Unlock the secrets of real estate with Stephan Piscano as he debunks the myth that local markets can escape the influence of national economic trends. By examining historical data from downturns like the 2008 crash, Stephan reveals the surprising truth about how interconnected our housing markets really are. Whether it's luxury homes in California or affordable properties in Texas, discover why no region is immune to broader economic forces, challenging the conventional wisdom that local factors can shield markets from national downturns.
Next, dive into real estate investing strategies that prioritize cash flow over mere appreciation. Stephan shares his personal journey and hard-earned lessons from the 2008 financial crisis, explaining why focusing on properties with solid rental histories and high cash-on-cash returns can fortify your investment portfolio against market volatility. Learn about the power of seller financing and strategic acquisitions that led to success in cities like Detroit, and find out how these techniques can ensure long-term profitability even in challenging economic climates.
Finally, explore how isolated events can create real estate outliers and trends, from HOA litigations affecting condo sales to the surprising market surge in areas like Washington DC and Detroit. Stephan offers a clear analysis of the national market landscape from 2022 through 2024, highlighting both the interconnectedness and unique movements of various U.S. cities. This episode invites listeners to challenge assumptions and appreciate the nuanced dance between national trends and local nuances in the real estate market.
www.stephanpiscanopodcast.com
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
All right, guys.
Thank you so much and welcome.
This is Stephan Piscano withthe Stephan Piscano podcast.
So what we're going to do todayis we're going to debunk, to me
, maybe the biggest myth in realestate guys, which is my local
market is special because of XYZ.
And I can't tell you I don'tknow if this is unique to me
(00:21):
because I have so many familymembers, friends, partners,
clients all across the countrythat I'm having conversations
with on a regular basis, but Ican't tell you how many times
over the last 20 years I'veheard someone say oh well, you
know, here in Oregon it's justour market's going to be
protected because all theCalifornians are moving here.
Oh, we're here in Texas andeverybody's moving here from
(00:42):
California or New York orwhatever it is, because we've
got no state income tax, sowe're protected.
Or, oh well, you know, themarket never crashes in Oklahoma
.
You know, you ought to look atthat.
That's what actually somebodysaid to me last night.
Or everybody's moving toFlorida, everybody's moving to
Florida, we're protected.
Same thing Nevada, arizona,alaska Everybody thinks their
(01:03):
market is special and they arespecial.
I mean every market's special inits own way for various reasons
.
Every market has advantages anddisadvantages.
But I have news for you, guys,and this is not a popular thing
to say.
I would in fact estimate thatprobably 80 plus percent of you
that hear this will probablydisagree at first, and I'm going
to try to show you factual datato prove that I'm correct that
(01:26):
while your local market mattersin a microcosm and it can have
some differences from thenational market because of
different trends and rentalpatterns and things of that
nature, the reality of it is,guys, just like we saw in 08, 09
, when the market crashed, itcrashed everywhere.
And it doesn't matter if youare in the mountains in Utah, if
(01:47):
you're in luxury homes oceanfront in Southern California,
you could be in the depths ofthe ghetto in Detroit or New
York or Baltimore, you could beanywhere.
You could be from the luxuryhomes, multi-million dollar
homes in Park City, utah, to thesmallest shack trailer park
(02:08):
that you could ever find in namea place, and it doesn't matter
If the market crashes in onearea, it crashes in another.
If the market soars like it hasthe last, really for the
majority of the last 12 to 15years here, it rises everywhere
and I'm going to show you thefactual data to indicate that.
(02:29):
Now I will say it's the areasthat boom the biggest when a
market soars the Phoenix,arizona, the Las Vegas, nevada,
the Southern California, theFlorida coastal cities, the
Oregon where I used to live thatwill have the biggest
(02:49):
percentage upswings, largestdollar amount upswings when a
market's booming.
But then on that day in 2008,when everything seemingly almost
crashed overnight, those arethe areas that crash the hardest
.
And then the areas like Texas,oklahoma, midwestern states,
(03:10):
ohio you know, alaska thatpeople think of as not
appreciating as much but alsonot crashing as much.
I got news for you While thepercentage or while the dollar
amounts aren't as big,percentage wise, they crash just
as hard, and I can tell youthat for a fact because in 2009,
2011, so on and so forth, I wasbuying homes in the ghetto in
(03:33):
South Dallas, in an area calledPleasant Grove, and we were
buying condos that we werepicking up for $11,000, $12,000
that a few years earlier wereselling for forty to eighty
thousand dollars.
And there were luxury homes inFrisco and Plano and in Dallas
itself that were eight thousandsquare foot mansions that were
(03:57):
selling for three hundred andfifty thousand.
During the last crash, Iremember I looked at a house in
a town called Meridian Idaho.
That's right by Boise.
And again, that's anothermarket that you think of as
ultra stable.
That was on acreage.
It was $600,000 back in 2012, Iguess it was that I was looking
(04:21):
to actually put an offer on it.
Horse property beautiful 6,000square foot masterpiece in
Meridian Idaho, and again,beautiful property, the whole
deal $600,000, about $100 a foot.
That same house is going forabout 4 million today.
Now there's rapid inflationthat's taken place over the last
10 years and all that that havean impact on that too.
(04:41):
But that's all part of the pie,that's all part of the metrics
that go into this.
And I tell you this really justto debunk the myth that guess
what?
It doesn't matter theseancillary factors that people
talk about and even, hey, it'snot really a positive thing for
me to acknowledge this becauseit would help us sell properties
(05:06):
if it was true and there arefactors that can benefit, really
unique factors, like we werelooking at property in Los
Angeles.
I was looking at about, I guess, 12 years ago, right around the
time that they were about toannounce formally but everybody
kind of knew it was going tohappen that they were going to
build the new stadium therewhich is SoFi now, and that's
(05:27):
where the Chargers and the Ramsplay.
And then now you got all that,and so you could pick up
property just about doubled invalue a couple of years later,
after that stadium was formallyannounced and then once it went
live.
And so there's situations likethat.
You can have areas of economicgrowth that can have a higher
bump on a small scale, but atthe end of the day, what I'm
going to attempt to prove to youtoday is that when there is an
(05:50):
actual market drop, like we sawin 2008, when the stock market
tanks, when the real estatemarket tanks by 50 to 70% on a
national scale, when thathappens, you can talk all you
want about the Californians thathappens.
You can talk all you want aboutthe Californians moving there.
You can talk all you want aboutthe tax breaks.
You can talk about whatever youwant.
It's going to crash in yourmarket too.
(06:11):
It's going to dip in yourmarket too, maybe not as much on
a dollar scale, dollar todollar, but on a percentage
scale, which is really whatmatters.
It's going to be about the same.
I tell you this, for is becauseyou know part of my job with
this show and with the webinarswe do and the educational
content that we try to produceis to help everybody in my
(06:34):
network be engaged and informedas investors first and foremost,
and then realtors in thenetwork that like the show and
listen to it too.
You know you can benefityourself as an investor or you
can benefit your knowledge foryour client base of investors
that you're trying to work with,and I like to take all of the
emotion out of it.
If you go to a place like weown property in Panama city
(06:54):
beach and those properties aredoing very well, I'm very
grateful for that.
That's a blessing.
But I've talked with people as,oh, it's so pretty there.
The feeling is so that meansabsolutely nothing, nothing
whatsoever.
I don't care, you can feel,because some of the best
percentage returns that I'veever had in my life as an
investor have been on theugliest properties that you'll
(07:16):
ever see, in some of the mostdangerous.
I mean, you know, in one of theepisodes I'm working on now
that's probably going to take afew weeks to put together
because we're going to reallytry to do this.
One big is talking about myhistory with buying $1 houses in
Detroit during the last crash,and these were houses that,
before the 08 crash, wereselling for many cases, more
(07:38):
than $100,000, which was a lotback then in Detroit and then
all of a sudden we're buyingthem for $500, $600.
I bought 12 of them forliterally $1, which is basically
a deed away from the bank.
So we'll do a whole episodejust on that those houses,
percentage wise, inneighborhoods where, literally,
houses are being set on fire andit's so dangerous that the cops
(08:00):
don't even want to come in andthe fire department doesn't even
want to come in.
To put it out Not anexaggeration and I'll tell you
about that Some other point intime that was the best
percentage return I've evergotten in my life.
In fact, I would make anargument that some of the uglier
homes, some of the moredilapidated areas, are the areas
where, percentage wise, you canget the best return, where,
(08:24):
percentage-wise, you can get thebest return.
And so that's what I want toram in everybody's head is, when
you're buying something, don'tever buy it based on ancillary
factors that you're told.
Buy it on percentage data,market-driven data, historical
data of rental rate performance.
When you base your strategy oncash flow, then you're protected
(08:44):
, regardless of the market, andthat's really those of you that
have seen a lot of the contentor listened to the show before
you heard me talk about it.
The purchase price of a home iswhat I care about the least.
What I care about is the amountof cash we're putting down.
How can we utilize thatproperty as a vessel to create
the highest possible cash oncash return?
I care about the rental history.
Create the highest possiblecash on cash return.
(09:06):
I care about the rental historyand it doesn't matter if it
rents for $600 or $6,000.
It's about the percentage,because if I can get a 32% cash
on cash return, even if it's onone unit that's renting at $600
a month, I would go do that 20times, just like we did with the
Detroit house.
We bought literally hundreds ofthose and we made a ridiculous
(09:33):
percentage return in thehundreds on the ugliest houses
that you would never want toeven think about going and
staying at.
There's always an opportunitythere and I hope that ultimately
there's some comfort in this,because if you don't let, it's
these little narratives that cansway a market and can.
That's what led us in 06, 07,when people were buying
everything up in Miami andPhoenix and Scottsdale and Vegas
(09:58):
and where I lived at.
Well, I guess I had alreadymoved to California, but I lived
in Bend, right kind of rightbefore or right during when all
this was starting.
The narrative in Bend, oregon,when I bought my first house
there before I moved toCalifornia, was we're going to
be protected and everybody'smoving up here from California.
(10:19):
That's not going to stop.
We're always going to becheaper than California.
As long as we're cheaper thanCalifornia, we're still going to
continue to rise.
In fact, when I was 20 years oldand I bought my first house, I
told my mortgage broker.
I said you know, I can't affordthat payment.
And he told me well, it doesn'tmatter, because it's going to
continue to appreciate an equityby 10 grand a month.
So you're good, you can justrefi it in a year.
(10:48):
I was like, oh okay, I mean Iwas 20 years old.
So it ended up being a uniquething because when I later sold
that house for a third of what Ipaid for it in a short sale, I
was already living in Californiaat that time and I hung on
longer than everybody advised meto, just because I was a kid
and I, you know, just onprinciple.
But that was really what led meto utilizing or developing the
seller financing model?
(11:09):
Because, number one, I neverwanted to be dependent on a bank
again and it also seeing all ofmy mentors that I knew at the
time suffer as a result of thatthat horrific 2008 crash.
It made me base my strategy oncash flow, which insulates us to
some extent from whatever themarket does, because I don't
(11:29):
ever want to be a slave toappreciation, because my
fundamental belief nobody canpredict appreciation the one
(11:50):
that's closest to me.
When that guy told me that in 05, 06, by 09, Bend had seen a 60
to 70% drop in market values.
At one point they had a near30% unemployment rate because at
that time their economy wasentirely based on the real
estate market.
They'd closed what they used tohave the mills there in town
and it was all based on thisbooming real estate market and
tourism.
And so when that tanked, thattown was a ghost town for a few
years.
Now it's rebuilt itselfbeautifully, as a lot of these
(12:12):
pretty much all of these areasI'm talking about have, and now
we've had more than a decadereally, like I said, closer to
12 to 15 years of consistentappreciation nationally, and so
Bend is the most expensive realestate in the state.
Now, las Vegas is doingextremely well.
Washington DC, which I'm goingto talk about, is among the
(12:32):
hottest markets in the country.
All of these places that weredecimated to the strongest
extent from 08 to 2012 are theones that come back the
strongest, but percentage-wiseit's all the same, and so that's
why, if you base your strategyon cash flow, if you don't care
what it's worth when you buy it,you only care what it's worth
(12:55):
when you buy it and when yousell it, everything in the
middle means nothing as long asyou can afford the debt service,
as long as you can afford yourmonthly payment.
And so that's why you base yourstrategy on cash flow and
generating a high cash, on cashreturn, and that's what allows
you to still be profitableduring a market downturn.
And I've said this many times.
I wrote an article for it forLinkedIn Pulse, about gosh
(13:17):
almost 10 years ago now it was2016.
And you can find that on Medium, too.
Just go to Stephan PiscanoMedia and all that it's called.
If the Market Crashes, I'm Happy, and the logic behind that that
you've heard me talk about alot is if I buy a property for a
million dollars and I'm earninga 20% cash on cash return.
(13:37):
Market dips tomorrow, now thatproperty is worth half of what I
paid for it.
That property is worth half ofwhat I paid for it.
I'm happy, and the reason I'mhappy is because I'm still
earning a 20% cash on cashreturn on the first property I
bought Because, as we saw in 08,09, when the market crashes and
pricing, rental rates eitherstay the same or actually they
went up a little bit about 2% In2009,.
(13:59):
The rental rates went upbecause of inflation and because
people still need a place tolive, and in that scenario, you
actually saw a large influx offormer homeowners that were
foreclosed on that were influxedinto the rental market as
renters, and so that demand madeit go up too.
So I'm still earning 20% cashon cash on the first property I
bought, which is fantastic.
That's a wonderful thing.
(14:20):
And now I'm going to go buy onejust like it at half price and
get a 40% cash on cash return,which is even better.
So, if you dollar cost average,with your focus based on cash
flow, not on appreciationbecause, again, I don't care
what your realtor says, I don'tcare what your mortgage, I
definitely don't care what yourmortgage broker says, just like
(14:40):
that guy told me 20 plus yearsago they don't know, I don't
know, you don't know, none of'tknow, you don't know, none of us
know what the market's going todo as a whole.
But what I can tell you and Ichallenge anyone, just like I
was telling when I was havingthis debate with some family
members last night tell me anycity, any metro area, any state
in 2008 or 2009, when thenational markets were tanking at
(15:05):
a historic rate.
Show me any metropolitan areaor any state that went up during
that time.
And you can't, because I'velooked.
But I mean, if I'm wrong andyou find one, then put it in the
comment section and I'll giveyou something.
I'll give you a thousand bucksor something.
I don't know because you can'tfind it.
(15:26):
It doesn't exist.
There was a myth that I actuallykind of believed.
There was a story that I'dheard about, and maybe some of
you heard about too, that therewas one zip code in Palo Alto
that during the the 08 to 2012market tank, that zip code
supposedly still went up becauseof all the tech millionaires
(15:47):
and billionaires that werebuying there.
And I always kind of believethat is because there are some
outliers with this.
There are really really rareoutliers where you can have some
weird stuff go on in a specificzip code or city.
But I tried to look that uplast night and I looked in Palo
Alto and can't find it anywhere.
So if it does exist, then showme the zip code and show me the
(16:07):
actual market data that goeswith it, because I don't.
It might have stayed morestable than most, and again,
it's all relative Right.
So if you are in Dallas, texas,and the market booms, maybe you
have an 11 percent appreciationone year, and maybe some other
state has six and maybe someother state has 30 or 22,.
(16:29):
You know, but to a general ruleof thumb, water finds its level
.
To a general rule of thumb, ifthe markets as a whole are
trending up, then everywhere istrending up.
It's just a question of exactlyhow much, but the percentages
are all going to be fairlysimilar.
Now you'll have isolatedinstances within a community,
(16:52):
for example like an HOA, like wehad some condos that we bought.
The HOA was under litigationand so at that time, the only
way that you could sell thosecondos banks wouldn't do
financing on it.
So the only way you could buyand sell those condos was if you
either bought them cash or withseller financing, which is why
we bought them.
Once that HOA litigation wasdone, then you were able to buy
(17:13):
them with traditional bankfinancing as well.
The market on those went up 60%in 12 months.
Now that's an isolated scenario, but that's not market driven
to a region, that's a specificdriven scenario to that HOA or
to that property, and obviouslyyou're going to have that
anywhere.
Oh well, this market's hotbecause of this.
(17:34):
Well, no, the market's hotbecause the market's hot
everywhere.
There are again.
I do want to be clear, thoughthere are a few exceptions, and
right now the only exceptionthat I can genuinely say I
believe is accurate isWashington DC metro area, and
that's because there was agenuine massive increase in
(17:55):
government hiring over the lastfive years or so.
One of my brothers lives in DC.
I was kind of involved inwatching his home search.
He didn't take any of my adviceon the seller financing stuff,
but I did kind of listen to whathe was experiencing and I did
try to look around a bit for himthere, and I can tell you that
is one market that I do thinkhas been abnormally surging and
(18:17):
that could abnormally dip.
If there actually are a lot ofgovernment layoffs because
that's a supply demand thingthat is statistically factually
you can look that up so thereare outliers there.
If there actually are a lot ofgovernment layoffs because
that's a supply demand thingthat is statistically factual,
you can look that up so thereare outliers there.
And then, obviously, places likeDetroit, which I'm going to
again.
I'm talking a lot about Detroittoday.
If you have a massive influx ofcapital, these are tangible
(18:41):
things that you can track, likeDan Gilbert, founder of Quicken
Loans and owner of the ClevelandCavaliers basketball team, who
I actually got to meet aboutgosh 11 years ago, I guess, now
2014.
Really nice guy.
Anyway, he, during that samecrash where I was buying and
flipping those $1 homes in theghetto in Detroit, he was saying
(19:02):
that skyscrapers were on saleand he invested hundreds of
millions of dollars into thecity of Detroit.
Just him personally.
So if billions of dollars getinvested in an infrastructure
with an intent to prop up anarea that has been destroyed,
that's a real life thing thatyou can put something on too.
But all this anecdotal stuffabout, oh well, this area
(19:24):
doesn't crash and this one does,or this one soars and this one
doesn't.
It's just not accurate, guys.
I'd like it if it was, that'dbe cool.
But the reality of it is as I'mgoing to show you with these
charts.
You're going to see when it'sgoing up in one place, it's
likely going up to some extentor another.
If it's going down in one place, it's likely going down to some
extent or another.
You're just not going to seethese swings where the market is
(19:47):
booming in Texas and it'stanking in California, because I
got news for you with all ofthe stuff.
And hey, I don't like thepolitics of California, to be
clear, but I've lived here foralmost well what?
17, 18 years I've lived hereand since I've been here,
everybody's talking abouteverybody leaving California,
(20:09):
and there's a lot of truth tothat, and I don't blame the ones
who do, because the politicsand the expense of living here
is ridiculous.
But guess what?
The market's way up inCalifornia too.
So I don't know, with all thesepeople leaving, the market sure
is surging in California in abig, big way.
So it's the same thing.
So anyway, I'm going to let meshow you some.
(20:29):
I'll quit ranting at you andrambling at you too much here
for the moment and show you someactual stats.
So this is the new home priceindex and you can go to mortgage
news daily.
It took me a while to find adecent chart nationally.
(20:50):
So if I, if anybody else, wantsto play with this and look it
up on your own and there's noaffiliation with them this is
the best one I found and thisone's going back all the way to
1980.
I'm going to do a a 10 yearchart here, but you can see.
See this is national.
Notice the trends to 2020.
(21:15):
And then, right here, rightabout pandemic time, april 2020,
new home prices nationally.
New home prices nationally364,000.
Nationally.
It peaked April 2022.
New home prices 562,400.
(21:37):
Pretty massive increase.
Now, this isn't the increase inthe monthly change.
This is now one month, march 22to April 22.
That month the marketnationally was up almost 10%
9.89%.
The annual change from April2021 was up 33.62%.
(21:58):
So remember that number.
And I don't know I'm doing allthis blind with you.
I did a little bit of research,but I'm doing it all blind here
.
I'm going to go off the top ofmy head.
So now I'm going to go overhere to local markets.
Okay, so we're going to startwith Los Angeles, california.
Okay, and this is a littleconfusing because for this site
and it really is hard to findgood sites to get this data, but
(22:21):
we're going to hop around thecountry here, as you can see.
That's why I chose this one,which is AEIorg, and get some of
the details here.
But so this is for Los AngelesMetro and I'm actually going to
(22:47):
do year over year.
So, going back to the quarterthat we're targeting here, look
at that Q1 2022, market peakedin Los Angeles, like it did
nationally, up 19.8%, accordingto this site, year over year.
All of these are a little bitdifferent.
Let me actually do national onthis one to see if it matches up
.
Yeah, look at that National,2022 Q1 up 20.6.
(23:11):
So we'll stick with thiswebsite, just so the numbers are
all the same, because all ofthese rated a little bit
differently.
This one's doing a percentagebasis versus a price basis, but
the numbers, what we want tofocus on is this percentage
right here 20.6.
National.
And then for Los Angeles, samequarter, 19.8.
(23:37):
Now, and then it dips reallybig 2023, and then you've seen
2024 go back up again.
So let's go back to the national.
Let's see how that.
Yep, look at that.
Exactly the same dipped on anational level up again q1.
(23:59):
So in the family discussion Iwas having last night, the
example that somebody used wasoh well, you must not go to
oklahoma very often becauseOklahoma, you know it doesn't
crash there.
Well, ok, let's.
Let's see Oklahoma City,oklahoma.
Oh weird, look at that.
The exact same trend as LosAngeles.
So if you're ever wondering ifthere was anything that Oklahoma
(24:23):
City and LA LA have in common,it's the pricing percentages in
the index.
So the exact same quarter thatnationally the country was up
19.8, or, excuse me, 20.2percent and Los Angeles was up
19.8 percent.
Oklahoma City was up 16.2.
Then, the same quarter that LosAngeles tanked or dipped a bit
(24:49):
I'd call that more of a dip thana tank because the value is
still high.
Oklahoma City did the exactsame thing.
Let's try another one.
And again, I'm doing these allblind.
I haven't looked this up, butlet's do.
Everybody talks about Floridaand we have a lot of properties
there.
I love Florida, I got familythere.
Let's do Florida.
How about Jacksonville, whereI've got some family there?
(25:10):
Exact same trends.
Again, these will all berelative.
The higher they go up, the morethey go down, but the trends
are all the same.
The percentages might beslightly different, but if the
market's up nationally, it'sgoing to be up everywhere.
If it's down nationally to abig level, it's going to be down
(25:35):
everywhere.
Let's look at another one.
How about Dallas, texas?
Look at that 30%.
So you actually saw biggerswings in Dallas, but notice the
negative percentage return whenit went back down and then
going back to compare it againto Los Angeles 19,.
(26:06):
About the same, same trends.
Actually, the numbers areslightly worse in LA than they
are in some of these other areas.
Let's look at Cincinnati, ohio.
This is the first one with alittle bit of difference because
they had a bigger boom righthere than they did here.
Just slight variation.
Atlanta, georgia same thingdown.
(26:28):
Let's look at New York.
Now, new York I think this onemight actually be one of the few
that could prove me wrong.
Yeah, because New York reallyhad a tough time with the
pandemic.
That was a real thing in a bigway.
But even them.
Similar trend.
How about Detroit?
(26:51):
It's interesting you are seeinga little trend here that the
Midwest so far and again doingthese blind is an interesting
way to do it, because I'm justreacting to it along with you.
They had their big boom Q2 of2021.
And then they had another popQ1 of 2022, like everywhere else
so far has.
But they had this little popright here which is interesting
(27:13):
that our two Midwest Cincinnatiand Detroit so far both had that
.
Let's try Boise.
Yeah, now Boise.
This is interesting.
Boise is the first one thatwe've had a real big difference
here.
Still the same general trend.
I mean, you know you're notgoing to pin it down to the
(27:35):
month for everywhere in 2021,quarter two, and then they
actually, when all these otherplaces were having their big
spike, they actually were stillup but were trending on the way
down and then everybody tankedQ2 2023 and then rebounded 2024.
(28:03):
But it's all relative, guys.
Like I'm saying about Tennessee, tennessee follows that trend.
So it's interesting.
You've got a trend from thefirst part of 2021 for kind of
more of the Midwestern statesand then everywhere.
That's kind of traditionallythose hot markets.
It's Q1 of 2022.
(28:24):
But that's going to vary a bit.
But when it went down, I've yetto see any market we've looked
up that didn't go way down.
And then, when they rebound,everywhere's rebounded.
How about Las Vegas?
We haven't looked that one up.
Yet Same thing.
(28:51):
Every market that we've lookedup at a trending peak right
around here in that 2021 toearly 2022, and then all of them
had a huge drop off to Q2 2023,and then some form of a rebound
(29:11):
in 2024.
Every single market we'velooked up.
How about Montana?
It's not even going to let medo Montana.
How about New Mexico?
So they're all going to followthat same trend, guys, q2 2022.
See if there's any other citiesin California to let me look at
here.
How about Bakersfield would bean interesting market?
(29:34):
Yeah, I thought so.
My guess was that Bakersfieldwould follow more of that
Midwest trend that we're seeing.
So I think actually the trendseems to be it's not really a
Midwest thing.
I think actually the trendseems to be it's not really a
Midwest thing.
It's more of a I'll call it asmaller city, but you know,
still large.
These are all bigger metroareas we're talking about,
(29:55):
versus those hotbed, extremelyvolatile markets that we're used
to talking about LA, new York,miami.
So here's a guess and I couldbe wrong, so we'll see.
I'll edit it out if I'm wrong.
I'm kidding, but I'm gonna lookat Miami next.
I would imagine, by this trend,miami probably peaked in Q1 of
(30:17):
2022, like LA did and some ofthese other big cities.
But the smaller cities that aregonna to be a bit more stable,
like the Boise, idaho, like theCincinnati, like Detroit, their
big rise was the beginning of2021.
And then they kind of leveled abit right here.
So it's interesting that evenin California, a city like
(30:38):
Bakersfield, which is still agood-sized city, just like
Cincinnati is, and all thatabout half a million people in
the metro area last I checkedNow I've stayed in many hotels
there driving back and forth.
I like Bakersfield quite a bit,but anyway, they would be more
in that trend.
So let's look up Miami now.
Yep, all right, we got it.
(31:05):
I really was kind of nervous onthat.
So, yeah, miami follows whatI'll call the volatile big city
trend.
So it doesn't make anydifference that it's Florida
with no state income tax orwhatever it is.
Versus Los Angeles, the Miamichart is almost identical to the
(31:26):
Los Angeles chart, which I'llpull up again Same quarter, same
drop-off, same rebound, andwe'll do one more I'm trying to
think of the most.
How about Iowa?
Des Moines, iowa, interesting.
(31:53):
Okay, so Des Moines actuallyfollowed more of that Miami Los
Angeles trend, but it's allstill the same thing.
Market goes up, market goesdown.
Oh, the one that I haven't donebut I've talked so much about.
How about DC?
Really curious about this one?
And they followed.
Okay, interesting, so it reallyso.
(32:18):
They really peaked Q2 2021.
So that would be right.
After the Biden administrationcomes in and the announcements
made, and then, like everysingle other market that we've
looked at, they dipped down andthen they strongly rebounded in
2024.
(32:38):
So that's the pattern, guys.
And well, let's look at Alaska.
It'll let me.
Alaska might be one of thoseoutliers.
I would think it's not evengoing to give me Alaska.
How about Utah?
Utah, same thing.
So I could bore you more with it, but I hope that that kind of
(32:58):
proves my point a little bithere to where.
I hope that that kind of provesmy point a little bit here to
where and I want to be clear onthis, because this is a topic
that you can kind of butcher andgo back and forth with.
If you want to argue about itone way or another, you can.
So I want to be clear yourlocal market does matter.
I'm not trying to say that itdoesn't.
It more matters on what youpersonally like, in my opinion,
especially depending on the useof the property the rental rates
(33:22):
.
If you want to look at a chartthat really matters, don't even
worry about the home rates.
Look at the rental rates andthe occupancy rates that's my
two cents on it anyway and thenagain look at what you can buy.
It's not so much about what theprice of the home is, it's what
the price to control the homeis, it's what the price to
acquire the home is cash in yourpocket, in your bank account
(33:43):
for your down payment.
It's more important about thestructure utilized to purchase
the property, in my opinion,than it is about the purchase
price of it.
Because you can take a $1million property and if you buy
it cash and your cap rate NOI,after all, debt service,
expenses and all that well, youwouldn't have any debt service
if you bought it cash.
(34:04):
On that $1 million property, ifyour cap rate is 10%, you're
making 100 grand a year on that.
If you did nothing, differentsame property, same purchase
price, same management, sameresult, same cap rate, 10%.
But you bought that propertywith 20% down and you've got a
(34:26):
5% interest rate withinterest-only amortization.
So now you're still making your10%.
So the property is stillgenerating a net operating
income of $100,000.
Now deduct your debt service.
So, since you bought it with20% down, you put down $200,000.
So you owe $800,000,.
Now deduct your debt service.
So, since you bought it with20% down, you put down $200,000.
So you owe $800,000.
If you got interest-onlyamortization with a 5% interest
(34:49):
rate, that means your debtservice on the property is
$40,000 a year.
So deduct that $40,000 a yearfrom your $100,000 net operating
income.
Your gross profit, your now newnet profit after debt service,
is $60,000 instead of $100,000.
But because you invested only$200,000 in cash to buy it on
(35:10):
finance terms instead ofinvesting $1 million cash to buy
it outright, now you'veinvested $200,000 to get $60,000
instead of investing $1 millionto get $100,000, which means
you've turned your cash on cashreturn from 10% to 30%.
And that's just math.
Nothing's changed.
Nothing's different.
(35:30):
It's the same property.
It's the same result.
The only thing that's differentis how you purchase the
property, and that's the biggestthing I can tell you is look at
those fundamental details.
That's so much more importantand you can sell me a.
You know.
A lot of times realtors will askme what kind of property are
you looking for and I'll tellthem anybody that wants to carry
paper.
I'd love to see it because itcould be a trailer park in
(35:52):
Northern Arizona which I love,by the way Northern Arizona,
sedona and all that one, some ofmy favorite areas, but anyway,
it could be a high rise inManhattan.
It could be an oceanfront condoin Newport Beach, like the one
we just thankfully got.
It could be a hotel in Dallas.
It could be a condo in ParkCity.
(36:13):
It could be anything.
It could be a house in Destin.
It means nothing to me what typeof property is.
I don't care about what kind offood they serve.
I want to know what the termsare, what's my projected rental
rate that I can get, what arethe terms I can utilize to buy
it and what does the math equateto percentage-wise?
I'm going to get on a return,because if you take a million
(36:33):
dollars cash and you can utilize$200,000 of it to make 30%, you
know $60,000 on that $200,000,or the example I just gave.
Now go do that five times withthat million dollars and now
you're making $300,000 on yourmillion dollars cash instead of
making $100,000.
And that's when you start to,if you look at it from a
(36:55):
percentage.
Don't worry about the dollars.
Look at the percentage return.
Have that be your focus andstick to that.
Then I promise you that you'regoing to do a lot better with
that mindset.
At least that's my humbleopinion.
I could be wrong, but that'swhat I strongly believe.
And this is from a guy thatkind of got my start during one
(37:16):
of the most horrific markettanks that this country has ever
seen and probably will ever see, and so maybe I'm, you know,
got a little PTSD from basingthings on appreciation.
But I just know how stronglyeverybody always sounds when
they're talking about, well, mylocal market is protected
(37:37):
because of this or that or theother thing, and then how sad it
is.
You know firsthand again,having experienced it in Bend
and other places and seeing it,how sad it is when they're like
oh well, I guess this ispossible, that the market can
tank in Bend or Vegas or Floridaor Texas or California or
(37:57):
anywhere else.
You know, and it has and itshall continue.
But all we can do as investorsand realtors and real estate
professionals is try to protectourselves as best we can and try
to be as stable as we can froma cash flow perspective so we
can weather the storm.
Because if I take this chartback out to the max, going all
the way back to 1980, you'll see, yeah, those crashes happen
(38:26):
back to 1980, you'll see, yeah,those crashes happen, but over
time, because largely ofinflation.
If we can hold on to it, we'regoing to be pretty happy about
it.
And it always does come backaround and it always will,
because the dollar is alwaysgoing to continue to be worth
less over time.
There's always a need forhousing, and so real estate is
(38:46):
the best inflation hedge in myopinion, and that's what it
should be looked at.
It should be looked at as aninflation hedge and a vehicle to
create cash flow.
And if you look at it as avehicle to create monthly and
annual cash flow and aninflation hedge and don't worry
so much about what the marketvalue is doing or does, then I
find it to be.
Then I believe you'll be muchhappier with it and you'll see
(39:08):
that it's a much more relaxedand enjoyable way to look at
things.
So I could have believe it ornot.
I could have rambled a lot moreon that, but that's just my
shortest way I can dive into it.
I hope it gives a little bit ofvalue to anybody out there and
I hope, if you're a nerd withthese stats, like I am, I hope
you just enjoyed looking at someof the markets around the
country, because that's fun todo and it's interesting.
(39:28):
So thank you, guys.
I sincerely appreciate youbeing in our network.
If you haven't already, againplease subscribe.
We really do appreciate it, andhave a blessed and prosperous
remainder of 2025.
And thank you.
All right, guys.
Thank you so much and welcome.
This is Stephan Piscano withthe Stephan Piscano podcast.
So what we're going to do todayis we're going to debunk, to me
, maybe the biggest myth in realestate guys, which is my local
market is special because of XYZ.
And I can't tell you I don'tknow if this is unique to me
(00:21):
because I have so many familymembers, friends, partners,
clients all across the countrythat I'm having conversations
with on a regular basis, but Ican't tell you how many times
over the last 20 years I'veheard someone say oh well, you
know, here in Oregon it's justour market's going to be
protected because all theCalifornians are moving here.
Oh, we're here in Texas andeverybody's moving here from
(00:42):
California or New York orwhatever it is, because we've
got no state income tax, sowe're protected.
Or, oh well, you know, themarket never crashes in Oklahoma
.
You know, you ought to look atthat.
That's what actually somebodysaid to me last night.
Or everybody's moving toFlorida, everybody's moving to
Florida, we're protected.
Same thing Nevada, arizona,alaska Everybody thinks their
(01:03):
market is special and they arespecial.
I mean every market's special inits own way for various reasons
.
Every market has advantages anddisadvantages.
But I have news for you, guys,and this is not a popular thing
to say.
I would in fact estimate thatprobably 80 plus percent of you
that hear this will probablydisagree at first, and I'm going
to try to show you factual datato prove that I'm correct that
(01:26):
while your local market mattersin a microcosm and it can have
some differences from thenational market because of
different trends and rentalpatterns and things of that
nature, the reality of it is,guys, just like we saw in 08, 09
, when the market crashed, itcrashed everywhere.
And it doesn't matter if youare in the mountains in Utah, if
(01:47):
you're in luxury homes oceanfront in Southern California,
you could be in the depths ofthe ghetto in Detroit or New
York or Baltimore, you could beanywhere.
You could be from the luxuryhomes, multi-million dollar
homes in Park City, utah, to thesmallest shack trailer park
(02:08):
that you could ever find in namea place, and it doesn't matter
If the market crashes in onearea, it crashes in another.
If the market soars like it hasthe last, really for the
majority of the last 12 to 15years here, it rises everywhere
and I'm going to show you thefactual data to indicate that.
(02:29):
Now I will say it's the areasthat boom the biggest when a
market soars the Phoenix,arizona, the Las Vegas, nevada,
the Southern California, theFlorida coastal cities, the
Oregon where I used to live thatwill have the biggest
(02:49):
percentage upswings, largestdollar amount upswings when a
market's booming.
But then on that day in 2008,when everything seemingly almost
crashed overnight, those arethe areas that crash the hardest
.
And then the areas like Texas,oklahoma, midwestern states,
(03:10):
ohio you know, alaska thatpeople think of as not
appreciating as much but alsonot crashing as much.
I got news for you While thepercentage or while the dollar
amounts aren't as big,percentage wise, they crash just
as hard, and I can tell youthat for a fact because in 2009,
2011, so on and so forth, I wasbuying homes in the ghetto in
(03:33):
South Dallas, in an area calledPleasant Grove, and we were
buying condos that we werepicking up for $11,000, $12,000
that a few years earlier wereselling for forty to eighty
thousand dollars.
And there were luxury homes inFrisco and Plano and in Dallas
itself that were eight thousandsquare foot mansions that were
(03:57):
selling for three hundred andfifty thousand.
During the last crash, Iremember I looked at a house in
a town called Meridian Idaho.
That's right by Boise.
And again, that's anothermarket that you think of as
ultra stable.
That was on acreage.
It was $600,000 back in 2012, Iguess it was that I was looking
(04:21):
to actually put an offer on it.
Horse property beautiful 6,000square foot masterpiece in
Meridian Idaho, and again,beautiful property, the whole
deal $600,000, about $100 a foot.
That same house is going forabout 4 million today.
Now there's rapid inflationthat's taken place over the last
10 years and all that that havean impact on that too.
(04:41):
But that's all part of the pie,that's all part of the metrics
that go into this.
And I tell you this really justto debunk the myth that guess
what?
It doesn't matter theseancillary factors that people
talk about and even, hey, it'snot really a positive thing for
me to acknowledge this becauseit would help us sell properties
(05:06):
if it was true and there arefactors that can benefit, really
unique factors, like we werelooking at property in Los
Angeles.
I was looking at about, I guess, 12 years ago, right around the
time that they were about toannounce formally but everybody
kind of knew it was going tohappen that they were going to
build the new stadium therewhich is SoFi now, and that's
(05:27):
where the Chargers and the Ramsplay.
And then now you got all that,and so you could pick up
property just about doubled invalue a couple of years later,
after that stadium was formallyannounced and then once it went
live.
And so there's situations likethat.
You can have areas of economicgrowth that can have a higher
bump on a small scale, but atthe end of the day, what I'm
going to attempt to prove to youtoday is that when there is an
(05:50):
actual market drop, like we sawin 2008, when the stock market
tanks, when the real estatemarket tanks by 50 to 70% on a
national scale, when thathappens, you can talk all you
want about the Californians thathappens.
You can talk all you want aboutthe Californians moving there.
You can talk all you want aboutthe tax breaks.
You can talk about whatever youwant.
It's going to crash in yourmarket too.
(06:11):
It's going to dip in yourmarket too, maybe not as much on
a dollar scale, dollar todollar, but on a percentage
scale, which is really whatmatters.
It's going to be about the same.
I tell you this, for is becauseyou know part of my job with
this show and with the webinarswe do and the educational
content that we try to produceis to help everybody in my
(06:34):
network be engaged and informedas investors first and foremost,
and then realtors in thenetwork that like the show and
listen to it too.
You know you can benefityourself as an investor or you
can benefit your knowledge foryour client base of investors
that you're trying to work with,and I like to take all of the
emotion out of it.
If you go to a place like weown property in Panama city
(06:54):
beach and those properties aredoing very well, I'm very
grateful for that.
That's a blessing.
But I've talked with people as,oh, it's so pretty there.
The feeling is so that meansabsolutely nothing, nothing
whatsoever.
I don't care, you can feel,because some of the best
percentage returns that I'veever had in my life as an
investor have been on theugliest properties that you'll
(07:16):
ever see, in some of the mostdangerous.
I mean, you know, in one of theepisodes I'm working on now
that's probably going to take afew weeks to put together
because we're going to reallytry to do this.
One big is talking about myhistory with buying $1 houses in
Detroit during the last crash,and these were houses that,
before the 08 crash, wereselling for many cases, more
(07:38):
than $100,000, which was a lotback then in Detroit and then
all of a sudden we're buyingthem for $500, $600.
I bought 12 of them forliterally $1, which is basically
a deed away from the bank.
So we'll do a whole episodejust on that those houses,
percentage wise, inneighborhoods where, literally,
houses are being set on fire andit's so dangerous that the cops
(08:00):
don't even want to come in andthe fire department doesn't even
want to come in.
To put it out Not anexaggeration and I'll tell you
about that Some other point intime that was the best
percentage return I've evergotten in my life.
In fact, I would make anargument that some of the uglier
homes, some of the moredilapidated areas, are the areas
where, percentage wise, you canget the best return, where,
(08:24):
percentage-wise, you can get thebest return.
And so that's what I want toram in everybody's head is, when
you're buying something, don'tever buy it based on ancillary
factors that you're told.
Buy it on percentage data,market-driven data, historical
data of rental rate performance.
When you base your strategy oncash flow, then you're protected
(08:44):
, regardless of the market, andthat's really those of you that
have seen a lot of the contentor listened to the show before
you heard me talk about it.
The purchase price of a home iswhat I care about the least.
What I care about is the amountof cash we're putting down.
How can we utilize thatproperty as a vessel to create
the highest possible cash oncash return?
I care about the rental history.
Create the highest possiblecash on cash return.
(09:06):
I care about the rental historyand it doesn't matter if it
rents for $600 or $6,000.
It's about the percentage,because if I can get a 32% cash
on cash return, even if it's onone unit that's renting at $600
a month, I would go do that 20times, just like we did with the
Detroit house.
We bought literally hundreds ofthose and we made a ridiculous
(09:33):
percentage return in thehundreds on the ugliest houses
that you would never want toeven think about going and
staying at.
There's always an opportunitythere and I hope that ultimately
there's some comfort in this,because if you don't let, it's
these little narratives that cansway a market and can.
That's what led us in 06, 07,when people were buying
everything up in Miami andPhoenix and Scottsdale and Vegas
(09:58):
and where I lived at.
Well, I guess I had alreadymoved to California, but I lived
in Bend, right kind of rightbefore or right during when all
this was starting.
The narrative in Bend, oregon,when I bought my first house
there before I moved toCalifornia, was we're going to
be protected and everybody'smoving up here from California.
(10:19):
That's not going to stop.
We're always going to becheaper than California.
As long as we're cheaper thanCalifornia, we're still going to
continue to rise.
In fact, when I was 20 years oldand I bought my first house, I
told my mortgage broker.
I said you know, I can't affordthat payment.
And he told me well, it doesn'tmatter, because it's going to
continue to appreciate an equityby 10 grand a month.
So you're good, you can justrefi it in a year.
(10:48):
I was like, oh okay, I mean Iwas 20 years old.
So it ended up being a uniquething because when I later sold
that house for a third of what Ipaid for it in a short sale, I
was already living in Californiaat that time and I hung on
longer than everybody advised meto, just because I was a kid
and I, you know, just onprinciple.
But that was really what led meto utilizing or developing the
seller financing model?
(11:09):
Because, number one, I neverwanted to be dependent on a bank
again and it also seeing all ofmy mentors that I knew at the
time suffer as a result of thatthat horrific 2008 crash.
It made me base my strategy oncash flow, which insulates us to
some extent from whatever themarket does, because I don't
(11:29):
ever want to be a slave toappreciation, because my
fundamental belief nobody canpredict appreciation the one
(11:50):
that's closest to me.
When that guy told me that in 05, 06, by 09, Bend had seen a 60
to 70% drop in market values.
At one point they had a near30% unemployment rate because at
that time their economy wasentirely based on the real
estate market.
They'd closed what they used tohave the mills there in town
and it was all based on thisbooming real estate market and
tourism.
And so when that tanked, thattown was a ghost town for a few
years.
Now it's rebuilt itselfbeautifully, as a lot of these
(12:12):
pretty much all of these areasI'm talking about have, and now
we've had more than a decadereally, like I said, closer to
12 to 15 years of consistentappreciation nationally, and so
Bend is the most expensive realestate in the state.
Now, las Vegas is doingextremely well.
Washington DC, which I'm goingto talk about, is among the
(12:32):
hottest markets in the country.
All of these places that weredecimated to the strongest
extent from 08 to 2012 are theones that come back the
strongest, but percentage-wiseit's all the same, and so that's
why, if you base your strategyon cash flow, if you don't care
what it's worth when you buy it,you only care what it's worth
(12:55):
when you buy it and when yousell it, everything in the
middle means nothing as long asyou can afford the debt service,
as long as you can afford yourmonthly payment.
And so that's why you base yourstrategy on cash flow and
generating a high cash, on cashreturn, and that's what allows
you to still be profitableduring a market downturn.
And I've said this many times.
I wrote an article for it forLinkedIn Pulse, about gosh
(13:17):
almost 10 years ago now it was2016.
And you can find that on Medium, too.
Just go to Stephan PiscanoMedia and all that it's called.
If the Market Crashes, I'm Happy, and the logic behind that that
you've heard me talk about alot is if I buy a property for a
million dollars and I'm earninga 20% cash on cash return.
(13:37):
Market dips tomorrow, now thatproperty is worth half of what I
paid for it.
That property is worth half ofwhat I paid for it.
I'm happy, and the reason I'mhappy is because I'm still
earning a 20% cash on cashreturn on the first property I
bought Because, as we saw in 08,09, when the market crashes and
pricing, rental rates eitherstay the same or actually they
went up a little bit about 2% In2009,.
(13:59):
The rental rates went upbecause of inflation and because
people still need a place tolive, and in that scenario, you
actually saw a large influx offormer homeowners that were
foreclosed on that were influxedinto the rental market as
renters, and so that demand madeit go up too.
So I'm still earning 20% cashon cash on the first property I
bought, which is fantastic.
That's a wonderful thing.
(14:20):
And now I'm going to go buy onejust like it at half price and
get a 40% cash on cash return,which is even better.
So, if you dollar cost average,with your focus based on cash
flow, not on appreciationbecause, again, I don't care
what your realtor says, I don'tcare what your mortgage, I
definitely don't care what yourmortgage broker says, just like
(14:40):
that guy told me 20 plus yearsago they don't know, I don't
know, you don't know, none of'tknow, you don't know, none of us
know what the market's going todo as a whole.
But what I can tell you and Ichallenge anyone, just like I
was telling when I was havingthis debate with some family
members last night tell me anycity, any metro area, any state
in 2008 or 2009, when thenational markets were tanking at
(15:05):
a historic rate.
Show me any metropolitan areaor any state that went up during
that time.
And you can't, because I'velooked.
But I mean, if I'm wrong andyou find one, then put it in the
comment section and I'll giveyou something.
I'll give you a thousand bucksor something.
I don't know because you can'tfind it.
(15:26):
It doesn't exist.
There was a myth that I actuallykind of believed.
There was a story that I'dheard about, and maybe some of
you heard about too, that therewas one zip code in Palo Alto
that during the the 08 to 2012market tank, that zip code
supposedly still went up becauseof all the tech millionaires
(15:47):
and billionaires that werebuying there.
And I always kind of believethat is because there are some
outliers with this.
There are really really rareoutliers where you can have some
weird stuff go on in a specificzip code or city.
But I tried to look that uplast night and I looked in Palo
Alto and can't find it anywhere.
So if it does exist, then showme the zip code and show me the
(16:07):
actual market data that goeswith it, because I don't.
It might have stayed morestable than most, and again,
it's all relative Right.
So if you are in Dallas, texas,and the market booms, maybe you
have an 11 percent appreciationone year, and maybe some other
state has six and maybe someother state has 30 or 22,.
(16:29):
You know, but to a general ruleof thumb, water finds its level
.
To a general rule of thumb, ifthe markets as a whole are
trending up, then everywhere istrending up.
It's just a question of exactlyhow much, but the percentages
are all going to be fairlysimilar.
Now you'll have isolatedinstances within a community,
(16:52):
for example like an HOA, like wehad some condos that we bought.
The HOA was under litigationand so at that time, the only
way that you could sell thosecondos banks wouldn't do
financing on it.
So the only way you could buyand sell those condos was if you
either bought them cash or withseller financing, which is why
we bought them.
Once that HOA litigation wasdone, then you were able to buy
(17:13):
them with traditional bankfinancing as well.
The market on those went up 60%in 12 months.
Now that's an isolated scenario, but that's not market driven
to a region, that's a specificdriven scenario to that HOA or
to that property, and obviouslyyou're going to have that
anywhere.
Oh well, this market's hotbecause of this.
(17:34):
Well, no, the market's hotbecause the market's hot
everywhere.
There are again.
I do want to be clear, thoughthere are a few exceptions, and
right now the only exceptionthat I can genuinely say I
believe is accurate isWashington DC metro area, and
that's because there was agenuine massive increase in
(17:55):
government hiring over the lastfive years or so.
One of my brothers lives in DC.
I was kind of involved inwatching his home search.
He didn't take any of my adviceon the seller financing stuff,
but I did kind of listen to whathe was experiencing and I did
try to look around a bit for himthere, and I can tell you that
is one market that I do thinkhas been abnormally surging and
(18:17):
that could abnormally dip.
If there actually are a lot ofgovernment layoffs because
that's a supply demand thingthat is statistically factually
you can look that up so thereare outliers there.
If there actually are a lot ofgovernment layoffs because
that's a supply demand thingthat is statistically factual,
you can look that up so thereare outliers there.
And then, obviously, places likeDetroit, which I'm going to
again.
I'm talking a lot about Detroittoday.
If you have a massive influx ofcapital, these are tangible
(18:41):
things that you can track, likeDan Gilbert, founder of Quicken
Loans and owner of the ClevelandCavaliers basketball team, who
I actually got to meet aboutgosh 11 years ago, I guess, now
2014.
Really nice guy.
Anyway, he, during that samecrash where I was buying and
flipping those $1 homes in theghetto in Detroit, he was saying
(19:02):
that skyscrapers were on saleand he invested hundreds of
millions of dollars into thecity of Detroit.
Just him personally.
So if billions of dollars getinvested in an infrastructure
with an intent to prop up anarea that has been destroyed,
that's a real life thing thatyou can put something on too.
But all this anecdotal stuffabout, oh well, this area
(19:24):
doesn't crash and this one does,or this one soars and this one
doesn't.
It's just not accurate, guys.
I'd like it if it was, that'dbe cool.
But the reality of it is as I'mgoing to show you with these
charts.
You're going to see when it'sgoing up in one place, it's
likely going up to some extentor another.
If it's going down in one place, it's likely going down to some
extent or another.
You're just not going to seethese swings where the market is
(19:47):
booming in Texas and it'stanking in California, because I
got news for you with all ofthe stuff.
And hey, I don't like thepolitics of California, to be
clear, but I've lived here foralmost well what?
17, 18 years I've lived hereand since I've been here,
everybody's talking abouteverybody leaving California,
(20:09):
and there's a lot of truth tothat, and I don't blame the ones
who do, because the politicsand the expense of living here
is ridiculous.
But guess what?
The market's way up inCalifornia too.
So I don't know, with all thesepeople leaving, the market sure
is surging in California in abig, big way.
So it's the same thing.
So anyway, I'm going to let meshow you some.
(20:29):
I'll quit ranting at you andrambling at you too much here
for the moment and show you someactual stats.
So this is the new home priceindex and you can go to mortgage
news daily.
It took me a while to find adecent chart nationally.
(20:50):
So if I, if anybody else, wantsto play with this and look it
up on your own and there's noaffiliation with them this is
the best one I found and thisone's going back all the way to
1980.
I'm going to do a a 10 yearchart here, but you can see.
See this is national.
Notice the trends to 2020.
(21:15):
And then, right here, rightabout pandemic time, april 2020,
new home prices nationally.
New home prices nationally364,000.
Nationally.
It peaked April 2022.
New home prices 562,400.
(21:37):
Pretty massive increase.
Now, this isn't the increase inthe monthly change.
This is now one month, march 22to April 22.
That month the marketnationally was up almost 10%
9.89%.
The annual change from April2021 was up 33.62%.
(21:58):
So remember that number.
And I don't know I'm doing allthis blind with you.
I did a little bit of research,but I'm doing it all blind here
.
I'm going to go off the top ofmy head.
So now I'm going to go overhere to local markets.
Okay, so we're going to startwith Los Angeles, california.
Okay, and this is a littleconfusing because for this site
and it really is hard to findgood sites to get this data, but
(22:21):
we're going to hop around thecountry here, as you can see.
That's why I chose this one,which is AEIorg, and get some of
the details here.
But so this is for Los AngelesMetro and I'm actually going to
(22:47):
do year over year.
So, going back to the quarterthat we're targeting here, look
at that Q1 2022, market peakedin Los Angeles, like it did
nationally, up 19.8%, accordingto this site, year over year.
All of these are a little bitdifferent.
Let me actually do national onthis one to see if it matches up
.
Yeah, look at that National,2022 Q1 up 20.6.
(23:11):
So we'll stick with thiswebsite, just so the numbers are
all the same, because all ofthese rated a little bit
differently.
This one's doing a percentagebasis versus a price basis, but
the numbers, what we want tofocus on is this percentage
right here 20.6.
National.
And then for Los Angeles, samequarter, 19.8.
(23:37):
Now, and then it dips reallybig 2023, and then you've seen
2024 go back up again.
So let's go back to the national.
Let's see how that.
Yep, look at that.
Exactly the same dipped on anational level up again q1.
(23:59):
So in the family discussion Iwas having last night, the
example that somebody used wasoh well, you must not go to
oklahoma very often becauseOklahoma, you know it doesn't
crash there.
Well, ok, let's.
Let's see Oklahoma City,oklahoma.
Oh weird, look at that.
The exact same trend as LosAngeles.
So if you're ever wondering ifthere was anything that Oklahoma
(24:23):
City and LA LA have in common,it's the pricing percentages in
the index.
So the exact same quarter thatnationally the country was up
19.8, or, excuse me, 20.2percent and Los Angeles was up
19.8 percent.
Oklahoma City was up 16.2.
Then, the same quarter that LosAngeles tanked or dipped a bit
(24:49):
I'd call that more of a dip thana tank because the value is
still high.
Oklahoma City did the exactsame thing.
Let's try another one.
And again, I'm doing these allblind.
I haven't looked this up, butlet's do.
Everybody talks about Floridaand we have a lot of properties
there.
I love Florida, I got familythere.
Let's do Florida.
How about Jacksonville, whereI've got some family there?
(25:10):
Exact same trends.
Again, these will all berelative.
The higher they go up, the morethey go down, but the trends
are all the same.
The percentages might beslightly different, but if the
market's up nationally, it'sgoing to be up everywhere.
If it's down nationally to abig level, it's going to be down
(25:35):
everywhere.
Let's look at another one.
How about Dallas, texas?
Look at that 30%.
So you actually saw biggerswings in Dallas, but notice the
negative percentage return whenit went back down and then
going back to compare it againto Los Angeles 19,.
(26:06):
About the same, same trends.
Actually, the numbers areslightly worse in LA than they
are in some of these other areas.
Let's look at Cincinnati, ohio.
This is the first one with alittle bit of difference because
they had a bigger boom righthere than they did here.
Just slight variation.
Atlanta, georgia same thingdown.
(26:28):
Let's look at New York.
Now, new York I think this onemight actually be one of the few
that could prove me wrong.
Yeah, because New York reallyhad a tough time with the
pandemic.
That was a real thing in a bigway.
But even them.
Similar trend.
How about Detroit?
(26:51):
It's interesting you are seeinga little trend here that the
Midwest so far and again doingthese blind is an interesting
way to do it, because I'm justreacting to it along with you.
They had their big boom Q2 of2021.
And then they had another popQ1 of 2022, like everywhere else
so far has.
But they had this little popright here which is interesting
(27:13):
that our two Midwest Cincinnatiand Detroit so far both had that
.
Let's try Boise.
Yeah, now Boise.
This is interesting.
Boise is the first one thatwe've had a real big difference
here.
Still the same general trend.
I mean, you know you're notgoing to pin it down to the
(27:35):
month for everywhere in 2021,quarter two, and then they
actually, when all these otherplaces were having their big
spike, they actually were stillup but were trending on the way
down and then everybody tankedQ2 2023 and then rebounded 2024.
(28:03):
But it's all relative, guys.
Like I'm saying about Tennessee, tennessee follows that trend.
So it's interesting.
You've got a trend from thefirst part of 2021 for kind of
more of the Midwestern statesand then everywhere.
That's kind of traditionallythose hot markets.
It's Q1 of 2022.
(28:24):
But that's going to vary a bit.
But when it went down, I've yetto see any market we've looked
up that didn't go way down.
And then, when they rebound,everywhere's rebounded.
How about Las Vegas?
We haven't looked that one up.
Yet Same thing.
(28:51):
Every market that we've lookedup at a trending peak right
around here in that 2021 toearly 2022, and then all of them
had a huge drop off to Q2 2023,and then some form of a rebound
(29:11):
in 2024.
Every single market we'velooked up.
How about Montana?
It's not even going to let medo Montana.
How about New Mexico?
So they're all going to followthat same trend, guys, q2 2022.
See if there's any other citiesin California to let me look at
here.
How about Bakersfield would bean interesting market?
(29:34):
Yeah, I thought so.
My guess was that Bakersfieldwould follow more of that
Midwest trend that we're seeing.
So I think actually the trendseems to be it's not really a
Midwest thing.
I think actually the trendseems to be it's not really a
Midwest thing.
It's more of a I'll call it asmaller city, but you know,
still large.
These are all bigger metroareas we're talking about,
(29:55):
versus those hotbed, extremelyvolatile markets that we're used
to talking about LA, new York,miami.
So here's a guess and I couldbe wrong, so we'll see.
I'll edit it out if I'm wrong.
I'm kidding, but I'm gonna lookat Miami next.
I would imagine, by this trend,miami probably peaked in Q1 of
(30:17):
2022, like LA did and some ofthese other big cities.
But the smaller cities that aregonna to be a bit more stable,
like the Boise, idaho, like theCincinnati, like Detroit, their
big rise was the beginning of2021.
And then they kind of leveled abit right here.
So it's interesting that evenin California, a city like
(30:38):
Bakersfield, which is still agood-sized city, just like
Cincinnati is, and all thatabout half a million people in
the metro area last I checkedNow I've stayed in many hotels
there driving back and forth.
I like Bakersfield quite a bit,but anyway, they would be more
in that trend.
So let's look up Miami now.
Yep, all right, we got it.
(31:05):
I really was kind of nervous onthat.
So, yeah, miami follows whatI'll call the volatile big city
trend.
So it doesn't make anydifference that it's Florida
with no state income tax orwhatever it is.
Versus Los Angeles, the Miamichart is almost identical to the
(31:26):
Los Angeles chart, which I'llpull up again Same quarter, same
drop-off, same rebound, andwe'll do one more I'm trying to
think of the most.
How about Iowa?
Des Moines, iowa, interesting.
(31:53):
Okay, so Des Moines actuallyfollowed more of that Miami Los
Angeles trend, but it's allstill the same thing.
Market goes up, market goesdown.
Oh, the one that I haven't donebut I've talked so much about.
How about DC?
Really curious about this one?
And they followed.
Okay, interesting, so it reallyso.
(32:18):
They really peaked Q2 2021.
So that would be right.
After the Biden administrationcomes in and the announcements
made, and then, like everysingle other market that we've
looked at, they dipped down andthen they strongly rebounded in
2024.
(32:38):
So that's the pattern, guys.
And well, let's look at Alaska.
It'll let me.
Alaska might be one of thoseoutliers.
I would think it's not evengoing to give me Alaska.
How about Utah?
Utah, same thing.
So I could bore you more with it, but I hope that that kind of
(32:58):
proves my point a little bithere to where.
I hope that that kind of provesmy point a little bit here to
where and I want to be clear onthis, because this is a topic
that you can kind of butcher andgo back and forth with.
If you want to argue about itone way or another, you can.
So I want to be clear yourlocal market does matter.
I'm not trying to say that itdoesn't.
It more matters on what youpersonally like, in my opinion,
especially depending on the useof the property the rental rates
(33:22):
.
If you want to look at a chartthat really matters, don't even
worry about the home rates.
Look at the rental rates andthe occupancy rates that's my
two cents on it anyway and thenagain look at what you can buy.
It's not so much about what theprice of the home is, it's what
the price to control the homeis, it's what the price to
acquire the home is cash in yourpocket, in your bank account
(33:43):
for your down payment.
It's more important about thestructure utilized to purchase
the property, in my opinion,than it is about the purchase
price of it.
Because you can take a $1million property and if you buy
it cash and your cap rate NOI,after all, debt service,
expenses and all that well, youwouldn't have any debt service
if you bought it cash.
(34:04):
On that $1 million property, ifyour cap rate is 10%, you're
making 100 grand a year on that.
If you did nothing, differentsame property, same purchase
price, same management, sameresult, same cap rate, 10%.
But you bought that propertywith 20% down and you've got a
(34:26):
5% interest rate withinterest-only amortization.
So now you're still making your10%.
So the property is stillgenerating a net operating
income of $100,000.
Now deduct your debt service.
So, since you bought it with20% down, you put down $200,000.
So you owe $800,000,.
Now deduct your debt service.
So, since you bought it with20% down, you put down $200,000.
So you owe $800,000.
If you got interest-onlyamortization with a 5% interest
(34:49):
rate, that means your debtservice on the property is
$40,000 a year.
So deduct that $40,000 a yearfrom your $100,000 net operating
income.
Your gross profit, your now newnet profit after debt service,
is $60,000 instead of $100,000.
But because you invested only$200,000 in cash to buy it on
(35:10):
finance terms instead ofinvesting $1 million cash to buy
it outright, now you'veinvested $200,000 to get $60,000
instead of investing $1 millionto get $100,000, which means
you've turned your cash on cashreturn from 10% to 30%.
And that's just math.
Nothing's changed.
Nothing's different.
(35:30):
It's the same property.
It's the same result.
The only thing that's differentis how you purchase the
property, and that's the biggestthing I can tell you is look at
those fundamental details.
That's so much more importantand you can sell me a.
You know.
A lot of times realtors will askme what kind of property are
you looking for and I'll tellthem anybody that wants to carry
paper.
I'd love to see it because itcould be a trailer park in
(35:52):
Northern Arizona which I love,by the way Northern Arizona,
sedona and all that one, some ofmy favorite areas, but anyway,
it could be a high rise inManhattan.
It could be an oceanfront condoin Newport Beach, like the one
we just thankfully got.
It could be a hotel in Dallas.
It could be a condo in ParkCity.
(36:13):
It could be anything.
It could be a house in Destin.
It means nothing to me what typeof property is.
I don't care about what kind offood they serve.
I want to know what the termsare, what's my projected rental
rate that I can get, what arethe terms I can utilize to buy
it and what does the math equateto percentage-wise?
I'm going to get on a return,because if you take a million
(36:33):
dollars cash and you can utilize$200,000 of it to make 30%, you
know $60,000 on that $200,000,or the example I just gave.
Now go do that five times withthat million dollars and now
you're making $300,000 on yourmillion dollars cash instead of
making $100,000.
And that's when you start to,if you look at it from a
(36:55):
percentage.
Don't worry about the dollars.
Look at the percentage return.
Have that be your focus andstick to that.
Then I promise you that you'regoing to do a lot better with
that mindset.
At least that's my humbleopinion.
I could be wrong, but that'swhat I strongly believe.
And this is from a guy thatkind of got my start during one
(37:16):
of the most horrific markettanks that this country has ever
seen and probably will ever see, and so maybe I'm, you know,
got a little PTSD from basingthings on appreciation.
But I just know how stronglyeverybody always sounds when
they're talking about, well, mylocal market is protected
(37:37):
because of this or that or theother thing, and then how sad it
is.
You know firsthand again,having experienced it in Bend
and other places and seeing it,how sad it is when they're like
oh well, I guess this ispossible, that the market can
tank in Bend or Vegas or Floridaor Texas or California or
(37:57):
anywhere else.
You know, and it has and itshall continue.
But all we can do as investorsand realtors and real estate
professionals is try to protectourselves as best we can and try
to be as stable as we can froma cash flow perspective so we
can weather the storm.
Because if I take this chartback out to the max, going all
the way back to 1980, you'll see, yeah, those crashes happen
(38:26):
back to 1980, you'll see, yeah,those crashes happen, but over
time, because largely ofinflation.
If we can hold on to it, we'regoing to be pretty happy about
it.
And it always does come backaround and it always will,
because the dollar is alwaysgoing to continue to be worth
less over time.
There's always a need forhousing, and so real estate is
(38:46):
the best inflation hedge in myopinion, and that's what it
should be looked at.
It should be looked at as aninflation hedge and a vehicle to
create cash flow.
And if you look at it as avehicle to create monthly and
annual cash flow and aninflation hedge and don't worry
so much about what the marketvalue is doing or does, then I
find it to be.
Then I believe you'll be muchhappier with it and you'll see
(39:08):
that it's a much more relaxedand enjoyable way to look at
things.
So I could have believe it ornot.
I could have rambled a lot moreon that, but that's just my
shortest way I can dive into it.
I hope it gives a little bit ofvalue to anybody out there and
I hope, if you're a nerd withthese stats, like I am, I hope
you just enjoyed looking at someof the markets around the
country, because that's fun todo and it's interesting.
(39:28):
So thank you, guys.
I sincerely appreciate youbeing in our network.
If you haven't already, againplease subscribe.
We really do appreciate it, andhave a blessed and prosperous
remainder of 2025.
And thank you.
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