Flipping America 584, Who Are You Calling An Amateur?

By on May 11th, 2023 in Podcast

podcast 548 Who Are You Calling An Amateur?

Bloomberg just published an article with the headline, “Wall Street Is Losing Out to Amateur Buyers in the Housing Slump” I have a question: Who are you calling an amateur? They assume the analysts in cubicles in New York are the pros and we are the amateurs simply because of bias. It’s more than just semantics, but I submit that pros do whatever they do for money. Amateurs have other reasons. And it’s the small investors like you and me who are making money at this game. The big institutional businesses, hedge funds and iBuyers, are not really making any money. I would submit that while the premise of the article is factually correct, the labels should be reversed. WE are they pros. THEY are the amateurs. 

There’s a lot going on in real estate right now and we need some time to unpack it. Which I’m going to do today. 

Ok ok, I do know a lot about single family residential investing. But once you get into other asset classes, it’s not all that hard to stump me. Fortunately, I know a lot of smart and experienced people from many different real estate asset classes and strategies. So ask whatever you want. We will know the answer or go get you one. questions@flippingamerica.net.

We have some good questions coming up today. 

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Listener Questions:

  • Andrew, Decatur, GA, “I bought Title Insurance when I bought my home, although I’m not sure what it actually insures. But now I’m being told I need to buy Title Lock Insurance. I don’t want to take risks with my home, but are people really able to just steal my home with some documents? What are these products, what do they cover and what do I need?”
  • Sanjay, Alpharetta, GA, “What is the best way to find seller leads right now?”

Quote of the Day

“It is not the man who has too little, but the man who craves more, that is poor.”

Ancient Roman Philosopher Seneca

Expected Air Date: Wed 2/1/23        

Guest: none

Transcript

[0:00] You’ve got questions and I’ve got answers or if you manage to ask something. I don’t know about I know people now There’s a lot going on in real estate right now And we need some time to unpack the news which I’m going to do for you today on this episode of flipping America.

[0:14] Music.

[0:28] It’s time for flipping America the show that teaches you how to make money in real estate estate wherever you are whatever your situation there is an opportunity for you and now here’s that flipping America guy Roger Blankenship thank you Kathy

Curtis and hello America great to be with you today and thank you for taking time to listen to this show we are here to bring you the best news and information we can on real estate and real estate investing along with,

inspirational people and methods, different strategies for making a fortune,

in real estate investing. Now I don’t believe that everyone needs to be flipping houses like you see on TV, but I do believe that everyone ought to,

consider real estate as a part of a balanced investment portfolio. And that’s why we’re here to help you figure out where you fit in. We’ve got a couple of,

really interesting questions from listeners. Actually we’ve got several,

questions we won’t have time to get to all of them today because we’ve got quite a bit of news to cover and we’re gonna do that first.

[1:26] Music.

[1:32] Now all of the stories that I talk about here on the show are as a result of our pretty thorough and exhaustive research. We’re tracking real estate news in every,

corner of the United States and in some places also around the world and if I mention a headline or a story today or anytime that you can you can mark this

down anytime that I’m talking about a show. First of all, we’re going to post about it on our social media feeds, at Flipping America on Twitter. Now, we don’t post these on Instagram,

but we do post them on at the Flipping America page on Facebook. That’s facebook.com slash Flipping America Media. We do have an Instagram feed, but we do different things with that.

Right, also the show notes get put into a blog post.

[2:22] And go onto the website and become a part of the archive and they’re available for future users.

Okay, here we go. First thing I want to bring up is a story in the New York Post and really some of these stories have been sitting here for a few days, this one’s fresh. In the New York Post, there is a story that’s out today.

[2:47] Well, actually, it came out a few days ago, but I just found it today. Goldman Sachs says that four cities are going to crash like it’s 2008.

And I don’t have time to beat around the bush a lot, so I’m just going to tell you, they think that San Jose, California, Austin, Texas, Phoenix, Arizona, and San Diego, California will likely see boom and bust declines of more than 25%.

These declines would rival those seen around 15 years ago during the so-called Great Recession. prices across the United States fell around 27 percent, according to the S&P CoreLogic Case Schiller Index.

This is a quote from the story. Our 2023 revised forecast primarily reflects our view that interest rates will remain at elevated levels longer than currently priced in, with the 10-year Treasury yields peaking in 2023 Q3.

As a result, we’re raising our forecast for the 30-year fixed mortgage rate to 6.5 percent to year-end 2023, representing a 30 basis point increase from our prior expectation, the strategists say.

[3:53] The story goes on to link the increasing mortgage rates to the decline in prices and of course, that’s kind of a given.

And it’s also expected, it’s not a surprise, it’s nothing that we haven’t been calling for. We haven’t been predicting a 25% decline anywhere.

So since Goldman Sachs said it, it must be correct, it must be true, and we need to respond accordingly, right? Well, not so fast, my friend.

[4:19] I have at least one other story that contradicts Goldman Sachs, and it kind of reveals that Goldman Sachs, sitting there in their New York offices, insulated and isolated from

what’s really happening on the ground, they know about as much about the local real estate situation as the average eye buyer, which means virtually nothing.

I have an article here from Axios Phoenix where they talk about this story with local Phoenix investors and realtors and even a professor at Arizona State University about the situation on the ground. And they believe that the Goldman Sachs story in the New York Post is a result of,

hyperbole and panic thinking and is a more sophisticated version of the clickbait we’ve,

been seeing on YouTube show up every year for the last several years talking about the great pricing crash that’s going to happen.

[5:21] Well, it didn’t happen in 2018. It didn’t happen in 2019 or 2020 or 2021 or 2022. So surely if they keep on saying it, it’s going to happen one of these years, right?

Well, maybe, but I kind of doubt it. I really think that the crash that we saw in 2008 was a once in a lifetime thing. Now our price is going to be down this year?

And I think that the end result is prices in some of the previously overheated cities Including those that were mentioned and some other coastal cities that were not mentioned in the story I think that they’re going to be down.

[5:56] On their average home sale price over the coming year That’s because they were over inflated to begin with because of all of the market heat from the last few years,

But there are some significant differences between what’s going on now and what’s going what was happening in 2008,

And come on anybody with common sense can see this and I think you’ll agree with what I’m about to tell you,

One of the things that well if you’re old enough to remember one of the things that drove the crash of 2008 2008 through 12 and it really actually started in June of,

2007 but the things that set it in motion,

happened way back in the late 1990s with a relaxing of the lending rules and and easy money, 100% financing,

and what we now call the liar loans, well we called them that then too, the stated income loans, and all kinds of ways to get people into home ownership,

to achieve this, you know, maybe it’s a noble goal to get people to own homes, but you’re setting them up for failure when you let people lie about their income and they don’t have to prove what they make.

So they don’t have the money to make the payments, but you give them a mortgage anyway.

[7:08] Anyone can look back and see that’s a mistake. Some of us could see at the time that that was a mistake, but we weren’t the ones that were being.

[7:18] Asked for our opinion. And that gets me to another story that I want to talk about today. And you know, in the words of my sometimes co-host, Star Keels, I feel some kind of way about this.

This. This is a story that’s from Bloomberg, and it just betrays the arrogance and, well, I don’t know what else to call it, but the arrogance that comes from the people that

sit in their cubicles in New York City and run numbers for a living and use complicated big words and conduct their analysis. This is the big take article in Bloomberg, and

this just appeared yesterday, I think. Yeah, updated January 30, 2023, and it’s the 31st as I record this, and it’ll be February 1st as this airs nationally. But it says,

Wall Street is losing out to amateur buyers in the housing slump. And I read this story with great interest because I wanted to see, and I already knew where they were going with.

[8:28] This, they’re assuming that Wall Street, because they have the professional reputation of money analysis and all of those things, they’re the pros, and those of us who are in the trenches, the little guys, we’re the amateurs.

That’s right.

If you’re a regular self-funded investor or maybe who uses private money or hard money loans to do flips and you make a comfortable living, you’ve got a bunch of rental houses and you have financial freedom, you’re an amateur.

[8:59] That’s right.

According to this. And they admit that Wall Street is losing out to amateurs. And there’s…so the reason I say I feel some kind of way about this is if I had a big outrage.

[9:13] Bone in my body, I would maybe be outraged at them calling us amateurs. But instead, what I find is a mild amusement by this, because they’re never going to get it. They’re never going to understand,

that the people who are the down-to-earth, hardworking people in the local economies,

they’re going to do better than the Wall Street guys in the real estate game.

This is something that Wall Street has never understood, and they’re not going to accept it. But real estate is hyperlocal.

And my friends and I have watched for years as the hedge funds have overpaid by tens of thousands of dollars, and in some cases, $100,000 for an asset.

And we just scratch our heads and wonder, how are they making money? And after about six months of watching this, I realized they’re not making money. And I’m not even sure that they are setting themselves up to make money.

And finally, as the years have gone by, and I put this on a YouTube video not too long I believe that they do not have profit as a motive.

[10:21] How could smart people go so long without making a profit if making a profit is what they intended to do?

Which brings me to this more fundamental question.

What is the difference between a professional and an amateur?

Well, the only thing I can think of is roughly analogous to sports, although the NIL deals are making this distinction.

Blurs the lines here, but an amateur in sports is someone who does not participate in their game or their sporting event for money. They’re doing

it on the amateur level, their college or high school, and they’re not being paid to play, they’re playing for love. Maybe they’re playing for their future, trying to make it into the professional ranks. Well, what is a professional? A,

professional is someone who gets paid to play.

All right, if we can accept that is the definition of or the difference between an amateur and a professional, who is the amateur and who is the professional?

[11:29] The so-called Wall Street professionals have never made money in real estate. None of the iBuyers have ever turned a profit.

I would say if they’re a professional at anything, they’re a professional at taking money from unsuspecting investors lining their own pockets with it and going out and taking a loss on real estate.

Alright, so they’re a professional something, but that sounds like the definition of a professional con man.

[12:00] Hmm.

[12:03] What about the average real estate investor? Now, I’m not talking about the people that go to a $50,000 seminar, go pay overpriced for one house, lose money, and then walk away thinking that’ll never work, because they’re not doing it right.

But this is for the tens of thousands of you who are listening to me right now, who know what I’m saying is true, and maybe hundreds of thousands, well, maybe another 100,000 or so, that have never heard of me yet,

and the Flipping America Show yet,

who are doing just fine investing, and no one’s ever heard of them.

They’re not running the numbers on a national level or a mega level. I think one of my former partners, Bill, he would be embarrassed to know that I even named him on the show.

Bill owns 20 free and clear rental properties, and Bill and I partnered in a commercial building for a while, and I ended up owing him a little bit of money from a deal that did not go well.

That happens. And so I traded out of the commercial building, and now he’s sitting on a multimillion dollar asset that I know Bill, he probably owns it clear and clear.

[13:09] All right, he is a pro.

[13:12] I have bought and sold over 2,000 properties. I’ve lost money on a few, but I’ve made money on most of them.

[13:21] I think that qualifies me as a real estate professional. And I would say the same of all of you little guys out there, guys and gals, who are listening to this,

you’re the pros, Wall Street, the iBuyers, they are the amateurs.

[13:41] And they will continue to lose out in the real estate game until they finally wise up, get out of real estate, and go back to energy futures or whatever else the hedge funds used to do.

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Okay, I got a little intense there. Now we gotta step back a little bit and have a little fun because this is one of the most unfortunate real estate headlines I have ever read.

And that’s because it, depending on how you read this, it could be hilarious and I’m gonna have a little fun with it. Here’s the actual headline, word for word.

Inside, Boy Smells, CEO, David Duplantis’ Historic Mexico Estate.

[15:03] And the first three words, inside boy smells. I couldn’t get past that when I saw that.

And I was genuinely trying to figure out what the headline actually meant.

[15:15] And what does the inside of a boy smell like? Oh man, who even knows?

But then I think about boy smells, boy smells, what the heck is boy smells?

Well if you don’t know that boy smells is a gender inclusive brand that sells candles and fragrances. If you don’t know that, you just think about Boy Smell’s.

[15:40] We’ve been kind of having a little laugh around here about that name. Apparently, I guess they’re doing okay, because this is inside the Boy Smell’s CEO, David Duplantis’ Mexico estate, and it’s a nice place.

But I just can’t help but think, kind of a stupid name for a brand? I mean, what is a Boy Smell?

Well, when we were tossing around ideas, I came up with, or first thing I thought of is sweaty head.

That’s a boy smell. Or body odor and dirt.

Or skid marked underwear. Or dirty laundry under the wet towels on the closet floor from last week.

Those are some of the boy smells that I’m probably most familiar with.

But now they’ve got stuff on the website that’s like watermelon and cinnamon, and I don’t know.

[16:30] I don’t get it, but then again, it’s been a long time since I’ve been culturally cool.

Maybe I was never culturally cool. Anyway, had a little fun with that. We’ve got the link in the story. It’s a nice place in Mexico, but we just had a little fun with the whole idea of boy smells.

So there’s a lot of other headlines that I need to get to, and I’m going to mention a couple of them.

I’m going to come back to them though in a minute because I’ve got a couple of questions from listeners that I surely want to get to.

And.

You know, when you send questions into the show, we answer the questions right away. Usually within 24 hours, if it’s a weekend, it might be 48 hours, okay? But we will get your answer to you.

And then, you know, the good questions, we’ll put in the queue and get to them eventually on the show.

[17:21] So don’t think that I’ve delayed in answering Andrew and Sanjay on these questions today.

They got their answers right away from us and we’re committed to do that. So if you have questions about real estate or real estate investing, send them to questions at flippingamerica.net.

And our dedicated team will get an answer to you, even if we’ve answered that question a thousand times before.

And let me say one other thing.

While you’re at it, if you go to the Flipping America website, there is an opportunity there to schedule a strategy call.

Just look in the, I think it’s in the top margin now, we moved it to the header, and there is a way that you could schedule a strategy call.

And for the month of February, I am continuing on what I’ve done in January, I am taking every strategy call myself.

There will come a time when I can’t handle them all, and that may be in March. But in February, I’ve committed, and so if you schedule that time, you’ll be talking directly with me.

[18:26] Now, to the questions. Andrew from Decatur, Georgia. I bought Tidal Insurance when I bought my home, although I’m not sure what it actually insures.

But now I’m being told I need to buy Tidal Lock Insurance.

I don’t want to take risks with my home, but are people really able to just steal my home with some documents?

What are these products, what do they cover, and what do I need?

Andrew, very good questions, and I know a lot of people are asking it, and I don’t know if you listeners now are hearing these commercials for Tidal Lock Insurance.

[18:58] Let me just tell you, title lock insurance is a scam. I know it doesn’t sound like a scam, and I know that theoretically it is possible for somebody to go down and file false documents, but I don’t know if it has ever actually worked,

because it’s always discovered.

And it is a crime, and the people committing this crime are prosecuted and go to jail.

It’s not even a civil matter. It is a criminal matter.

It just really can’t happen.

[19:29] Now, what the Tidal Lock Insurance companies do is they just scan the title to your home every once in a while.

What is the title? Okay, the record of title. The record of title, for those of you that are brand new to this whole thing, is the history of how the property that you own changes hands.

My wife was a title examiner for 27 years. a couple of times they wanted the history of a property that went all the way back to the Louisiana Purchase.

So she’s done that, and she’s also done, you know, 50-year title exams. And really what they’re doing is they’re just looking to follow the chain of ownership,

and it’s called the chain of title, following that ownership to make sure that everyone who used to own the property has been paid for their interest in the property.

And it gets complicated when people leave a property to multiple heirs, and then those heirs leave, they split it up further.

And sometimes, you know, title examiners have to do some fractional math, and they have to do some real investigating to see if anybody else is hanging out there who didn’t get paid or didn’t, maybe they got paid, but there was no recording of this, the satisfaction of their interest in the property.

So, um…

[20:52] What title lock insurance purports to do is they will go and periodically, maybe a couple times a year, they will just look at your title record to see if anything has been filed on,

the title to cloud the title of your property. And if something has, they notify you.

They don’t do anything about it. They don’t prevent it. They can’t prevent it from happening. And there is no remedy in in case someone actually attempts to steal your property.

Most of the people that are sophisticated enough to try to do some real estate scam know that this can’t work. So they don’t bother. They’re just taking your money for very little.

It’s not a lock.

They can’t prevent this from happening. And it’s not insurance because they don’t pay you if under some extraordinary circumstance where this actually worked someday, they don’t pay you.

[21:48] So it’s neither a lock nor it’s insurance. You don’t need it. Now, the other thing, Andrew, is title,

insurance that you bought when you bought your home. This is something every homeowner should buy. And I buy title insurance with every investment property that I buy as well,

if possible. When I buy a foreclosure at the courthouse steps, those don’t come,

with title insurance.

And that’s a risk that we take. So we make sure that we run the title ourselves.

And that’s an expense that we go to, and we go to that expense on properties we’re interested in even if they have a false and misleading bid. Looking at you, auction.com. Anyway.

Actually, I’m friends with auction.com. I buy a lot of properties from them, so forget I said that, auction.com. Anyway.

We buy title insurance every time we can, and you should as well, because what this is doing is, you know how I described it back in the chain of title?

There may be someone whose interest was never satisfied, maybe someone who had the majority share interest in a property represented themselves as the title holder and somebody that owned one eighth of a piece of it, or some small thing, they never got paid.

[23:02] And maybe they come out and claim that they actually own a piece of that property and they’re owed some money.

Well, if you have title insurance, the title insurance company will defend that in court and if a judgment is rendered in favor of the plaintiff, the title insurance company will pay.

So that means it’s in the interest of the title insurance company to make sure that you have clear and marketable title.

And there are some things that just are not clear And you have to go back and solve them.

And they have different ways. I won’t go into all the different ways that attorneys and real estate people, title companies, can go and try to solve these problems when they come up, just to make sure that they’re delivering a clear and marketable title.

Sometimes they consider the risk so small that they will insure over a particular thing.

And that’s fine, as long as you have the title insurance. You can feel a relative amount of safety. So title insurance is real.

Title lock insurance is fake.

You don’t really need it.

[24:16] I would say, you know, I don’t advocate that you buy travel insurance. I don’t advocate that you get the extra coverage on rental cars.

[24:24] But, and both of those things are really not needed. But title lock insurance is far less needed than those things because the possibility that someone could actually,

pull off the scam that they describe as being an everyday event in their commercials is remote.

Sanjay from Alpharetta, Georgia, what’s the best way to find seller leads right now? And I wanted to spend a minute or two on this question because it’s been really tough over the last four or five years.

With the market the way it is, anyone can stick a sign in the yard and sell a house in pretty much any condition at any time.

Now.

[25:05] I’m going to let you in on a little secret, Sanjay, and the few hundred thousand of you that are listening to me right now.

As the market turns, and it is surely turning as we have predicted, not crashing but turning, it is turning and it’s turning in favor of a balanced market where there’s going to be a three to six month supply on the ground, average across the country.

Some places are going to have eight month supply, and some places are still going to be running in short supply.

You are in Alpharetta, Georgia, is still going to be one of the hotter markets across the country, Atlanta as a whole. And that is, for those of you around the country, Alpharetta is a suburb on the northern side of Atlanta. It’s far enough away that it’s kind of hard,

to call it a suburb, but it’s continual suburban environment from downtown Atlanta all the way through Alpharetta and beyond. So I consider it part of metro Atlanta. And the population

is growing and demand is going to remain strong and so you have that. It’s not going to be as severe it has been in the past few years. So what’s the best way to find seller leads? The best way to find seller leads right now is the best way.

[26:14] To find seller leads at any time. Every method that you can do or afford to pay for, do them all. That’s the best way. Now I’ve got a little book on Amazon called,

fantastic deals and where to find them. It describes all of the methods that I used to have anywhere between five and twenty thousand opportunities show up in my inbox every single week. More than I can possibly imagine. I’ve got an.

[26:44] Acquisitions person on our team while I’m over here yakking on the radio. I have an acquisitions person working hard to go through these lists and and look at the possibilities and recommend things to me and our team and.

[26:59] That little book tells you how I got all of those leads being sent to me. Even then, those are not the best leads I’ve ever had.

The best leads I’ve ever had are the leads where when I really had nothing else to do, I did door knocking, I did cold calling, I did letter writing.

I have addressed more envelopes, hand addressed more envelopes than I care to admit. And you know, I believe that direct mail still works because people don’t get much mail other than the occasional bill and sales flyer.

If they get a hand addressed envelope, particularly if it’s not white, you know, it can be any color red, green, blue, yellow, it doesn’t matter as long as it’s not white and it’s hand addressed and there’s a stamp on it, they’re going to open it.

[27:54] Now they may be getting lots of letters, but if you will persist and continue, if you have a campaign of seven mail touches and you devise them all in a way that they’re going to get noticed red and opened, one touch is not going to do it.

But I think that direct mail is an old idea whose time may be coming again because no one’s doing it.

Everyone is getting lots of phone calls and everyone is tuning out any number that’s not already in their book.

So it’s very difficult to reach anyone when you’re doing cold calling.

But not very many people are going to the trouble of doing direct mail. That would be my number one.

And number two would be to price out an entire neighborhood and go door to door with an offer already written up on every house in the neighborhood. If you’re willing to pay 180,000 for this house as is, write up a contract.

When you stand at the door, tell them you’ll give them 180,000 cash for it, and you’ll give them 30 days to move or whatever.

[29:02] We were getting ready to do that before the pandemic hit, and we never have done it, but I look forward to finding a way to make that happen in 2023.

[29:10] And I’ll let you know, I’ll report back here.

[29:13] Hey, this is Roger Blankenship reminding you of something the ancient Roman philosopher Seneca said.

It’s not the man who has too little, but the man who craves more that is poor.

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