Hello my friends, and welcome to another episode of Passive Real Estate Investing. I’m your host, Marco Santarelli. Today I am joined with my good friend and industry associate Dustin Heiner. Dustin, welcome to the show.
What’s up Marco? Thank you so much for having me on the show. It’s, it’s so great meeting other real estate investors who have podcasts too, because, you know, we’re in the industry, we’re helping people, but at the same time, you know, we can actually carry a conversation and have a lot of fun doing it. So I really appreciate you having me on. It’s just so great meeting somebody else who invest very similar, you know, because there’s a lot of other ways to invest storage facilities. Those are good, don’t get me wrong, but I just love, like what, you know, turnkey type properties. I love long-term. I love making sure that I’m making money every single month. But no, thank you so much for having me on the show.
Yeah, no, it’s great. So the reason I had such a quick intro and getting you right Introed, is because this is like a very ad hoc, unscripted un bullet pointed episode on really just whatever we want to talk about when it comes to crushing it this year in real estate investing in 2024, how does a real estate investor crush it? So, we’re gonna talk about whatever comes to mind, like we’re we’re just doing this because you’ve got the Real Estate Wealth Builders Conference coming up very soon, which we’re gonna talk about, and it’s something that I think a lot of people listening to this are gonna be interested in. So we want to talk about, we want to plug it, it’s not a shameless plug, but, you know, we want people to have availability or access to your event. Now, this event is now going into its third year.
I was the keynote speaker for the last two years, and I’ll be there again this year. You know, doing whatever I do, I’m gonna talk about whatever I talk about. I’m not even sure what that’s gonna be, probably, you know, the economy and whatnot. But yeah, definitely want my audience to attend. And you know, obviously we want as many people from your audience to attend to learn, because you’ve got a whole bunch of speakers. So before we kind of deep dive into, you know, how to invest in real estate today, mortgage rates, the economy and all that stuff, you know, take a minute or two and, and just talk about REWBCON, what it is, where it’s at, how do people attend and what they can expect to learn and take away, because you’re gonna be there. Obviously, I’m gonna be there and let’s just see who else is interested in going.
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Absolutely. And with the conference, I’ve been to many conferences. So more than likely your audience, they’re good investors. They already know that they want to invest. They are most likely already investing. And with that, you’ve probably gone to any event or some sort of real estate event in general. And usually, ’cause I’ve been to these and I hate them, it’s all hype and sales pitch from the stage. And then they say, now run to the back. It’s normally a billion dollars, but it’s a thousand dollars today. I hated those because it’s all, it’s all just sales. And I wanted something that was completely opposite of that because I wanted something that I would want to go to. So if I hate those, let me create something. And then you were Marco, you were one of the first people that I called. ’cause I said, you know what, this is what I’m trying to do.
I really just want to create an event or a conference or something that we can get our communities together, our listeners, our students, our investors, and really just create a big party where we can all come together and help each other to invest. So this year, REWBCON, the Real Estate Wealth Bill conference, it’s gonna be in St. Louis, March 14th through the 16th in downtown St. Louis, got this amazing hotel. It’s literally an old, like a train station. When I say like Grand Central Station, it’s like that. And they Hilton refurbished it to be a theme park and hotel. So it’s, it’s super awesome. I’m super excited about that place. But the greatest thing about this is not necessarily the hotel, hotel is great, St. Louis is very central for everybody to fly into. But the great thing is we’re getting people like me and you and 40 plus expert investors who literally are just coming not to sell things, but to help the people that are coming.
All of our audiences. In fact, I’ve got my podcast, you have yours, other, all the other people. We have our own students and podcasts and YouTube. But it’s all of us just helping people how to invest. And that’s one of the biggest reasons why I love you coming is because you bring so much. I’m not very analytical, I’ll be completely honest to say that you are so much more analytical and every time you give the keynote, people are saying, my goodness, I, Marco’s keynote was so amazing because I got so much information, I got so much insights. And I remember last thing I’ll quickly say is 2022, when you got got up there and gave your first keynote, I remember you talking about why right now is the best time to invest, right? Right. Like you are helping everybody to continually realize it’s always the best time to invest.
You just need to know how to do it. You know, the when’s the best time 20 years ago, the next best time is today. And so you got up there and you gave up so many and so much data points, it all came true, like everything you were talking about because it’s still going on. So with that, the conference is amazing. And for everybody, if you want to come, we want to be there because Marco’s gonna be there. I’m gonna be there. And 40 plus other expert investors, hundreds of other investors there. We just want you to invest. We want to help you become even better at investing. We talk about all types of asset classes, but like I said, the best thing that most people say is they come away, say what Marco talked about on the main stage was absolutely gold. I needed that
<Laugh>. Yeah, no, I appreciate you saying all that very kind words. I will try to live up to that again this year. So let’s knock it outta the park now. REWBCON is gonna be even bigger this year. It’s a multi-day event. You have even more speakers talking about every potential track of real estate investing from wholesaling to buy and whole to flipping to you name it, right? It’s all there. You know, I guess the best thing for people to do is, is go to the website and learn about, you know, everything that’s going on quickly.
The, the website, I’ll just quickly ’cause I didn’t say it. It’s R-E-W-B-C-O-N, REWBCON.
R-E-W-B-C-O N.com. And just use the promo code Marco. If you listening, Marco will know that you came from him and he’ll wants to hang out with you. Just like my students, my audience, they want to come hang out with us. And so Marco’s gonna be there. So definitely like Marco’s a good guy, like more than likely you listen to this, you probably might be thinking, you know, Marco, he’s like either a celebrity or he’s just somebody that’s like, you know, far off. No Marco’s a regular everyday person just like me. Yeah. And just think of us as like your next door neighbors that we just wanna help <laugh> and just be there for you.
Well I have a lot of next door neighbors then.
Well, so let’s kick things off here. How can you know investors crush it this year? You know, let’s just kick this around again. You know, this is just ad hoc, it’s unscripted, you know, maybe share some thoughts. I’ll share some thoughts. Where do you wanna start?
When I think of what my audience, students and everybody for Master Passive income, what they’re asking me right now is how do you invest with prices still pretty high? You know, they’ve come down a little bit. Let’s say 15, maybe 20% at the very most. Some places may be a lot less, but they’ve come down a little bit, but they’re still pretty darn high. But the interest rates are really high. And we know the Federal Reserve came out saying they’re not gonna be cutting rates anytime soon. And with that, that means mortgage rates probably are not gonna be affected very much in a down era, like going down, it’ll more than likely continue to creep its way up, especially if the Fed comes out and said, Hey, the economy’s doing better than we thought. We’re gonna actually put more inflation or there’s more inflation. So we’re gonna put more interest on there.
So we’re gonna raise the interest rate. And with that then our mortgages are gonna up. So the biggest question that I have had from all the people that talk to me about real estate investing is how do we invest with these high interest rates? Well, I’ll be completely honest, everybody, especially those TikTok gurus that say, Hey, I, I have two properties, come follow me. Like I’m gonna tell you, they’ve only investing for maybe a year, two years, three years. Marco and I have been investing for a very long time. Like Marco. What year? I started in 2006. When did you start?
I started about 32 years ago.
Okay. Lots of experience between the both of us. Yeah. And we’ve seen down economies and we’ve only had a booming economy for the last, what, 14 years. Eventually something’s gonna happen. But it’s always been where interest rates are normally 5, 6, 7, 8, where my parents bought their first house, it was like 17%. Yeah. So us knowing two and a half percent, 3% for the longest time, that’s not normal. And so what I’ve seen is students saying, oh, it’s so crazy. These in rates are so high. I’m like, no, it’s actually pretty average now <laugh>. It’s just getting back to where it should be. So for me, mm-hmm, <affirmative>, the biggest question is how do we invest with the high interest rates? What I look at is making sure that I actually account for that expense, the mortgage expense, you know, the interest, everything, the payments that I have to go out before I buy the property.
If I can’t afford my mortgage, if I can’t afford that interest, I don’t buy the property. Like the tenant needs to be paying enough money to afford the property managers, the contractors, yeah. You know, vacancy factor repairs, cap expenses, mortgage payment, all that stuff. And then I buy the property making sure I suggest I love making $250 or more in passive income, but I do not buy a property until I make sure those expenses are accounted for. Because the biggest thing I try to get everybody to understand, if you’re a real estate investor, yes, you’re an investor, but what more So you are, you’re a business owner, you own a business that needs to make money every single month or every quarter, but it needs to make money. You don’t just hope to make money. Just like if you’re selling, you know, a candy bar, you would not buy it for $2 if you could only sell it for a dollar because you’d lose money every single month. That’s not a good business. But same thing with real estate investing. We wanna make sure that we’re making money with every transaction that we buy. But that’s what I’m seeing. What, what, what are you seeing with interest rates right now?
Well, you know, fortunately we’ve seen mortgage rates for investors come down from the eight, eight and a half percent range down into the seven. So now we’re floating, plus or minus, depending on credit. And the deal itself, you know, somewhere around 7%, you know, the expectation is that these mortgage rates will continue to drop and average out to somewhere close to six, 6.2% over the course of this year. So I, I really think the Fed is gonna loosen up, you know, they’re gonna stop pumping the brakes and maybe start to, you know, juice the economy. So we’ll see mortgage rates come down, which will be good. It’ll provide liquidity, it’ll help with, you know, just kind of greasing the housing market, if you will. It’ll make mortgage financing or leverage more affordable. So I see that improving, not tremendously, but it will improve over the next 1224 and 36 months. It just has to, because the fed and the, you know, the government doesn’t want to crush the economy. They don’t want to slow things down. And especially this year, 2024 being, you know, election year.
They don’t want to create an environment as in the economy where it’s gonna hurt them. So I think that’s gonna improve. But investors, you know, should still be looking at deals. They just have to be more selective. There’s probably less to choose from for two reasons. One, not as many markets make sense today as they did, let’s say three and four years ago. So there’s less choice in terms of markets. Also in terms of availability, inventory has been pretty tight. We’ve seen some crazy appreciation rates, especially in 2020 and 2021, where appreciation rates on average have been, you know, in the 20% range, like, you know, to 19,20,21%. Now, granted, this is not all around the country. I’m, I’m generalizing because I’m looking at the country as a whole, but it, it was just nuts. For two years now, we’ve seen a tremendous pullback.
In fact, in terms of what is expected in this coming year, 2024, in terms of resale home prices, we’re probably gonna see again, on average nationwide, an increase of one to 2%, which is not a lot. It’s in fact it’s lower than historic norms. But again, you know, I’m chalking into this, you know, the San Franciscos, the Los Angeles, the New York’s, the reality is, it might be higher than that, but conservatively speaking, resale home prices will probably appreciate nominal single digits. You know, it could be anywhere from the one to 3% range, new homes. On the other hand, because there’s such demand and pressure to build new homes, you know, we’re probably gonna see two, three, maybe 4% average rates of appreciation this year. Still positive, still good, but it’s kind of the breather that the market has to take the cooling off or the pullback from what we’ve seen.
But also keep in mind too, what’s also holding back these appreciation rates, which normally would be much higher if we didn’t have mortgage rates as high as what they are right now in the seven to 8% range. These appreciation rates would be at least double that if we were back in the sub 5% mortgage range. So anyway, that’s what I think most people should and could expect in terms of what’s coming up for this year. But, you know, just to kind of tie a bow on that, and then I’ll throw it back over to you, Dustin, is this shouldn’t stop in real estate investors from investing in real estate. You know, like you still can invest, you should invest, you can crush it this year by just looking in the right markets for the right types of deals. You know, this is something obviously, you know, my company here at Nora real estate investments helps investors do, you know, we’ve got 25 markets where we have lots of inventory, lots of deal flow, the numbers make sense, but you’re not gonna find that in, in, in most markets.
Like certainly not the big markets, what I call a tier one market. You will find it in many of the, the secondary tier or tier two markets. Certainly you do find it in the tertiary markets. Not everybody wants to invest in tertiary markets. You know, they’re smaller, they’re typically, you know, further out from the major metropolitan areas. But the deals are out there, the numbers do work, you can make it work. And even if you have a slow year, things will pick up. Real estate works. It always works as long as you buy, right? It’s the most historically proven asset class. It does produce returns, not necessarily great cash flow or great cash on cash returns in the beginning, but those fix themselves. They heal themselves over time because we’re always gonna be in an inflationary environment. So rents will go up, you know, something I heard you say just a little while ago. But yeah, I mean, real estate is a great wealth preserver, a long-term wealth creator, and over time a great passive income creator. So anyway, I’ll pass it over to you. ’cause You know, once you get me going, I won’t stop
<Laugh>. Totally. Well, same here. And so with that, you brought up something that I, I actually wanted to ask you about. So what I perceive as a big reason why you, you brought up supply of homes that are out there. I see. And obviously there’s lots of people wanting to buy homes to live in 100%. A big reason why I’ve seen rents go up, like my long-term rental properties, the rents went up and up and up. And here’s the big reason why in, you know, from 2020 to 2024. Now, the big reason why that I’ve seen is the supply of rental properties, which means talking about supply of selling of homes, actual homes for sale. But it really comes down to so many more people buying short-term properties. They’re basically, if you look at a, a map of a Zillow, or sorry, go back to Airbnb. So if we’re at Airbnb, you look at Phoenix, there’s like, I wanna say 70
Might be like 17,000 Airbnbs or something like that. It’s, it’s a crazy amount of Airbnbs, which used to be long-term properties or properties that people live in permanent residence. But now these are turned into short-term properties. So that’s why the, all the supply is gone because all these short-term people are coming in, they lo they watch this TikTok people and said, oh, I could do that too. I can make lots of money with one property. But then they, they buy it up and they overpay because they say, Hey, if I could rent it out short term, I can make a lot of money. So a combination of all of that. What do you see, Marco, about the short term properties and is there anything, is there maybe a bubble where there’s so many short-term properties now that prices are, like you see on Airbnb, prices are coming down now because they’re, it’s the market saturated, but what are your thoughts about that short-term properties in general?
Well, for the longest time and for many, many years, I didn’t want to venture down that road and probably because I was biased, you know, with my company at Nora Real Estate, we only sell and talk about long-term rentals. So it’s the traditional one or two year lease, you know, long-term buy and hold, you know, things that have just historically proven themselves to work and work time and time again. And I didn’t wanna venture out, so I guess I didn’t look at it because it’s not something we wanted to offer, right? But I did invest a couple years ago in my own short-term rental, and now I’m, you know, kind of doubling down in the sense that me and a partner are now looking to potentially acquire six or more of them, you know, together and, you know, just build it out. I have a little bit of a different take on the short-term rental thing.
I just don’t want plain vanilla, short-term rentals. ’cause I, I want something that’s highly desirable that is gonna be attractive, have strong demand and charge a premium. And so we have a way to do that, a formula to do that. But I didn’t care about short-term rentals before. Now I see a need for them and I can see how they can be profitable, but the same rules apply the fundamentals. You want to be in a good market. Now granted, you know, with short-term rentals, you know, you might have to look at it a little bit differently because it might be a place where people frequent or vacation often, or it’s, it’s geographically located somewhere where that is always gonna be in strong demand or maybe seasonally. So you, you have to keep that in mind because that can kind of make or break the investment.
What I’ve found with short-term rentals though, is often the numbers don’t work as a traditional long-term rental where you have a one or two year lease like it, it won’t cashflow positive, but it can, and it will as a short-term rental, just because you have a premium in terms of the nightly rates and the gross monthly rent that you take in from that rental. So the numbers do end up working out and it could be pretty attractive, but it’s not the type of investment for everybody because it has a lot of turnover. You have to have the right management to be able to turn it over like a hotel room. It’s not just something where, you know, you’re in and out each and every year as you turn over to a new tenant. Or maybe less than that if they stay long term. Anyway, I’m not sure if I’m answering your question, Dustin.
Oh, it’s okay. Well, it kinda gets me in a direction of, ’cause you said something, I’m gonna challenge you here a little bit on this. You were saying like high demand areas, like, like the Disneyland or Disney World, like we have a lot of travel, although where, where I’m gonna push back in a little bit and say there are lots of areas of the country that, let’s say a population’s over 30 to 40,000 people that people have to go. There’s weddings there, there’s graduations, there’s somebody’s traveling. But here’s the big thing about if you went out to what, I think you call it a tertiary market, but like a, a secondary market that’s not nearly like the, you’re paying like, you know, $600,000 for a house. Let’s say you’re paying $200,000 for the house, well, you’re getting a dramatic decrease in the amount of money that you’re paying out.
And I was talking, a good friend of mine, he has 21 rentals, I wanna say it was in Indiana, somewhere around there. I can’t remember exactly where it’s at, but it’s in a smaller city. And this max 30,000 people in that city and he has 21 there, lower priced homes. And he said his rents are literally 15, maybe 20% less than you would get at the big, you know, big cities like Nashville or whatever. And so just keep that in mind. Like I’m not against short term at all. I think short term is fantastic portfolio. The midterm as well. In fact, I know a lot of my students are crushing it by getting midterm, short term, like you said, lots of turnover. You have to make sure that you’re on top of that, that property managers are on top of it. Midterm meaning 30, 60, 90 days.
It’s still furnished. You get traveling nurses, traveling executives, you know, families that wanna stay there for, you know, 30, 30 days or 60 days. You do get still a lot of money compared to renting out long-term, you know, long-term leases. So you’re gonna be paying it per, they’re they’re paying per month as opposed to per year in a sense. So they’re getting, they’re getting locked in 30, 60, 90 days. But yeah, so that’s my little challenge to you is that these other smaller areas are fantastic as well, but your rents don’t drop nearly that much. It’s not like 50% drop. It’s like maybe a 15 to 20% drop then you, what you would pay at like, you know, Orlando Disney World,
Right? Yeah, yeah, no, I, you know, I, I don’t dislike short-term rentals. In fact, I do like them. It’s just, it, it requires a little bit more homework and due diligence to make sure that you’re in the right area, especially the right community or neighborhood where you have that ongoing desirability. And there are tools online to help you figure this out. There are quite a few tools that you subscribe to that will show you the inventory of short-term rentals in the area, what they charge per night, you know, on average over the course of the year. And you can see, you know, what you’re looking at in terms of competition, then you could work your numbers from there. So it requires a little bit of more work, but it’s certainly an option. And just another way for investors to crush it in real estate this year. You know, it’s just, I jokingly say there’s 101 ways to make money in real estate. There’s probably more than that. There’s probably, you know, 500 or a thousand ways to make money in real estate.
Totally agree. And every asset class, as long as you get the right person, like everybody that listens to you, they know that you’re the expert. Like they want to work with you because you’ve already got things figured out. Just like if somebody wants to invest in storage facilities, well you want to be around the people who’ve already done it. That’s the big thing. Or multifamily, like a hundred, 200 unit apartment complexes or short term, like you wanna be around those people. That’s why I love my conference, the real estate wealth bills conferences. I literally bring all my friends, like you and other investors who have different asset classes. Every asset class is great as long as you know what you’re doing. If you don’t know what you’re doing, you can get in trouble. But that’s why you actually want to be and find the right people.
I keep listening to the passive real estate podcast, like you want to continue to listen because you’re gonna be growing in your knowledge and understanding. Oh, but oh, I, I remembered. I also want to, what are your thoughts about the supply? You know, we, we, we’ve seen supply was really, really low for a long time. Prices went up, supply seems like it’s coming back a little bit or anyways, what are you seeing right now all over the, ’cause you have properties all over the country, you have for your turnkey company all over the country. But what are your thoughts about supply?
Well, let me kind of close the loop on the rent thing and then I’ll talk about the supply thing, if you don’t mind. So, you know, we were talking about rents for a minute ago and we were talking about short-term rentals versus traditional rentals and whatnot. If we just look at what has been happening with rental increases over the last year or so, apartments for the most part have been flat in some areas it’s been increasing. But the year over year appreciation in terms of apartment rents have been declining. But single family homes for the most part have been going up year after year after year. That’s been pretty strong. And the expectation for 2024, again, nationwide as a whole, we’re taking like a very big average across the nation. But single family rents are expected to go up 3.5% this year, which is still a pretty strong bullish rate of increase.
And that’s because there is, there is strong demand, a lack of supply. And you know, if you’re a real estate investor, you know, this is just wind in your sails. And so, you know, we’re talking about how do you crush it this year? Well just maximize your rents, you know, if you can charge the maximum fair market rent in your area, acquire more property, continue building your portfolio, get into areas that have strong demand and will continue to have that high desirability. ’cause Your rents will continue to go up, especially if inflation is going to, you know, stay high. Now granted, it’s come down quite a bit, but you know, as long as that inflation is still pretty strong and above historic norms you’re gonna continue to see single family rents go up. Now that kind of segues into your question, Dustin, you know, about supply, supply has improved, but it’s still pretty tight.
There will be some more easing this year because in terms of single family starts, we expect that to go up about 4%, which will add more inventory to the supply this year with mortgage rates dropping, we’ll see existing home sales increase about 8%. It’ll bring more churn and more inventory onto the market. So those people who are now waiting for inventory will come out and be able to purchase that inventory. But that’s just still existing inventory. It’s not new inventory. There’s still a lack of new households for the existing demand. I mean, that has been a, a problem for years. It’s not gonna change. And it’s been expected and continues to be an expected problem until 2030, at least 2030. So another six years of let’s just call an imbalance between supply and demand in favor of a seller or homeowner or investor because it’s the upward pressure in the market that’s giving us the upper hand in terms of price appreciation and rent appreciation.
That just plays into our wealth creation and our cash flow. So, you know, but there’s two sides to every equation. It’s gonna be problematic for homeowners or want to be homeowners and renters because it’s not helping with affordability. Affordability will improve slowly as mortgage rates come down. But right now, you know, we’re still in a higher rate, relatively speaking, quote unquote higher mortgage rates. So rents are gonna stay high because of strong demand and the affordability is, is coming down and improving, but it’s still not where we were, let’s say four or five years ago when we had rates in the three to 4% range. Will we get there again? Who knows. Maybe, but you know, it’s not, it’s not gonna be right around the corner. It certainly won’t be this year. So
So do you think there’s ever gonna be another 2008 again? I mean, ’cause we had the subprime loans that caused a lot. I would, like I was mentioning a little bit earlier, I just see a lot of short term properties, people who don’t know what they’re doing, just a way over paying for a property, hoping that they’re gonna rent it out every single month, all 30 days a month, you know, 365 days a year. ’cause That’s how they, in order to pay their mortgage. Do you think there’s ever gonna be some sort of correction or crash like that? ’cause I honestly thought it was gonna come like five years ago, but it’s, it still hasn’t come and it seems like it’s been good for a long time. But what are your thoughts with that?
Well, you know, to, to kind of play into our overall theme, you know for this episode on how does a real estate investor crush it in 2024? You shouldn’t be in this environment with the fear that we’re heading towards a housing crash. Or you shouldn’t be standing on the sidelines thinking, well, I’ll wait for prices to correct or correct tremendously because I’m expecting some sort of major correction or a crash like we had in 2008. I can tell you that’s just not gonna happen. It’s not gonna happen. And the reason for that is, well, there’s many reasons for that, but the biggest reasons for that is this. In 2006 we had a situation where we had a lot of liquidity. Leverage was easy to qualify for, so everybody was able to qualify for financing. And that means that anybody and everybody who wanted to be a so-called real estate investor.
And I say that in air quotes, could be because if you could fog a mirror, you can get a loan. And that just means everybody was now investing in the market. But truly they weren’t investing, they were speculating. So it was driving, it was a bunch of speculation driving construction through the roof in many areas around the country from Florida to Southern California. And that pushed prices up because it was a false sense of demand and there really weren’t true buyers out there. So there was a lot of overbuilding. And because of cheap rates, investors were getting into the market and hoping to flip, not hold for long-term cash flow, but flip properties. And it created a dynamic where we had too much supply. In fact, 2007 was actually the only year in the last three plus decades where we actually had more inventory available than the actual demand for that inventory.
But then once that cleared out through the great recession of 2008 and that inventory started to come back down and the real demand for housing exceeded the supply that was really there, you know, we were back into a supply imbalance where demands outstrips supply, and then we’ve been in that situation ever since and we continue to be in that situation. So we just can’t keep up. You know, we need about 1.5 million housing units every single year to just stay up with the organic growth in the country. Right now, you know, we’re producing between 1.1 and 1.2 million units per year. So we’re constantly in this deficit of, you know, three to 500,000 units shortage. Now we’ve been able to catch up in the last recent year or so, but we’re still not there. We still have a ways to go. Like, you know, supply has, has been increasing year over year, and it’ll get us there.
And maybe the prediction is, is that by 2030 we’ll be there where we’re gonna see some sort of level of equilibrium where supply and demand are more or less in balance. Of course, you know, the general economy’s gonna play into that, mortgage rates are gonna play into that, but just based on the trajectory, that’s where we’re at. But we’re not gonna see another 2008 to your question because right now, number one, homeowners and people who hold property as a whole are equity rich. We don’t have a situation where people are underwater or upside down because they were able to get mortgages at a low rate or refinance at a low rate where they can afford the mortgage. And because of the, a massive amount of appreciation that we’ve seen year over year over the last five plus years, they’re at a position where they have lots of equity in their property and they don’t have a lot of debt compared to that.
So they’re equity rich. Second, there’s a very high percentage, I forgot the number, but it was in the 30% range, 30 some percent of homes in the country, if I remember my, my data right are actually free and clear. Third, the qualification standards are much more stringent now and for years compared to the way they were from 2000, let’s say 2003 through 2006, when we got into trouble back then, like I said, you know, you could have a, you know, a no doc loan, a stated income loan, a ninja loan, which is no income, no assets, no job. You know, you could get financing quite easily today, the average credit score for most mortgages, well pretty much for mortgages as a whole is seven 20. So the average credit score is seven 20 or above. They’re qualified borrowers, qualified investors. They have the capacity and the capability to afford the mortgage and be able to to service that mortgage. And I think people are more prudent today. There’s far fewer speculators today than there were back then.
One thing, o one quick thing, speculators, I think these short term property, like, because like there’s so many of ’em. Mm-Hmm, <affirmative>, those guys are speculating that they can actually keep them rented for the high rates that they can ’cause they have these five, $6,000 a month mortgage. So I, I pay a little like devil’s advocate or like on the opposite side is not thinking there’s gonna be 2008. Again, I don’t, I don’t believe it’s gonna be something like that, but there’s gonna be some turmoil because as soon as people start having issues with traveling, you know, like I’m not saying 2020 all over again where people are having something where locks us down, but let’s say the economy does stall or it does have happened to where, you know, people might be losing their job, then fewer people are going to be actually traveling, which means all these, like I said, 17, like I think it was like 17, 20,000, something like that.
Ridiculous amount of, of Airbnbs in the Phoenix area, which those would normally be long-term homes or rentals or pri primary residences for people. And so what I’m seeing is there are more Airbnbs coming on the market now for sale because they can’t keep the up the mortgage payment. They can’t afford the strokes every month. So I do see that if there is some turbulence in the economy, we’re gonna see something like that happen where these, these people that speculated they paid way too much for these Airbnbs, they’re gonna have to sadly short sell them or foreclose on them because they can’t afford the mortgage.
Yeah. Yeah. And that’s a good point, Dustin. You know, this again plays into kind of the general theme here of how do you crush it In 20 24, 1 of my business partners, Josh and I are keeping an eye on the Orlando area around the theme parks because we’re already starting to see some capitulation from people who were buying property over the last, let’s say 2, 3, 4 years, where now there’s a bit of a softening and with mortgage rates going up and, you know, whatever may be going on, we’re seeing actually prices coming down on properties that are short-term rentals, but they haven’t been able to keep them occupied enough to really cover, you know, their expenses. And so now they’re selling them, you know, basically at what they bought ’em for or even less. So there are opportunities out there that are popping up. And you know, that’s kind of one of the differences between short-term rentals and traditional rentals is that short-term rentals seems to be very, very price sensitive.
They can fluctuate, especially in changes in the area or in the economy. And you know, if the economy is suffering and people are traveling less, you know, that just means that there are fewer people who are filling up these short-term rentals. And that means demand has dropped and, and then owners adjust the price, they start to lower their, their nightly rate in order to attract fewer people that are out there. And, you know, that just causes a problem for everybody that owns short-term rentals in the area because now your gross rent are lower. And you know, now it’s a question of whether you can afford to keep that property or not. So, you know, that can drive some opportunity. So if you’re in the market for short term rentals, you know, that’s something to keep an eye on is just keep an eye, a close eye on the market for what’s coming up for sale. Because a lot of times you’ll see things come up in areas that are swimming in short-term rental properties where people are capitulating and just saying, Hey, you know, I, I just can’t afford it. I I maxed out the financing on this property and I just need to get out now because, you know, I’m just not making enough to make it work. So
It does seem like that’s the direction that it’s, it it will eventually go because of speculation, you know, and it’s not speculating of flipping, it’s speculating of renting it for higher amount. Okay, so one other thought too, as I was thinking about how we’re gonna be able to crush our real estate investing, the biggest thing that I’ve seen is if you know how to invest and you’ve invested through markets where there’s up and down high and low interest rates, and I love making money whether or not the market goes up, down, or sideways, I love that because I don’t have to speculate. I’m not guessing it. If I, the reason why my students do so well, and the way I invest is when I started back in 2006, that was before the crash of 2008, and all the gurus were saying, you know, you want to buy and you want to get appreciation, like that’s what you’re gonna invest for.
I didn’t, because I can’t feed my family with appreciation. I needed passive income. So I was buying long-term properties. I could make a minimum of $250 a month with passive income. And then when 2008 happened, not saying it will happen again, but even when it did in 2008, I made more money in rents. ’cause Sadly, what happens is if somebody has to foreclose on their home, they were normally a home buyer, well, that gives them the opportunity to now rent or makes them, forces them to actually rent where the demand for rentals goes up. My rents go up if there is a downturn. So I love being able to, I guess they call it, you know, hedge my bets. No matter what happens. If the mark goes up, I make more money ’cause I make more money in rents. I make more money in the value of the home goes up, I take it out in equity to buy more properties.
Same thing. If the market goes sideways, I’m still making money there every single month. And my long-term property, short-term as well, I’m not, I I love, I love residential, I love buy and hold, but it could be long-term, shortterm midterm. In fact, I own midterms as well. But yeah, so if the market goes down though, I’m still making money in passive income. That’s what I love, is I wanna be safe no matter what. That’s why I don’t want to pay, like some people, let’s say in Orlando, they’re paying, you know, a million dollars for a home that they need to rent it out every single day of the year at like, I don’t know, $200 a month or two, sorry, $200 a day, $250 a day. And if they don’t get that, then they’re actually gonna be hurting. I don’t like to speculate. I like to make sure as best as I can, I don’t lose money.
But that’s how my students are actually, I would say crushing it is because in fact, one of my students, oh, because I actually wanna hear any stories that you have. So one of my students, he literally was trying to invest for two years and was not getting it done, never taking a step, never actually doing it. He started investing me in, this is 2024 when we’re recording this, in 2023. In July of 2023, he started working with me and master passive income, got one-on-one coaching. He now literally has seven units, I think like three duplexes and one single family home that he’s making like $4,000 a month from these properties. He bought ’em well, and he’s making passive income on these properties. And he has all these equity now because he, he bought ’em brought ’em really well. But a lot of my students or audiences are saying to me, well, there, there’s no properties out there.
Interest rates are too high. Like there’s always these excuses, or a harsh way to say it, but like, reasons why it’s hard to invest. Well, it’s only hard if you don’t work with somebody like Marco or myself that we show you, hey, we’ve had experience in this area, or we know what’s actually working. So for my students, it’s literally knowing how to find the right properties, buying ’em at the right price. So you’re not way overpaying, you know, speculating 20% over value, but then making sure that you are, you’re having long-term, midterm or short-term properties that are not gonna be dependent on a booming economy.
Yeah, a couple things. So, you know, like another way for a real estate investor to essentially crush it this year is not so much to be crushing it this year, but to set yourself up or position yourself to be able to crush it going forward from this year forward. And that is this. If you’re one of those people that are thinking that I should wait either for, you know, a market correction, which you know, is more or less already happened in many of the markets now, we’re just kind of, we’re gonna, we’re gonna range sideways for a while and then, you know, in the next year or two as mortgage rates drop, we’re gonna start seeing, you know, some acceleration, more momentum, and again, an increase in property values in rental rates, you know, as demand continues to increase without the supply catching up and mortgage rates coming down, making affordability for everybody, including investors there.
So that’s just gonna happen. But what I was going through in my mind is this, don’t sit on the sidelines and wait, especially if you think that, you know, mortgage rates are too high. Don’t forget, there was a time when 9% mortgage rates was the average, and when it dropped below 10% into the 9% range, there was a flurry of refinancing because people were getting, you know, the rate of a lifetime. It was single digit, it was back into the, you know, single digit range. You know, we’re, you know, today we’re in the 7% range, something like that, which is a steal of a deal if you think about it. And we’re actually at the long-term historic average, you know, it’s, it’s that, that’s six to 7% is where, where we’ve been for the longest time. But think about this as far as crushing it, you know, this year going forward, you can crush it by getting yourself in the market.
If you’re not already in the real estate market or increasing your portfolio size, continue to invest and continue to buy even if your rate is six, seven, 8% or more. And here’s why. One thing we do know, because it works like clockwork, is mortgage rates will come back down. They go up and they go down cyclical over a long period of time, like over the course of years, not months, but they have to come back down. We cannot stall the economy with the housing market being a good 30 some percent of the overall US economy. When you factor in everything combined, you know, it’s, it’s about a third of our US economy. We can’t stall that. Politicians don’t wanna do that. The Fed doesn’t wanna do that. They don’t want to see, you know, a recession. They don’t wanna stall the economy. So at some point they need to start making sure that they’re putting some more fuel on the fire to keep things, you know, burning and moving forward.
That means this, that means that mortgage rates will continue to decline over time, maybe slowly at first, but they will continue to decline. So if you get into a, a good rental property today, one that makes sense a year from now or two years from now, guess what, you’ll be able to refinance that 7% rate down to your 6% rate or your 5% rate just like everybody did year after year after year as the rates were going down over the last decade or in the last two decades. So when rates are going up, grab the deals that you can, when rates are coming down, you refinance the deals that you have that just improves your cash flow and and just improves the position you have on those properties and it just accelerates everything for you. So that’s how you crush it. Just still stay in the game. Get in the game if you’re not, be in the game, stay in the game and then continue to refinance.
Absolutely. And I love what you’re saying, and I have a a, a quote or a saying. So you do not wait to buy real estate. You buy real estate and then wait, the more time that you have and you own a property, the more money you make in rents, the more the appreciation goes up. The more you pay down the mortgage, the more tax benefits you get. There’s so many great things about it. So you don’t just wait and say, well, when it’s this, or when the interest rates are that you don’t just wait to buy it, you buy it and then wait, and exactly, you hit the nail on the head with these interest rates being high. ’cause That’s usually the biggest question. What about these high interest rates, quote unquote high, because you, and I know it can get much higher than this, but if you lock in, let’s say 7% on a property and you’re gonna be at 7%, making sure you’re not losing money every single month, that’s the big thing I would suggest. But if it goes up, you’re gonna be glad that you’ve got a 7%. Like if it’s at 12%, you’re like, whew, I’m so glad I bought back when I listened to Marco and Dustin on the podcast and I got this 7%, but then you’re right, Marco, if the rents, or sorry, interest rates come down, it’s at 6%, 5%, whatever it might come down to, then you refinance it and you’re back even better than you were when you got 7%. Either way, we buy real estate and then wait.
Yeah, yeah. You know, and, and just again, to repeat the whole mortgage rate thing this year in 2024, we’re expecting the mortgage rates to drop a little bit over the course of the year and probably average out around six to 6.2%. But but that’s gonna continue into 2025. The expectation is that the rates will be in the five to five, probably closer to 5.5%. And you know, I don’t have a crystal ball. The data is showing that we’ll be in the 5% range somewhere in there next year. So, all right, so you have 7% this year, and in a year or two, you’re gonna be able to refinance to five and a half, maybe five, you know, that, that just improves your cash flow. And that’s not including the, the fact that you could potentially be increasing your rent a little bit, you know, by three, four, 5% each and every year just through just rent inflation. You know, that’s, that’s just gonna happen. You, you have no control over it. It’s gonna happen.
Absolutely agree. And even with one thing I also love about real estate investing is if it know there’s inflation, we know inflation, like year over year, it’s probably been a total of like, you know, 5%, then 8%, then almost 9%, 10% and kept going up. Now it’s back down a little bit, but communal over time, it’s gone up a lot. But the great thing about real estate investing, my rents have gone up over that time. So even though there’s inflation, it hasn’t really affected me very much because my rents, my money keeps going up. Just like if you go to your boss and say, Hey, boss inflation’s up. He is like, I know it’s up, you’re not getting any more money <laugh>, but with my rents, it’s the value of the other properties in the area that those rents are all going up, so I can raise up my rents as well.
So that’s why, you know, in, in, seriously, like we, we, we use that idea of crushing your real estate investing. You do it right, you make sure that you do it now, but then you’ll also, on top of that, with the interest rates and inflation, it helps you to make sure that you’re making money in the future. Like it’s, it, in fact, for me, I look at it as being generational wealth. I’ve got four kids, I’m really blessed with my wife having our fifth child. She’s pregnant right now and she’ll be doing two or three months. And with that, I will literally be giving these properties to my kids, 30 plus properties. I own hotels and stuff like that. All literally like all, especially all the homes because I own them free and clear, I’m gonna give them to my kids. With that, they’re gonna be able to make passive income from these properties.
Obviously, they’re not trust fund kids. I’m actually teaching them how to invest, teach ’em how to be wise in their, their money. I personally got, because I’ve quit my job, I have 40 plus hours of my life back that I now build businesses. So I currently have five businesses that make me money, and now I hire my kids and my kids actually work in the business. I’ll give you a quick example. My daughter’s actually editing my podcast now. So with my podcast, I was just doing the editing all myself, and she’s 15 years old. As she was 14 when she started and she said, Hey daddy, I’d like to help. I said, well, let me teach you how to <laugh> start editing the podcast. She does an amazing job, better job than I did. And so that’s the great thing about real estate is it’s everything and even generational wealth. Yeah,
I love it. Very, very well said, and congratulations on your upcoming child.
Thanks man.
You know, just kind of a, a final thought about the whole affordability thing. A lot of people think that, you know, having the high interest rates is a bad thing. Like when I say interest rates, I mean mortgage rates. You know, you have to remember that there’s two sides to every coin. In fact, you know, there’s actually three sides to every coin. There’s the edge, and it allows you to look on both sides of the coin. But, you know, the, the thing with affordability is, is that if mortgage rates are high, that means a lot of people can’t afford to buy their own home, which means that they have to rent. ’cause Everybody needs a roof over their head. Well, if you’re a real estate investor, that’s good for you because now you know, there’s more people being pushed into the tenant pool, which again, increases demand for the limited supply of whatever is out there for rental properties.
And that’s to your benefit as a real estate investor. But if you’re not in the game, it’s not gonna help you. You’re not gonna benefit from this in any way, shape, or form. Now, affordability, like I said before, is gonna improve, you know, a little bit this year and into next year. But, you know, you have to stay the course and keep in mind that even though things are looking, you know, crappy from an affordability perspective and slowly improving, it’s still in your favor. But if, unless you’re, you know, unless you’re in the game or investing or building a portfolio, you’re not gonna benefit from that. So even though you know, the pendulum swings one way, which is bad, in some sense, there’s always some good that comes along with it. Because no matter whether the pendulum’s swinging left or right, it takes away from one area of profitability or attractiveness with real estate investing.
But it adds to another part of that equation. There’s many variables with real estate, you’re always gonna win. If you do it right, you’re always gonna win. You’re always gonna profit. Sometimes it’s just the depreciation, sometimes it’s the cash flow, sometimes it’s the equity growth and the appreciation. But you know, as long as your property is well located and occupied, it will, it will it will carry itself, it’ll pay for itself. It’ll generate passive income. It’ll grow over time. Your equity will increase, your net worth will increase. And you just need to start stacking one after another after another. And, and guess what? You know when you have time on your side, it’s like you said, you know, don’t wait to buy real estate. Buy real estate and wait. It’ll start to compound for you.
It absolutely does. That’s why I love the snowball. It just keeps growing. And in fact, I love how my properties, I literally, oh, one thing I wanted to add. So my properties and the equity that I have in my properties, I want to have access to that capital. I don’t wanna just sell my property, get that money to buy more property. How about instead, refinancing, pulling that cash out. Or if you have a residence and you can actually do a home equity line of credit, I know of one or two companies that you could do it on an investment property. There’s not a lot, but definitely in your primary residence, like, I literally own my house free and clear, but I got a home equity line of credit because I wanted access to capital so that when there is something that comes up, it’s not like I’m already paying interest on it ’cause of the homemaker line of credit, but I have that access to capital.
Like, oh man, there’s a great deal that come up, came up. Let me go ahead and buy it now. Then I could refinance it and pull that cash out, pay off my homemaker line credit. I’ve literally done that many, many times. In fact, one of my students up in Sacramento, he’s a pastor up in Sacramento, he knows he can’t work literally for the rest of his life. So he said, Hey Dustin, I don’t have any money, but I wanna invest in real estate. I said, okay, let’s look at it. Turns out he has a house, bought it in 2016, had a good amount of equity. We got a homemaker line of credit. He bought a house in, I wanna say it was Atlanta, and then refinanced it, pulled that cash back out plus $30,000 extra, put in his pocket, paid off his homemaker line of credit, had the $30,000, buy the next property. So it’s having access to capital, that is a huge, huge deal in your real estate investing. ’cause If you don’t have that, it’s gonna be very, very hard. It’s not impossible to do no money down. It’s not impossible, but it’s very, very, very hard. So much better if you have that access to capital.
Yeah, a hundred percent agree. Well, I mean, obviously we can all help investors find their way and give them access to deals and all that stuff. I mean, you and I are both here to help real estate investors do whatever they want to do and achieve their goals. So do you have any final thoughts, Dustin?
No, that was, it was, I wanted people to realize that they need to have capital. If they’re gonna move on, especially, let’s say Mark and I don’t see it, but let’s say there is a crash and all of a sudden everything’s back in 2009 and 10 again, where it was like, it was so great. I wish I had more money. I would’ve bought a lot more properties. Then if you had that access to capital, then you would be able to absolutely deploy that money into properties and just gobble as many as you can. So my suggestion, whether the market goes up, down, or sideways, you’d be buying, if it goes up, then great. You make more money, you keep buying. If it goes sideways, you keep making money, you keep buying. If it goes down, you buy even more because the prices are better. You keep making even more money.
Yeah, no, I love it. I guess my closing thoughts are this, you know, just keep stacking, keep investing, keep building. You know, right now, it’s not the frenzy we saw in 20 20, 20 21. About 70% of the markets around the country are what we would call normal in terms of market conditions. Which means that, you know, they’re healthy markets. There’s, there’s sales activity, prices are rising ahead of inflation. You know, that’s about 70% of the country, at least in the major metro markets that, you know, we’re, we’re tracking about 12% of those are strong to very strong. You know, there’s very strong growth and it’s, it’s about 19% that are, I would call slow at this point in time, which means that it’s just lagging. But these are markets that are, you know, either correcting because they ran up too fast in a short period of time, or there’s just excess inventory because of a lot of new construction, or it’s just a weak environment right Now, you know that, and that’s subject to change, but there’s a lot of opportunity out there.
Keep in mind that most of the markets around the country have normalized, which means that there’s going to be inventory, there’s gonna be opportunities, there are deals out there to be had and to be found. And you know, we’re, we’re seeing at least on our end supply increase, you know, in, in markets in the Midwest, pockets of the northeast, you know, throughout the south, southeast into Florida, you know, the markets that we’re, you know, pretty active in as far as our turnkey rentals go. We’re just seeing opportunity. There’s no excuse not to invest right now. As long as you qualify for financing, you, you know, you can, can be in the game or you can get in the game.
Absolutely right. It’s access to capital, getting financing and being ready to invest. And obviously keep listening to both of our podcasts. Like you keep listening, you’ll be learning so much more on how to do it if you have that ammunition. Like if you, you, you go to college to get education, to knowledge, to help get a job. But man, there’s so much great information on Marco’s podcast. My podcast, like what we just give out. It’s like we’re just here to help you to invest.
So let’s just wrap it up with REWBCON. Where can people get information on REWBCON and tickets and all that kind of stuff?
Yeah, so the, let’s do this. You go to rewbcon.com, R-E-W-B-C-O-N.com, and you get your ticket. Use the promo code “Marco”, Marco and I, I, I just came up with this right now. Marco and I, I wanted to give all of his audience 10%. I’m gonna up it on my end. I’m gonna give you guys 20%. So if you guys go, I’m just, I’m gonna give you even more. I want you guys to do it, 20% off – Use a promo code, “Marco”, but go to R-E-W-B-C-O-N.com. But we wanna see you there. It’s in March and it’s an annual conference, so always we’re, we’re basically doing it all the time to help you to invest. But yeah, come check out REWBCON, see Marco speak. He’s absolutely amazing when on the keynote stage. You’re gonna love that. But then also, you know, yearend Marco’s podcast. And this is actually gonna be playing on my podcast as well, the Master Passive Income podcast where we just love helping people and Marco and I are friends and especially when we get to hang out and do with each other on you know, a good conference and stuff. I still need to go one to one of your plays, though. I still have yet to go to any play a Broadway play that especially. So I need to go check out one of your Broadway plays.
Well, let’s go together. We can, you can come as my guest. It’ll be fun.
Let’s do it, man. I’m down.
Alright, right on. Well, cool. Well, Dustin, thanks for taking the time. I’m looking forward to seeing you in March at REWBCON and anything I can do to help you let me know. But thank you for the you know, the generous discount. So discount code MARCO at REWBCON, R-E-W-B-C-O-N Real Estate Wealth Builders conference rewbcon.com. Alright, well that’s it for today. Thanks, Dustin.
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