's going toget you where you want to go.
Speaker 1 (55:01):
Absolutely, brother.
If anybody wants to connect upwith you, Colton, what's the
best way for them to get intouch with you, man?
Speaker 2 (55:07):
Yeah, facebook, colton Van Elzen,
K-O-L-T-E-N-V-A-N-E-L-Z-E-N.
If anyone wants to reach out,I'll give out my number, but
number, but you know that's920-639-5884.
(55:28):
But I try and post weekly,bi-weekly, some sort of econ
update, some sort of just kindof lesson to learn and see
what's going on so you can kindof help understand, you know,
and make a sense of what's goingon out there.
Speaker 1 (55:36):
Beautiful man.
Well, thanks for being on,buddy.
This has been great, and ifyou're out there listening to
this and you're like, hey guys,I will.
I would love to get in the game, but I just I'm not ready to
start looking at deals yet.
I just have some questions orwhatever.
You don't have to sign up forthe buyers list for us at
Wisconsin discount properties.
You can just go to the websiteand fill out the contact us form
(55:57):
that's going to be a little bitdifferent and just try to help
you answer some questions,connect you to some great people
like Colton or whoever else outthere you might need as a
resource, and try to help youmake that first step into
getting into this exciting gamethat we love here called real
estate investing.
With that, Colton, we're goingto wrap buddy.
I appreciate you, man, andappreciate you being on, and
thank you guys all for listening.
(56:26):
If you guys got some value outof this episode, please share
this thing.
It's not necessarily for us tohelp grow the audience.
We love that.
We appreciate that.
But I go back to the rippleeffect right?
You guys sharing this show?
If there's value here and youthink somebody could benefit
from this, there's people outthere that are stuck working a
nine to five, that they hateevery single day, and this one
episode could be the thing thattriggers them to take action to
change their life and theirkids' lives, and those kids'
lives and the futures of that.
So please share the show, be afriend, let's get the word out
(56:48):
there and then with that, we'llsee you guys on the next episode
.
Everybody, welcome back to another episode of the
Wisconsin Investor Podcast.
I am your host, corey Raymond,and I'm excited today because,
again, I always try to bring youguys amazing guests, and I have
another one lined up for youtoday.
We're going to get into somereally juicy stuff today that I
nerd out on, and I love talkingabout this kind of stuff.
But I'm going to save that fora second because, as I do
usually, I'm going to do alittle commercial for Wisconsin
(00:22):
Discount Properties, whosponsors the show.
I think I talked about this ona different episode, but I'm
going to talk about a deal thatI picked up, actually from
Wisconsin Discount Properties inthe Oshkosh area, so this is
one that was out to the list.
If you're not on the buyer'slist, you can get on there by
going towisconsindiscountpropertiescom
and putting your information in.
We'd sent an email out.
(00:43):
It's a trailer house in Oshkoshon about a half acre with an
attached garage.
It's not a normal foundation,so it's not like somebody can
come just pick this baby up andmove it, but nobody wanted it,
nobody offered on it, and sothat's usually what happens.
If I'm picking up a deal, it'susually because we ran it
through our process and nobodywanted it.
So now I snatched it up andI'll tell you what this deal end
(01:03):
up being.
It's going to be a phenomenaldeal.
We got it for, I believe, 50 or55,000, um, headed out to the
list for a little higher.
You know, as the boss, I get alittle discount on some of these
things, uh, but regardless itwould have worked either way.
We've got about 5,000 into theinto the property and we just
signed a lease for 121,295 onthis bad boy.
(01:25):
So I'm going to be all into itfor about $60,000, maybe less,
and it's going to rent foralmost $1,300 a month.
Now, not the sexiest property inthe world.
You look at it from the outside, doesn't look great, but it
gets the job done, it's bringingthe rent in and it's going to
cashflow like crazy.
So imagine adding 10 of thoseto your portfolio, what that
(01:47):
could do for you.
If you're missing out on thesedeals, you're not making offers.
You can do that again.
Go towisconsindiscountpropertiescom,
plug your information in and getadded to the buyer's list and
start getting deals like thissent to your inbox every Monday
morning 6 AM.
With that, let's get intotoday's episode.
I got my brother from anothermother, colton Van Elzen here,
buddy.
What's going on, colton?
Speaker 2 (02:06):
What's up?
Corey Glad to be here.
Speaker 1 (02:07):
I'm excited to have you.
Yes, Colton and I met actuallythrough church years ago and you
were still in high school,right?
Speaker 2 (02:15):
That is correct.
I was going to wonder if youremember I vividly remember how
we met was through the GuatemalaMission Trail.
Yes met was through the uhguatemala mission.
Yes, oh yeah, I don't know ifyou care.
You remember this, but thereason you guys got to go on
there is because there was alittle cow that plotted on your
uh spot oh yeah, I remember thatvividly.
Speaker 1 (02:35):
I tell people about that story all the time.
Yep, yep, that was uh, the togive our audience a little
background on that.
So wisconsin this is one of thethings I love about wisconsin.
There was a charity, uhfundraiser.
I donated 50 to uh, I think itwas juvenile arthritis,
something or another forsomebody in one of my networking
(02:56):
groups and, um, I forgot allabout it and it was for the big
ox plop bingo.
So what happens here and somecharity fundraisers is they mark
off these different squares andthen they release these cows.
I believe I've never actuallyseen it, but I this is what I'm
told.
And if the cow poops in yoursquare, you win what it said
(03:21):
prize, right.
So for the 50 prize, thewinnings were $12,500.
And at the time this was 2016,.
I think Colton is that when wewent, yeah, it's 2016, 2017.
Yeah, Somewhere in that ballpark.
We didn't have.
We didn't have a lot of money,and so we had signed up to do
this missions trip that Coltonand I went on together and
that's how we met and we didn'thave enough money to go on it.
(03:43):
But you know, you tithe, or bigbelievers in tithing, and God
shows up and provides inmysterious ways and boom, big
plot, ox plot, bingo was one wayGod was.
I was kind of laughing.
I'm like you're funny, god,that's it.
I guess we're going on this trip.
Thank you, sir.
So we went on the mission tripwe had, Uh, so we went on the in
(04:10):
this mission trip.
Speaker 2 (04:11):
We had a great time.
We got to build some wells inGuatemala together in about 110
degree heat and humidity.
Speaker 1 (04:14):
I think Right.
So it sounded about right.
Yeah, we uh, we worked ourbutts off.
We sure did.
We got not one well, but twowells.
We were overachievers,overachievers, and then we
brought that work ethic back andtoday we apply it in real
estate investing right.
Exactly, yeah, and the we applyit in real estate, investing
right, exactly.
Speaker 2 (04:26):
You know, the funny thing is that was when you guys
were just getting intowholesaling or like you guys
were just starting your business, and I remember we were you
know the many van rides whereyou got hours to just sit and
chit chat and you're talkinglike, yeah, I'm going to call
these people and door knock onthem, I'm going to sign a
contract and I'm just going tosell these contracts.
I was like that sounds illegal,it doesn't seem right.
(04:47):
Like my parents had a buildingbackground.
I'm like, no, you do thetraditional list with your agent
and do all this P's and Q'sthat you know we're told about
and you know you you've donewell with it.
So yeah.
Speaker 1 (04:59):
Yeah, that was crazy.
That was, yeah, you're right.
That was like right when wewere starting up in 2016.
So it's been a fun ride since.
And let's talk a little bitabout you, though, Colton.
So you also have some realestate investing that you do but
you're also a underwriter forCapital Credit Union on the
business, commercial side,correct?
Speaker 2 (05:17):
That is correct.
So yeah, a little bit about me.
I'm born and raised in greenbay, so true wisconsinite, uh
slight traitor in me.
I went out to the university ofminnesota so I studied out
there, got my degree at gopherum, and uh loyal viking fan now
you know being converted whenwhoa whoa.
Speaker 1 (05:38):
You might have to end this podcast in the background
here, but yeah, wow.
That's gotta just be hard tolook at every day now, since
you're purple people hereexactly, uh, get, get the inside
information you know, send itback to the.
Speaker 2 (05:55):
That's right now.
Uh, studied finance accounting,got my degree out there, came
back my wife's from here, so wedid the traditional house
hacking route.
That's how we kind of got intoreal estate and kind of done
networking and all that andtrying to learn more.
Um, did our first flip lastyear, so you know that was fun,
man.
Um, a lot of learning lessons.
And then, uh, yeah, been incommercial underwriting for the
(06:18):
last three years three and ahalf years so get to see all of
the other experienced realestate investors and business
owners, kind of come through andsee how they do operations and
a lot of good learnings fromthere as well.
Speaker 1 (06:31):
That's awesome, man.
That is so cool.
We got a lot we can unpacktoday and I'm excited to talk
about it because you presentedfor the REI Success Club, which
is a little club that we host in.
Green Bay and you brought I mean, you had just like some amazing
information is what thefeedback was.
I was down here in Florida, sounfortunately I wasn't able to
attend, but I said, man, I gotto get Colton on here because I
(06:52):
love talking about the economyand what's happening and I
always like to try to figure outwhere's the puck going.
Right, like that's one of thethings I want to.
I don't want to know where apuck is at today.
I want to look ahead and saywhere is this thing going the
next six months or 12 months,and so we're going to get into
some of that a little bit.
Talk about the flip, though.
How did you, how did you guysend up doing on the flip?
Speaker 2 (07:10):
so it was a three bat , two bath ranch in green bay um
bought it off anotherwholesaler.
Speaker 1 (07:16):
Sorry, I know, I know this guy's a trader all around
man going out of minnesota.
Speaker 2 (07:22):
He's cheating on me with other wholesalers benedict
arnold man oh my goodness butyeah, it was uh one of those
hoarder houses.
They uh, supposedly, per theneighbor, had 30 cats in this
house, 30.
It smelled like it.
It smelled like it, um, andthey were the people that were
leaving were so generous, theyleft us a, a cat.
Speaker 1 (07:43):
Wow, that was really nice of them.
Speaker 2 (07:45):
Yeah, we couldn't find it, but they left it.
Oh wow, they said here's somefood and let us know if you find
it.
Here's our number.
Uh yeah, and so the great storyof it was we found the cat
three months later and the duckwork.
No dead not not alive anymore.
(08:08):
Yeah, as I say, that's, that'sin the middle of summer.
So, oh yeah, our house smelledeven better.
Wow, it was quite in, uh, quitea learning experience there, my
goodness.
But nothing a little killscan't uh cover and remove the
smell from.
And we cleaned it up, fixed itup really nice, um, and we uh
got it ready.
And you know one of the thingsyou use when you get these
projects you're like, oh, it'sgoing to go boom, boom, boom,
(08:30):
we're going to be done in andout of here in two, three months
.
And you know, six months laterwe were at the closing table and
getting it sold.
But we made a small profit.
You know, I wrote my parentsinto it and if it wasn't for
them, I don't think we wouldhave profited, because you know
my dad's skillset and being ableto figure out the problems and
not have to pay the highercontractor fees.
(08:51):
Uh, we were able to save somemoney, but the dollar per hour
wasn't good.
But hopefully the education onthe backend for future flips is
kind of where the payoff willhopefully be.
Speaker 1 (09:01):
Dude, if you did a hoarder cat house right out of
the gates with a dead cat inyour duck work buddy, you got
your education for sure and youdidn't lose on it.
I mean, that's a hell of a,that's a win all the way around,
right there.
Speaker 2 (09:13):
Exactly.
Might've lost on the dollar perhour timeframe, but you know
that's.
That's just the price you paysometimes.
Speaker 1 (09:18):
That's it, man.
I'll tell you what the firstcouple.
Like my brother I had him onthe podcast early on and, yeah,
he always talks about his firstflip he lost, I think, like 16
or 20,000 bucks or something onthe first one.
But you know, colton, how muchwas it to go to UW Minnesota?
Speaker 2 (09:34):
It was about 15, 20 K granted.
I joined the national guard, soI'm in the army currently.
You know.
Speaker 1 (09:39):
Thanks for your service.
But uh, yeah, I mean that wasprobably a 60 80 000 education.
There you go 60 to 80 g's rightdown the tubes.
Now you're making a littleincome thanks to that now with
the old capital credit unionthere, but to make a few bucks.
Could you imagine getting paida few bucks to go to college and
learn a little little thing ortwo and get out with a heck of
an education you know I think itwould uh reshape a lot of how
(10:04):
people think about money and theeconomy, and you know where
they spend their time.
So yeah, absolutely my kids,like we, just we they're.
I'm so proud of these kids.
They they sold some water andseashells on the bike trail
behind our house most likelyillegally, I think.
I don't think you can sellthings on the trail, but they
did it and I was.
I was out there helping, soI've, I'm part of the crime.
(10:26):
Yeah, I'm culpable.
They made about 130 bucks inlike four hours out there, which
was awesome.
Yeah, like people were justgiving them like $10, 20 bucks.
And then they were like, hey,we should do this for the
homeless.
And I was like this is awesome.
You guys are such good kidsLike they could have either way.
I was proud of them.
Like your entrepreneurs may takethe money, but then they
started advertising to peoplethey were doing for the homeless
(10:47):
.
I'm like, well, now you got togive it to the homeless.
You can't just you can't changeyour mind after you start
saying that, right, so they madethese little packs.
They went to Walmart.
I took them to Walmart.
They bought these little packsof like you know, little kits of
(11:08):
like grooming kits and someother stuff and Bibles and these
other things, and so we'releaving florida tomorrow and
yesterday we went to thishomeless shelter to just we
couldn't find enough homelesspeople, so we just went to the
shelter to give them, to them todistribute, and they kept.
The lady up there was so likeoh, you guys are great kids, you
know all this stuff.
She's like where are you gonnago to college?
You gotta go to college.
and I'm like I don't know if youdo.
I don't think you do.
I think you could do a flip andget a couple of cats in your
ducks and you could get a heckof an education.
If that's the direction youwant to go, you don't really
need the college degree, butthat's a whole nother podcast
(11:30):
topic that you and I could getinto.
Talk about the cat thing,because I want to stay on this
for a minute.
We have a lot of economy stuffwe want to get into, but the cat
smell out of there, cause thatdeters a lot of people animal
smells.
Speaker 2 (11:50):
Yeah for sure.
So the first thing is, when youhave a property right that
usually has a smell to it is yougot to figure out where's the
smell coming from, where is itlocated Right.
And so in this property it waslocated everywhere, you know.
It was located everywhere, youknow when you you got 30 cats
that they're not missing a spot,you know.
So the first thing we did waswe tore everything out that you
could remove right all thecarpet, all the flooring.
(12:12):
We had to remove all thecabinetry, a lot of the woodwork
that was stained with the p thesubfloor yeah, okay, got rid of
the subfloor and again, thatsounds scary but a lot of it was
.
You're just taking the saw,cutting out the bad spots,
putting in the new stuff, layingin the new OSB, and you were
(12:32):
fine.
And so the stuff that wasn'treally visible and you could
still smell it we applied whatwe called kills.
There's other stuff like brinprimer, so it's like a primer
paint that you can buy at yourlocal lowe's home depot.
It's about 150 dollars for fivegallons and it covers pretty
(12:54):
well.
And so we basically tookrollers and we rolled it over
the entire floor and even someof the wall areas.
You know the lower wall areaswere kind of peek and splash up.
Even some of the wall areas,you know the lower wall areas
were kind of peak and splash up.
And we did about one to twocoats of that through the entire
house and it was time consumingbut it was well worth the
investment because afterwards itsmelled like a brand new you
(13:15):
know house in a sense.
Right, yeah, you didn't havethat odor lingering.
We put some air fresheners inand some other stuff you know in
the paint to help you know,once we did the painting of it
to help get it even freshersmell, but yeah, yeah, I think
that's one of the great point onthis.
Speaker 1 (13:34):
And one reason I want to talk about this, colton, is
I I hear this a lot from buyers.
It's like oh, there's a.
You know, with our process wetry to notate if there's a pet
order, cause we don't we don'tlet people walk through them
until prior to closing.
Once you're under contract,within three days prior to
closing, you can walk throughthe properties.
But we try to tell people, hey,there's a pet smell.
Or we have our inspectors notehey, strong pet odor or
something.
So you can kind of budget forthat.
So if you have a house you'regoing to the point here that I
(13:56):
think that you just made, that Iwant to emphasize if you get a
house, that's a hoarder houseand you're going to replace a
lot of stuff anyway, the catstuff is like budget a little
bit extra for the kills and youknow some subfloor and some
other stuff, but it really isn'tgoing to be that much more than
what you're going to already doto the house to flip it anyway.
Now, if you have a strong petodor and the house is pretty
nice, like pretty turnkey,that's where it can become a
(14:18):
little bit more expensive.
Like we have one right now.
We just closed on and, uh,we're gonna just do a light
remodel on it and put it on themarket.
But it has some carpet andthere's a little bit of a dog
odor in there, so we're gonnaget the ductworks clean.
We're gonna get the ductworkclean and we're gonna replace
the carpet and we might throwsome kills underneath the on the
subfloor just to make sure wegot it all and that's it, you
(14:38):
know, and and then we're gonnaturn it around.
Speaker 2 (14:40):
So not that big of a deal yeah, and I mean the other
thing too, with orders, right,is you just have to remove the
source of order too?
Right, that's huge.
Right, like removing all thecats, having them out of there,
right, we still had a cat livingthere, yeah, p like we were
killsing, and there was p on topof the kills no way yeah,
because we didn't know wherethis cat was.
It was a skittish cat, it was upin the ductwork.
(15:02):
Like you can't see it, right,you'd occasionally think you
hear something.
But you know, when you'reworking in a property by
yourself late at night, you'relike, yeah, that's just you know
.
Sure, the friendly neighborhoodghost you know come to say yeah
, it's just one of those thingsyou just don't know until you
know.
And it's a solvable and, likeyou said, it's not as expensive
(15:22):
as people think.
Right, yeah, you could could belooking at $500 in materials
and then your labor.
If you hire it out, you know afew thousand dollars in paying
fees.
Speaker 1 (15:30):
Yeah, not that big of a deal for sure.
Well, good, I'm glad you guysmade a couple bucks on that.
You got a house, you got a flipunder your belt.
Now the sky's the limit for youguys.
What's the goal for you?
What are you guys seeing in thenext few years as far as what
you guys want to do personallyin the real estate space?
Speaker 2 (15:45):
That's a great question, you know.
I would love to continue to addand acquire.
You know, I think most realestate investors see right the
power of being able to buy realestate, hold it for a long
period of time.
You know, the one thing wedon't talk about is and we'll
get to hit on today but theamazing part of real estate is
you can leverage it right.
Speaker 1 (16:04):
You know as an underwriter.
Speaker 2 (16:05):
I'm supposed to hate leverage, right, you know it's
the bane of these real estateinvestors.
But when you look at thecalculation of a 20-year
amortization or 25-yearamortization, you know, and only
having 20 or 30% down,traditionally right, your
minimum return is still like 6%or 7%.
That's not even an appreciation, that's just you breaking even,
(16:27):
paying that loan back andbasically turning that 20% into,
you know, having that propertyfree and clear.
So the just power of that is tocontinue to focus there.
But I say in the short term,the next one to two years is
purely income.
Got to focus on raising theincome level because the reality
is real real estate costs a lotof money.
It's not cheap business to runand operate in and so that's
(16:49):
kind of the focus is trying todevelop some more income.
Speaker 1 (16:52):
So nice You're going to do that through some more
flips, yeah, okay.
Speaker 2 (16:55):
Yeah, I said more flips and hopefully maybe I try
one or two wholesales.
But you know, you know thatgame's hard.
It's a lot of time, a lot ofinvestment there.
So there's no free dinner outthere.
Speaker 1 (17:07):
No, that's one thing I hope people understand.
I get calls a lot from peoplewho are like I'm going to get
into real estate, I'm gonnastart with wholesaling.
I'm like you know you'restarting with probably the
hardest part of real estate.
Like the easiest one to start,in my opinion, is all that stuff
which, like you said, you hadyour dad helping you.
(17:27):
But if you didn't have your dadhelping you, you got to go find
all these people to do all thisstuff.
And that can be a challenge inany market, but especially in
the last few years, that'sprobably one of the bigger
challenges is finding peoplethat are reliable, reasonable,
to do the work for you.
Or you get a propertymanagement company.
They've got hundreds ofproperties, they could leverage
that workload to get a moreaffordable pricing for you and
(17:48):
they can manage it all.
All you got to do is find thedeals and find the money you get
into flips it's a little morechallenging because now you got
to build a contractor base, butwhen you do wholesaling, you got
to find, a the property belowwhat any flipper has to buy it
at, and then B you got to findthe buyers to be able to buy it
at, and then B, you got to findthe buyers to be able to buy it.
So you have like really twobusinesses that you're starting.
When you start a wholesalebusiness, you got to find the
(18:09):
acquisition side and then yougot to also find the disposition
or the buyers to sell it to.
And people are like, oh, it'llbe easy Get a good deal.
It's like it's not as easy asyou think.
Right, everybody's got theirlittle buy box, their little
preferences of what they want,little neighborhoods they want.
You know it's.
It can be a grind.
Speaker 2 (18:24):
So, and given this market right, Northeast
Wisconsin is probably one of themost competitive, at least in
Wisconsin, because there's not alot of inventory and there's a
lot of sophisticated people thatare looking to jump in and make
a buck.
Speaker 1 (18:38):
So absolutely Absolutely.
Well, let's talk a little bitabout the economy.
Let's transition now.
So, as an underwriter, I'minterested.
What are you looking at in yourposition?
So, if I'm coming to you for aloan, how are you involved in
the economics of what the bankis doing?
Do you get involved in that atall?
Or is that at differentpositions and they just kind of
say, hey, Colton, here's whatwe're looking for as a bank
(18:58):
right now.
We want you to do this, this orthis and underwrite it this way
.
How does that happen?
Speaker 2 (19:04):
So for most institutions the direction of
the commercial portfolio isusually headed by the chief
financial officer, chief creditofficer, so it kind of it's up
to their discretion.
So they get a goal from the CEOand that says, hey, we want to
grow by X amount, and so theyhand that to the chief credit
officer and then their goal isto figure out how.
(19:24):
And so they hand that to thechief credit officer and then
their goal is to figure out how,how they reach that.
And so capital credit union.
I would say we were reallyinvestor friendly to real estate
folks two to four years ago andwe've transitioned more towards
manufacturing and so it's kindof the preference of what that
(19:46):
lead person has and kind oftheir experience.
So, like a lot of localcommunity banks you know, a lot
of the ones that you guysmentioned are great for real
estate investors because that'stheir bread and butter.
They get a lot of folks to comethrough, they can continue to
grow their loan portfolio fromthat.
And even the credit unions Imean we do still quite a bit of
real estate ourselves, and sothe focus is just kind of what
(20:13):
is the goal of growth?
You know, with rates kind ofbeing higher.
The cash flow is a lot tighterand so I would say that's kind
of where people may have seenthat some of the banks and stuff
have kind of walked back alittle bit on real estate or
it's a little bit tighter ontrying to get money on the
commercial side.
But you know there's still moneyout there if the deal's right.
I always tell people you knowyou can get the best deal if you
(20:34):
run your numbers right.
You know if your DS, if yourproperty's cash flowing and you
have good equity position, likeyou're going to get a loan and
it's going to be approvable, youknow where it gets.
Tricky is people come in, theproperty doesn't cashflow, they
didn't run their numbers right.
They're trying to get a loan.
You know max loan to value.
You know 80% and it can bedifficult when you just don't
(20:57):
run those numbers beforehand.
Speaker 1 (20:58):
Yeah, yeah for sure.
And I think what I love whatyou just said there's capitals,
you know, switch tomanufacturing a little bit more.
They want that in theirportfolio a little bit more.
And this is a point I make to alot of people too is, you know,
it's really important to have alot of lines in the water with
different lenders, because theappetites change.
Like you said, the goal changesfor the bank.
You're like, hey, well, buddy,we just did, you know, last
(21:30):
three years we were doing this,and they're like, yeah, but our
appetite changed now.
And then you're like, crap, nowI got to go start all of these
relationships over again, whereyou got to go give a lot of the
banks the same information.
Anyway, when you go try to getpre-approved, you might as well
just get pre-approved by a bunchof them and then just maintain
that relationship andcontinually check in on like,
hey, how are you guys doing onrates, what's your appetite for
(21:51):
real estate right now?
And just stay up to breath,like, and then you just kind of
use them as chess pieces foreach deal and sometimes they you
know, I found some banks reallylike a certain type of deal, so
if I bring them a certain assetclass within real estate.
They might be like, oh yeah, wereally want this one.
We'll give you this rate orthis.
Or they might be like, ah, yourrate's going to be here.
You go to another bank, they'rea percent less.
(22:13):
You're like, oh great, let's goover here.
And just maintaining a lot oflines in the water I found has
really been helpful for us overthe years.
Speaker 2 (22:22):
No, that's huge.
And my big piece of advice topeople is have a lender folder.
(22:51):
So have a PFS, which is apersonal financial statement.
Have that filled out.
So all you got to do is changethe date, change a couple of the
numbers.
You can send that off rightaway.
Have three years of taxes, yourbusiness and personal all in
this lender folder.
And then another separator iswhen you're bringing a deal.
Have a proposal, have a factsheet of what the deal looks
(23:12):
like, what you're going to bedoing to it, what your end goal
of the deal is right.
So say, if you bought it from awholesaler, okay, talk about
the price you bought it at.
Talk about the condition it was.
Talk about the condition it istoday.
Show that level of competencythat you're able to operate
these deals and you're able tomake the numbers work.
And then show them hey, this isthe goal is to continue to grow
(23:35):
.
This you know.
Show that you have an appetiteof wanting to grow and you want
to build that relationship withthem.
That's valuable.
And then the other thing thatany business is communication.
If you can communicate, respondtimely to your lenders like
they're not asking questionsjust to make your life hard.
They're trying to figure outinformation so that they feel
secure in the transaction.
Yeah, remember the lendinginstitutions holding 80 of the
(23:59):
money to buy this property.
Right, like they have more skinin the game.
Right to make deals work, likethey don't want to lose money
either.
You show you're competent.
You show them this lenderfolder.
You communicate clearly, like,right there, you're ahead of the
game.
Speaker 1 (24:15):
Yeah, my guess is Colton.
That's such good nuggets.
I hope everybody goes back andlistens to that.
That's looking, you know, toget lending going from
institutions and hard moneylenders are going to want the
same thing.
So like, even though it's morerelationship based in the hard
money lending and it's kind ofthere's no real standard there,
I guess every hard money lenderis a little bit different on
what they want, they still wanta few things.
They want communication.
All of them do.
(24:35):
They want competency.
Right, those are like two majorthings.
They want to know you got yourcrap together and you know what
you're doing.
That's all there is to it.
And if you're brand new and youdon't know, find a mentor,
somebody who knows and has beenthere before, and just talk to
them about what should I do onthis property and then to
communicate that to your lendersafter talking to your mentor on
those types of things.
But I think that's reallyreally important communication
(24:58):
and competency.
Like the bar's pretty low outthere right now.
Guys, if you can do thosecouple things and I'm talking
not even lenders, just ingeneral you're going to stand
out above the crowd and peoplearen't going to want to do
business with you because notmany people do those very basic
things.
Speaker 2 (25:15):
No, and this is the thing too.
It's like everyone thinks it'spurely numbers.
Right, I would say half of aloan approval decision is
literally can we trust thisperson to repay us?
And how do you build that trust?
It's stuff I would just mentionearlier.
Have your documentations ready,have the clear communications,
answer the questions before theyeven have to be asked.
You know that's the one thingis.
(25:39):
You see, sometimes peopletrying to hide stuff.
You know like, oh, I'm notgoing to mention this, but we're
looking through everything,right, we're that says an
underwriter.
We're trying to unearth, dig upany pieces of information, get
ahead of the curve.
You know it's not going to hurtyou.
Speaker 1 (25:55):
Yep, yep, for sure, yep.
It's always better to just letpeople know what's going on and
be upfront and transparent aboutit, if you can, before they
have to find out and ask youabout it.
Right, yep, yep, for sure,colton, let's get into the
economy a little bit, brother.
So what are you seeing rightnow?
I mean right now, as we'rerecording this, it's mid-April,
right, we just had some tariffsgo out, big, big tariff.
Every time I tie Any problem.
Now that joke in our family islike why did my kid do that?
(26:17):
That's probably tariffs.
That's probably why they'reacting up.
It's probably the tariff.
But seriously, like the tariffswent in, then they're paused,
except for China, and there's alot of turbulence going on.
I saw the 10-year treasury wentfrom 4.3, 4.4, down into threes
, then back to 4.4, which maybeyou could talk a little bit
about that.
I don't know exactly what thatmeans, but I don't imagine
(26:38):
that's probably healthy for mostthings.
But what are you seeing overallas far as it relates to the
economy?
And let's talk a little bitmore about Wisconsin and maybe
even Northeast Wisconsin, sincethat's where you're based on
what you're seeing on theeconomic side of things as the
underwriter and the lender here.
Speaker 2 (26:55):
For sure.
We'll touch on the tariff partreal quick.
The best meme I've seen for itis if you ever watch Karate Kid.
Tariff's on, tariff's off.
Tariff's on tar tear us offright.
Speaker 1 (27:08):
Oh, that's awesome.
I haven't seen that one yet.
Speaker 2 (27:11):
It's just back and forth, back and forth, you know.
So what the terrorists havedone and you kind of talked
about it is they've created alot of uncertainty.
So you can kind of see that inall of the Fed surveys.
The University of Michigansurvey that came out last Friday
was the lowest in three years,four years, like depths of the
(27:32):
COVID pandemic, like level oflack of confidence was from
these tariffs.
What does that actually mean?
Nobody knows.
So that's the best part abouteconomics is like there's a lot
of forward looking indicatorsand right now, to be honest,
those look horrible.
You know the CEO surveys, justnot a lot of confidence.
(27:56):
United Airlines just came outwith their earnings on Friday
and they said we have guidancefor a recession and we have
guidance for normal state, butwe don't know which way we're
going.
Wow, so like even majorcorporations do not know where
we're headed.
So that level of uncertaintycauses the 10 year to go up.
(28:16):
Uh, cause interest rates to goup because the bond market they
want to be paid a premium forthat uncertainty, they want to
be.
So the tariff front, who knows?
We'll see three, six monthsfrom now what actually happened.
What did the administrationstrike a deal on and not strike
(28:37):
a deal on, and we can kind ofpick up the pieces that are left
over from that.
Hopefully I'm of the mindsethopefully they cut deals and
they figure this out quickerthan you know, quicker than they
haven't you know, and we canmove forward.
Because the reality is we allwant to operate on a certain
level playing field.
We want to kind of know whatthe rules of the game are, and
(28:58):
when the rules of the game areshifting, it's tough to operate.
Speaker 1 (29:01):
Yeah, I think, uh to to touch on that a little bit,
one thing we've seen over thelast year and a half or so is
everybody just got used to likehere's where the rates are and
that's the.
That's the game we're playing,and so I can effectively run my
numbers now based off of what Ithink I'm going to be able to
get an interest rate at.
And I think what you justtalked about is, when we have
uncertainty, it starts to createpeople to pull back a little
(29:24):
bit and they start going, whichusually what I've and you tell
me if I'm crazy on this Coltonbut when I see people pull back,
typically I run into it.
I'm like, ooh, good, moreopportunity for me, sweet, and
then I'll acquire a bunch ofproperties and everybody else
sits on the sidelines Causethey're like I don't know what
you know, and especially likeyou talked about your goals, you
want to buy and hold moreassets.
We all realize the buy and holdgame is how you build true
(29:47):
wealth in this, in this world,and like these next three to six
to 12 months, if there's a lotof uncertainty and I can pick up
some deals because of that,because the people are shedding
properties a little bit cheaperand I don't know what my
interest rate is going to be.
But I don't care, because I'lljust refinance that sucker when
interest rates go down in twoyears or three years or four
(30:07):
years or whatever it is.
Any comment on that?
Anything you want to touch onthere?
Speaker 2 (30:13):
Yeah, I mean A.
You got to buy a property,right the interest you're buying
the house, not the interestrate, and that's a good realtor
term.
And the reality is is interestrates fluctuate.
They go up and down, and thegreat part of the country we
live in is you can get 30 yearfixed rate debt on that right
when you know typical one tofour, you know multifamily, and
(30:37):
so when the time comes whenrates are lower, you can
refinance that and make thatcash flow, you know, just
skyrocket and you know one ofthe things that we can kind of
see is rates are expected to godown.
So, even with this uncertainty,if the economy were to go in
the worst case scenario and thisis a good segue to just kind of
real estate pricing if we gointo a recession, interest rates
(31:00):
come down.
It's just the Federal Reserveis not going to let the economy
flounder, they're not going tolet everyone lose their job.
They're going to cut ratesfaster than you can think, right
, think of COVID, think of 2008.
The Fed will backstop theeconomy, right, and so that's
kind of the term right now.
It's labor overinflation is theterminology that they're using
(31:22):
the market for cutting interestrates.
So we had a little bit of datacome out today.
It's called the initialunemployment claims.
Every Thursday at 7.30 amCentral Time, these numbers come
out.
You know, this month was like219,000 or this week was 219,000
.
Not a lot.
If you see that number climbingabove 250 into 300s each week,
(31:46):
then you're like oh, we're,we're, we're going into
recession.
That was what was happeningback in September and August of
last year and when that's whenyou saw interest rates at its
lowest point in the last fouryears Okay, Got it.
So labor is going to be theprimary driver of where we go
with the rates.
But if rates go lower, you'regoing to be able to refi, you're
(32:08):
gonna be able to get in, getthat property refinanced and
capital is gonna be better.
So it's, you just gotta go inand bite the bullet, underwrite
a little more conservative, havea little more reserves.
You know, I don't thinkanyone's gonna go broke if you
have that six to 12 months ofreserves.
Speaker 1 (32:29):
Right.
Speaker 2 (32:30):
So just having that cushion and you know what, maybe
you're not buying 10 properties, but you could buy eight.
Right yeah, just don't sit onthe sidelines.
Speaker 1 (32:39):
Exactly, dollar cost to average it.
That's all there is to it.
Yep, now interest rates if theFed.
Correct me if I'm wrong here,cole, but if the interest rates
from the Fed drop, that doesn'tnecessarily mean that we're
going to see a drop on ourmortgage rates, correct?
Speaker 2 (32:55):
Yep, so there's two separate categories.
So the Federal Reserve theycontrol what we call a picture
of a yield curve.
So a little thing.
So the yield curve the Fedcontrols the short end of the
yield curve.
The long end of the yield curveis controlled by the market.
You know, the bond market andsimilar things influence both
(33:16):
right, inflation, right.
When inflation was running hightwo, three years ago, like you
know, eight, 9% both ends of theyield curve were higher because
the market and the Fed wasraising rates to compensate for
the higher inflation.
So when the Fed cuts the shortend of the yield curve, the
federal funds rate is what it'scalled that lowers the
(33:39):
three-month, two-year and thatwill follow.
So what that would affect isyour prime rate, so your line of
credits.
You'll see a quarter percentkind of come on there.
You'll see auto loans usuallyfollowed lower as well with the
Fed.
But the 30 year mortgage ratethat we're talking about, that's
(34:00):
purely tied to the 10 yeartreasury, and so there's a great
chart on it.
If you just Google what makes upmy 10-year treasury or my
30-year mortgage, there's the10-year treasury and then you
have basically what the bank orthe lending institution needs to
make on that.
So that's another 1% to 2%.
(34:21):
And then you have the marketwhoever you're selling these
loans off.
So most loans if people didn'tknow this on the 30-year side
get sold off to the market.
So you go to your local bankcredit union, you take out your
application, you get that loanon your house.
The bank will then turn aroundand sell that out to a bigger,
(34:42):
more liquid player, because thebank doesn't want to service
that.
They don't make their moneythere, and so that is influenced
by a few different factors, butit's primarily the 10-year
treasury.
And how is that influenced?
We can go down that rabbit holeof.
It's basically what we weretalking about earlier inflation
(35:02):
and the labor market.
Speaker 1 (35:04):
So those are the two major things.
If I'm like, hey, what's the?
What's going to happen withmortgage rates?
Yes, I can look at 10 yeartreasury.
But if I want to go a littlebit more granular, I'm going to,
I'm going to be following thatreport every Thursday morning on
the labor statistics.
And so if the labor, ifunemployment rises, then we
should start to see some drop inthe mortgage rate.
Speaker 2 (35:24):
Yeah, you will see a drop in the 10-year right, and
so the reason why I go back tothe 10-year, because it's more
purely correlated to the dataright.
So if the 10-year drops, the30-year will follow it.
But sometimes it doesn't followthe 10-year perfectly, and
that's because what we weretalking about earlier is
uncertainty.
(35:44):
So when there's a higher levelof uncertainty in the market,
the difference between the30-year and the 10-year can kind
of fluctuate, right.
So the 10-year could go downand your 30-year stays a little
bit the same, because we don'tknow what's going on in the
economy.
Both will come down, but theyjust might not come down at the
same rate.
Speaker 1 (36:03):
Ah, okay, got it.
That makes sense.
Oh, might have lost you herefor a second.
(36:27):
So, cole, we just talked aboutthe 30-year fixed rate.
Uh, for more people, like, ifyou're flipping, that's really
important for who's going to buyyour house, right?
What about, like, for me as theinvestor on the commercial side
(36:50):
?
How does any of this stuffaffect rates on the commercial
side of things?
Speaker 2 (36:55):
yep.
So you know, as we talked right, the fed, federal funds, right,
it's kind of on that shorterend of the yield curve and you
know the Fed funds affectseverything in the sense that
it's just kind of the baselineinterest rate that the
government's willing to pay onthe money.
And for the commercial side,what it really ties to each
institution is a little bitdifferent, but it ties heavily
(37:17):
to the.
They call it the five year FHLB.
It's similar to the 10 year.
It's just another market bondrate, but this is more based on
the five-year and that's becausemost institutions do a three to
five-year arm.
Yeah, they call it right, and sothat's why they kind of base it
on a little bit of the shorterend of the curve, sure, and the
commercial side what they do isthey do a spread.
(37:39):
So because most institutionsthey keep the loan in-house
right Capital Credit Union givesyou a loan, we keep it right.
Community First gives you aloan they keep it right on the
commercial side of things.
They're not turning around andselling it on the back end like
they do with the traditionalthird-year mortgage product and
so because of that they have aspread that they need to make on
(38:03):
that to be able to stay inbusiness and roughly that's
between 250 basis points and 350basis points.
Speaker 1 (38:11):
Okay.
Speaker 2 (38:12):
Depending on your relationship, it can fluctuate
by a good 1%.
So for those who in theaudience who don't know what a
basis point is, it's basicallyone, one hundredth of a percent,
right, so it's.
You know.
Point zero zero one is you knowone basis point or point zero
one.
So it's basically 100 basispoints equals one percent.
(38:34):
So one basis point is pointzero one percent.
Speaker 1 (38:38):
So when we refer to that, that makes sense and so is
that.
Is is the five-year.
If I watch the, say, the10-year treasury and I see that
going down right, then I'm like,oh cool, 30-year rates are
probably gonna come down at somepoint.
To follow that Is that similarLike is the 10-year, then is
that an indicator I could watchand say, oh, the five-year is
(39:07):
probably going down too.
Or what are the factors youmentioned earlier?
The labor over inflation is thething to be watching, is that?
Speaker 2 (39:10):
similar to the five year or are there different
things to be watching for thatfive year?
So it's similar.
If the economy is going into arecession the short end of the
yield curve as they call it thefederal funds rate to the two
year treasury it'll start todrop.
So the numbers came up todayearlier.
The two year kind of stayedrelatively the same because they
(39:32):
weren't good, they weren't bad,didn't really change anything.
But if the numbers were bad,you would see a 10 basis point
drop, which is prettysignificant in the low end and
that starts to price in kind ofwhat they think the market
thinks the fed will do.
Yeah and so yeah, it's reallyjust kind of watching what the
labor market does and how that,you know, starts to trend.
(39:53):
Uh, the market will front runany recession, so they'll know
beforehand.
Um, like, if you see the bondmarket, right now there's the
10-year and the 2-year.
They call it the 10-2 spread.
Right now it's 50 basis points.
So right now the 2-yeartreasury is, let's just say it's
3.5% and the 10-year treasuryis at 4%.
(40:14):
So there's a 50 basis pointspread and that usually
indicates when you sit at thatlevel there's some bad stuff
going on in the economy orthere's a recession kind of
coming here.
That's usually when stuff tipsoff.
But yeah, for the averageinvestor.
If you just look at the weeklyunemployment claims and you just
kind of see the trend right,not one report is going to
(40:35):
change anything.
It's the trend of the report.
So they call it Jobs Friday.
It's the first Friday of themonth.
Typically the jobs report forthe prior month comes out.
Okay, and same thing.
The federal reserve wants tosee a trend of these data points
before they make any decisionson what they're going to be
doing.
Okay, and that's what affects,kind of the market rate.
Speaker 1 (40:57):
So one, one bad month isn't going to do anything.
One great month isn't going todo anything.
It's going to be what's thepattern that we're seeing, and
then their Fed's going to dosomething based off the pattern
or hold it based off the pattern.
Speaker 2 (41:08):
Exactly.
And that's the same thing withthe commercial loan rates, right
, you see the five-year could befluctuating, right, it's not
just flatline, it goes up anddown.
Your commercial lender is notgoing to just follow that to the
T.
That's why you see, most peoplequote around 7% and that's kind
of been that way for the lastsix to seven months or almost
(41:30):
even a year.
It's been that seven to sevenand a half percent.
And the reason why it kind ofstays there is just because it's
hard to fluctuate with themarket.
You know it's up and down everyday.
So you want to have some levelof consistency and some
investors would have saw thatpricing was a little bit better,
probably back in last AugustSeptember.
Timeframe commercial loans Ifyou were getting a quote, you
(41:50):
know it can affect the market,especially when you know
institutions are trying to grow.
They can be more aggressivewhen the five years lower, but
typically they'll try and keepit steady.
So like, if the Fed cuts, whichis projected in June is the
next 25 basis point cut, youknow you'll see overall the
market come down a little bit,at least 25 basis points.
(42:12):
So you know you said of sevenyou'll be at six and three
quarters.
Speaker 1 (42:17):
Okay, okay, very cool , very cool.
Well, that is good to know, man.
What about just as we kind ofget of get to wrap here, colton?
What about overall economics?
You know, before we got on hereyou were showing me a pretty
cool site and if you want totalk a little bit about that and
then how people could use it todo their own research, as time
goes on, so if you're listeningto this, say, three months from
now, everything we're talkingabout might be irrelevant other
(42:39):
than this point right that we'retalking about here of how
somebody could maybe do some oftheir own research and stay up
to snuff on different markettrends in your market, whether
that's Northeast Wisconsin,madison, Wausau, whatever the
case is, if you want to justtouch on a little bit of what
this data is and how somebodycould really use it to benefit
(42:59):
themselves as a real estateinvestor, For sure.
Speaker 2 (43:07):
So I'm going to plug.
One thing is for the if youwant to know where the Federal
Reserve is going, or at leastwhat the market thinks, it's
called the CME FedWatch group.
You type that in, or FedWatch.
If you type that into yourwhatever browser Google you
should click the first link andyou slide over to your screen.
There'll be a thing that saysprobabilities.
You click on that.
It'll show you for the next 12to 18 months of where the market
(43:30):
anticipates the federal fundsrate will be, and that can give
you an anticipation of whereinterest rates will be six to 12
months from now.
It changes every day.
It changes when the datareleases, but right now the
market's predicting basicallyfive to six rate cuts over the
next year and a half.
Wow, so it's about one to oneand a half percent.
Wow.
(43:50):
So, that's the first-.
Speaker 1 (43:52):
What was it called CME?
Speaker 2 (43:54):
CME FedWatch Group FedWatch Group.
Type that in, I'll put that inthe notes.
Speaker 1 (43:58):
I'll put that in the notes.
I'll put that in the show notes.
Fed watch group.
Speaker 2 (44:02):
Okay, yep, so great, great plug there.
Just say, cause people ask thelenders like, hey, where are
interest rates going?
Right, you know we work inbanking.
We don't know.
Yeah, you know, you pointedthis like this is the most
(44:23):
accurate.
So that's that one.
The one that Corey here istalking about.
It's called the Redfin DataCenter, and so you go to that.
You type in Redfin data center,google, you scroll down, you'll
see something that kind ofcomes up called Redfin Weekly
Housing Market Data, and there'sa whole list of options that we
can touch on here.
But then, for those of you arein Green Bay, you go to the
(44:44):
region name where it'll say allRedfin metros.
You type in Green Bay andyou'll get your local metro data
.
So for us it's Green Bay.
Speaker 1 (44:54):
Yeah, and what I struggled when we were on here
prior Colton.
So for those of you guyslistening, you go to the website
, you go down, you have to likekind of look to the right side
of your page off the right ofthe graphs, and then it's like
the second little dropdown.
You'll see a little dropdownthing.
You click on that where it saysall metros and then you can
type in Green Bay, madison,milwaukee, wherever, wherever
you're listening to this, andyou can get just really a ton
(45:15):
you could nerd out for a longtime on this website.
Speaker 2 (45:22):
Yeah, it's really cool.
It's got like three to fouryears of prior data so you can
kind of see what are the trendsin your market, see what's going
on.
And I think that's the pointthat you know you're going to go
with here is, if you go toGreen Bay and you type in right,
we're doing this kind of liveright now and you type it in,
you go, you can do a four weekor 12 week average.
I personally like the 12 weekaverage.
It kind of smooths out the dataa little bit, gives you a more
(45:44):
clear picture of the trend.
And you just go to new listings.
Median price and this is whatthe real estate investors here
are going to love to hear andsee is prices up, are up 10%
year over year.
Right, our median listing pricein green Bay right now, per
Redfin data as of let's see, asof let's see, as of april 13,
(46:07):
it's over 340 000.
That's the listing median price.
Right, a year ago that pricewas 313 000 so buy and hold
investors.
Speaker 1 (46:16):
Your, your assets went up over the last year,
right, right, good for you.
For those of you flipping, Iwould say for me that what that
tells me as a flipper is like ifI can stay around the median
for my list price or under, I'mgoing to have a lot of buyers
that can afford that house,right?
Is that what you would say fromthat as a banker, colton?
Speaker 2 (46:38):
I totally concur and you know this is.
You know you've talked torealtors in the area that
anything over to that three 2330marker that median number.
It's tough out there.
It's longer days on the market,you're going to have a little
bit less competition, butanything under that it's flying
off the shelf.
You're still getting multipleoffers and that was one of the
(47:01):
conversations we had is just ifyou can get a lower price
property and fix it up, you knowthere's a buyer pool there for
you.
Speaker 1 (47:09):
That's amazing.
So I love this stuff.
Man, I could nerd on this typeof stuff all day, so I'll put
that in the show notes as well.
Guys, the Red Bin Data Center.
So you guys could go nerd onthat as well If you're into
nerding on things like that.
But that's just a goodindicator.
Like in 12 months, look at howmuch that's changed the median.
So if you're buy box, if you'regoing to use this to help
develop your buy box right Oflike, hey, where do I?
(47:31):
If I'm flipping properties,where do I want to be?
I want to be at the medianprice or below right For my ARV.
Well, now that's going tochange.
So you want to be checking thaton a regular basis.
Or you're going to be missingout on deals because you're
stuck at 313 and your ARV islike ah, this one's at 325.
I don't want to go over BoomNow you just missed out on a
great opportunity to get oneright in the hot price point
(47:52):
there.
Speaker 2 (47:53):
Yeah, and the other point too, right, if you want to
go to this and kind of seewhat's going on in your market,
is you can track what's the newlistings data, right?
There's a lot of doomers outthere.
They call it doom porn orthey're just like oh, the
housing market's going to crash.
The housing market's going tocrash.
And you look at the newlistings, just in green bed
we're on track for 2024 numbersLike we're in the same trend.
(48:15):
There's nothing abnormal rightnow that's going on in the
market.
There's low inventory, there'sa lot of demand still, and so
those factors haven't changed.
And the other thing too isthere's another great chart If
you just look up year over yearreal estate prices.
Just even in the country,there's been two periods, two
periods in the last 40 yearswhere real estate prices have
(48:37):
gone down.
It was 1995 and then 2008 to2011.
That was the only time wherereal or like nominal housing
prices went down.
Every other year, prices havegone up in recession or not
recession.
And that's kind of that pointwhere we were talking about
earlier.
If interest rates come downduring a recession, guess what
(48:58):
that does?
That opens up your buyer pool,right.
That opens up demand, becausemost people make their purchase
based on the monthly paymentthat they can afford, and when
interest rates go down, guesswhat?
That monthly payment opens upyour entire aperture what they
can pay for a property.
And so yeah.
Speaker 1 (49:18):
It's so interesting.
People don't buy on price, theybuy on payment.
Speaker 2 (49:21):
Yep.
Speaker 1 (49:22):
So yeah, and right now, if prices are still going
up over the last three years,when interest rates have gone to
the highest they've been, sincewhat?
Since the 80s, maybe, or maybethe 2000s, I think mid-.
Speaker 2 (49:36):
Early 2000s Unaffordability of housing is as
bad as it was in the 80s, wheninterest rates are at 20% Wow.
Speaker 1 (49:44):
So if prices are still going up in this, can you
imagine what the price of yourasset is going to do when the
interest rates drop?
It's going to go up.
So if you're sitting on thesidelines, this is my take on it
.
Colton, you tell me if I'mcrazy on this.
Speaker 2 (50:06):
If you're sitting on the sidelines waiting for
interest rates to go down, whatyou're basically doing is just
waiting to pay a higher pricefor that same property.
That's what history goes toshow you, and inventory levels
are still historically low.
There's another great chart ofnationally.
If you just look up nationalinventory levels, we're roughly
at 1.3 million right now.
If you go pre-COVID, you'reroughly at 2 million.
You go at peak recession 2008,.
(50:27):
Great financial crisis, realestate bubble we're at 4 million
.
So we're at a quarter of whatthe great financial crisis was.
We're at almost half of what wewere pre-COVID.
So it just goes to show you thecurrent dynamics aren't there
for a big housing crash.
And the only areas where yousee prices going down are Texas
and Florida.
(50:48):
And that's because the newbuild construction there is
heavy and so it's a supply anddemand thing, and every other
metro area in NortheastWisconsin.
We're just not building enoughand it's just hard, it's
expensive to.
You know, builders don't wantto lose money right in
construction.
Speaker 1 (51:05):
I just read something this morning, actually kind of
preparing for this and some ofthe economic stuff I get every
day in my inbox, and they weretalking about builder confidence
is really really low right nowbecause of the uncertainty they
don't know where prices aregoing to be on the materials and
all this other stuff, sothey're pulling back on building
new stuff again, which is justgoing to create a bigger housing
issue, which, again, dependingon what side of the fence you're
(51:28):
on, the best time to plant thetree was 20 years ago.
Second best time is today, andit's not prices, aren't, in my
humble opinion.
I'm no Robert Kiyosaki here orsome other financial gurus, but
in my opinion I don't seehousing prices coming down for a
long, long time, like you said,twice in the last 40 years.
Pretty safe bet.
I think I did a solo episode awhile back with a chart that
(51:52):
shows the losses in real estateand I think six out of the last
76 years I think it's somethinglike that We've either had zero
growth or loss.
So pretty safe bet.
Speaker 2 (52:05):
And four of those years was from 08 to, basically,
2012.
That was again a wholedifferent dynamic.
You had ninja loans wherepeople could qualify for
anything.
The builders were building leftand right.
We don't have those dynamics.
Speaker 1 (52:19):
Lending's tighter, building's a lot less, yeah
absolutely Well, cole, we got towrap here.
Buddy, I know you actually havea real job that you have to go
do, so we'll let you get to thatman.
Before we wrap, though, wealways ask a little fun question
here, and part of the reason wedo this is I have people
outside of Wisconsin that arelike, hey, I might want to
invest in Wisconsin.
What is Wisconsin all about?
About what's your favoritewisconsin tradition or place to
(52:42):
visit here in the great state sofavorite tradition?
Speaker 2 (52:47):
I was thinking about this.
I love a good supper club.
I know a good friday fish fry.
You go to the supper club.
You go to your a nice salad bar, get the salad, you have your
double drinks, you know fromthat five to seven happy hour,
and then you get a good fish fry.
Uh, it's a little clam chowder.
Speaker 1 (53:04):
Absolutely, man, that's.
That's been a real popular oneon the on the show the old
Friday.
You know supper clubs andwhat's funny is I just grew up
thinking everybody has these andit's really like a Wisconsin up
maybe Minnesota thing, butoutside of that it's not very
popular outside of here.
Speaker 2 (53:21):
So very traditional Midwest Wisconsin.
And cheese curds, that'sanother one.
Uh, you gotta plug cheese curdsin Wisconsin, culver's great
Wisconsin brand.
I know they're expandedelsewhere but can't beat either
of those.
As far as the location, I'llanswer that second part.
I haven't heard this one much,but I love the North woods,
minocqua so pretty Um and theMinocqua Tomahawk area, all the
(53:44):
lakes up there.
It's gorgeous.
Speaker 1 (53:47):
Yeah, I'm a door County in which that comes up
once in a while now.
Um, but I love, I still preferbeing in the North woods, like
if I, if our family was likecloser that way, I would move up
to the North woods of Wisconsin.
There's like nothing like itthat I travel all over the place
and I still love the northwoods of wisconsin, so I'm right
there with you, buddy.
Speaker 2 (54:04):
That's probably my favorite spot in the state too
yeah, door kind of gets a lot oflove, so I want to give the
northwood some love.
You know, it's a lot lesstraveled, a little bit more
rustic yes, yes, absolutely alot more lakes.
Speaker 1 (54:15):
I like the inland lake.
I love, I love, I love livingby the bay, but it's so.
The water is so dang cold.
It's like by maybe mid July Ican actually get in there, and
then that lasts all of two weeks.
Before August, cold nights kickin and then I'm like dang well,
that was fun.
It lasted, you know exactly.
Well, Colt man, this has beenawesome.
Dude, this is one of myfavorite episodes we've recorded
(54:36):
so far.
I love talking about all this,this kind of economic stuff.
I'd love to have you back on.
You know, as the yearprogresses and you know, things
start to shake out a little bit.
If you're up for that, man, ohfor sure.
Speaker 2 (54:46):
Yeah, I love providing data and value.
You know, the end of the day iswe can all be our own resource.
You know, use the Redford DanceCenter, use the other links and
just stay aware.
But, as Corey always says, takeaction because at the end of
the day, that's what's going toget you where you want to go.
Speaker 1 (55:01):
Absolutely, brother.
If anybody wants to connect upwith you, Colton, what's the
best way for them to get intouch with you, man?
Speaker 2 (55:07):
Yeah, facebook, colton Van Elzen,
K-O-L-T-E-N-V-A-N-E-L-Z-E-N.
If anyone wants to reach out,I'll give out my number, but
number, but you know that's920-639-5884.
(55:28):
But I try and post weekly,bi-weekly, some sort of econ
update, some sort of just kindof lesson to learn and see
what's going on so you can kindof help understand, you know,
and make a sense of what's goingon out there.
Speaker 1 (55:36):
Beautiful man.
Well, thanks for being on,buddy.
This has been great, and ifyou're out there listening to
this and you're like, hey guys,I will.
I would love to get in the game, but I just I'm not ready to
start looking at deals yet.
I just have some questions orwhatever.
You don't have to sign up forthe buyers list for us at
Wisconsin discount properties.
You can just go to the websiteand fill out the contact us form
(55:57):
that's going to be a little bitdifferent and just try to help
you answer some questions,connect you to some great people
like Colton or whoever else outthere you might need as a
resource, and try to help youmake that first step into
getting into this exciting gamethat we love here called real
estate investing.
With that, Colton, we're goingto wrap buddy.
I appreciate you, man, andappreciate you being on, and
thank you guys all for listening.
(56:26):
If you guys got some value outof this episode, please share
this thing.
It's not necessarily for us tohelp grow the audience.
We love that.
We appreciate that.
But I go back to the rippleeffect right?
You guys sharing this show?
If there's value here and youthink somebody could benefit
from this, there's people outthere that are stuck working a
nine to five, that they hateevery single day, and this one
episode could be the thing thattriggers them to take action to
change their life and theirkids' lives, and those kids'
lives and the futures of that.
So please share the show, be afriend, let's get the word out
(56:48):
there and then with that, we'llsee you guys on the next episode
.
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