October 18, 2023 • 26 mins
Ever wonder how the world of real estate impacts our global economy? In our exciting new episode, we unfold this mystery, taking you on a journey from the heart of foreclosures, their profound effect on lenders and borrowers to the key role of government assistance programs in these tumultuous market conditions.
Switching gears, we reveal a compelling investment opportunity in a small farming fund and the ambitious plans of tech giants to construct a new city in California. We delve into the intriguing dynamics of how external money shifts the real estate market and the various types of ownership around the world. This episode is a treasure trove of stories, insights, and education on real estate investment. Join us!
About the Host:
Justin Bogard – Note Investor specializing in performing Residential Real Estate Debt. He finds deals and acquires them for his own portfolio as well as educates investors while walking them through the process of owning a Real Estate Note!
Connect with the Host:
Facebook - bethebank
Twitter - bethebank1
Instagram - bethebankpodcast
American Note Buyers - https://anbfunds.com/
Monthly Broadcast - https://youtube.com/playlist?list=PLzc944w1xydt5aLDrrEPHJhdJeDkBjjD4
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Narrator (00:02):
Interest in real estate.
How about wealth?
Well, they go hand in hand, andhere you'll learn all about it.
Welcome to Be the Bank, apodcast where we discuss and
debate the topics centeredaround real estate investing.
Your host, justin Bogart,shares insights into investing
in real estate to create realwealth and passive income for
(00:22):
you and your family.
He'll share stories of realestate investments done right,
walk you through the process ofowning a real estate note and,
most importantly, educate you soyou can Be the Bank.
This is Be the Bank brought toyou by American Notebuyers.
Now here's your host, justinBogart.
Justin Bogard (00:46):
Hey, hey folks, this is Justin Bogart here.
Season five, episode number 21of the Be the Bank broadcast
Today.
We're going to be talking abouta couple of case studies, a
couple foreclosures that aregoing on Well, it's actually
some of our investors, so it'sjust kind of interesting to talk
through and we also want tomention about the recent
activities going on in theMiddle East area between Israel
(01:07):
and Gaza, and we'll have amoment of silence for the people
out there and hoping everybodycan be safe for the ones that
are kind of caught up in this byaccident.
Just a moment of silence forthem.
Okay, let's get on with theshow.
(01:27):
Hey, hey, petaluma, richard,how you doing, sir, doing?
Okay, the weather is cooled offquite a bit.
It's where I've had the windowsopen most of the time in the
(01:48):
house, and so it's kind of anice change.
I don't have to run the airconditioner.
Richard Thornton (01:52):
Nice, nice.
Yeah, Weather out here can'tmake up its mind.
It's humid one day, humid onehour, then cool, the next then a
little bit of rain, thensunshine, then kind of like okay
.
Justin Bogard (02:04):
Make up your mind , darn it.
Richard Thornton (02:06):
Yeah, do I put on a raincoat or not?
Come on.
Justin Bogard (02:09):
Yeah, we, the girls and I well me, but the
girls will be on fall break, mydaughters next week, as we're
recording this, which is theweek of October October 10th
actually is the day that we'rerecording this.
So, yeah, next week is springbreak, fall break, and most of
the people around in Indianaactually have their fall break
(02:31):
right now, so we got kind of adelayed schedule, I guess,
compared to most folks.
Richard Thornton (02:37):
Yeah, see, we don't get fall break here unless
you're in year round school,that's it.
And then you get the wholemonth of October off.
Wow, yeah, but that's but.
But you don't get summer off.
Yeah, that's your round school.
But most schools here the fallbreak is unknown.
A bunch of the schools havestarted to elongate Thanksgiving
(03:01):
holiday because you get paidschools get reimbursed by the
number of heads in the classesand so many kids are absent
because they're going off onvacations anywhere.
That they said, well, look, wemight as well give everybody the
time off we're not losingheadcount and we just add the
(03:22):
days on at the tail end of theyear.
Justin Bogard (03:25):
Yeah, it's like we go to fall break here for a
week and then we are in schoolfor a couple more weeks and we
have a Thanksgiving break.
Our Thanksgiving break is justthree days it's the day before
Thanksgiving, it's theThanksgiving and then obviously
the Friday after Thanksgiving.
Richard Thornton (03:36):
Right, right.
Justin Bogard (03:39):
And then we get like two, two weeks in a day, I
think in winter, over the winterholidays.
Richard Thornton (03:45):
That's nice.
Justin Bogard (03:46):
Yeah, so you know , do you like skiing?
The girls they like to tube,they do the inner tube stuff.
They haven't actually doneskiing yet.
Here in Indiana, man, we gotflatlands, we have little bunny
hills, so we don't see anymountains, so they're not.
You know, I've done a couple oftimes, I've skied in a mountain
before, which is awesome, butthe girls haven't got to
experience that yet.
Richard Thornton (04:06):
So I have to get you on a snowboard sometime.
Justin Bogard (04:09):
Yeah, that's what I used to do.
I've actually never done skisbefore, I've only done
snowboarding.
Richard Thornton (04:14):
So that's fun.
Justin Bogard (04:15):
Yeah, it definitely is.
But so when I opened up thepodcast today I talked about,
you know, the war going on overthere in the Middle East and so
with that stuff going on, howit's, you know, obviously very
unfortunate that we have to seethat and hear about that.
Hopefully, you know, nobodyclose to anyone listening to
this podcast or the two of ushave anybody.
(04:37):
You know that's that's going to, you know, have something bad
happen to them because of it.
But economically this can makesome changes and ruffle kind of
the world economy from it.
Richard.
Richard Thornton (04:51):
It, can you know?
I mean, on the one hand it'sinteresting.
It's not that we don't alwayshave a lot of different forces
going on out there but theworld's a really complex place
right now, with war in Ukrainerestricting oil flow.
This quite possibly is going torestrict oil flow also.
(05:12):
I'm going to very much seeSaudi Arabia pulling back.
The Fed was going to raise inrates, but from what I'm hearing
now, they're saying maybe not.
Let's see what's going tohappen with inflation here,
because if oil and other thingsstart to go up, then they may
not need to raise the rates.
(05:32):
That may just cool things downaccordingly.
All that's on the one hand.
On the other hand, the stockmarkets are used to some sort of
turmoil.
I don't know to what degreethey're going to be affected.
The one thing that might playwell for us in the mortgage
(05:53):
market is that whenever there'sturmoil like this, investors fly
to safety, and so the mortgagemarkets and debt markets are
very safe, Regardless of whatgoes on elsewhere.
You've still got the Americanhousing market, even though
rates are up and things likethat, chugging along.
(06:13):
I'm sorry prices are falling insome areas, not in others, but
there's not doom and gloom inthe American housing market,
mortgage market, and certainlynot in our end of the woods.
So that would say, actually, Idon't know about you, but I've
had a couple of people in myportfolio, much to my chagrin,
(06:37):
call me and say they'rerefinancing, They've got a lot
of equity in their property andthey're finally able to even
though their credit rating maynot be sterling, they are now
able to since they've got somuch equity.
The lenders saying okay, fine,and ABC Bank or whatever will
give them a loan and give them amuch lower rate.
(06:58):
So I've got some rollover in myportfolio, which doesn't make
me very happy, but maybe we'llsee a slowdown on that.
Justin Bogard (07:10):
Now, you always like that passive income.
Richard Thornton (07:13):
I do and a lot of my portfolios, you know, is
partials, and so I made thosepartials thinking that my payday
was going to come along in acouple of years.
And now my payday is goingbye-bye and I'm not losing any
money and I made money doing thedeal originally, so I can't
(07:33):
complain too loudly.
I was going to get potentially10 or 15 years of income off of
each one of those loans.
So, you hate to lose that.
Justin Bogard (07:42):
Right, just real quick, want to mention to our
listening audience that we dorecord this podcast on our
YouTube channel, the AmericanNotebuyers YouTube channel, if
you want to see the video streamof what we're doing as well,
and we welcome you to do that aswell.
Back to what you were sayingabout kind of the world economy,
I did read an article recentlyand I want to say it was part of
(08:05):
something in Yahoo Finance thatI read and it kind of brought
me down a tangent of otherthings and what caught my
attention was the world liketotal market share of real
estate, and so it estimated thatproperty, you know kind of in
general, was around, I want tosay the number was about $5.2
(08:29):
trillion in US dollars, if youcan equate the property across
the world.
And they said they could theysee that growing.
The projected rate that it'sgrowing at is, I think, around
5% and that would put us atabout over $8 trillion as a
world real estate market and ofthat market currently, when they
(08:51):
ended the numbers, like in 20,at the end of 22, the North
America, which is mainly, youknow, united States, north
America alone was 52% of that.
Richard Thornton (09:04):
Wow, wow, that's amazing.
Yeah, that's amazing.
You know, as you were sayingthat, what just came in my mind
too is one place where this mayweek a little bit of havoc is
that we in the US here are veryaccustomed to 20 or 30 year
fixed loans.
(09:24):
You get your mortgage, you putit away and thank you very much.
But in most European countriesUK certainly, and in Canada if
you get a home mortgage, you'reonly getting like a five-year
deal at the most, and so youhave to roll your mortgage over
every five years.
And if you happen to be rollingover right now, I mean quite
(09:48):
often they the bank will renew,but it is a complete renewal and
underwriting and Pegging to anew rate.
So if you were at three and ahalf and now you're gonna re
roll over at five and a halfouch.
Justin Bogard (10:02):
Right, and I wonder, if they do that they
make the the term five years, sothat banks don't need, like a
fanny main, freddie Mac toExactly we.
Richard Thornton (10:11):
We have the most robust secondary market in
the world.
Yeah, and I mean you know thatsystem as well as I do, in terms
of Fanny main, freddie Macacting as a secondary market.
70% of the mortgages that aremade are sold to Fannie and
Freddie.
They turn around and securitizethem, sell them to Wall Street,
(10:33):
wall Street packages them andputs them into ABC pension fund
and you know Everywhere else anddo all their fun little stuff
about tranches and wonderfulthings like that.
That's what makes the world goaround in America.
Justin Bogard (10:49):
Yeah, the big short does a good job of
explaining how that works.
Now, obviously, they put badloans in there that they
shouldn't have put in there, butthat's, that is how the other
world works for a security stuff.
That's a good job that youexplain that, and that movie was
actually good for other reasonsas well.
Yeah.
Richard Thornton (11:06):
Yeah.
Justin Bogard (11:09):
Well, yeah, so that that was interesting, as I
was, I was gonna be surprised ifyou knew that information,
because I never thought aboutthe world Real estate market
share in general and it kind ofmakes sense because US
properties you know they have alot of value to them.
A lot of outside money comes infrom other countries.
Like you know, china, russiaand other places come into the
(11:31):
US to buy the real estate and soreal estate in other countries
aren't, are not as valuablebecause their dollar isn't
equating the same.
So that's why they're saying inUS dollars, air quotes there
it's currently at about fivepoint two trillion and grown and
grow to like eight.
Well, let's call it eight pointthree trillion.
I think that's what the numberwas right so like by twenty,
(11:52):
twenty thirty two.
Did I say that earlier?
Twenty thirty two is what it'ssupposed to be.
Okay, so I mean.
Richard Thornton (11:57):
What's interesting also about that is
that there's so many differentforms of ownership worldwide.
For instance, in UK, the crownowns most of London and so while
different owners and quoteshave Ownership of their
(12:18):
properties, they're leasing theground from the crown so they
don't really own the dirt, andthat's that's how the the Crown
makes a lot of its money in theMarriott England.
And I realized that Hawaii is avery small part of the world,
(12:38):
but the King KamehamehaFoundation owns most of the land
in Hawaii.
Okay, and there's a lot of Justoddball what we would consider
oddball different situationslike that where people can't
actually own land.
So if you've got a fivetrillion dollar number, that's a
pretty big number.
Justin Bogard (12:56):
It is Pretty big number right.
That's also, you know, land.
It's also commercial buildings,residential buildings and stuff
like that.
I think that broke it down andresidential was obviously the
biggest part of the NorthAmerica right a 52% market share
Versus you know, the commercialand land.
But that's pretty interesting.
Richard Thornton (13:15):
Yeah, one thing that I've found very
interesting that I really didn'tknow that much about as a
friend of mine.
He's an analyst, senior analyst, he's about my age, 70s For a
small farming fund.
So what this fun.
When I say small I mean likefour or five billion and they
(13:38):
just invest in farmland and theyit's a long, long-term play.
But they are convinced thatthey can get three to five
percent growth in farmland overthe years and that it will be a
very good investment.
And they've got a lot ofinvestors because the very
secure investment Not a wholereturn, right, you know there, I
(14:05):
mean XYZ pension fund might beokay with four percent.
Justin Bogard (14:09):
Yeah, I mean, if they want something that's, you
know, I can't say guaranteed,but they want something pretty,
pretty sure, with a lot ofsecurity and a lot of low risk,
that's, that's kind of where youwant to land is a mix of that.
Richard Thornton (14:20):
I mean, if you wanted to be in California
especially, land's certainly notgetting any cheaper here.
And I don't know if you'veheard about this tech group that
wants to build an entire newcity outside of San Francisco.
I am not.
That is gonna go.
Yeah, the bunch of the techgiants Sam, sam Altman, the guys
who started oh, what was it?
(14:43):
I care what the other high-techfirms were, but there's maybe a
dozen billionaires wenttogether on a sleuth basis.
They bought up thousands andthousands of acres in Solano
County, right outside of SanFrancisco, and it just hit the
(15:03):
press here about a month ago andwhat they're saying is hey guys
, you know what?
You've got an affordablehousing crisis.
You need more cities.
We're going to build a city andwe're going to do it smart.
Now we're going to planeverything out and it'll all be
computer-based and yada-yada, sowe'll see where they go.
But things like that aredriving speculating land up
(15:26):
considerably out here.
Justin Bogard (15:27):
That's awesome.
It'll be interesting if it'slike a 10 or 20-year plan to get
that all done.
Richard Thornton (15:31):
So it'll be that it kind of reminds me of
how the you know M-Rights buildup.
Justin Bogard (15:39):
You know what is it.
Is it Abu Dhabi?
Yes, or Dubai?
And now they've built thatplace up from taking pictures in
the 80s, when they firststarted getting by in all that
desert and then turning it intojust like they did all that.
It's like amazing.
Richard Thornton (15:53):
And they're still building.
Justin Bogard (15:54):
So Right, but online is a real estate.
So I have a couple of investorsthat I keep a close eye on to
help them out with stuff.
And they have reached out to merecently because of, like, some
foreclosure stuff and havingsome questions.
And so one guy had reached outto me because the borrower had
(16:14):
stopped paying.
So I went ahead and wentthrough foreclosure and then
kind of he didn't know what todo after that.
So I was trying to help explainwhat's going on with that.
And so he had somebody go out tothe property and notice it was
pretty much, you know, lookedlike it wasn't taken care of at
all and that nobody lived thereand stuff.
So he was, you know, kind ofconcerned on what to do and he
had invested.
(16:34):
I think he only has about$40,000 into this non-performing
note that he got foreclosed onand then you know, with all the
costs and expenses, that's kindof what he has into it.
But the neighborhood values of,you know, a rehabbed house
that's livable are goinganywhere from 150 to 180.
And so I was telling him like,man, you're, you're in the, as
(16:55):
Eddie would say, you're in thecatbird seat, right.
Richard Thornton (16:57):
Yeah, yeah.
Justin Bogard (16:59):
And I was like, man, you're sitting pretty good.
I was like, even if you wantedto put 50, 70, 80K into it, just
do rent-ready type of stuff.
And you know, because thesehouses are old, they're kind of
like your nice houses, you know,with 1800s, built in the 1800s
and stuff.
So they've got some.
They've got some seasoning tothem, right.
So, what you expect to have.
You know uneven floor or somelittle bit of rot.
(17:21):
You know some wood boringinsects, you know that are down
there in the in the crawl spacein the basement.
I was like man you're, you'resitting, good, no matter what
Cause.
I think a wholesale would pay,you know, probably double what
he has into it just to get theproperty back.
So it's all, it's all goodthings.
It's like sometimes you getthese notes and they go
(17:42):
non-performing and because ofall the appreciation that's
happened the last, really last,three years, three, four years,
right it's.
It really makes the opportunityof some of the legacy notes in
our portfolio.
They're not that dangerous, youknow.
Richard Thornton (17:57):
So does he have the ability to work with a
contractor to renovate it, orwhat's it going to do?
Justin Bogard (18:04):
So he actually has a rental close to that city.
This is actually in Indiana.
I actually know where the cityis at and he is using the
property management company tokind of put eyes on it, secure
it and kind of give him anestimate of like what, what's it
going to take to make thisproperty right?
And when I told him the valuesin that area I was like this is,
(18:26):
this is going to be a prettygood deal, because people are
looking for again affordablehome ownership.
And and this is the going marketrate for these little like on
American style bungalow.
Is it bungalow?
Yeah, bungalow.
American style bungalow housesthat are built Craftsman.
Yeah, craftsman, like theystarted in 1800s and they redid
(18:49):
them like in the 50s and stuffRight, Right, Right Added on to
them and stuff like that.
So this is exactly what theyneed and the thing is, is not
not cookie cutter, but they'reall very similar looking.
So they all.
I already know the problemswith it.
Richard Thornton (19:01):
Yeah, so I'm.
You know, I must admit, as aCalifornia I'm jealous of some
of the, because I've been to seesome of my properties in
Illinois and around and and yougo to these little towns where
the population is 20 or $30,000.
And, like you say, it's full ofa bunch of little, these old
craftsmen houses that were builtin the you know turn of the
century or whatnot, and they'recool little houses and we would
(19:23):
die out here.
I mean they go for a milliondollars out here, big ceilings
open space, big hallways, like.
Justin Bogard (19:31):
It's like real wood, not laminated wood.
You know, the walls are plaster, the ceilings are plaster.
You know, hopefully they'vebeen updated with electrical and
plumbing, but yeah, that'spretty cool.
Richard Thornton (19:45):
I just about fell over this last week, so
about four blocks from my househere this lady who lived in her
house.
She bought it in 1952.
Just passed and her family soldit and it hadn't been renovated
since 1952.
I'm sure they'd done a littlebit in there, but for the open
(20:07):
house they just opened it up andthere was a little bit of
yellow construction tape aroundthe floor in some places because
it was definitely rottedthrough, like you said, and the
house is about 2,200 square feet.
Nice little house, but theysold it for a million too and
(20:28):
I'm going my God, you've got ahalf a million dollars of
renovation just to make theplace livable.
It's crazy.
Justin Bogard (20:38):
Yeah, our other investor that we're helping is
going through a situation kindof close to Mobile Alabama
around that side of the countryand a situation where the
borrower they started off prettywell like I could probably say,
(20:58):
seven to eight months, and thenthey had some trouble making
payments.
They got some governmentassistance and they got actually
behind by about, I think, sevenor eight months total and the
government assistance programcaught them up and also paid
forward about five months.
So after they got caught up, Ithink it was around $10,000 to
$12,000 with corporate advancesand stuff with taxes and
(21:20):
insurance they paid the nextfive months one month at a time
and so it was kind of nice thatthe investor got that.
And then the borrower justcouldn't hold a job or couldn't
get a job that was sustainableto afford that because I think
it was a single mom, they had acouple of kids, so it was just
(21:41):
obviously it was tough to getall the income they need to
afford the house and so theyactually walked away from the
house and moved into anapartment unbeknownst to the
investor and just found this outrecently.
And so the borrower just said Irecognize I can't afford it,
but I was too embarrassed to sayanything about it.
And then the servicing companyoffered say, hey, why don't you
(22:03):
just sign a deed in the lieu,and that way we don't have to
foreclose on it?
And they're just like, oh, howdoes that work?
And it's just kind of cool whenyou have the conversation and
they're just like, oh really, sothe investor pretty much gets
the property right back withavoiding foreclosure, and then
they just, you know they need todo any repairs to it or
whatever.
They can just sell it as is andjust kind of move on to the
(22:25):
next investment, or they canresell it with seller financing
again.
Richard Thornton (22:27):
So just yeah, so one of my properties in
Illinois that's exactly whathappened to me is that the gal
was living in the house with aboyfriend.
They got into a spat boyfriendmoved out, she could no longer
make the payments and basicallyshe said look, what do I do here
?
I said, well, why don't I justtake it back?
And she said, fine.
(22:48):
I mean she was happy that wedidn't have to go through a
whole bunch of foreclosureproceedings and everything else.
Justin Bogard (22:58):
Yeah, it's interesting that as long as I've
been doing this, whenever theborrowers communicate well, I
have high assurance that even ifthe loan goes sideways, that
I'm gonna be able to make moneyon it pretty well.
Because the more that theycommunicate and the more that
they're open and transparentabout what's going on, the
(23:18):
easier it is for them to be likeyeah, here's the property.
You know, even if they haveequity in it, they're just still
, they're willing to walk awaybecause they just, you know not
that we're trying to fool themabout anything, but like if you
just give us back the property,that's great, you know, and the
property is worth 110 as is, andthen you have you know what's
to say $70,000 into it.
I mean, that's a lot of freemoney that just came your way.
Richard Thornton (23:41):
Yeah, and especially if you've been
transparent along the way.
I've got a borrower who turnsout I'm not gonna have to
foreclose on Okay, and he I'vehelped.
I mean, he went through a nastydivorce so the wife lived in
the house for a while, he movedout you know all sorts of
travails like this and he's justbarely been able to keep up on
(24:07):
his payments.
But he's deferred a whole lotof maintenance.
Justin Bogard (24:11):
Okay.
Richard Thornton (24:14):
And so we figured out that he's got like
almost $100,000 worth of equityin the house.
So he's going to sell it andpay me off, which I'm fine with
because I'm getting that whole.
He gets to put close to$100,000 in his pocket.
That's great.
Yeah, he needs that money andso the main point is that I've
(24:38):
been really transparent andhelped him and worked with him
over the years, so he has notbeen trying to be difficult with
me at all.
Justin Bogard (24:47):
Yeah, it goes a long way as the lender just to
kind of empathize with theirsituation or sympathize and just
say hey look, I know you'rehaving struggles, don't feel bad
about it, life happens Right.
Tell me what's going on and letme see if there's an option
that we both can benefit fromand use it.
The first thing I say, like, goget some government assistance.
(25:08):
Like there's tons of programsout there for people that lose
their jobs and stuff like thatand it works out great.
And or if they just can'tafford to stay there, I mean
obviously like, just, you know,let's try to get you something
else that you can't afford.
Richard Thornton (25:21):
Right.
So the woman you were speakingabout earlier, who got the
government assistance I mean,even though she's not able to
hold on in the long run, she's agood example of why the huge
foreclosure tsunami that we allthought was going to happen has
not happened and is not going tohappen Because a lot of those
(25:42):
people I don't know what theactual statistic is, but I'll
say I would think well above 50,maybe 70% of those people have
been able to maintain and getback on their feet and be just
fine, and so the program worked.
Justin Bogard (25:58):
Absolutely All right, Richard.
We are running out of timetoday.
Thanks, again for hanging outon the podcast and bringing some
feedback.
This was a good discussiontoday on some of the world
market conditions and also alittle bit of stories on
foreclosures.
It's always fun to see happy,happy endings when things start
going sideways.
Richard Thornton (26:16):
That's right.
Justin Bogard (26:16):
That's right.
Don't forget to check us out onour YouTube channel, the
American Notebuyer's YouTubechannel.
I'm Justin Bogart.
This is Richard Thornton.
This is season five, episodenumber 21 of the Be the Bank
podcast, and we will see youguys next time.
All right, bye guys.
Narrator (26:52):
Thanks again for listening.
Interest in real estate.
How about wealth?
Well, they go hand in hand, andhere you'll learn all about it.
Welcome to Be the Bank, apodcast where we discuss and
debate the topics centeredaround real estate investing.
Your host, justin Bogart,shares insights into investing
in real estate to create realwealth and passive income for
(00:22):
you and your family.
He'll share stories of realestate investments done right,
walk you through the process ofowning a real estate note and,
most importantly, educate you soyou can Be the Bank.
This is Be the Bank brought toyou by American Notebuyers.
Now here's your host, justinBogart.
Justin Bogard (00:46):
Hey, hey folks, this is Justin Bogart here.
Season five, episode number 21of the Be the Bank broadcast
Today.
We're going to be talking abouta couple of case studies, a
couple foreclosures that aregoing on Well, it's actually
some of our investors, so it'sjust kind of interesting to talk
through and we also want tomention about the recent
activities going on in theMiddle East area between Israel
(01:07):
and Gaza, and we'll have amoment of silence for the people
out there and hoping everybodycan be safe for the ones that
are kind of caught up in this byaccident.
Just a moment of silence forthem.
Okay, let's get on with theshow.
(01:27):
Hey, hey, petaluma, richard,how you doing, sir, doing?
Okay, the weather is cooled offquite a bit.
It's where I've had the windowsopen most of the time in the
(01:48):
house, and so it's kind of anice change.
I don't have to run the airconditioner.
Richard Thornton (01:52):
Nice, nice.
Yeah, Weather out here can'tmake up its mind.
It's humid one day, humid onehour, then cool, the next then a
little bit of rain, thensunshine, then kind of like okay
.
Justin Bogard (02:04):
Make up your mind , darn it.
Richard Thornton (02:06):
Yeah, do I put on a raincoat or not?
Come on.
Justin Bogard (02:09):
Yeah, we, the girls and I well me, but the
girls will be on fall break, mydaughters next week, as we're
recording this, which is theweek of October October 10th
actually is the day that we'rerecording this.
So, yeah, next week is springbreak, fall break, and most of
the people around in Indianaactually have their fall break
(02:31):
right now, so we got kind of adelayed schedule, I guess,
compared to most folks.
Richard Thornton (02:37):
Yeah, see, we don't get fall break here unless
you're in year round school,that's it.
And then you get the wholemonth of October off.
Wow, yeah, but that's but.
But you don't get summer off.
Yeah, that's your round school.
But most schools here the fallbreak is unknown.
A bunch of the schools havestarted to elongate Thanksgiving
(03:01):
holiday because you get paidschools get reimbursed by the
number of heads in the classesand so many kids are absent
because they're going off onvacations anywhere.
That they said, well, look, wemight as well give everybody the
time off we're not losingheadcount and we just add the
(03:22):
days on at the tail end of theyear.
Justin Bogard (03:25):
Yeah, it's like we go to fall break here for a
week and then we are in schoolfor a couple more weeks and we
have a Thanksgiving break.
Our Thanksgiving break is justthree days it's the day before
Thanksgiving, it's theThanksgiving and then obviously
the Friday after Thanksgiving.
Richard Thornton (03:36):
Right, right.
Justin Bogard (03:39):
And then we get like two, two weeks in a day, I
think in winter, over the winterholidays.
Richard Thornton (03:45):
That's nice.
Justin Bogard (03:46):
Yeah, so you know , do you like skiing?
The girls they like to tube,they do the inner tube stuff.
They haven't actually doneskiing yet.
Here in Indiana, man, we gotflatlands, we have little bunny
hills, so we don't see anymountains, so they're not.
You know, I've done a couple oftimes, I've skied in a mountain
before, which is awesome, butthe girls haven't got to
experience that yet.
Richard Thornton (04:06):
So I have to get you on a snowboard sometime.
Justin Bogard (04:09):
Yeah, that's what I used to do.
I've actually never done skisbefore, I've only done
snowboarding.
Richard Thornton (04:14):
So that's fun.
Justin Bogard (04:15):
Yeah, it definitely is.
But so when I opened up thepodcast today I talked about,
you know, the war going on overthere in the Middle East and so
with that stuff going on, howit's, you know, obviously very
unfortunate that we have to seethat and hear about that.
Hopefully, you know, nobodyclose to anyone listening to
this podcast or the two of ushave anybody.
(04:37):
You know that's that's going to, you know, have something bad
happen to them because of it.
But economically this can makesome changes and ruffle kind of
the world economy from it.
Richard.
Richard Thornton (04:51):
It, can you know?
I mean, on the one hand it'sinteresting.
It's not that we don't alwayshave a lot of different forces
going on out there but theworld's a really complex place
right now, with war in Ukrainerestricting oil flow.
This quite possibly is going torestrict oil flow also.
(05:12):
I'm going to very much seeSaudi Arabia pulling back.
The Fed was going to raise inrates, but from what I'm hearing
now, they're saying maybe not.
Let's see what's going tohappen with inflation here,
because if oil and other thingsstart to go up, then they may
not need to raise the rates.
(05:32):
That may just cool things downaccordingly.
All that's on the one hand.
On the other hand, the stockmarkets are used to some sort of
turmoil.
I don't know to what degreethey're going to be affected.
The one thing that might playwell for us in the mortgage
(05:53):
market is that whenever there'sturmoil like this, investors fly
to safety, and so the mortgagemarkets and debt markets are
very safe, Regardless of whatgoes on elsewhere.
You've still got the Americanhousing market, even though
rates are up and things likethat, chugging along.
(06:13):
I'm sorry prices are falling insome areas, not in others, but
there's not doom and gloom inthe American housing market,
mortgage market, and certainlynot in our end of the woods.
So that would say, actually, Idon't know about you, but I've
had a couple of people in myportfolio, much to my chagrin,
(06:37):
call me and say they'rerefinancing, They've got a lot
of equity in their property andthey're finally able to even
though their credit rating maynot be sterling, they are now
able to since they've got somuch equity.
The lenders saying okay, fine,and ABC Bank or whatever will
give them a loan and give them amuch lower rate.
(06:58):
So I've got some rollover in myportfolio, which doesn't make
me very happy, but maybe we'llsee a slowdown on that.
Justin Bogard (07:10):
Now, you always like that passive income.
Richard Thornton (07:13):
I do and a lot of my portfolios, you know, is
partials, and so I made thosepartials thinking that my payday
was going to come along in acouple of years.
And now my payday is goingbye-bye and I'm not losing any
money and I made money doing thedeal originally, so I can't
(07:33):
complain too loudly.
I was going to get potentially10 or 15 years of income off of
each one of those loans.
So, you hate to lose that.
Justin Bogard (07:42):
Right, just real quick, want to mention to our
listening audience that we dorecord this podcast on our
YouTube channel, the AmericanNotebuyers YouTube channel, if
you want to see the video streamof what we're doing as well,
and we welcome you to do that aswell.
Back to what you were sayingabout kind of the world economy,
I did read an article recentlyand I want to say it was part of
(08:05):
something in Yahoo Finance thatI read and it kind of brought
me down a tangent of otherthings and what caught my
attention was the world liketotal market share of real
estate, and so it estimated thatproperty, you know kind of in
general, was around, I want tosay the number was about $5.2
(08:29):
trillion in US dollars, if youcan equate the property across
the world.
And they said they could theysee that growing.
The projected rate that it'sgrowing at is, I think, around
5% and that would put us atabout over $8 trillion as a
world real estate market and ofthat market currently, when they
(08:51):
ended the numbers, like in 20,at the end of 22, the North
America, which is mainly, youknow, united States, north
America alone was 52% of that.
Richard Thornton (09:04):
Wow, wow, that's amazing.
Yeah, that's amazing.
You know, as you were sayingthat, what just came in my mind
too is one place where this mayweek a little bit of havoc is
that we in the US here are veryaccustomed to 20 or 30 year
fixed loans.
(09:24):
You get your mortgage, you putit away and thank you very much.
But in most European countriesUK certainly, and in Canada if
you get a home mortgage, you'reonly getting like a five-year
deal at the most, and so youhave to roll your mortgage over
every five years.
And if you happen to be rollingover right now, I mean quite
(09:48):
often they the bank will renew,but it is a complete renewal and
underwriting and Pegging to anew rate.
So if you were at three and ahalf and now you're gonna re
roll over at five and a halfouch.
Justin Bogard (10:02):
Right, and I wonder, if they do that they
make the the term five years, sothat banks don't need, like a
fanny main, freddie Mac toExactly we.
Richard Thornton (10:11):
We have the most robust secondary market in
the world.
Yeah, and I mean you know thatsystem as well as I do, in terms
of Fanny main, freddie Macacting as a secondary market.
70% of the mortgages that aremade are sold to Fannie and
Freddie.
They turn around and securitizethem, sell them to Wall Street,
(10:33):
wall Street packages them andputs them into ABC pension fund
and you know Everywhere else anddo all their fun little stuff
about tranches and wonderfulthings like that.
That's what makes the world goaround in America.
Justin Bogard (10:49):
Yeah, the big short does a good job of
explaining how that works.
Now, obviously, they put badloans in there that they
shouldn't have put in there, butthat's, that is how the other
world works for a security stuff.
That's a good job that youexplain that, and that movie was
actually good for other reasonsas well.
Yeah.
Richard Thornton (11:06):
Yeah.
Justin Bogard (11:09):
Well, yeah, so that that was interesting, as I
was, I was gonna be surprised ifyou knew that information,
because I never thought aboutthe world Real estate market
share in general and it kind ofmakes sense because US
properties you know they have alot of value to them.
A lot of outside money comes infrom other countries.
Like you know, china, russiaand other places come into the
(11:31):
US to buy the real estate and soreal estate in other countries
aren't, are not as valuablebecause their dollar isn't
equating the same.
So that's why they're saying inUS dollars, air quotes there
it's currently at about fivepoint two trillion and grown and
grow to like eight.
Well, let's call it eight pointthree trillion.
I think that's what the numberwas right so like by twenty,
(11:52):
twenty thirty two.
Did I say that earlier?
Twenty thirty two is what it'ssupposed to be.
Okay, so I mean.
Richard Thornton (11:57):
What's interesting also about that is
that there's so many differentforms of ownership worldwide.
For instance, in UK, the crownowns most of London and so while
different owners and quoteshave Ownership of their
(12:18):
properties, they're leasing theground from the crown so they
don't really own the dirt, andthat's that's how the the Crown
makes a lot of its money in theMarriott England.
And I realized that Hawaii is avery small part of the world,
(12:38):
but the King KamehamehaFoundation owns most of the land
in Hawaii.
Okay, and there's a lot of Justoddball what we would consider
oddball different situationslike that where people can't
actually own land.
So if you've got a fivetrillion dollar number, that's a
pretty big number.
Justin Bogard (12:56):
It is Pretty big number right.
That's also, you know, land.
It's also commercial buildings,residential buildings and stuff
like that.
I think that broke it down andresidential was obviously the
biggest part of the NorthAmerica right a 52% market share
Versus you know, the commercialand land.
But that's pretty interesting.
Richard Thornton (13:15):
Yeah, one thing that I've found very
interesting that I really didn'tknow that much about as a
friend of mine.
He's an analyst, senior analyst, he's about my age, 70s For a
small farming fund.
So what this fun.
When I say small I mean likefour or five billion and they
(13:38):
just invest in farmland and theyit's a long, long-term play.
But they are convinced thatthey can get three to five
percent growth in farmland overthe years and that it will be a
very good investment.
And they've got a lot ofinvestors because the very
secure investment Not a wholereturn, right, you know there, I
(14:05):
mean XYZ pension fund might beokay with four percent.
Justin Bogard (14:09):
Yeah, I mean, if they want something that's, you
know, I can't say guaranteed,but they want something pretty,
pretty sure, with a lot ofsecurity and a lot of low risk,
that's, that's kind of where youwant to land is a mix of that.
Richard Thornton (14:20):
I mean, if you wanted to be in California
especially, land's certainly notgetting any cheaper here.
And I don't know if you'veheard about this tech group that
wants to build an entire newcity outside of San Francisco.
I am not.
That is gonna go.
Yeah, the bunch of the techgiants Sam, sam Altman, the guys
who started oh, what was it?
(14:43):
I care what the other high-techfirms were, but there's maybe a
dozen billionaires wenttogether on a sleuth basis.
They bought up thousands andthousands of acres in Solano
County, right outside of SanFrancisco, and it just hit the
(15:03):
press here about a month ago andwhat they're saying is hey guys
, you know what?
You've got an affordablehousing crisis.
You need more cities.
We're going to build a city andwe're going to do it smart.
Now we're going to planeverything out and it'll all be
computer-based and yada-yada, sowe'll see where they go.
But things like that aredriving speculating land up
(15:26):
considerably out here.
Justin Bogard (15:27):
That's awesome.
It'll be interesting if it'slike a 10 or 20-year plan to get
that all done.
Richard Thornton (15:31):
So it'll be that it kind of reminds me of
how the you know M-Rights buildup.
Justin Bogard (15:39):
You know what is it.
Is it Abu Dhabi?
Yes, or Dubai?
And now they've built thatplace up from taking pictures in
the 80s, when they firststarted getting by in all that
desert and then turning it intojust like they did all that.
It's like amazing.
Richard Thornton (15:53):
And they're still building.
Justin Bogard (15:54):
So Right, but online is a real estate.
So I have a couple of investorsthat I keep a close eye on to
help them out with stuff.
And they have reached out to merecently because of, like, some
foreclosure stuff and havingsome questions.
And so one guy had reached outto me because the borrower had
(16:14):
stopped paying.
So I went ahead and wentthrough foreclosure and then
kind of he didn't know what todo after that.
So I was trying to help explainwhat's going on with that.
And so he had somebody go out tothe property and notice it was
pretty much, you know, lookedlike it wasn't taken care of at
all and that nobody lived thereand stuff.
So he was, you know, kind ofconcerned on what to do and he
had invested.
(16:34):
I think he only has about$40,000 into this non-performing
note that he got foreclosed onand then you know, with all the
costs and expenses, that's kindof what he has into it.
But the neighborhood values of,you know, a rehabbed house
that's livable are goinganywhere from 150 to 180.
And so I was telling him like,man, you're, you're in the, as
(16:55):
Eddie would say, you're in thecatbird seat, right.
Richard Thornton (16:57):
Yeah, yeah.
Justin Bogard (16:59):
And I was like, man, you're sitting pretty good.
I was like, even if you wantedto put 50, 70, 80K into it, just
do rent-ready type of stuff.
And you know, because thesehouses are old, they're kind of
like your nice houses, you know,with 1800s, built in the 1800s
and stuff.
So they've got some.
They've got some seasoning tothem, right.
So, what you expect to have.
You know uneven floor or somelittle bit of rot.
(17:21):
You know some wood boringinsects, you know that are down
there in the in the crawl spacein the basement.
I was like man you're, you'resitting, good, no matter what
Cause.
I think a wholesale would pay,you know, probably double what
he has into it just to get theproperty back.
So it's all, it's all goodthings.
It's like sometimes you getthese notes and they go
(17:42):
non-performing and because ofall the appreciation that's
happened the last, really last,three years, three, four years,
right it's.
It really makes the opportunityof some of the legacy notes in
our portfolio.
They're not that dangerous, youknow.
Richard Thornton (17:57):
So does he have the ability to work with a
contractor to renovate it, orwhat's it going to do?
Justin Bogard (18:04):
So he actually has a rental close to that city.
This is actually in Indiana.
I actually know where the cityis at and he is using the
property management company tokind of put eyes on it, secure
it and kind of give him anestimate of like what, what's it
going to take to make thisproperty right?
And when I told him the valuesin that area I was like this is,
(18:26):
this is going to be a prettygood deal, because people are
looking for again affordablehome ownership.
And and this is the going marketrate for these little like on
American style bungalow.
Is it bungalow?
Yeah, bungalow.
American style bungalow housesthat are built Craftsman.
Yeah, craftsman, like theystarted in 1800s and they redid
(18:49):
them like in the 50s and stuffRight, Right, Right Added on to
them and stuff like that.
So this is exactly what theyneed and the thing is, is not
not cookie cutter, but they'reall very similar looking.
So they all.
I already know the problemswith it.
Richard Thornton (19:01):
Yeah, so I'm.
You know, I must admit, as aCalifornia I'm jealous of some
of the, because I've been to seesome of my properties in
Illinois and around and and yougo to these little towns where
the population is 20 or $30,000.
And, like you say, it's full ofa bunch of little, these old
craftsmen houses that were builtin the you know turn of the
century or whatnot, and they'recool little houses and we would
(19:23):
die out here.
I mean they go for a milliondollars out here, big ceilings
open space, big hallways, like.
Justin Bogard (19:31):
It's like real wood, not laminated wood.
You know, the walls are plaster, the ceilings are plaster.
You know, hopefully they'vebeen updated with electrical and
plumbing, but yeah, that'spretty cool.
Richard Thornton (19:45):
I just about fell over this last week, so
about four blocks from my househere this lady who lived in her
house.
She bought it in 1952.
Just passed and her family soldit and it hadn't been renovated
since 1952.
I'm sure they'd done a littlebit in there, but for the open
(20:07):
house they just opened it up andthere was a little bit of
yellow construction tape aroundthe floor in some places because
it was definitely rottedthrough, like you said, and the
house is about 2,200 square feet.
Nice little house, but theysold it for a million too and
(20:28):
I'm going my God, you've got ahalf a million dollars of
renovation just to make theplace livable.
It's crazy.
Justin Bogard (20:38):
Yeah, our other investor that we're helping is
going through a situation kindof close to Mobile Alabama
around that side of the countryand a situation where the
borrower they started off prettywell like I could probably say,
(20:58):
seven to eight months, and thenthey had some trouble making
payments.
They got some governmentassistance and they got actually
behind by about, I think, sevenor eight months total and the
government assistance programcaught them up and also paid
forward about five months.
So after they got caught up, Ithink it was around $10,000 to
$12,000 with corporate advancesand stuff with taxes and
(21:20):
insurance they paid the nextfive months one month at a time
and so it was kind of nice thatthe investor got that.
And then the borrower justcouldn't hold a job or couldn't
get a job that was sustainableto afford that because I think
it was a single mom, they had acouple of kids, so it was just
(21:41):
obviously it was tough to getall the income they need to
afford the house and so theyactually walked away from the
house and moved into anapartment unbeknownst to the
investor and just found this outrecently.
And so the borrower just said Irecognize I can't afford it,
but I was too embarrassed to sayanything about it.
And then the servicing companyoffered say, hey, why don't you
(22:03):
just sign a deed in the lieu,and that way we don't have to
foreclose on it?
And they're just like, oh, howdoes that work?
And it's just kind of cool whenyou have the conversation and
they're just like, oh really, sothe investor pretty much gets
the property right back withavoiding foreclosure, and then
they just, you know they need todo any repairs to it or
whatever.
They can just sell it as is andjust kind of move on to the
(22:25):
next investment, or they canresell it with seller financing
again.
Richard Thornton (22:27):
So just yeah, so one of my properties in
Illinois that's exactly whathappened to me is that the gal
was living in the house with aboyfriend.
They got into a spat boyfriendmoved out, she could no longer
make the payments and basicallyshe said look, what do I do here
?
I said, well, why don't I justtake it back?
And she said, fine.
(22:48):
I mean she was happy that wedidn't have to go through a
whole bunch of foreclosureproceedings and everything else.
Justin Bogard (22:58):
Yeah, it's interesting that as long as I've
been doing this, whenever theborrowers communicate well, I
have high assurance that even ifthe loan goes sideways, that
I'm gonna be able to make moneyon it pretty well.
Because the more that theycommunicate and the more that
they're open and transparentabout what's going on, the
(23:18):
easier it is for them to be likeyeah, here's the property.
You know, even if they haveequity in it, they're just still
, they're willing to walk awaybecause they just, you know not
that we're trying to fool themabout anything, but like if you
just give us back the property,that's great, you know, and the
property is worth 110 as is, andthen you have you know what's
to say $70,000 into it.
I mean, that's a lot of freemoney that just came your way.
Richard Thornton (23:41):
Yeah, and especially if you've been
transparent along the way.
I've got a borrower who turnsout I'm not gonna have to
foreclose on Okay, and he I'vehelped.
I mean, he went through a nastydivorce so the wife lived in
the house for a while, he movedout you know all sorts of
travails like this and he's justbarely been able to keep up on
(24:07):
his payments.
But he's deferred a whole lotof maintenance.
Justin Bogard (24:11):
Okay.
Richard Thornton (24:14):
And so we figured out that he's got like
almost $100,000 worth of equityin the house.
So he's going to sell it andpay me off, which I'm fine with
because I'm getting that whole.
He gets to put close to$100,000 in his pocket.
That's great.
Yeah, he needs that money andso the main point is that I've
(24:38):
been really transparent andhelped him and worked with him
over the years, so he has notbeen trying to be difficult with
me at all.
Justin Bogard (24:47):
Yeah, it goes a long way as the lender just to
kind of empathize with theirsituation or sympathize and just
say hey look, I know you'rehaving struggles, don't feel bad
about it, life happens Right.
Tell me what's going on and letme see if there's an option
that we both can benefit fromand use it.
The first thing I say, like, goget some government assistance.
(25:08):
Like there's tons of programsout there for people that lose
their jobs and stuff like thatand it works out great.
And or if they just can'tafford to stay there, I mean
obviously like, just, you know,let's try to get you something
else that you can't afford.
Richard Thornton (25:21):
Right.
So the woman you were speakingabout earlier, who got the
government assistance I mean,even though she's not able to
hold on in the long run, she's agood example of why the huge
foreclosure tsunami that we allthought was going to happen has
not happened and is not going tohappen Because a lot of those
(25:42):
people I don't know what theactual statistic is, but I'll
say I would think well above 50,maybe 70% of those people have
been able to maintain and getback on their feet and be just
fine, and so the program worked.
Justin Bogard (25:58):
Absolutely All right, Richard.
We are running out of timetoday.
Thanks, again for hanging outon the podcast and bringing some
feedback.
This was a good discussiontoday on some of the world
market conditions and also alittle bit of stories on
foreclosures.
It's always fun to see happy,happy endings when things start
going sideways.
Richard Thornton (26:16):
That's right.
Justin Bogard (26:16):
That's right.
Don't forget to check us out onour YouTube channel, the
American Notebuyer's YouTubechannel.
I'm Justin Bogart.
This is Richard Thornton.
This is season five, episodenumber 21 of the Be the Bank
podcast, and we will see youguys next time.
All right, bye guys.
Narrator (26:52):
Thanks again for listening.
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