Expected Air Date: 10/22/18
Real Estate, we appreciate you! Let’s talk about appreciation. Looking to the future. What has happened in the past 12 months? What is expected for 2019? What is appreciation anyway and what is the historic rate of appreciation in housing? A complete explanation plus news and some of your questions coming up.
How to contact us
Twitter and Instagram @FlippingAmerica
We now have a profile at houzz.com for what it’s worth.
Call our National Comment Line: 404-369-1018, ext 1. Leave your message or your question.
- FlipStarter Nov 2-3, Atlanta, GA
- Lunch with me every Wednesday.
- Flipping America App is in the app store. You can listen to the show, read the show notes, and the entire catalog of shows is now available to you. It’s a free download and there are no upsells or in-app purchases. Free to download, free to listen. Go ahead and give it a try and drop me a line and let me know what you think.
- Want a quick analytical tool to tell you how strong a potential fix and flip deal is? Download the Property Grade app. You answer 10 simple questions about the property and the app instantly tells you what you can expect to make, your return on investment, your return on cash, and then the program gives the project a letter grade using the proprietary Flipping America Investment Property Grade algorithm.
- Whoops! They missed! https://www.housingwire.com/articles/29284-the-best-and-worst-cities-for-home-price-appreciation-through-2018
Topic: Comment Line calls and Questions
Call 404-369-1018, press 1 and leave your message!
firstname.lastname@example.org Tell us where you’re from!
- Allen, Rashad, Kenyon, Caroline, Adam, Portia, Priscilla, Martin, Richard, Clive, Suzanne, “The stock market seems to be a better play for a passive investment. Historic 8% vs. housing historic 3%”
- Stanley, Toledo, OH, “I want to buy a rental house. I’m looking at houses around $80,000 I can rent out for $1000 or I can also find houses for $20,000 I can rent out for $700. I can do the math, so I know the cheaper house is a better return, but I wonder about rate of appreciation, quality of tenants, etc. Is the better return always the best play?
Motivational Thoughts for the day
- It’s not about “perfect.” It’s about “effort.” And when you bring that effort every day, transformation happens. That’s how change occurs.
- Jillian Michaels
[0:16] 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.
[0:34] And by Braswell Capital Solutions commercial lending made easy on the web at Braswell Capital solutions.com,
and now you’re sad flipping America guy Rodger Blankenship
thank you Kathy Curtis good morning everyone we’re back from a terrific weekend visiting with our friends at American Ira at their US headquarters in Asheville North Carolina just want to say to Jim and Kathy hit
a special thank you for just a wonderful time we went up there Friday evening
met with him for a little while did some business had dinner and then they graciously put us up in their apartment which is right above their office and just build brand new
we were told we were the very first guests to stay in their new apartment accommodations above their office in
well what an honor and just a terrific weekend of visiting the art scene and Asheville and taking a nice ride down the Blue Ridge Parkway to get back home yesterday.
It was great thank you Jim and Kathy hit an American IRA and boy I’m looking forward to the things that we have coming up
in our partnership with American Ira to help you maximize what you’re doing in real estate hello everyone and good Monday morning,
to you I am Roger Blankenship and I teach people how to make money in real estate a little bit of a milestone here today this is show number 200.
[2:03] You know when we started to show you and have to go ahead very little thought about show number 205 zero thought I wondered if we would make it the show 50 and.
You the listeners have created what this has become one of the fastest-growing real estate shows in the United States.
With a very bright future ahead of us an opportunity to expand coming up very shortly and we’ll talk about that a little bit later when things become a little bit more official but the show is growing every month membership is increasing and.
[2:38] I just want to say thank you and the show today is about appreciation I want to appreciate you our listeners and thank you for all your kind words got an email from someone,
questions at flipping America network.com course you can send your real estate questions there any time.
The question was is it okay if they just sent us an email expressing appreciation without a question and of course that’s okay actually we love that we it’s it’s gratifying to here.
[3:05] That we are actually helping people out there in the business so keep those cards and letters coming yeah we do appreciate hearing from you so let us know what you think and let us know how we can improve,
of course if you have questions about real estate ask your questions and send all of this email to questions at flipping America network.com and,
of course you can also call in at 404-369-1018 and hit extension one,
and you can leave your message for us we will listen to it we will deal with it and will help you out in any way that we can
show the theme for today is appreciation so we appreciate the listeners and I also want to say real estate we appreciate you
real estate is what gives us a topic to discuss here for the past 199 shows and today on show 200 we are going to talk about appreciation specifically.
Real estate appreciation and we appreciate the opportunity that real estate spring brings us but that’s kind of an emotional thing when I’m talking about real estate appreciation I’m talking about a financial thing see what I did there.
[4:10] The word intent kind of turned it around but show number 200 is all about appreciation so let’s talk about appreciation looking to the Future
what has happened in the past 12 months what’s expected for 20 XIX what is appreciation anyway in what is the historic rate of appreciation and housing I’ve got a complete explanation of
real estate appreciation coming up plus news and some of your questions but first couple of announcements
we’ve got flip starter Now flip starter is our event
designed to give you all of the information that you need to get started fixing and flipping houses.
I can’t tell you how many times people come to one of our events or right in or call in and say hey I’ve seen these house flipping TV shows or just when I’m out.
[5:01] In life in restaurants and you know just
taking the weekend off if something comes up where my email is given or what do you do for a living.
Almost every single person that I talk to says I watch those
house flipping shows on TV or I love those house flipping shows on TV I’ve always wondered how to do that how do they do that how do you get into that business,
so in it it did never the blade begins a conversation about the process of starting this business because we get asked so often.
And people have been asking us for years to teach them how to get into this business we have come up with flip starter it’s an event.
Put on by flipping America designed to help you get started fixing and flipping houses.
We kind of break the mold from the industry and really kind of having sort of an anti Guru model,
going here we don’t want to do and,
8 or 10 hour or two-day or three-day glorified sales pitch to some $50,000 course that’s not what we’re after at all instead what we want to do is give you the information you really need to help you start your Fix and Flip business.
[6:13] Can you come and spend Friday evening and all day Saturday with this when you walk away you’re going to have a handful of tools that will help you get going
for some people it’s enough it’s all they ever need vac for most of the people that come that’s that’s the result others want to take advantage of our funding opportunity that we present during the event and they also someone to take advantage of the ongoing mentoring and just becoming a part of the flipping America family and all of that to explain to you while you’re there if Live start of it all if if all you want to do is just get started fixing living houses you owe it to yourself
to invest $100 in this exciting business where money can be made in any,
economy in any real estate market and just about any area in the country
yeah that’s right it’s a hundred and $99 in this Friday evening from 5 to 7 and Saturday from 9 to 5
it’s $199 but right now we’re running a special on the website it said we call it the second mouse discount
and you can sign up for $149 all you have to do is go to bit. Ly / flip starter.
Now that is a you know it’s a bit ly link and that’s going to take you to flip Tina flipping America network.com flip starter same page either way you get theirs okay.
[7:35] . l y / flip starter this less to type and easier to remember we hope that’s why we created that.
. l y / flip starter
alright how to contact us here we are at flipping America network.com all kinds of stuff for you to do and see and no on the website and more stuff coming we’re working on it just as fast as we can in between juggling you know a busy schedule of three shows per week
plus we’re actually flipping and fixing houses plus we’re creating content for our courses and for.
Our weekly mentoring phone call that we do every Thursday evening as you want to be a part of those one-time right in and let us know and we’ll give you a link in an opportunity to sit in on one to see what it’s like when we’re doing our online coaching
all right and then on Facebook.
[8:26] Look up flipping America media and on all the other social media just look up flipping America Twitter and Instagram we are at
flipping America now we’re going to do the news in just a few minutes and we’re going to cover several stories were going to talk about appreciation but just know that there are
probably 5 to 10 stories that come come out about real estate every single day.
That we are not going to get to on the show we just don’t have time for all of it and some of it you know may or may not be you know the wide interest or even something that we want to talk about on the show so
there’s a lot of information that’s going to hit you on social media that.
[9:06] You’ll never even hear about here so make sure you follow us on Twitter and Instagram and of course we’re on LinkedIn Google Plus
house.com for what it’s worth it’s where I’m connected investors we’re on BiggerPockets
we’re everywhere you want to be as a real estate investor and I want to say again if you have a questions about real estate it couldn’t be it can be real estate investing but it can also just be
real estate if you’re thinking about buying a house if you have question if you’re a realtor and you have questions about dealing with an investor
reason I say this is because we get that sometimes okay we want to hear from you
to go ahead and send your question in and the last thing I want to mention and wait by way of announcements is if you hit our website
at the top of every page there’s a blue button that says click here for a free strategy called for the next
two weeks at least the next two weeks I am going to personally feel 200% of those calls you touch that button
you set up a time that goes It goes to a schedule or calendar link and I set up so that the next two weeks you’re only going to talk to me now if you want to talk about them internship
program that’s something different than you’re going to end up talking to Mary about that and that’ll be fine because Mary is wonderful and you’re going to love talking to her and she will help you understand what that program is all about but if you’re going to do the free strategy call.
[10:32] For the next two weeks it’s going to be me and I would love to sit and give you give you.
[10:37] 30 to 45 minutes of my time to help you understand your best fit in real estate investing this is not a sales call
our mentoring program is Nim and invitation-only thing but I am going to ask you several questions during the call
that are designed to help you focus on what it is you want to do is real estate so if you want to try it out just click the button and see what it’s like.
[11:07] Couple of other announcements real quick we have a couple of apps in the App Store of course the flipping America show is an app in the app store just don’t go to the App Store and download flipping America listen to it and tell us what you think.
[11:20] And then the property grade apps in the App Store to you answers 10 simple questions about the property in the app instantly tells you what you can expect to make.
Your return on investment your return on cash and then the program gives the project a letter grade by using the proprietary flipping America investment property grade algorithm,
okay we got through the announcement soon we’ve done the show set up so let’s get on to the news and talk about what’s happening in the world of Real Estate.
[11:54] What do you know about opportunity zones opportunity zones have come and gone but they have come back
the opportunity Zone was created in the 1.5 trillion tax overhaul enacted late last year and the opportunity zone is designed to stimulate investment from Real Estate Investors and Developers
Neighborhoods that are a little bit economically distressed and so I’m going to link you to some opportunities own stuff when we.
Do you know any social media after this but that’s really all I had to say because that music means we are going.
[12:52] 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.
But there has to be a way to get started that’s what we will do for you at flip starter flip starter is our 8-hour course designed to give you all the information you need in order to get started in the business of fixing and flipping houses on Roger Blankenship.
The flipping America guy who is fixed and flipped more than 800 properties over the years.
I will share with you the tools I developed for use in my own business the strategies the management techniques and the systems are used to build a business that was flipping a hundred properties for year.
[13:28] What would it feel like if you could quit your job and not only work for yourself but own a business that will ultimately provide you with more income and more free time.
[13:38] My goal is to train the next generation of real estate Millionaires and I want you to be one of them find out more at flip starter event.com.
[14:06] Okay that break kind of snuck up on me there I was focusing on opportunity zones and I didn’t,
I didn’t realize when I started it that I actually didn’t have enough time to actually talk about it so let me finish the thought based on recent census data,
an opportunity zone is a
designated census tract that had an average poverty rate of over 32% which is nearly twice the national average the median family incomes
average 37% below the area or state median and unemployment rates were nearly 1.6 times higher than average those.
Targeted opportunity zones are twice as likely to be located in a county that had reported a property rate of at least 20% for 30 years.
Okay now there is a map for finding the opportunity zones.
Can I find the map at vig.org.
Did it’s just a map of opportunity zones are probably one of the federal government side somewhere but we’re going to give you a link to this where you can see opportunity zones from all across the country and for you listeners in the state of Georgia because.
[15:15] You know I’m in Georgia the show originates in Atlanta
and naturally we have a lot of followers around here in the city of Atlanta and courses where we do our investing hunt I’m throwing in a special link just for Georgia designation some folks these things are easy to find just Googling opportunity zone maps and you’re going to see it
[15:34] As an added little bonus I picked up something from funrise the top 10 and you know I love top 10 list the top 10 opportunity zones in the United States
and I never one would be Oakland West Oakland Uptown jingletown and Coliseum industrial all that’s number one
and that’s in California number to is Los Angeles which includes downtown and South Los Angeles number 3 San Jose.
And that includes Market Almaden Washington Guadalupe East Northside Jackson Taylor and Mayfair number for
San Diego Golden Hill South Park in Barrio Logan now are you noticing a little theme hear some of the finest best,
you know that these these areas hit the top of all of our radar screens for best places to invest their also where they are some opportunity zones are and there’s very expensive real estate and there’s opportunity zones in these areas it’s interesting
for sure you know there’s a lot of population there’s a lot of middle-class around there to number 5 Seattle Beacon Hill in International District Number 6 opportunity zones in Portland Pearl District and Central Eastside number 7
Phoenix downtown Tempe Chandler and Mesa number 8 Nashville.
[16:56] East Bank Five Points 12 South and Edgehill number 9 Atlanta Bankhead Grove Park and English Avenue.
Number 10 New York City Brooklyn and we have honorable mentions for Houston Gridiron Midtown and downtown and.
I don’t really know their criteria for picking the top 10 it seems to me like an opportunity zone is an opportunity Zone but if one of those is where you are then
that’s should be a point of Interest now I know that particularly in Atlanta Grove Park is an area of real interest the city is.
Has announced plans and already broken ground on building a new park
it’s going to serve that area and a lot of my investor buddies are excited about that so find out what’s going on in your neighborhood whether you’re out there in California or one of the others but look these are the,
10 according to somebody you know fundrise the.
[17:55] Really the number one opportunity zone for each of you my listener friends is the opportunity Zone that is nearest you
and to do that you just need to start googling the maps look at the link we’re going to send out later on social media and find an opportunity zone why do you want to invest in these well there are some compelling reasons not to.
These areas tend to be higher in crime.
You really have to keep your wits about you and your crew needs to be paying attention we have had one house has been broken into four times fortunately all I’ve ever stolen is the doorknob
why are they breaking into the house and stealing the doorknob is completely beyond me.
So you have to make sure you’re paying attention and do what you need to do to secure your possessions and definitely don’t leave things laying around in particular overnight but.
If you invest in these areas there are tax breaks and you need to consult your Tax Advisor to find out the.
[18:51] Got the story from CNBC real estate sales are falling in the high-tech States and surging in the low-tech states and just got a quick video for you to watch and we’ll link that to you but it just makes sense,
that when you tax an activity that activity declines that’s always been the case all right and it’s always going to be.
I’m going to link you to an article from realtor.com it was magazine. Realtor it’s the Daily News well.
[19:24] Oh yeah it’s Realtor Magazine okay this is I think.
The number one reason the market is staying as hot as it is now it’s pretty much conforming to what we predicted but what we predicted was the market would still be rising at rates above inflation for
2018 and it is.
As we look in the 2019 we see this it it’s got to begin to cool off however the kind of the wild-card of uncertainty here is with.
New housing starts in the reason I think one of the key reasons that.
Housing remains tight and inventory remains low and demand remains high is we do not have the new construction activity that everyone.
Assumed and predicted
would be happening by now single-family housing units dropped .9% to 871000 units while multifamily starts those for apartment buildings condos punch.
15.2% to 330000 overall now this is over
and then this is an annual rate overall housing permits.
[20:35] Dropped .6% last month so as much as we need new housing
housing permits are actually declining some Economist or blaming softening on higher mortgage rates that are hitting the housing affordability
I don’t really think it’s the mortgage rates some are blaming the tariffs and I think that it’s
more likely a cost of a function of the cost of construction then the mortgage rates when you look at those they cost of construction is affecting the.
[21:08] The process I believe more than mortgage rates will it when you put them both together you have something.
Definitely hits at housing affordability but the point of the whole thing is even with the higher construction cost.
In the higher mortgage cost now construction costs are at an all-time high but loan costs are not what the what’s happening with long cost mortgage cuz they’re getting kind of back to normal.
what is the explanation I don’t think there is a simple answer for this and you know so far CNBC hasn’t called to ask me my opinion but I’m going to give it anyway because I know you want it
the answer actually is a mix of a number of different factors one of which is.
Log home builders went out of business in the crash and just have him come back lending guidelines for those who are Builders are so tight
that a lot of the people that would be in the business don’t have enough cash to carry the project forward and just can’t get in it so the barrier to entry
is high and that barrier is set in part by lenders that would Finance some of the new construction another factor is of course
you know we mentioned the mortgage rates and the cost of construction the cost of lumber is another the cost of concrete is another and the fact that.
[22:32] It’s just not considered a very desirable industry for labor and.
Construction companies particularly home builders are having a hard time finding labor to provide.
The what they need in order to get out there and start building the house is so you put several of these factors together and most of the people that could be doing this or finding that there’s something else that they can be doing that’s a little easier even if it includes
doing nothing so they’re there are a lot of
potential players and home builders that are sitting on the sidelines waiting for the situation to get a little bit easier on at least one or two of these fronts and I don’t know when it’s going to happen but I know until.
Home Building starts back in Earnest and we start to see increases in the in a year-over-year increases in the number of new housing starts
we’re going to have this housing situation with us for a little while with an overheated Market.
[23:32] I will say that the market is overheated but it is it is it the heat is cooling a little bit it still heated but
the rate of increase is dropped off and when you look.
At the core logic data which I spend some time looking at this morning boy what a way to come back from a weekend off is to stare at church for a couple of hours.
I did spend some time looking at the data and just I looked at the housing price index going all the way back to 1995 just as
also a Prelude to do the upcoming topic on appreciation and the.
[24:08] Home price index for the last 12 months is up about how close to 6%.
Last year at this time I had said that we would be by the end of 2018 at about 7%,
I am seven to seven and a half percent in Atlanta but nationally I did predict a 5 to 5 and a half percent increase and low and behold we are right on that.
[24:34] And honestly it’s not because I’m so smart it should because I read a bunch of this data and real estate’s actually fairly easy to project if you,
take a good look at all of the data points and realized it’s not.
It just doesn’t move that quickly with you no one notable exception in 2007.
Speaking of predictions I found something interesting in housing wire this morning and it’s an old article but I only found it.
[25:01] Today and it says the best and worst cities for home price appreciation through 2018 this is an article written in 2014 and even though it’s old news it’s an old prediction and.
I just told you it’s fairly easy to predict what’s happening in real estate I think that it’s.
It’s easy to predict what’s happening real estate most of the time I’m just going to say and this is not really defensive housingwire although I will defend him as a reputable source of in information.
[25:30] Anyone trying to predict what was going to happen between 2014 and 2018 had a pretty good chance of just flat-out missing it because it was an unusually volatile time for Real Estate.
One of the things that they predicted was that by 2018 the home price appreciation would slow to an average of 2.1%
2.1% and according to the core logic data that I just decided it’s at 5% and it’s been at 5% for.
A while you know every month CoreLogic puts together the year-over-year number and they have done this for years and,
we’ve been between 5 and 6 or 4 and 6% all of this year in our year-over-year price increase and doesn’t really come as a surprise
that’s a little higher than the rate of inflation is it cause for alarm if you go back and look at the price increases leading up to the crash.
You were looking at annual price increases of 12 to 16%
so no I think what we are seeing here is actually a sign that the market and it did increasing dub by double-digits for several years after the crash but it’s come back and it’s on its way back to kind of
marking Pace with inflation
never going to compare what’s going on with appreciation and inflation in just a few minutes when we get right back.
[27:24] Hey you want to learn how to flip houses I want to show you how to flip houses and there’s probably no one in the country better qualified than me to show you I flipped hundreds and hundreds of them.
And I also have some training and degree and experience and education so I can show you how to do exactly what I’ve done hundreds of times don’t believe me.
Head on over to flip starter event.com but in the meantime Give a listen to Pat caywood Cleveland Tennessee and I’ve been.
Doing some flipping since about March of this year and had started with a Nationals program that was very expensive.
I’ve spent today with Roger Blankenship learning about his program and boy do I wish I’d met Rodger.
[28:13] He has a clear concise program and many tools that are going to be very hot.
[28:19] And starting and managing a program and the mentorship and Leadership and coaching that he’s offering our invaluable.
Thank you so much Rodger for your time and sharing what you never know what’s around the corner
but you can be confident that you’ll be ready for whatever comes your way Legal Shield and ID shield look out for you so you can get back to living life
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[29:45] And we’re back I’m Rodger Blankenship and I teach people how to make money in real estate.
On the show flipping America we don’t encourage everyone to go out and drop what you’re doing and start flipping houses like you see on TV.
[29:57] But we do encourage everyone to consider real estate as a part of a balanced Investment Portfolio and to that end we try to bring you the very best information news statistics demographic research data reports
Trends training techniques tools and tips that we can.
To help you do the very best you can with real estate and have the best possible outcome so.
Just as real estate is highly local your involvement was real estate is highly personal it depends on a variety of factors about you and your life that’s why we like to.
Get people involved in the strategy session to find out where you shouldn’t be investing in real estate it depends on things like your own personality your your management ability your task orientation your skill-set your risk.
[30:51] Intolerance your age has something to do with that and.
Really what you’re doing for a job so all of those things are the things that we incorporate into our strategy calls and.
We’re here to help people to help you this is what we’re doing now today our topic is appreciation.
And of course I begin by appreciating you my dear listener friends I appreciate you appreciating you for helping make this show what it has become one of the fastest-growing real estate shows in America and then we had little appreciation,
for the medium of radio and appreciation of fact this is show number 200 but really.
[31:35] Where the topic for today is real estate appreciation then we’re talking about what happens to the value of a home and we’re going to stay focused on single-family homes for this discussion on appreciation alright.
When you think about homes and home values of course people think about their home as their primary source of invest
and if you were regular listener to the show you know that I discourage that type of thinking I don’t want you to think of your own home as an investment.
I do kind of ascribe to the Rich Dad Poor Dad idea that an investment is something that actually brings you some income.
I prefer to think of your own personal residence as kind of a forced Savings Program if you.
[32:24] Let’s face it there are some advantages to owning a home.
The comfort and security The Pride that you feel and and taking care of a place and I certainly believe that if you are a parent you probably ought to have.
Children and if you have children they ought to have a yard to play in and out and have some parents that will make him go out and play in the yard I just
I’m old enough to believe that being outdoors and pan learning to entertain yourself is a really important part of development,
so I am all for home ownership
but I’m also at the same time not willing to admit that it is always the best possible use of your money
in some cases and now I think this is more the exception than the norm but in some cases it may make more sense to rent and.
Use the difference in what you would pay between renting and owning.
To put into solid Investments and of course that also depends on what kind of return you’re going to expect from your Investments now.
[33:27] Let’s talk about real estate prices for a minute and then I’m going to I’m going to in a little while I’m going to introduce you to a rent vs own calculator that I found on the internet and it’s really cool.
Okay the truth about real estate prices.
If you go back and you look at the history of real estate prices and the year-over-year increase in price as you can start just pick a spot I mean you can you can go to 1920,
you can go all the way back to the pilgrims if you want to but you can find that.
The prices of real estate have always gone up and kind of the theory behind that is is to quote my dad I like to invest in dirt because they’re not making any more of it and that’s true.
As the number of people grow the amount of dirt or ground for them to live on does not grow and so the demand for that dirt.
Does grow and that means that the prices,
will grow until there is some appreciation just built into the fact that it is a finite.
[34:33] Substance but now you know yesterday I’ve mentioned to you before that
yesterday my wife and I spent some time on the Blue Ridge Parkway which by the way if you’re if you live or ever come east of the Mississippi you owe it to yourself to go for a drive on at least part of the Blue Ridge Park Parkway truly one of America’s great Treasures
we would stop at one of the many many Scenic overlooks on the Blue Ridge Parkway and just stand there and stare out at The Hills And as far as you could see.
Very little evidence of of human habitation even though the Eastern United States is much more densely populated than the West
and so it’s easy to stand there and say well there’s plenty of dirt available there’s plenty to go around but we’re talking about the dirt,
in the areas where there is opportunity for people to provide for their living in their livelihood without having to farm the ground themselves so homes in those areas tend to increase in value.
[35:31] Now I’m going to give you a bunch of resources and we’ll link to all of these in the show notes and course they’ll be on W post on social media as well
but I got a charge from Investopedia that goes and looks at home prices from 1968 through 2004 and in that time
there is no decrease now course we know that in 2006 and 7 we had a huge decrease for a couple of years there’s a consistent increase and if you averaged it out it would average out about 7 or 8% per year but this is misleading
The numbers are only as accurate as the intent and the interpretive abilities of those who are reading the numbers in
it what these numbers don’t show is that the average size of a home has dramatically increased in the 1950s the average size of a home was,
900 square feet in the 1970s the average price of the average size of a home had grown to 1500 square feet,
and by 2004 the average size of a home being built in the United States was 2349 square feet now this trend has begun to back off a little bit recently but you see it it just.
[36:47] It goes almost without saying that it cost more to build a 2000 square foot house then a 1000 square foot house and so.
That means that the home prices are going to go up not necessarily as a result of inflation or appreciation but just because of increased cost of construction.
Right so when you factor out the increase cost of instruction.
Home prices on average over a 50 or a hundred year. Are pretty steady at about a 3 to 4 something between 3 and 4% increase.
When you think about that.
[37:25] Are you gaining three to 4% of year what makes what makes home ownership such a great deal well.
As I’ve said before homeownership is a good thing for stability of a family it’s a forced savings plan and what I mean by that is.
You know you have to pay your mortgage payment every month or the the lenders going to come and take your house away from you and foreclose on it right and so people make their mortgage payment
and in the first 10 15 years doesn’t make much difference
into their bottom line Equity or net worth but between the year 15 and 30 you’re paying down mostly principal.
And so once you have paid down the principal on the house this house that you bought is worth maybe twice what it was when you originally bought it that is if you stay there for 30 years and now it’s paid for.
And so the complete value of that property is your equity and let’s face it.
The vast majority of people who are listening to this or not listening to this but live in the United States of America.
They will not put that money in savings on a regular basis for 30 years and let that compound and and grow at a at some sort of a
an interest rate or an investment rate that would rival you know the 3% gain they’re getting on their house they’re just not going to do it.
[38:54] In fact it doesn’t take a whole lot of effort to find Investments that will get you 5 to 6% things and sometimes even as much as 8% annually.
[39:05] So how do you know whether you should buy a home or or rent well most of you should buy a home most of all of us should buy it.
And just enjoy living in it.
Then later on when we’re older and want to downsize and we want to sell out we’ll have some equity and we’ll have a little bit of money to live on that’s the way it’s going to work for most people.
If you were one of those people who is highly disciplined and you look at the numbers and you see that you can rent for far less than you could buy.
And what you’re renting is you know enough.
All right and you are disciplined enough to take that difference and put it into solid Investments that are going to pay you 6 to 8% per year and you’re going to invest that difference every single month for 30 years.
Then maybe you should think about renting.
[39:58] Just to kind of put this into black and white terms for you I found something called the ultimate rent versus buy calculator and they said it’s a Michael Bluejay. Com
Slice House / rent versus Buy.
. HTML I’ll send you the link for that will put it in the show notes and will also post it on social media now Michael Bluejay is he’s he’s just a nut he’s a weirdo he’s got a bunch of different websites on all kinds of different topics,
and he’ll dig in and I mean the topics vary widely.
The one of the topics is how to buy a house and when I found this calculator I knew it around with it and plugged in some of the numbers did some of the math and it’s really good I don’t know if he did it himself or he hired somebody else,
this is a very good calculator and not it doesn’t just give you a quick result whether you should rent or buy it has a data table that shows you,
when did buying becomes a better decision than the renting.
[41:03] And in terms of number of years and it’s color-coded and it’s pretty clever and so I’m going to recommend it to you Michael.
Bluejays.com house / rent versus Buy.
He’s got another article in the section on the long-term real estate appreciation rate in the US and.
I’m going to link you to that too and you make several good
good points he does point out that homes are getting bigger in that kind of skews that the numbers he also says the trying to
take the future appreciation rate is trying to is like trying to predict anything but I think that with the Hundred Year history that we have and you know we have a little bit of a blip.
In 2006 and 7 and 8 and then you know even for a few more years after that prices were coming down but.
If you look at that blip and you continue to look at the average or the median.
Prices of of homes it’s almost like the blips high and low.
[42:06] Kid even doubt and we’re Trucking along at a historic 3% rate of depreciation 3 to 4%.
[42:16] No one of the things that I also want to point out about appreciation is we’re talking about very large.
Sets of data and nationalized numbers this is one of the.
Interesting things about real estate but I think one of the opportunities that is just built into real estate the real estate market is not universally efficient and what I mean is there are pockets.
[42:47] The actual results are going to be very different than the national Norms you may find areas where do you have,
rates of appreciation that far outstrips a national norm and I think if you look carefully at some of the opportunity zones that we mentioned earlier there may be an opportunity there for you to realize some appreciation.
If for example.
Let’s just take for example what’s going on with this project in the city of Atlanta over the past really 10 years called the Atlanta BeltLine the Atlanta BeltLine.
That was a vision of the city planners of the city of Atlanta and it was designed to take some old abandoned railroad tracks and some other.
Basically Pathways that could be created to build a little bit of a loop around the city inside the you know famous 285 perimeter around Atlanta and.
They would join together infrastructure Investments and improvements from the city and creation of a walking path that was called the Beltline
and Investments by the city into the community there and they broke it up into sections and they would pick off sections a pink Zone 3 and 4 to begin and they begin developing their so
that begin to attract investors to come and buy old abandoned warehouses in shops in the.
[44:16] There’s a beautiful
place now that’s a reconditioned old factory it’s been several things but it’s now the Ponce City Market on Ponce de Leon and that’s just one example of private investors buying up this real estate around the Beltline area
and that attracted others who wanted to live there the hipsters move in that means coffee restaurants and and.
Cool stuff and the process of gentrification begins and oh my goodness what is done to
the condition of houses in the property values and some of those great old neighborhoods over there in that area have really come back to life they had beautiful
wonderful houses in there to begin with that had you know kind of the area had been run down for years and now it’s come back and as the,
Focus now on zones 1 and 2 and those areas begin to gentrify and improve
private developers come in and they buy up abandoned land and they build mixed-use facilities it’s all brand new and it’s a wonderful thing to see these areas are
appreciating at a rate far greater than the standard rate of appreciation and so you could pay full retail for a house and some of these areas and just hang on to it.
And double your money in two to three years it it’s happening and that’s just one example.
[45:45] It comes with the cheer problems to you know you you’re always going to have people who,
don’t like something and their issues to do a dress they’re two they’re not going to get into right here on the show but I’m illustrating a point it’s possible to get invested in,
in an area where appreciation is a smart play because it’s going to give you a return on your money that far exceeds the national.
Standard and rate of appreciation that’s the reason to bring in that whole thing up.
[46:20] We did a one-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.
[46:33] Peter Faulkner here I send it a one day flip starter training session led by Rock.
[46:40] Amazed to see what has happened in Rogers Live from the last $15 plus years flipping over 800 house.
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[48:23] And we’re back I am Roger Blankenship and I teach people how to make money in real estate.
And we’re going to deal with some of your questions now and some of your we save some of your questions about this topic for today Allen.
Rashad Kenyon Caroline Adam Porsche Priscilla Martin Richard Clive and Suzanne have all asked questions.
That can be summarized in this. I’m not using anyone’s exact words here but I had the team just to settle it because we had we get asked this so many times and the question goes something like this.
The stock market seems to be a better play for Passive investment historic 8% versus housing historic at 3%.
That 3% number that’s quoted there is the historic 3% appreciation rate that we’ve been talking about in explaining on the show
and my answer is always this if you’re going to buy an index stock fund versus paying retail for.
Houses that you may or may not rent out do the stock thing okay because you’re right.
[49:35] That those are the historic numbers but of course people who really want to play the stock market.
Learn some tips and tricks and techniques and take some courses about the income investing and they do some different things with the options and trading that.
Are designed to increase their return Beyond 8% I had one guy claimed that he was making 300% so I said.
So if I give you $100,000 a year from now you’re going to come back and and give me a $300,000.
I’m getting $100,000 back you know he said no no no no I don’t mean like that on the anal thing I’m just means I’ve done some traits that made 300%.
And so I said well big deal you know I could do that with a bicycle I found in a rental house.
Guess I’m I left it behind I’ve done it with drum sets and abandoned furniture and who named you know but you don’t you can’t look at an individual result anyway I digress.
[50:41] If that’s what you’re going to do just do the stock thing just put your money into a mutual fund or some sort of indexed fund and call it a day go you know.
Hang out with your friends play some video games and do whatever it is you do if you’re really interested in diving into this though.
[51:00] I know that some people are doing quite well in the stock market when they learn those tips and tricks but I also know.
[51:09] Any real estate investor worth their salt is going to do better than 3% and listen folks if you can’t do better than 3% just buy a house and let it sit there.
Okay because you’re you’ll get 3% as long as you kind of maintain it and keep it from falling in on itself you’ll get 3% all right but.
[51:31] What we do in our business is we do not pay retail and wait for appreciation to give us the profit we buy properties that for one reason or another we are able to buy at a discount
this is an advantage that we have over the stock market.
You don’t get stocks at discounted prices because of Market efficiencies you pay the price whatever the price is what you pay and that price goes up and down from day-to-day. But that’s the price that you pay.
In the housing market there is a price that you know house may be worse but you may be able to actually buy it for half of that or a little more than half of that
and here’s another thing that you can do with houses that you can’t do with stocks that one of my more famous Rodger isms that goes out there it’s out there on the internet somewhere is.
You can’t add value to your stock portfolio by adding a bathroom.
[52:23] Okay there’s a little bit of a joke but you can add value to real estate
you can add square footage you can add grease functionality you can improve what’s there in the case of cash flowing properties you can put tenants in it and that income increases the
value of the real value of the property there all kinds of things that you can do to add value to real estate that you really can’t do to stock.
You don’t have any power to add value it’s that the value-add on the stock is all in the hands of the people that are running the company
which you know if they may be really good hands make make some of the most capable people in the world have their companies being traded on the stock exchanges.
But with housing you’re in control you’re in control of how you buy it and what you do to improve it and how you add value to it.
[53:15] So to all of you I would say if you want to be completely passive then maybe yeah consider the stock thing but I would also add this I know ways that you can earn double-digit returns.
Are near double-digit returns in passive investments in real estate.
[53:34] Seriously I do if you want to do find this out for yourself.
Hit flipping America network.com click on the strategy call and make that the topic that we discuss because I’ll tell you.
I’ll tell you on the call what you have to do to achieve double-digit Returns on a passive real estate investment the investment is secured by real estate the value of it can never go to zero and.
In the worst case scenario he might lose a little money but you’re never going to lose it all okay,
Stanley from Toledo Ohio says I want to buy a rental house I’m looking at houses around 80,000 I can rent out for a thousand a month or I can also find houses for $20,000 can rent out for 700 a month
I can do the math so I know the cheaper house is a better return but I wonder about the rate of appreciation.
[54:35] Quality of tenants Etc.
Is the better return always the best play and I think Stanley just the fact that you asked the question reveals that you know the answer the better return is not always the best play.
And I think that the deeper question you want to know is what are some other things to think about and you’re on the right track you really you really are you’re doing great.
Look at the quality of the schools.
To greatschools.org and the quality of the neighborhood from neighborhoodscout and I see what I’m getting because whether it’s the
80000 ounce I can rent for a thousand or the 20,000 house I can rent for 701 a tenant to move in there and feel safe for themselves and then their family and I want them to stay for 2 or 3 or 5 years.
The longer the better.
[55:30] Why because that’s when rental houses single-family homes truly cash flow when you have to replace a tenant every year.
You’re just going to lose money it doesn’t matter really what your spread is or.
Do you know what your rate of return is you’re going to lose money if you have to replace the tenant every single year because you can’t hold out
their security deposit for normal wear and tear and painting the walls comes from normal wear and tear and if you have a thousand square foot house you’re going to spend probably $1,500 painting it
alright so you want stable houses low maintenance houses in good neighborhoods
where people want to move in and they want to stay for a long time.
[56:15] Now I know that you mentioned rate of appreciation and so and that’s why we put the question in this show today.
What you need to do is take a look at what’s going on with the prices in that neighborhood in that area because remember I quoted you National statistics on appreciation but also
tried to point out that appreciation just like real estate is local and local areas go through their own Market cycles and they have their own rates of appreciation
[56:45] Probably thrown into the national average there going to be something like the national average but you may have a recent history or a reasonable future expectation.
I’ve hired the national average return so you have to take a look at that on the local level and make your decision accordingly.
[57:05] And I want to throw one of those thing in there how about this whole thing you know.
Nothing in this life is permanent except for the reality that things will change.
[57:21] So we’re spending a lot of money.
Improving old neighborhoods and gentrifying and bringing old houses back to life
and then moving on to the next neighborhood and doing again it’s very easy when you’re in the middle of that situation to assume this is the way it’s always going to be now that we’ve made these neighborhoods nice again they will always stay
nice and so whatever I buy here is going to be okay for the next 30 or 40 years I would differ with that.
[57:56] I believe that’s one thing you can count on this change and the socio-economic and the issues of human heart.
And culture will bring.
Those areas probably back to a situation of Despair in distillation again.
Sometime in the future not know when but maybe 15 20 30 years change is the constant.
[58:25] IBooks that’s all the time we got today here comes the music so let’s wrap it up by saying keep your eyes open there’s opportunities.
[58:52] Jillian Michaels said it is not about perfect it’s about effort.
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[59:31] You’ve been listening to flipping America real estate investing for everyone if you have any questions about real estate send them two questions at flipping America network.com,
listen three times a week on stations across the country or on the flipping America app free in the App Store.
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