Expected Air Date: 11/29/18
Opening
A little while back we did a show on Chicago and one of our guests was Jane Garvey. We knew we needed to get her back for an extended interview and that’s coming up today. We are going to focus some of our time on rent controls. Jane thinks they are not the answer for affordable housing and offers up 91 reasons why they are not.
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“You got circumstances, I got circumstances, we ALL got circumstances. But you won’t find me under mine.”
-Roger Blankenship
Transcript
[0:00] Music.
[0:16] America the show that teaches you how to make money in real estate wherever you are whatever your situation there is an opportunity for you flipping America is sponsored in part by American IRA
founded by investors for investors on the web at American Ira. Com,
and by Braswell Capital Solutions commercial lending made easy on the web at Braswell Capital solutions.com and now here’s that flipping America guy Rodger Blankenship.
Hello everyone a couple of weeks ago we did a show about Chicago in the Chicago market and also talked about Illinois a little bit one of our guest Jane Garvey,
back with us today I had so many questions I wanted to ask her about life and investing in the Chicago area and my friends
I’ve learned over the years that if you have a chance to tap into the mind of a true expert take it.
As soon as our last interview was finished I ask Jane if she would come back and speak with me further about issues in real estate investing she graciously agreed and that interview is coming up in just a few minutes I’m excited to share it with you she is a walk,
Encyclopedia of real estate knowledge creative deal structuring history perspective and good old-fashioned common sense,
that’s coming up in just a few minutes now I don’t want to get off on a rant to your and I certainly don’t want to get political.
[1:42] But when I say that there’s your hint that both might be about to happen I’ll try to control myself but I just want to say it’s a shame,
that we always tend to elect political hacks to office who get there by promising things they know they can’t deliver to people who really don’t believe them but hope they might get some of what was promised
unfortunately the only real experience these elected officials often have is the experience of public posturing,
carefully freezing retractable promises and posing for photo ops.
But we put them in the positions where they can break the back of people in the community who risk their own money
invest their time and give their lives to be building businesses that create jobs and prove lies brought in the tax base and improve those very same communities.
[2:35] These Small Business Leaders are courageous but not stupid.
[2:41] When they see the local government making decisions that discourage dampen and destroy their business they tend to just move on to a different place where they can be more successful.
[2:50] Urban blight is a complicated subject and I’m not going to pretend to elucidate all of the causes here but I can tell you one thing is certain,
if you see an area that is blighted a lack of businesses lack of opportunity run-down homes failing schools you will also see an area with ineffective elected officials perhaps self-serving,
or perhaps well-meaning but ignorant none the less about how business works and how business owners think I’ll fit in the name of fairness,
I’m using air quotes here or even safety they will pass regulations that crush the very businesses that feed their community.
[3:31] It’s not really a big mystery a large number of elected officials are completely clueless about business and business is the lifeblood of a community.
So what can we do we are not going to change the world and we’re certainly not going to change human nature the only thing we can change is ourselves and how we respond to the world around us.
It’s possible we may change some minds and touch some lives by continuing to advocate for individual responsibility limited government
and an agreed-upon moral code of right and wrong these things are the foundation of a free society and I don’t know about you but I’m very much in favor of Freedom so
tell you what I’ll keep doing my bit you do yours and bit by bit perhaps we can make our place better fair enough.
[4:21] Okay see that wasn’t a bad rant was it alright I didn’t get political didn’t name any names that’s not our style here keep it positive,
keep Floyd look for opportunity because it’s everywhere hey how to contact this year at flipping America you can find us on the web at flipping America Network,
come and were there for you on the web 24/7 we’ve got to RSS news feeds that are continually renewing what’s going on with the news and information about real estate around the world.
But they’re happening live on the main page of the website plus a lot of other information and opportunities there for you to get involved in learn more listen to this show learn to listen to back issues in that sort of thing.
[5:07] How you find us on Facebook by looking up flipping America media and on Twitter and Instagram,
at flipping America we’ve got a YouTube channel we got a presence on LinkedIn and Pinterest and housing
that sort of thing and you know I’m not a big social media person but hey I’ve got good social media team members here,
and well you know we’re doing all right but we’re planning to get even better and what we do a little bit more strategic with our social media so you don’t follow us on Twitter and Instagram,
and,
you’ll see that we post information and lot of articles about stuff that we don’t have time to get to on the show and it just outside of what we would talk about on the show but might be of interest to you I did get a question this week
about some of the stuff that gets posted and my answer is I post things that are adventurous to me.
That I think are impactful in one way and it may be a tangential it may be way out there somewhere.
[6:09] But the it’s somehow connected to my thinking and and what I’m thinking about what’s going on with real estate
sometimes it’s just for fun sometimes it’s something goofy but if it amuses me I’m a post it just to see if it amuses anybody else and so really that’s what it is there’s no hard-and-fast criteria,
sometimes I’ll post it if I think other people will be interested in it and honestly some things I post I’m not that interested in but I think some of you might be so just trying to help all right,
if you’re not into the social-media thing but you can do an email feel free to send us emails at.
[6:46] 2 question questions at flipping America network.com its questions at flipping America network.com we will answer your question about real estate we may not answer your question about
what to do with your friends sick cat but we will answer questions about real estate whether it’s real estate that you want to buy for yourself.
[7:07] Or real estate investing and now that I’ve said that I need to tell you I tell you almost every show the show is called flipping America,
and the show has become very popular because of the popularity of the house flipping shows on TV and we appreciate,
we’re grateful for that but here on this show we don’t encourage everyone to just drop what you’re doing and start flipping houses like you see on TV we do encourage everyone to invest in real estate,
consider having some type of your some part of your portfolio as a real estate investment you don’t necessarily have to be flipping
that’s not even true investing you don’t even have to necessarily own rental properties you can invest in a real estate investment trust you can invest in private Equity Fund
but you know there is a fun going here or with
my partners and friends called DT investment funds and you can read about that by going to DT investment funds.com and you know you can possibly just put your money and sit back and relax and let other people who are doing the hard work
bring some benefit into your life but definitely you need to balance out your portfolio with some real estate in there somewhere.
[8:20] Okay if you’re going to be in the Atlanta area on a Wednesday please come have lunch with us we do it every Wednesday except not the Wednesday before Thanksgiving and if it’s a holiday like you knows Fourth of July or New Year’s Day we’re not going to,
at lunch on those days but every other Wednesday we’re having lunch somewhere in Atlanta you can find us on meetup.com and and find out where it is,
but you can also just.
Connect to see what the show will tell you but usually right now we’re going to Huey luey’s Tex-Mex restaurant on in Sandy Springs on Roswell Road pretty easy to find just look up Huey Lewis and if you come in from out of town
and you say you heard about it on the show your lunch is on me.
[9:02] We had a we overflowed the rim this past Wednesday and it was a lot of fun and a lot of good connections being made deals getting done
and the money Changing Hands people making money
it’s good to see flipping America apps in the App Store you can listen to the show read the show notes in the entire catalog of shows is now available to you it’s a free download and there are no up cells are in app purchases free to download free to listen
go ahead give it a try and drop me a line and let me know what you think,
also a reminder that we have our analytical tool in the flipping in the App Store and it’s called property grade,
all you have to do is answer 10 simple questions about the property in the app instantly tells you what you can expect to make your return on investment you return on cash and then the program gives the project the letter grade using the proprietary flipping America investment property Greg,
algorithm all right folks we’re going to I go to a break just a minute and then we’re going to come back we’re going to talk to Jane Garvey,
fascinating conversation she knows so much about what’s going on and has such an interesting perspective can’t wait to share that with you and then I think toward the end of the show if we have a little time I’ve got a few questions from listeners that I want to get okay Satan will be right back.
[10:18] Music.
[10:35] Have you ever seen one of those Fix and Flip TV shows and thought to yourself I could do that or even better I’d like to do that.
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I thought it was amazing I put pages and pages of notes and I just want to recommend that you go to it because in my opinion,
Dish Nation that he gets on contractors alone makes it worth the price but that’s not the only thing that he talks about I highly recommend that you attend his flip starter it’s worth every dime.
[11:57] Music.
[12:10] Jane Garvey welcome back to the show last time we talked we just had a
a couple minutes really we have what we had do you know 10 minutes or so a segment the talk and I’d there is just so much more I wanted to ask of you and you know we have a mutual friend and Gordon cats and I’ve been in in this business for 15 years but for those of you that have been in the business for
30 and 40 years I just say,
bless you let me learn from you and so thank you for taking time to talk to this again today I really appreciate it,
are we just had an election.
And you guys in Chicago elected the house and a senate the governor that are all in favor of rent controls I’d like to just go ahead and talk about rent controls for a minute if that’s alright with you,
I would be happy to,
okay I don’t live in a rent control area there’s there has been a tiny little bit of talk about it in Atlanta but not enough to really gain traction but I know it’s been a part of living in Manhattan or New York City for years
and just why don’t you tell us a little bit about what it is and why anyone thinks it’s a good idea.
[13:23] Rent control come to the number different forms what they’ve been talking about here in Illinois is to.
Basically take all residential housing and.
Controller by government-controlled Boards are playing on the bill that they introduce dead 59fifty County,
we decided instead to set up 6 of them around the state and basically those boards set the rents,
it will adjust the manual eBay cost of living index.
[13:58] Which of course has no tax component were some of the other components of what it makes it.
What the landlord’s going to be responsible to pay or not part of the cost of living index but in any case they will set around some of the accounts are protected.
Talking about having the landlord’s put 10% of the wrench into a.
Maintenance fund is controlled by the board and if they want to do maintenance they have to go in front of the board and beg for money and the board has the ability to give that money to people,
are operating housing that basically haven’t contributed to it also.
Are you saying Bateman’s like abatements but without the eye.
[14:47] Okay I don’t remember seeing Bait House what kind of fun are they contributing to.
[14:53] Maintenance maintenance like him fix up maintenance okay alright alright,
and hard-of-hearing over here on this end it’s it’s amazing so you have to contribute money to a maintenance fund that you may not be able to get back later on when you need to do maintenance,
or even if you do when you have to go and beg for it in front of a board and if they only have 6 boards in the state and every single rental property is.
They are being controlled by them I can imagine it being months before you would even get a hearing.
[15:31] If you need to raise the rent beyond what they have because you’ve been a special need of some kind again months before you could get a hearing to do that.
Man rent control in general.
[15:44] Autonomous or pretty much a hundred percent in agreement with it not working and the reasoning for that is.
Just like let’s say we had cucumbers cucumber farmer and you decided that you covers were too darn expensive than they ought to be $0.05.
Can you cast a lot of cucumbers are $0.05 cucumber farmer.
It’s not going to plant cucumbers next year.
This year he may or may not Harvest a cucumber city is already planted depending on this $0.05 would cover the cost of harvesting and getting.
[16:22] I’m an investor that invest in rental property I don’t need to do that in Illinois.
I could do that Gardner anywhere else where I don’t have government controlling every step I make Beyond costumes.
[16:42] To the state of administering these boards gets passed directly into the rental property so we be added to the cost of operating the rental cost rental property with Camp the income we can come with us.
No caps on property taxes which are already like 3 and 1/2 to 4 months worth of a red here.
[17:03] I can’t see this working is he has to work elsewhere when you end up having happened is that some.
People stay where they are in residential property find people in New York that are renting an apartment for a hundred bucks a month.
Their kids songs moved out they got affect 5 bedroom apartment but why in the world would they move out.
When words that own the property at the time that red control came in pretty much all lost them.
Because I couldn’t pay the bills and other people have bought them through.
Distressed property or the government owns number in Oak City on summer something of that sort.
So it stops the natural flow of people in and out of housing because people stay stock I ran into a guy at Santa Monica from Santa Monica I was going to Provo Utah last spring.
He was in the airport with me we got talking and he said yeah he said I’ve got.
[18:10] One of those lucky lottery winners who has a rent-controlled apartment in Santa Monica.
Killer talking about what he was doing in Provo Utah well that’s where most of his businesses these days.
Operates the business and deals with customers in Provo from his rent-controlled apartment in Santa Monica.
Because Why move out of something where you got your price of a controlled.
Yes but why operate your business in California where taxes are high.
[18:44] Because apparently the rent controlled Apartments easier yeah all I know he might very well have some sort of little shopping.
Pro Bowl where you can operate the business there and only shows the salary.
Sure anytime there’s a government system there are plenty of people out there figuring out a way to gain that system
and at any time the government gets involved it it it’s to me it seems like it decreases our freedom and it produces
opportunity and the promise efficiencies never happen all I can help all I can do is think if you like your doctor you can keep your doctor.
And then just one of the great political lies of a generation but I will try not to get political on this show right here this just sounds like a nightmare and waiting what is the reason what is the compelling reason for anyone,
trying to justify rent control.
[19:43] Screaming and yelling us because there’s not enough affordable housing and because some areas are regen terrifying and pushing the poor people out of the area.
[19:54] Which is just one of those natural cycles in real estate we go.
[19:59] Point of Decay back into reinvestment in the area which region provides the area.
But unfortunately some of the people who move in when it’s in the K can’t afford to live there when it’s fixed up.
[20:14] So either you force the people who own the property all of these years to keep their dilapidated building and enforce the neighborhood don’t deal with having a dilapidated building.
We find some other solution for those people that have been living in those apartments that are way too cheap for what the neighborhoods worth at the moment their solution of scabs around Force the landlord to keep them.
Somebody wants to build new buildings they have to take those old tenants at those cheap rents which they can’t afford to build a new building or do a,
a massive Rehab on something if you’re going to have to keep a lower rent for 2 months what about the gentrification toward flipping the setting affect that does it.
[21:00] I think flipping is part of the problem.
You take your neighborhood nuts then marginal can you start fixing up buildings that.
[21:12] Let’s search raising the rent cuz people go in they fix up a building looks so you could have two or three flat and fix up the building they rerun it to new people that are building the building goes up in value and then they sell it.
Or keep up for a rental you know what’s happening in Atlanta is a lot of single families homes are getting fixed and and soul,
not never rented just sold to end buyers and that that’s happening a lot.
The one thing that I could see it happening a lot is people that have single family homes.
Okay I’m done rental could put them back on them I’m sorry but them back on the market this is embarrassing. My phone go off in the middle of your show that’s all right
you know it’s just not the first time it’s okay.
[22:15] People that help single family homes that have been rentals can obviously fix them up and sell them as single family homes.
Unfortunately if they wait to the point where this ride control is already in place you’re going to have to give the tenants like 3 months worth of notice.
Yeah they’re going to have to paint the Towne 3 months worth of rent 14 days before they move out to get them to move.
They’re probably also going to hit a market where whole lot of people are dumping property because you don’t want to be stuck in the mud control nightmare.
[22:48] Yes it just doesn’t seem like there’s there’s any way that it makes sense because you take away,
an Investor’s incentive to come to your area and put their money into a property you limit what they can make with no limit to what you can take from them as a government and,
almost anyone out there this in this business that has any money left to put into it is just going to go somewhere else so what’s going to happen to these areas that there’s only one direction they can go at this point right,
I Can Do This One Direction they could go.
I am trying to fight this I have decided that the real,
way to fight this is to come up with other Solutions okay and I want to get to that because I believe that I believe in capitalism and free markets and you got a free market solution right.
I have a lot of free market solution okay well we’ve got to go pay the bills for a minute but when we come back from this break we’re going to talk about Jane Garvey and her
she’s got a document that outlines,
I don’t know what is a 90 ways to deal with the rents and create affordable housing without letting the government take over another chunk of our economic life.
I will do that right when we get back.
[24:14] Music.
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[25:19] Larry Lucas and I’m a student in Rogers.
Mentor program and I’m happy to say I’m working on my very first house we see this house gilding.
Maybe $70,000 in profit but flipping America mentoring program is the only one that includes.
Financing your dicks so the measuring program does exactly what.
The contracts to do Rodger and Andrew the other fellows in the team Tony have been super in providing oversight and guidance flipping America.
Has been the.
Vehicle that is allowing me to achieve my dreams and becoming a real estate investor.
[26:13] Music.
[26:34] We’re back I’m with Jane Garvey G is as you know from our introduction earlier she is the really the mom of all Ria’s endure it in the state of Illinois and she was instrumental in founding the.
Oh tell me the name of it again now that creative,
I run the Chicago creative Masters in Chicago creative Association and you know,
right so and you been doing real estate investing for a number of years a long time and,
are you seeing a lot you’ve been through a lot and we’re talking about one of the greatest threats to individual liberty coming up in the state of Illinois and then his rent controls and Jane has developed,
a list of suggestions of things that the the.
A free market could do to bring in ring controls I’d love to hear some of those ideas and tell her listeners how they can get your report.
Okay I got 91 ways to create affordable housing and control ain’t one of them that was the complaint and there was not enough affordable housing.
Call the first the biggest one is get out of the way.
We have too much government already trying to control rental property through zoning through inspections licensing.
[28:02] Insistence on using old-fashioned but and expensive materials.
[28:11] Permit permits for things that it’s ridiculous temperaments for so that’s when will chunk is get out of the way.
If they blocked off on some of that stuff that would encourage investors to come into the area and provide more housing the more house and it comes into the area naturally with supply and demand as they work.
I’ll be more affordable housing right secondly.
Downzoning which is been going on for years in the area probably has some your areas to.
My particular town here which is not one of the Townshend have been complaining about affordable housing all the way should they took and they said they’re no longer billable you need six wide Lots.
[29:03] Because they wanted bigger houses so they could get more taxes.
But by doing nothing but whole bunch of lots unmeltable for smaller housing.
Cabin in the city 2 things burn down there on two small lot for a new house it won’t let people put in manufactured housing.
Manufactured housing is one way to build that’s cheaper than stick-built.
Dulcimer Stone Delta’s in Chicago.
Take some of the affordable Solutions out of the off the table.
In memory of our areas they took all the all of the Garden Apartments and said that they were not permitted.
[29:51] Good news regarding apartment it would grandfather you in knowing that you’re done or when you sell the property then get used one of the alderman in Chicago proposed in ordinance,
that would take less that restriction and he estimated there would be over a hundred thousand new units coming on the market by doing that wow.
That’s just insane but it’s reality.
Another type of proposal is okay what kinds of incentives could we provide for,
investors to build affordable housing well.
[30:32] Temperature strips I don’t like to have districts but if this works is certainly one of them the opportunity zones that the federal government has put in or another one of them.
You could take areas where you’re having a problem and do some sort of.
Incentive-based financing for people that we’re going to build in that area if they would Bill cheaper units.
[30:57] But you’re also going to find one of many communities the people that don’t want cheaper house.
We’ve had many communities around Illinois developers have said Okay I want to build a 50-unit building here I will make.
[31:12] 20% of a quarter cord affordable housing for people that are making.
Less than 60% of the median income in the area and they end up with protests at City Hall because the people don’t want low income people coming into the neighborhood.
So I need to change the mindset of the neighborhoods that they’re trying to but they don’t want the people that come along with low income housing.
They’re voting for the things that turn this into low-income housing.
Ask your neighbor one of the other things cities have done cuz in the World War II right after World War II major housing crisis in this country.
Young people would take big old Victorian houses and cut them up into four or five.
Cheap apartments zoned out of existence where they provided incentives for people to take the big old tire back into a big old house.
4542 and turns it into one on affordable housing unit.
So quit doing that sort of zoning that eliminates the sorts of things.
[32:34] Well I guess what I wanted what I want to say here is you got 91 really good ideas like that how about letting them let me publish them on our website that alright with you,
yeah well we’ll just do a blog post from a guest writer Jane Garvey and and we’ll get it out there plus will send this to anybody in America who request it and I’ll talk to you offline about how to get a copy of that
over to us and I will put it up for you on the website
but that’s all great I love free market Solutions and I think the free market can work because free market is the best last hope we have to balance self-interest
and keep from Crossing line into greed and make sure that you know free market capitalism has done more to create wealth.
Any other economic system in the history of the world there’s no denying that,
I’d like to talk about some other larger things in the real estate business you’ve been around long enough to see a lot of things come and go and so I’d like you to just weigh in on some different things if I could but all right all right.
[33:35] You know in 2008 I don’t think this is a big secret but maybe our Oliver lister’s don’t know this in 2008,
in the we were deep into the crash especially in the Southeast I went
Salt Lake City and sit down with the president of Ameriprise and propose to him that we put together a real estate investment trust that focused on,
single family homes the reason I wanted to do it is I know I can pick him up so cheap right now this was kind of like a once-in-a-lifetime opportunity and he looked at me and he said well thanks
sounds like a pretty good idea but it’s never been done I don’t think it can be done there too many moving parts so
I don’t think it will happen I came home a little discouraged and and decided not to pursue it and then 3 years later here comes all the hedge funds and they’re buying these properties so,
let me ask you this what do you think about the impact of hedge funds with single-family homes and that he seen them active in Chicago I’m sure you have,
lots of single-family homes of turned into single-family home rentals near,
I think that may be part of the problem because you don’t have the mom and pop landlord interacting with tenants you got.
[34:50] Huge fan that you can’t do much about.
I suspect that’s all going to come crashing down at some point why do you say that because I agree with you.
I say that because they’re in it for the money once the money is not there they’re gone and they’re in the problem is that there’s too much of an all-in-one hands like the Monopoly.
Monopoly goes when you got a problem I think in particular and probably elsewhere 2.
The market changes in laws change that’s not going to be the favorite investment of these electrons,
right yeah I’ve often said you know I was here before the hedge funds got here and I’ll be here after they get interested in Tech or AI or gas and oil and move on to whatever is next because for them it’s just one more products that they can run the numbers on,
for me it’s real estate.
Could very well be an opportunity for you and for me and for other people that like to buy and Rehab houses have been rental properties.
Marketplace of mostly what should be single family homes and owner occupied single-family homes.
So they’re going to need work once they start getting rid of them now in your area did you watch the hedge funds consistently pay too much.
[36:18] All right have you also wondered how in the world are they making any money.
Like all of us here probably,
you don’t have the same sort of overhead for my mentor
that I had at the time when when the funds first came to town to a business Mentor teaching me how to be a better businessman said never presume to know how another man makes his money
and it actually took me a couple of years to
get curious enough to dig into what the hedge funds were actually making and how they were doing it but yeah they were buying properties paying too much but when they added leverage to the mix they were able to romantically improve the returns to their
investors,
not naughty kind of return I would want but at least a decent return the problem that I see though is they paid too much the values haven’t gotten back to the point where they can actually unload these properties at any kind of a prophet,
and they might be over leveraged I don’t know but I suspect that some of these headphones are actually in trouble.
[37:30] I don’t know enough to tell you that either well we watched a few of the hitch for the smaller ones here either sell out you know that they’ve also to Black,
is Blackstone BlackRock black something,
Blackstone we’ve seen them sell their entire portfolios to them,
we’ve also seen I have a friend who works for a local guy hit you up here locally and,
managing a pretty significant part of their operation and he just got laid off as they were out they said Outsource that part of their operation that tells me they have cash flow problems,
so his friends are one thing and and I guess you agree that they coming what are some other.
Big things that look like they were going to disrupt our industry that turned out to be just a flash in the pan.
[38:28] It’s kind of a tough question.
Oh sorry I don’t mean to ask the tough questions I mean to throw out the softballs to you let your knock’em out of the park because some of them,
what was the tax reform back in 87 when I was around that wiped out the Savings and Loans okay.
We dem and we touched on that briefly last time we were on the show but tell us about it again.
Basically wiped out the depreciation that you could hand off to your investors at the time anyway people were investing in properties.
For the negative cash flow so that they could write you don’t have write-offs and once the,
tax reform hit they couldn’t take those write-offs anymore so they quit paying the bills and the people who would set up.
Goosebumps ended up wiped out wiped out.
Yeah we ended up with gasoline.
Redistribution of wealth redistribution of properties.
[39:49] Music.
[39:56] Did a 1-day flip starter in Chattanooga Tennessee and low and behold one of my old College friends came out to the event his name is Peter Faulkner and here’s what he had to say about the event.
[40:09] Peter Faulkner here I send it a one day flip starter training session led by Rod.
And I was amazed to see what has happened in Rogers Live from the last $15 plus years flipping over 800 houses in men.
[40:24] Music.
[40:52] Appreciate.
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[41:40] Music.
[42:00] Back and with Jane Garvey were talking about the tax laws that change in 1987 and the impact on Savings and Loans and what that did to the real estate investment world.
And pretty much change how you could borrow money and what he could do with it as well as alone who owned what.
It also changed how Landing was happening.
Tired of the actor he had what was called a graduated graduated payment mortgage it would step up up every year so they could get people in the housing it really low.
Write some of my cousin made more money they could be paying more we used to call them triple mortgages.
What it felt like they were doing to people and that was mostly a Savings and Loan Servicing.
You did ask a question I’m come up with there was a market correction I’m some sort right after.
9/11 2001.
[42:59] Which was I think everybody thought was going to be a big and long-lasting but it really wasn’t.
Everybody was scared for a few few months to a year or so.
[43:12] What are the good things about real estate is that it takes awhile for people to be scared or properties so mascara can move off.
I think you see the same sort of thing in communities that have natural disasters that suddenly nobody wants to buy in an area that’s flood.
Floods occasionally years later they forget about a totally and go back to buying right next to the Mississippi River delta sir whatever.
[43:44] Not something.
[43:46] I couldn’t tell you how many times I’ve seen that sort of activity let me know if you own something in one of those places just hang on for a while the funeral go by in.
Your price is all so you seen a lot of Cycles in the market over time and the ups and downs and you’ve you figured out ways to make money whether the market is up or down in real estate right.
You just have to be doing something different in the different markets so you just your strategy and I think.
[44:19] When the markets going down Lucas a little bit tougher but one of the good things for the market going down as there’s more and more and more opportunities as time goes on.
I’ve suggested the people that are doing flipping in a down Market which you can still flippin the down Market there’s always.
Always some opportunity to sell fixed a property.
Your property will go to the top of the pile for what somebody’s going to buy but you have to price it accordingly.
And so if you’re going to buy fix and resell you have to buy extra cheap the extra cheap is by GC prices are going down.
5% year when you better be buying 5% cheaper than your near Leawood.
Alright that’s good I’m glad to hear you say that because people come to me almost everyday now and save we’ve got to be heading into a correction it’s been to in years what what do you say when people say that to you.
I said nonsense does Real Estate follow a 10 year cycle thank you got to look at what’s going on.
[45:36] In terms of the whole investment world what are people’s other choices in terms of where they’re going to put money what are people’s ideas about.
The future and we do have a lot of people went through the crash in 2008 saying I’m feeling nervous.
[46:01] Sometimes nervousness causes problems fortunately we are in a longer-term investment so it’s not like the stock market nervousness causing an immediate correction,
real estate people can get cooler heads to prevail.
Can I hear one of those cooler heads you can probably look at it and say okay to spray some extra nervous why don’t I buy their property right now let them out.
Buy low enough that you are not going to have a problem the other thing.
In 2008 we had a massive correction if somebody had positive cash flow property they should have had a problem.
[46:41] I think some of the people created their own Problem by the siding the play now Head Underwater property.
Add more than it was for and so they gotta quit paying on it if you get a positive cash flow property keep paying on it or go to the bank if you can and talk to them about adjusting your.
Down to a lower price next that’s a possibility in and they may very well do it for you if you.
Honda financing place in the local place where you can actually talk to somebody.
[47:17] Igloo in a right to make a decision and that’s getting fewer and further between right
that’s still but it’s your right,
yeah I went into my bank a week ago to send a wire on the house I was buying in Michigan then today I went back to the same bank to the same office to what’s in The Wire
on a house I’m buying in Ohio and was a different person.
And this person didn’t get promoted from within the ranks at that Branch she came from a whole other Branch nice guy,
but that none of them have any kind of decision-making Authority so I follow you there
alright so Jane look into your crystal ball will bitten tell us what’s ahead I know rent controls are a major nightmare looming over the state of Illinois
but as you think about real estate investing in general where do you see opportunities working for those of us who are looking.
[48:19] Well I think we need to get your mobile in terms of where we’re willing to go.
I’ve always said that there’s areas in Chicago going up areas going down here he’s going sideways well that’s true nationally to and because of the internet and because of.
Proliferation of companies that are doing market research everywhere and the availability of that to all of us there’s no reason we have to be stuck in one spot.
We can be flexible we can look to where the opportunities are.
I think if you look around the country there are areas where you probably shouldn’t invest and they tend to be the ones that are most talked about as wonderful because they were attracted everybody.
Are there other sleeper cells out there with her areas of great employment.
[49:19] Subway in shortage of housing.
Some of them are places that have just brought a new companies with no job so we’ll be a shortage of Housing and drive prices up on housing both flip housing as well as.
Rentals if you’re thinking about rentals.
I have a pension for rentals long-term investing I would kind of like to do the work once or twice.
Continue to have some profit from it.
But I’ve always been a believer in mixing what I’m doing the flipping houses provide some better income for today.
[49:56] Pulling property provides better income long-term but most of us need to eat today as well as,
types of long-term growth in the long-term growth since we’ve seen a couple of times in our real estate history is not guaranteed,
write really wise words Jane thank you so much and tell her listeners how they can reach out to you directly if they want to.
Well they can reach me at Chicago creative investors association’s website is ccia – info.com.
Her phone number is right up my phone numbers right on there but if you want to direct and 630-858-4663.
[50:37] Yahoo email,
nccaa fcci a dashing for.com okay Jane Garvey thank you for joining us on Flipping America today and we look forward to talking to you again soon,
you’re welcome thank you,
all right emails and I don’t know if we’re going to have time for very many but,
let’s Jump Right In Chester from Milwaukee Wisconsin I heard you mention
tracking your daily expenses on your lips and I wonder how you do that and please tell me again why that’s important it seem to make a lot of sense but when I told my partner I couldn’t really answer his questions about it alright,
so here we go tracking daily expenses on your flips why start with the why why is it important to do this,
Chester the the main reason I got started tracking the daily expenses is,
you know back in the crash years 2008 9u know we would put the property out there for sale and we would almost always get a lower price than.
[51:48] We were listing at 4 in fact.
That’s been the norm throughout my career with the exception of the past couple of years but most of the time you’re going to get a little bit lower offer sometimes it substantially lower offer.
So you have to take a look at that situation and back in the day that low offer we got might be the only offer that look like we are going to get anytime soon and so I
wanted to start thinking about what what if I say it just say no to this offer or what if I negotiate for a higher price and they walk away
am I prepared to keep this property on the market do you know it took me three weeks to get this offer am I prepared to sit in for another 3 weeks and then 4 weeks to closing so you know 7 more weeks,
and when I was trying to calculate the opportunity cost of an it just really figure this out you know that there is the cost of lost opportunity which is a little bit different difficult to quantify but your hard cost of holding the property that’s,
that’s fairly easy if you think about all of your cost and so.
I wanted to know if I hold this house for another 7 weeks or let’s say 70 days.
What is it going to cost me in the way to get there was to break it down into a daily cost and so here are the components of your daily cost there’s some of this you really can’t avoid for example you have utility bills.
[53:17] You have a maintenance if it’s during the time of year when you have to pay someone to cut the grass and keep the yard looking nice you have.
[53:26] Taxes you have insurance and then if you have borrowed money you have the cost of capital all of those things
become a part of your daily cost now if you don’t borrow the money did the other costs are relatively small and I know many many investors who are cash investors and they don’t even bother to calculate this state they use some other metric when they’re thinking about what to do with a low offer
but if you have borrowed the money this can,
make your daily cost at me when I first started doing this we were having properties that would cost us $70 a day and I’ve had properties that cost me as much as $200 a day or even the one that cost $280 a day
when you’re sitting there and you know that it’s costing you $280 a day,
to sit on this it kind of get you motivated to keep on moving so.
[54:23] Created a little bit of a grid and and do you know you can do this Chester if you know anything about spreadsheets you can setup your own spreadsheet to do this.
You put in your annual property taxes you put into your cost of your insurance and you know.
Property taxes are an annual number Insurance maybe a six-month number or a 3-month number,
it could be a monthly number depends on your policy your utility bills are going to be monthly numbers and you see those are all different time periods and so I decided to just,
take them all down into what each one cost per day and then add that up and move there you have your daily cost your interest rate,
of course you.
[55:08] You figure this by how long you’re going to hold the property and I’ll go ahead and say this to I have a formula for knowing how long you’re going to hold the property and how long is it well,
first of all you think of your average days on market for that area,
and then you add another week to that and then you think of how long is it going to take you to make your repairs,
and then you add two weeks to that how long does it take to make your repairs well.
We figure a contractor that’s really getting it on can spend about $7,500 a week so if we have a $75,000 rehab budget,
we’re thinking of
10 weeks for construction and that seems tight in the contractor will look at that say who me I don’t know if I can do that then I’ll ask them during the mobilization anyone how long is it going to take you to do that and once I get that answer I’ll take that answer and had two weeks to it
in case of bad weather and sorry excuses
I always put a little bit of fluff in the schedule so 2 weeks additional to the construction time 2 weeks additional to the marketing time and
then we look if we add up the total number of days that’s going to be and that’s our whole time.
Alright so then you can take your daily cost multiply that times your whole time and you have a pretty good idea what your overhead at least your job specific overhead is going to be now gets a little tricky if you’ve got a hard money loan and you paid points do not.
[56:33] Try to calculate the points I fiddled around with this for a while and there’s no way really to put those points down into a time-based,
formula because the points are not time-based they just are what they are they come right out of the bottom line so,
I’m just relax about that leaving out there and you’re going to have to pay them that you pay those at closing so
that’s already done when you’re out there trying to figure what you want to hold on to a property for another 70 days or not now in this market you may not have to hold for another 70 days and this is where this can,
be a little less instructive but every situation is somewhat different so you’re thinking about out into the future,
you know back in the day when I developed all of this it may be another 2-3 weeks before we got another offer but in this market you might get another offer tomorrow so you have to look at how many times your property is being shown,
and how many times is being looked at online then how many times you get shown what is the feedback and I would say.
[57:38] If your house is being shown three or more times a week you’re going to get an offer pretty soon,
that’s three or more times a week if it’s not being shown three or more times a week then you probably need to make an adjustment on the price listen to the feedback coming from the showings that you do have and I just whatever you can,
but if you could just do what you can and there’s nothing else you can do about the property then you got to start adjusting your price you got to get it to where there’s three showings a week then you’re going to get an offer.
[58:08] I hope all of this helps so much more but you know we’ve got more shows coming folks thank you so much for tuning in we’ll talk again very soon.
[58:18] Music.
[58:50] Carlisle said go as far as you can see and when you get there you’ll be able to see further.
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[59:16] Music.
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