By John Burley
By John BurleyAs we begin 2023, as a fellow Real Estate Investor, I am extremely excited. Here is why: Rising interest rates, prices dropping, increasing inventory, properties on the market longer, Wall St. and I-Buyers on the sidelines (just taking a breath really), money supply drying up for wholesalers, investors with flawed models dropping out and quitting like crazy, and FEAR throughout the market, FEAR.
So, you may ask, why is this all good? Because these are the exact market conditions where the Great Investors make their money and more importantly, keep it! Most people like to do what everyone else is doing. Especially in RE Investing. Just a year ago, how many people were flipping and wholesaling? How many people were clamoring to do hard money loans? How many people were lining up and overbidding for the privilege of paying more than ever before for properties? That’s right, lots and lots!
Now, it has all changed, people are afraid of what the market and interest rates, and the economy will do. So, many are paralyzed and stuck in fear. Yet now, is when high-end professional investors are moving in. I have been doing this since the late 1970s. I have been through five full cycles of the markets moving up and down – even invested with interest rates of 18%. There is very little I have not seen or done while completing thousands of real estate transactions. And if there is one thing I have absolutely learned and integrated into my real estate investors soul, it is this: Contrarian Investing is the way to go!!
Right now, we are at the precipice of one of the great real estate investment opportunities of your lifetime. The only question is what will you do with it? The great investors of history. The ones who actually make money in not just up markets, not just flat markets, but also down markets all have one thing in common. For years, and then decades (I am over 40 years in the game now), is that they look at it from a contrarian point of view. When RE is in favor they are scaling down, paying off bad debt, and building up a war chest, you know as all real businesses that succeed for the long term do.
When RE is out of favor, they are jumping in with both feet. But they are not doing what everyone else is doing, nor are they running the traditional RE Education Models. No, they run it like a business. And for that, they understand that by far (not even close) the most important thing in real estate is not real estate. It has never been, nor will it ever be. The most important thing in real estate investing is MONEY. With money and the ability to borrow, real estate is very easy. Without money and the ability to borrow, real estate is very hard. Yet, almost every RE Education Program avoids the truth and spends all kinds of time trying to figure out how to do RE without money, even though everyone knows it takes money.
We cut right through the noise. Rather than do what everyone else is doing, we address the big truth of real estate investing head-on. We work on raising money, lots of money, first. We show you exactly how to raise it with all the details. And since my background is from the World of Wall St, I show you exactly how to: Raise the money, get paid to place it (we get paid $10,000 upfront on every property), how to buy it, how to maximize returns for the long-term, and how to monetize to the point where realistic expectations are that you will earn back the price of the property in its entirety within 10 years. For example, on a $300,000 property, we make over $300,000 over 10 years. I will show you that in detail on Saturday Afternoon!
But John, aren’t we going to have another Big Crash like all the news, YouTube, and podcast gurus are saying? The answer is an emphatic NO!
The 5 Major Reasons why we are not about to repeat 2008:
- Big Crashes only happen once every 60-90 years. They happen not because of wars, or great economic turmoil. They primarily happen because the people who went through them last time are now dead. It is not that history, perse, repeats itself, rather it is that most people forget history and thus they repeat the mistakes of the past. And while there are charts that go back thousands of years that vet this out, here in the US, since 1765 we have had only 4 major crashes. They were in 1790, 1872, 1932, and 2008. Way too many people who have a major hand in the game still remember 2008 and its history. Thus, we are not set up for another Depression, or Great Recession as the politicians liked to call it!
- Wall Street. Wall St in modern history has bought and funded the good debt (government-insured loans). This is good. In the early 2000s, they got greedy and jumped in with all the other (fools?) and bought the bad debt, the results were catastrophic. During this run, Wall St got greedy again but instead of buying debt, they bought the asset! Completely different, they are in, but now they are owners, not lenders. This automatically adds stability and raises the bottom. The toxic loans, in large numbers that were commonplace in the 2000s simply no longer exist in any substantial number.
- “Mom and Pop” Real Estate Investors. In 2006, it was normal for a small RE Investor to have five properties in a place like Las Vegas. They had a total of $10,000 all in for five properties. High Interest, High Leverage, and “Liar” Loans. A normal scenario was $1,400/mo. PITI and $1,200 rent and 3 were vacant! This was an easy walk away as they had no “skin in the game” and were losing money every month while being underwater. Today, that same Investor would have $400,000 real money as “skin in the game.” Their payments are $1,200/mo. PITI and they rent for $1,800/mo. and they are all rented! A very different scenario. Like Wall St long-term positions the small RE Investor is not walking away from their “skin in the game” cash and positive cash flow, just because the value goes down. They will sit and wait for the market to recover, while cash flows. Again, nothing like 2008.
- Supply. In the mid-2000s, we had a glut of oversupply. Massive overbuilding and speculation by poorly trained institutions, investors, and homeowners who let their emotions get carried away, led to such a large inventory that it was not a question of if but rather when it would all come tumbling down. Today, it is the exact opposite, most areas have a housing shortage and are vastly undersupplied. One of the big reasons why it took so many years for prices to correct after 2008 was the oversupply of properties. There were simply not enough families to occupy the properties at any price.
- Homeowners. This is the bedrock of the housing market. Well over 60% of all homes are owner-occupied. As they go, so goes the housing market. Before the Big Crash of 2008 they were as a whole, overleveraged, many had “toxic loans,” and interest rates, for most were in the 7-8 to 10 percent range. And many, many loans were made without proper due diligence or underwriting. The end result, families had financed far more than they could afford or pay for which of course resulted in the “Tidal Wave” of foreclosures and short sales in numbers never seen before or again. Fast forward to 2023 and the homeowner, as a whole is in an entirely different position. Most are sitting on record levels of equity. Their loans are in the 2.5-4% range, with many paying them off on 15-year rather than 30-year models. Their payments are lower than rent, and they could not afford to buy today what they already own. Stable and secure would be the two words that best describe where most American Homeowners are today in relation to their home, payment, and debt situation.
Because of these 5 Major Reasons, I do not believe we are even vaguely looking at a 2008 repeat. Equity Markets, such as residential real estate has always trended upwards. However, they do it in a natural, repeatable cyclical manner that generally runs from 10-14 years. They go through growth, prosperity, recession, and then depression (if a politician says the “R” word, it is probably a depression). Repeating over and over. The new highs are generally higher than the old highs, and the new lows are generally higher than the old lows.
This is why seasoned veterans, like me, who have not just been through the downturns and survived, but actually thrived as we did in 2008-12 during the Great Crash look at this as a tremendous “window of opportunity.” Now is when we begin raising the money, earn the $10k placement fees, find the great deals, and remarket for big profits.
At the evening programs, we will show you the exact presentation we and our students have used to raise and place billions of dollars. This is a proven model that we have been using for over 30 years. On the Saturday event, we will get into even more detail, look at creative acquisitions, and how to remarket for maximum profits.
I look forward to working with and meeting you at the upcoming events!