Expected Air Date: 5/16/19
Today we are going to talk a bit about affordable housing – as in, why can’t we have some? We’ve been researching it here so you don’t have to. It comes down to three factors: Labor shortages, the impact of tariffs, and government regulations. In a few minutes I’m going to discuss all of these in depth and hey, I’ll try to not let it get boring. As always I’m going to focus my analysis on how this impacts you both as a citizen of this country and an investor. Also WeWork is in the news today and is now known as the We Company. I’m going to talk about what they are up to and I guarantee at least one or two of their new ventures is going to surprise you. I also have a situation in Jacksonville with one of our listeners who got a quote for a roof and when the invoice came it was triple the quote. What should she do? Hear my advice coming up on today’s show.
Let’s do the news!
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- A TOP reason we have the affordability crisis: Regulatory oversight from all layers of government make up 25% of the average cost of a new home and represent a fixed cost of nearly $85,000 per finished house. https://www.housingwire.com/blogs/7-pulse/post/49037-pulse-heres-how-higher-regulatory-costs-are-impeding-housing-affordability
- Right on cue – a dilapidated shack in San Francisco is on the market for $2.5 mill. The reason for the price? A good view AND a demolition permit, which took the current owners 2 years to obtain. https://www.housingwire.com/articles/49057-shack-with-a-view-dilapidated-home-in-san-francisco-lists-for-25-million
- Another possible reason for affordability problems – at least coming up? Tariffs. https://www.cnbc.com/2019/05/13/higher-chinese-tariffs-just-made-your-home-renovation-more-expensive.html The difference here is many of these choices are optional and the remodeler or investor can budget around them. We cannot avoid regulatory overreach.
- And there’s a Construction Labor Shortage: https://www.contractormag.com/construction-data/70-contractors-struggling-meet-deadlines-labor-shortage-persists
- New model for homeowners and renters insurance: Lemonade. https://www.cnbc.com/2019/05/14/lemonade-2019-disruptor-50.html
- The top ten depreciating markets in the US. Louisiana has 5 of them. CT, IL. Also: for the rest of the country, appreciation slowing down to a projected 3.7%. In other words, only slightly stronger than a normal market rate of 3% https://www.housingwire.com/blogs/7-pulse/post/49053-pulse-this-state-has-more-depreciating-housing-markets-than-any-other
- Foreclosure rate ticked up slightly at the end of 2018 but still at near the all time low. https://www.housingwire.com/articles/49044-us-mortgage-delinquency-rate-rises-from-18-year-low-mba-reports
- Foreclosures came back down again in first quarter of 2019. https://www.attomdata.com/news/market-trends/april-2019-u-s-foreclosure-activity/
- I hope they can use some of that money to fix their app. https://www.housingwire.com/articles/49052-nextdoor-raises-123-million-now-valued-at-more-than-2-billion
- WeWork is now the WE Company. Also WeLive (co-living) and WeGrow (elementary school – $42k tuition), and Rise by WE (wellness and fitness center). https://www.cnbc.com/2019/05/14/the-we-company-2019-disruptor-50.html
- The WE company is also launching an acquisition and management platform called ARK. https://www.globest.com/2019/05/15/wework-launches-2-9b-acquisition-platform/ The article doesn’t specify what type of real estate is being acquired, but I guess it’s safe to assume commercial office space.
- Where the millenials are buying! https://www.cnbc.com/2019/05/02/millennials-are-pouring-into-these-smaller-cities-and-buying-homes.html
Your Questions: Send emails to email@example.com
- Angie, Alpharetta, GA, “Making slow, but steady progress. We have our financing squared away and are ready to start fixing and flipping. Any suggestions on the best way to locate distressed properties for sale in the Gwinnett area? For ease of access and starting out at a lower price point, we thought it best to stay within a certain radius of our primary residence (Alpharetta) and focus on more of a middle class area. Any referrals or suggestions you can provide would be greatly appreciated.
- Linda, Jacksonville, FL “This roofer had put on two roofs for me doing the hurricane last year so I trusted him. He did mention that his company had merge with another and his job function had changed. Because of the previous relationship with my other two rentals didn’t think I would get screwed, The roof that was removed was shingle so the quotes were given on that. The following invoices were sent out first for repairing the roof $4,531.92 (wasn’t aware of a repair quote dated 4/2/19, second invoice 4/3/19 in amount of $5,361.92, third invoice sent 4/11/19 in amount of $11,789.54 & finally invoice no date but received via emails on 4/13/19 after numerous requests for an updated invoice. Yes the insurance company has all invoices but remember I was told because of the pitch shingles could not be installed. The requirement for shingles is a 2″ pitch across entire roof. Yes this is a rental & yes I believe I’m being screwed but I will seek legal advise on this problem. Any suggestions will be appreciated. Maybe I need to share this roofing company with the group. What do you think? Surely wouldn’t like this to happen to anyone else. By the way, the square footage of the home is less than 1200 sq. ft. & my friend got a modified roof installed 4 years ago & his cost was less $7,000 ( I have his receipt). My friend house was approximately 1400 sq. ft. Thanks again for your interest & help.
- The charges do seem unreasonable. I’ve used rolled roofing on low pitch roofs and the cost wasn’t much different than shingles. The repairs (I’m assuming the decking) might be legitimate, but this could have been known ahead of time to some extent. Did they get up on the roof to inspect or just use a drone? When I get to a situation like this (I’ve done 900 flips and bought over 200 rentals so far, so I’ve seen a lot unfortunately) I realize none of the options are really pleasant. But here is how I proceed:
- Is the insurance company going to pay or fight the charges? If they do not want to pay they may help you fight them.
- Next I try to talk with the decision maker. My part would go like this: “The pitch of the roof was known when you quoted. I expect you to honor your quote, even if you made a mistake. I’ve made mistakes in this business and no one is paying for them but me. I shouldn’t pay for yours. We have a written and signed agreement.”
- If that doesn’t work here’s my next step: “I belong to a group of investors here that collectively own hundreds of properties. And I’ve been in touch with a nationally syndicated radio show (that would be Flipping America, my show). They know about this situation. Is this how you want me to tell them it ended?” You have to be careful when telling your story. If the company is litigious you may face a lawsuit for slander or libel. But you are permitted to state the facts.
- If that doesn’t work (and I’m assuming he completed the work): “Ok then, I’m going to honor what we agreed to in writing even if you won’t.” That’s all I say. This is basically inviting them to lien the property. In Georgia if a contractor liens the property they have 1 year to follow through and sue for foreclosure of the lien or it just expires. If you plan to keep the house the worst the can happen is you get to tell this to a judge. 9 times out of 10 the liens just expire because 9 times out of 10 the contractor knows they can’t win. This is personally a bit distasteful for me because I strongly desire to be honorable in all my dealings. But I’ve realized over the years that people will run over me if I let them. So I stopped letting them.
- Here’s the potential downside. If they have a case and pursue that case, you will have legal expenses and even if you win, you will still have those legal expenses. If they pursue the case within the time limit I would recommend you consider settling at a reduced number. This is not legal advice. Please consult counsel if it comes to that. I’m just making you aware of the practical issue here. Settling is almost always cheaper than paying lawyers to fight it out.
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And now you’re sad flipping America guy Rodger Blankenship housing as in.
Why can’t we have some it’s been years since the market has bounced back the real estate market has been back so strong.
But we have an affordable housing crisis in this country and I’m afraid that Real Estate Investors as in general are not doing anything about it.
We’re just buying the properties that are there fixing them up and selling them for the price point and I don’t know if you have a moral obligation to fix this problem my friends my listeners but.
[1:21] We need to talk about it because it is growing to a crisis proportion increasingly people who have an average income.
Unable to afford the average price house in many cities and metropolitan areas across the country so why do we have the crisis we’ve been researching it here so you don’t have to
and it comes down to three factors labor shortages the impact of tariffs and government regulations
now in a few minutes I’m going to discuss all of these in debt that I’m going to try not to let it get boring because as always I’m going to focus my analysis on how this impacts you both that is a citizen of this country and also as an investor.
[2:05] Also we work is back in the news today they never really get out of the news but they they now are rebranding themselves as the Wii company I’m going to talk about what they’re up to and I guarantee at least
one or two of their new Ventures is going to surprise the heck out of you you’ll be you’re going to be really surprised when you find out what their
diving into an almost wonder if they’re getting a little off track with this but anyway that’s coming up I also have a situation in Jacksonville Florida was one of our listeners who got a quote for a roof and when the invoice came the invoice was Triple the quote
what should she do and we’ve been going back and forth a little bit but I’m I’m going to share with you my advice.
To Linda in Jacksonville and that’s coming up in just a moment but let’s dive into the news as you know one of the metrics we track here constantly at flipping America.
Is the Foreclosure data because we are watching to see when the market is turning how it’s turning where it’s turning.
And the impact is going to have on housing so many people that I know are.
Aware and cognizant of the crash that happened in 2006 7 and 8.
[3:23] And that how we really lost so much during that time and are weary and wondering when is it going to happen again
and I’ve been saying for years now that it’s not really going to happen again in the same way that it happened before that was I think while once-in-a-lifetime experience now I never want to Discount the effect of the combined greed of those that are in the financial industry
they’re not too much unlike anyone else have people everywhere and all Industries are greedy sometimes that self-interest crosses the line and become something that damages other people that’s what happened in 2007 and.
[4:02] A lot of my friends are waiting with bated breath thinking it’s about to happen again
really my as I get out into these meetings and listen to people talk I hear people say it’s got to happen again there’s something that happens every 10 years in real estate,
and so it’s got to happen again and this got to go part of me is just sitting there saying oh really why is that is that like a rule.
Well so are we a year ago we sat down and identified the
factors that we thought we needed to pay attention to in order to understand what’s about to happen in the real estate market now I did an entire show on those factors and you can research that if you’re listening on the app
you can search for any topic and you can see the data points that we are constantly monitoring the one of the most important is the Foreclosure rate in so here’s the news.
On that according to housingwire.
[4:56] At the end of 2018 foreclosure rates ticked up slightly.
In the fourth quarter of 2018 now they still are the fourth lowest of all time and still at a low Point since 2006 and.
It’s only a very slight increase but then according to Adam data with some research done on the first quarter of 2019 the Foreclosure activity came right back down again and is now right at,
All Time Low.
What does this mean well this means we’re not in imminent danger of a crisis the crisis came about because of a spike in foreclosures because of crazy loans that were being made.
Many of them were being forced upon the lenders by.
Misguided policies from the federal government I’m afraid to say wanting to ensure the dream of American Home Ownership back in the mid-aughts in 2004 and 5
the federal government mandated that lenders make.
[6:00] Loans that were really just risky stated income loans we call them liar loans all of those things and you know the liar loans themselves weren’t the sole reason for the crisis e-notes a number of factors but,
when lenders realized that they could sell off the paper on those because they were conforming to the new federal guidelines they jumped in and made those loans.
Not all of them but a lot of them in a lot of the lenders that made a lot of those loans are no longer in business today and,
you also had the securitization of those loans now that is nothing new and it’s still going on but the end and even the securitization of subprime loans that was a factor then but the.
[6:41] Collateralized debt obligations that came out of the securitization of those loans
that’s where things got a little dicey and I don’t want to spend time talking about the sea dios today we’ve talked about it before and if you have questions about it you’re welcome to write in but that.
There is a little bit of a collateralized debt they didn’t call it that anymore but
they’re still doing it a little bit and so there are some things to to watch and pay attention to but one of the key things that any of us can look at is foreclosure activity the loans that lending guidelines today are tighter than ever
and because of that foreclosure activity is greatly greatly reduce it’s at one of the all-time lows I think the only way that you can improve the current foreclosure,
Is to have even higher requirements for the loans which if you listen to the show all the time you know that I am an advocate for I believe that 20% down payment is a good idea for homeowners
and I know it sounds cruel and I’ve been told to sound cruel because a lot of people couldn’t afford to get a home because they.
Can’t save 20% of the down payment 20% of the home price for a down payment.
And to that I say well that would teach people how to save money and live within their means with it so ultimately that’s a good thing.
But it’s never going to happen if we don’t make them do it I guess okay so there’s your foreclosure news.
[8:10] And the end result is take a deep breath and relax
now I’ve got some other things to the top 10 depreciating markets in the United States there are you know we are looking at several years now of record growth in the value of homes but if you go back and look at the grouse
average over the past 50 or 80 years in real estate you’ll see that it takes along at about a 3% annual rate that’s the normal rate of appreciation and you saw it you’ll see a pretty significant downturn in the two thousand six seven eight
time frame and by 2012 it starts to come back up and it comes back up at a furious Pace until 2017 or 18 when it starts to level off a little bit but it is leveled off now.
And we’re right back where we would have been if we had been at a steady 3% rate all the time and it’s almost like that.
That bump never existed although it did exist in a lot of people’s minds and so we are really kind of at a normal Market.
[9:16] Do u.s. appreciation for homes this year.
Is projected to be around 3.7% in other words only slightly stronger than the normal historic.
Rate of increase of 3% 3.7 is still pretty good if you want to have a little fun take the value of your house that you live in right now.
3.7% to that at the end of one year then take that value and add 3.7 because it is compounding its 3.7%
h e r well it it will come I say I believe it’s going to come back to 3% we’re going to be right at average maybe within the next six to.
10 months and if you go back and listen to this show historically.
What is happening now is what I told you was going to happen in 2017 real estate and it’s not because I’m so smart real estate is not that hard to predict if you pay attention and we’re paying attention here.
Okay now in spite of all of this good news there are 10.
Metropolitan areas in the United States that are actually depreciating.
[10:31] Gamo some of these are not really metropolitan areas some of them are just
cities okay but the interesting thing is five of the cities that have a depreciating rate are in Louisiana one is in Arkansas or in Connecticut in Illinois now.
Here are the bottom 10 markets in the United States Alexandria Louisiana,
Hammond Louisiana Danville Illinois Baton Rouge Louisiana Lafayette Louisiana Shreveport Louisiana.
Decatur Illinois Hartford Connecticut Norwich New London Connecticut.
[11:12] And Hot Springs Arkansas.
[11:15] There you go the bottom markets in the US basically outside of New Orleans and the coastal areas of Louisiana you’re looking at kind of a depressed Market.
I’m sad by that but it’s basically just something for us to keep in mind as we look at our opportunities in these areas of all of these the the one real major metropolitan area that surprised me is Hartford,
Connecticut that it’s a down Market but it when I read through the article Hartford tends to be a downmarket all the time I don’t know what’s going on there
except I know it’s in the cold New England states and I’ve been hard Ferdinand done so freaking events there and I enjoyed my time in the people there and liked it a lot didn’t really have any aspiration to move there and maybe that’s
what’s going on with a lot of people have you heard of the app next door.
Well next door is becoming a significant concern they just raised 123 million dollars and now the company is valued at over 2 billion dollars they have a new CEO.
[12:20] Sarah Friar who came over from Square took over and Lead this charge to raise all this new money and if you don’t know.
[12:30] Next door is designed to be a neighborhood
Centric social network to allow people who live in the same area to connect with and communicate with each other and you know I use next door in Midtown here Atlanta I kind of like it the problem I have with it is I can never get the app to log in and stay logged in and
honestly it’s more trouble than it’s worth so I hope they take some of this hundred twenty-three million it is race and fix the app
but otherwise congrats to you next door and good luck with your expansion to overseas markets.
[13:05] In the next story were talking about where the Millennials are moving that we reported on this before and we’ve identified the fact that a lot of mid-sized cities across the country are seeing huge growth in
their population but this particular story I picked up from CNBC talks about
the specific cities that seem to be seeing a huge influx of Millennials because of job opportunities they are and listen up folks if you’re near one of these areas you may want to
think about buying in these areas Madison Wisconsin Oklahoma City Grand Rapids Michigan Omaha Nebraska.
Durham North Carolina
El Paso Texas Salt Lake City and even a couple of more expensive markets like Seattle and Denver are seeing an uptick in
the rate of home buyers among Millennials so there you go Madison Wisconsin Oklahoma City Grand Rapids Omaha Durham El Paso Salt Lake City what do all these places have in common well,
they have jobs and they tend to have.
[14:13] Jobs no Durham North Carolina has been on our radar for several years actually it was on our radar when we started the show three years ago almost three years ago and it’s still a hot area
and we know the Millennials like going where they can find
good work good high paying jobs but also we’re other Millennials were people there a jar and the things that they like the music venues and.
Things like high walkability scores yeah that wasn’t a factor in.
[14:45] Well any of the houses I’ve ever bought but that is a factor now and it’s one way.
Properties get raided and it’s one of the things that’s important to today’s newest crop of home buyers.
[14:57] We got to go to a break but when we get back we’re going to talk about we work and what they’re up to and then we’re going to dive into the topic of the day which is affordable housing.
And we got all that plus questions coming up from our listeners it’s so much more so hang in there folks will be right back.
[15:38] Never know what’s around the corner
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[17:14] That’s right for $50 a month.
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[17:43] An Initiation fee is $750.
That’s going to get you access to the course and then it’s $50 a month for as long as you want to stay a member
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[19:24] If you have questions about real estates in your questions to questions at Roger Blankenship. Com
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[20:14] That’s right I’m handling him right now that we’ve had some times when I couldn’t handle all of them but I’m back on the strategy called desk right now and I’ll take your call and we’ll spend 30 minutes together and I will help you,
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[21:41] Flipping America Network all one word so there’s a difference between flipping America the show and flipping America Network
which is the site that you use or the app that you use to buy and sell investment properties across the country.
[21:56] Alright let’s talk about we work for a minute we work is the company that
the kind of was the one of the pioneers of co-working office space Nicole working office space has been around for awhile Regis has been doing it and there were people that we’re even doing it before Regis but we were kind of made it hit
they’re the ones that brought in all the glass walls and you feel like you’re in an aquarium in there or something like that like you know
everybody could see what everybody else is doing and made it seem like more more like everybody was out there on the same team even though it’s a bunch of small companies working in the cubicle size
offices I think the glass walls made it feel not so small and confining
and eating he caught on it’s trendy and hip there in a bunch of places around the country and around the world several locations here in Atlanta and they seem to be doing well I don’t know that there,
making a profit yet but they are attracting a lot of attention and raising a lot of money.
So they have just rebranded themselves as the Wii company and they are now.
[23:03] They’ve been recognized by CNBC is one of the top 50 disruptive companies of 2019 so congratulations there.
I haven’t I was surprised in Reading what’s going on with them if they they renamed themselves the Wii company because they now.
Have a cold living space called we live now I knew about that and we talked about that on the show but they have a couple of others that were new to me they have a venture called
we grow I guess what we grow is I don’t know if you’d ever guess I wouldn’t have guessed
no it’s not a greenhouse staffs being smart Alex over there it’s elementary school that’s right.
We work are the we company now has a private elementary school our schools I’m not sure how many locations they have but I do know this the tuition is $42,000 a year.
[24:01] All right and it got something else I thought you might be interested in to Lisa surprised to know about there is a venture called Rise by we.
[24:11] Which is a weird name to me but you know there’s a lot of weird names out there most of these companies that are coming on now have some sort of weird name you can you may have a technology business that.
[24:23] Combines massive amounts of data with some sort of financial thing and some new Wiz bang feature and you could call it.
Purple turtle you know you can eat it doesn’t matter what do you call your companies these days so what is Rise by we.
[24:40] It’s a wellness and fitness center okay I guess that’s maybe less of a stretch
then the elementary school thing because a lot of workplaces now or doing any know they have like the new NCR headquarters here in Atlanta Georgia has a Wellness Center built in and it’s it’s a full-fledged gym I know some other companies around.
The city that have Jim’s built-in of course they don’t get used much and so a lot of the companies that built in their own gym now that sell memberships to those gyms just so they can afford to keep the space there.
And we Works got something else going on it’s a new company at acquisition and management platform called ark.
I read the article on this and I’m not really even sure what Arc is doing it because it never
interesting Lee amazes me sometimes how things slip past editors it never talks about what type of real estate they are acquiring but I guess given their history and what they’re into its.
Safe to assume that they are acquiring commercial office space now their business model that I’m familiar with has been to
lease out entire floors and large
Beno skyscraper type buildings are other large buildings around in the cities and then sublease that space to the individual users
it does it seems like a great idea and I’ve done the math on this you know and you can rent
the high-end office space in Atlanta goes from $25 a square foot now I’m quoting commercial.
[26:10] Prices in this is per year okay $25 a square foot all the way up to $40 a square foot in the most expensive buildings in the Buckhead area that I’ve seen and maybe it even goes to 45 I don’t know but that that’s the highest I’ve ever seen
the minimum entry level at
one of these co-working places you’re looking at an effective rate of about 80 to $85 a square foot now why would anyone do that.
It’s because there are other savings realized in that expense for example you really don’t know when you’re
renting space at $25 sqft you were sent you renting reception space and maybe some other space that you don’t really need on top of that you have infrastructure you got to add your own
networking so for some of the co-working places I’ve looked at include all of them include high-speed internet access
as part of the deal but some of them include unlimited color printing as part of the deal they got a network printer and you can just fire off
ghetto 500 beautiful color copies of this report that you’ve done and that’s included in your price one of the places I’ve looked at I don’t think we work does this but they even include they’ve got like a
coffee and Donut Bar where you can get your breakfast when you get there and that I’m not going to say it’s free but it’s included with your price.
[27:37] There’s a difference there okay until they do different things like that to.
[27:43] Make a little bit more palatable but really when you’re looking at instead of the cost per square foot you’re just looking at your bottom line
when you go into some of these other buildings to rent office space there’s a minimum amount of office space in it maybe if you’re a small business if you’re a start-up it maybe more,
space than you actually need.
And so doesn’t make sense to get all this extra space because your costs are going to be so much higher especially with all the other infrastructure things that you have to do you have to buy your own coffee and
donuts and your own color laser printer but for someone on a tight budget
and just looking at the bottom line this make sense it’s the way to go it’s very popular.
I know I’ve been to some co-working spaces looking for space for myself and a lot of them are booked completely up.
So I know that the model works I’m not sure why they’re not profitable but I’m sure they’re going to figure that out and I think all of their investors believe that as well.
And so now they’re launching into acquiring and managing their own properties and the Ark Ark is a joint venture with another company but like.
[28:55] All of the stories that I’ve mentioned you can go to my show notes either on the website flipping America that us or on the app
and you can click on the Articles and read these for yourself if you want to dig in a little deeper and that’s every story that we talked about and I’ve got some on the list today that we’re just not going to get too cuz we’ve got to go to a break and when we get back from this break I’m going to talk to you about affordable housing
what’s going up with what’s going on with that and what we might can do about it be right back.
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[31:38] Starting about a year ago on this show I started saying if anyone out there can figure out how to build new construction.
In an affordable price range for first-time home buyers and make a profit there is a fortune waiting for you.
And I wondered what the delay is all about because I’m not the only person thinking about this and I know that their home builders out there.
Some home builders are on the sidelines summary.
Active but almost no one is building entry level homes no one is building anything that would be considered affordable and affordable housing is the crisis that led to the recent adoption by the state.
Oregon to have rent controls across the state they think that this is going to address affordable housing its we.
[32:27] Identified on this show I think it will do nothing but exacerbate the problem because the problem of affordable housing doesn’t stem from.
Necessarily the greed of the builders Builders of course they’re going to operate in their own self-interest and no one can fault them for that I don’t fault them and you shouldn’t either.
We have to recognize that.
The builders face certain realities in this business which must be addressed if they want to stay in business and they want to be profitable.
They want to know put food on the table for their families and and do the things for their kids that we all want to do for our kids they’ve got to figure out a way to make money.
And it’s growing increasingly difficult now.
Affordable housing as I’ve researched this my team and I have looked into all of this we’ve really narrowed it down to three major factors impacting affordable housing and they are.
In no particular order construction labor shortage.
[33:34] The impact of tariffs and government regulation there’s some will argue that
technology is a factor in the housing shortage and I’ve looked into it I’m not buying that totally but I definitely have been able to find some impact from the labor shortage
they have tariffs and government regulation so which one is the deal killer whale.
It may come as a surprise to you that the true deal-killer and housing and affordable housing is.
Drum roll please.
[34:11] He has a drum roll back there that’s banging on the desk anyway the real deal killer is government regulation.
[34:22] That’s right the effect of the tariffs.
I’m going to go back and review all of us a little bit more in a moment but the effect of the terrorists it is projected that the tariffs are going to add seven to 8%
to the cost of construction over the next 6 to 12 months.
That cost will be passed on to the consumer are the home buyer but that’s not even reality yet now.
In all fairness we have been feeling the impact of the Tariff on Canadian timber for a couple of years.
Lumber prices are just out of sight compared to what they used to be.
[35:02] That is already baked into our current cost and it affects the the cost of things.
But not as much as you would think and not as much as some in the popular media and popular culture would have you believe.
This is not a show about tariffs and I don’t want to get into the philosophy or anything about tariffs I just focusing on the impact of them the impact of them has been higher Timber prices so far
it may mean higher cost of goods you know fixtures and things that are manufactured in China in the coming months,
and many of the home builders are absolutely convinced that their product is going to cost more and.
The homebuilding business is not considered to be a high-margin business in the first place and so increases and cost have to be passed on to the consumer as much as they would wish they didn’t have to increase their prices they do
but they believe it’s going to represent at 7 to 8% increase now that’s a significant number but if you want to talk about a significant number listen to this folks.
And you can read the stories for yourself because this is going to be a little bit hard to believe.
[36:19] 25% of the cost of any home that is built is due to the involvement of the government at every level.
Federal state and local and all of the guidelines in the requirements that must be met.
[36:37] This has to do with just the cost of compliance Plus.
You know most of the development that’s done is based on loans and there are delays there are delays due to the government regulations that can stretch from 6 months.
It when we talked about the time from buying a piece of dirt to starting the first house on that.
Developed lot that you did out of that dirt there’s almost a minimum of 6 months and that’s 6 months is interest.
And Beyond the six months it can go in some municipalities and Builders have to plan to hold that dirt for 5 years.
While they are going through the permitting process now,
as if 25% of the cost of a home isn’t enough that means if you have a $200,000 home $50,000 of that was would have been spent on government compliance but that’s not really the number
that’s 25% of the average cost of a home but there are fixed costs and there are people that are studying this.
[37:50] One such person is Robert Dietz Chief Economist of the National Association of homebuilders and I’m going to quote some of what he just wrote in housingwire because I think you need to hear it.
[38:01] Well I’m going skilled labor shortages and building material price volatility
made worse by tears are slowing projects and raising construction cost a fundamental limiting factor on development are the regulatory rules
connected to single-family Construction in apartment development the number of rules associated with developing land and building homes and apartments are
immense and scope and involve all layers of government too often.
These rules are examined in isolation thus missing the quote death by a Thousand Cuts in quote process that layers.
[38:38] Higher costs on the total construction process holding back Supply in contributing to the affordability crisis
in recent years the National Association of homebuilders economic steam undertook to detailed surveys of Builders and developers to determine the aggregate effect of regulatory burdens on housing,
with the second study co-author with the national multi multi Housing Council in 2016.
National Association of homebuilders published study of the single-family sector that found on average approximately 24% of the final price of a single-family home is due to regulatory burdens
imposed by all levels of government
the results were revealing in terms of where these costs arise 3/5 of the total impact was due to the higher costs associated with finished lots for example
delays related to Land Development raise housing cost recall that most land developer housing is purchased using debt which means higher interest expense with time,
in fact the survey found that the typical lot is subject to a 6.6 month delay however in some tightly regulated regulated markets.
[39:43] Delays can exceed five years no it’s not just the level.
Of burdens that matter but the recent Trends in cost growth in 2011 survey nahb estimated that regulatory burdens added a little more than $65,000 to the price of a new home $65,000
that’s nuts but in 2016 they took the same survey and the average came to $85,000.
[40:14] If you have $150,000 home out there that you’re trying to sell $85,000 of it it was just in the cost of development and Regulatory Compliance.
[40:26] That could explain why you don’t see houses being sold for $150,000 at least not new construction if a builder this thing about this folks from a practical standpoint if a builder.
Is going to go to all of the pain and suffering of Regulatory Compliance and they can they can choose to build starter homes
where they might make a few thousand dollars on each house
or they can build second homes are nicer homes little bit bigger homes the regulatory process is the same the fixed cost $85,000 is the same however
they can build a bigger house and instead of making another $10,000 on the house they can make 30000 on the house what would you do.
Come on be honest what would you do.
[41:13] I can’t fault anyone for doing the thing that is going to make them more money and I can understand why almost no one is motivated to build.
New construction that is Affordable and guess what folks.
I don’t see it changing do you see any government municipalities that are interested in rolling back regulations.
[41:40] They’re interested in making it easier and here’s the thing with organ of course they’re focused did the Capitals in Salem but they’re focused about the.
Unaffordable housing that’s around in Portland and I’ve been to Portland and I’ve looked at the housing there and it’s an interesting Market I didn’t,
she it is particularly unaffordable but I guess compared to income maybe they were getting to that point but.
I looked into what was going on with Real Estate Investors in new construction in Portland in the reason I was there was my wife’s son is a chef there and we went out to visit
of course when I’m there I’m not all about just visiting I’m looking at the real estate market to but here’s the thing.
You almost can’t get a permit to build a house in Portland and if you want to develop an apartment complex oh my goodness the regulatory burdens are
unbelievable and so if you
have the money and the interest and you want to do something like this you want to build are you going to go somewhere where it’s going to take you five years to get the permitting and get clear to build are you going to go somewhere else where you can do it in six months.
[42:48] It’s just common sense folks and so the government creates the problem of a lack of affordable housing and then the government believes that they can fix the problem.
Telling private property owners what they can and cannot do with their own property
and guess guess what you shouldn’t be surprised that the private property owner start feeling resentful and the people that have the ability to leave.
Leave in fact.
[43:19] Diana’s son just told us that that they’re packing up and they’re moving they’re not sure where they’re going yet but they’re getting out of Portland.
Now they’ve identified spots that they’re thinking about going to and I think they’re jumping out of the pan and Into the Fire.
But hey everybody needs to experience life to the fullest and you know everybody needs to live in the big cities while you can that’s what you want to do so I say go for it.
All right circling back around to the story what can be done what can be done to address the affordable housing crisis well the only realistic solution is to eat these regulatory oversight.
[44:00] A box I just don’t see it happening I don’t see the communities going backwards now
somebody could pick on this story and say that well it’s you know written with a from a slanted viewpoint you know that the contributor is biased and has an agenda you could say that but
the data backs up what he said right so when we come back I’m I’m going to talk to you a little bit about what I think we can do to address for double housing.
And it’s going to require the cooperation of a lot of people but I’m not going to suggest a government solution the only thing I can suggest for the government is to.
Get less involved get out of our life.
[44:54] If you’re a real estate investor.
[44:56] You owe it to yourself to get a profile on the fan the flipping America Network it’s a flipping America network.com.
The profile is free if you’re a buyer a landlord a rehabber you enter what you’re looking for.
Particularly the ZIP codes of interest you can put up to 10 but we’ve already we’re working now to expand that to 25 you don’t have to sit on the app you don’t have to sit on the on the website.
All you have to do is tell us what you’re looking for your profile includes your cell phone number which will verify at the time you register and when a property is posted in the zip code you’re interested in your going to get a text message that says.
Look what just hit the fan.
[45:41] Everyone should register all 43,000 ZIP codes in the United States are included and you could be finding your next property,
just by listening for your text tone we call it snap click sold because if you are a seller.
[46:00] You can download the app will anyone can download the app and in the App Store it’s called flipping America Network all one word no spaces you download the app flipping America Network and.
[46:12] If a course is a buyer you can search for properties using the app
but as a seller you could be at the property negotiating a deal with someone that you want to wholesale you could take a few pictures of the property and that’s the snap part then you can.
Take to upload this property to the fan put a little information about the property there and.
Immediately that property will get texted to 5:10 doesn’t hundred I don’t know
however many investors have expressed an interest in that zip code you no longer need to manage a mailing list you don’t have to go out and put together your flyers in your brochures or create
ads for Craigslist or other sites just posted in the fan dozens of people will see it it may be sold by the time you get back to the office that’s why we’re calling it snap.
Click sold www.dot flipping America Network. Com register now.
[47:19] All right we’re talking a little bit about affordable housing here and I want to wrap up the conversation with just a word.
To you my friends my listeners and my fellow Real Estate Investors across the country what can we do to contribute to affordable housing well.
We can buy some of these two one deals that were built in the 50s and they were adequate at the time and remodel them and leave them as a 2-1.
Can make a little bit less profit and move on down the road and I know that the first thing that you’re going to ask and you should ask is the same question that the builders asked.
[48:01] Why should I go to all the trouble to do this when I could add square footage and turn it into a 3-2 and double my money or make a lot more money.
That that’s a question you need to ask and you need to answer it for yourself and I’m not asking you to do anything.
You know I’m not asking you to take one for the team here or do something just for the sake of being Noble I’m asking you to look at it from a business standpoint
if you take a 2-1 and you remodel a it’s going to be another thousand 1200 square feet at the most if you remodel that sucker and put it out there on the market you’re going to move through it.
Quickly the rehab going to go quickly you may not even have to pull a permit
depending on where you live the municipality the guidelines state laws and that sort of thing but you may be able to get done a lot quicker than if you want to add square footage and and do the 3-2 so you got to run the numbers on it
and are you interested in creating a beautiful Masterpiece or are you interested in moving the money.
There’s always a balance on that in this business mostly what we need to do is move the money we don’t necessarily need to turn every house into a statement.
Instead just might remodel it and move on if you keep it a 2-1 you’re going to sell it for a lot less than if you turn it into a 3-2.
That’s one way you can address affordable housing and really for Real Estate Investors Fix and Flip investors that’s about all we can do the other thing that I would suggest is that you pay attention to what’s going on with your local government.
And the rules and guidelines and try to elect people who want to roll back.
Regulations Nelson regulations are good and useful we need to protect our waterways we need to protect our air we need to do things like that but some of the
regulations in the building industry are just a burden placed there because someone some bureaucrat and somebody in power felt like well we can write this rule so let’s do it let’s require them to do this and let’s require them to do that.
[50:05] There’s always a balance between the need for government to protect our environment and to protect us which is the Mandate of the government they federal state and local government to protect the citizens
but sometimes that protection becomes an over reach and we’ve got to right now I think it’s tilted
in the direction of government interference and we need to roll that back okay I’ve got to get to some emails or we’re going to run out of time at least want to deal with the let me see if I can.
Help Angie a little bit and then maybe we’ll talk about Linda Angie from Alpharetta Georgia now we’ve this is the middle of a conversation that Angie and I’ve been having
and I recommended some hard money lenders including of course my a Braswell Mike Braswell Braswell Capital Solutions one of our title sponsors of the show shout out to Michael and find them at Braswell Capital Solutions.
[50:57] And Mike is a great guy and glad to help you also we have I’m friends with Kim igwe at Baker Collins and in fact that you’re going to be hearing more from Baker Collins from the show here coming up in the next month or so
Angela recommended some lenders for her and then we got this email making slow but steady progress we have our financing squared away and are ready to start fixing and flipping,
any suggestions on the best way to locate distressed properties for sale in the Gwinnett area for those who is not from Atlanta Gwinnett is a suburb on the northeastern side of metropolitan Atlanta
for ease of access and starting out at a lower price point we thought it would be best to stay within a certain radius of our primary residence which is Alpharetta
and focus on more of a middle-class area any referrals or suggestions you can provide would be greatly appreciated okay for those of you not from Atlanta.
You should know that Alpharetta is not a middle-class area.
Show Angie congratulations on living in Alpharetta but of course you’re going to be not flipping houses if you want to buy in the middle class are you going to you’re not going to be in Alpharetta and that’s okay and I think you are right to do that.
And so I’m going to.
Is One Direction you can go you can also consider going north a little further out that get you up into Dahlonega and that’s pretty well outside of Atlanta and you’re not you’re going to find a lot fewer opportunities there.
[52:22] But here are some suggestions now keep in mind and in Atlanta alone I have over 7,000 investors in that are registered in my Meetup Group.
Okay that means I don’t have Mall.
[52:39] There are a lot of investors in metro Atlanta a lot of investors in Gwinnett County we bought a house in Gwinnett County this week before last and.
You know dick you’re up against a lot of people so here’s what I would suggest you do.
[52:59] Go to vistaprint.com and no they are not an Advertiser I don’t get any kind of Kickback for this but at this print.com you can get 250 business cards for free get yourself a free card that says I buy houses.
And you can say whatever combination of any location in any condition.
So forth and so on but it needs to have your phone number and I need that needs to be a Google Voice number or not your cell phone some other phone that forwards to yourself on K you don’t want to be putting your cell phone out there.
[53:31] Trust me on that okay and
an email and you can be you know I don’t know if you can get Angie buys houses at gmail.com but it doesn’t need necessarily be your company name email I suggested you get something that’s
easy for people to remember and easy for you to say when you go to networking meetings
all right get those cards printed up and their purpose here is not to get 250 cards the purpose is to get rid of 250 cards get over to Gwinnett County and start putting them out
put them out where ever you can now I’m not a big fan of the bandit signs I’m not.
I’m not on the bandwagon about them I’m not necessarily against them I’m just not doing them because,
it irritates the people in the communities you’re trying to reach and also it’s a violation of the code the local code most places and I don’t want to build my business.
Around any idea that has us running from the law so people put out these bandit signs with the
Google Voice number that leads to a burner phone or an answering service just so they can’t be identified and find that that I’m just I just don’t want to do that bad also I’m not in favor of that but there are a lot of other things that you can do.
[54:45] You can put up legitimate signs with the real estate gangs that go up on the weekend
you can do this there are some driving for dollars apps that you can download and try but you can get through the neighborhood
also not big on driving for dollars but that’s because I’ve got deals coming from plenty of other sources then I would suggest that you get out to as many networking meetings as you can because there are a lot of wholesalers at these meetings and tell people you’re looking for
and what are you looking for telling what you looking for you know entry-level homes in Gwinnett County and that’s what you want and pretty soon.
[55:22] You’re going to start getting deals coming to your inbox the next thing is join the Gwinnett County and folks I’m saying this to all of you whatever area you’re in.
Join your local buy sell trade group on Facebook and jump in there from time to time and.
[55:40] Say hey does anybody have a house you need to sell in the next 30 days I really want to buy one and I’ve got cash and I can close fast we can make it happen.
[55:50] Those are just a few things for the standard things that we do there are many other things you can do you can get a list I do not recommend that you buy list from.
The people that you’re going to find when you do a Google search those people,
they’re going to pop up and I don’t want to name any names here but they’re really good at getting to the top of the rankings in the Google search but they’re not really good at providing the list that you want you need to,
get list from reputable people one of them would be at Angie cousins at foreclosures daily.
How come you can check her out they have different kinds of lists in Georgia I would go to law clerk on demand.com and
talk with them because.
They’re they’re going to get you the best freshest data because they actually have clerks in the county courthouse in Gwinnett
and so I hope that information helps you let’s see Linda I don’t know if we’ve got time
to really help you here let’s see what we can do in the in the time we have remaining Linda Jacksonville Florida the roofer had put on okay
this is the roofing story and I’m going to shorten the email but basically the roofer gave her one quote and then came back and said.
[57:04] I gave her an invoice for three times the original quote claiming that the roof pitch
was not steep enough for shingles and they had to put a different type of roofing product on she was not informed of any of this during the process now has been presented with the bill which has been submitted to the insurance company.
[57:21] This is 1/12 out of 1200 square foot house and the bill is $17,000 that’s kind of nuts.
[57:29] I’m so here’s what I said the charges do seem unreasonable I’ve used rolled Roofing on low pitch roofs in the cost difference wasn’t much
the cost wasn’t much different than shingles the repairs
I’m assuming the decking might be legitimate but this could have been known ahead of time to some extent did they get up on the roof to inspect or did they just use a drone when I get to a situation like this and I’ve got plenty of experience
I realize none of the options in front of you are Pleasant so this is how I proceed.
[57:58] I tried to talk with the decision maker at the company and I say.
The pictures of roof was known when you quoted it I expect you to honor your quote even if you made a mistake I made mistakes in my business for years and no one is paying for them but me.
I shouldn’t have to pay for yours we have a signed and written agreement.
[58:17] And that music means we are running out of time folks I’ve got more answer to this I’ll come back to it on our next show.
Thanks for tuning in today my friends and remember what you doing out there is keeping your eyes open because you never know where their next meal is coming from.
[58:55] My good friend Gordon cats just said everything worth doing is worth doing poorly the first attempt and getting better as you go along great thought for the week and that’s brought to you by the foundation for Renewal working together with.
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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.
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