EP 507 – Hurricane Dorian’s Destruction

Foreign this is the no Closers show where you get the latest developments in distressed note investing and learn the secrets of how you can control millions of dollars worth of property for pennies on the dollar. Get educated and entertained by someone who has closed thousands of deals and lives to support you in achieving the same. Now here's your host, CEO of We Close notes Scott Carson. Good morning, good afternoon, good evening, everybody. Welcome to this episode of the no Closer Show. As always, Scott Carson, your host. Excited to be here today with you today. What's really in the news right now is everything going on with Hurricane Dorian. Obviously It's a Category 5 hurricane. It's over as we record this is over Bahamas, you know, a few miles off the coast of Florida. It could stay over the Bahamas. It could move up the coast. First and foremost, our thoughts and prayers go out with the families of people that are there that have had to evacuate, friends and family of those that have family in the neck of the woods. Our thoughts and prayers go out to you. I mean, just a couple years ago we had Hurricane Harvey hit here in Texas, obviously hit the Gulf coast where I grew up from, and then obviously hit Houston and caused over $125 billion in damage. And it's estimated that Dorian's going to see at least that amount, if not more, maybe channel Hurricane Katrina for over $160 billion for a couple of reasons. One, I would say Harvey would have caused more devastation if it hit a little higher valued area. Not saying I was wishing for that. Not at all. Means the south coast, southwest, Gulf coast, part of Texas, property values are less than they are in Houston or in other areas of the country. So I think you can look at how many people were impacted more so than you look at the the amount of damage that was caused because that can vary depending on what happens in specific areas of the country. But anyway, what I wanted to have this episode talk about a little bit today is we look back at what happened with Harvey and then the subsequent dominoes that kind of fell in the industry. What can you expect? Well, first and foremost, let's just talk about there's obviously going to be some damage when you've got 120, 180, 200 mile per hour winds. Stuff is just not built to stand up to that for long term. You look at some of the early photos coming out of the Bahamas. Yeah, there's been some damage. We're going to see that damage. One of the things that comes to mind more than anything else was when Hurricane Andrew Hit in Florida a few years back? Well, quite a few years ago now, about 15, 18 years ago. What caused you look at some of the photos and the devastation as it rolled across Florida. I was working for Palm Harbor Homes for a brief stint, about 120 days actually. And they used photos from that devastation to help sell their homes there because there was a mobile home park that was hit and everything was destroyed except for the one Palm harbor home that was built there was built like a traditional home, but then a rickety mobile home which you often think are modular home. So are we going to see some of that? I think we're going to see some batteries. And it all depends on what happens with hurricane. Does it come ashore full brunt there? Does it hit Cape Canaveral? Does it go up to Jacksonville? Does it stay a little bit further south and come across like West Palm beach, that neck of the woods, Martin counties? Being that I invest heavily or have invested heavily in Florida last couple years, I know those areas all too well. And fortunately we've been able to divest most of our investments over the past couple of years or the stuff that we own is not on the water anymore because that's where it's going to be hit the worst. It's going to have. You're going to have wind damages, you're going to have storm surge and then you're going to have a lot like happened in Houston with the flooding. And that was the biggest thing that happened two years ago. It was a lot of devastation from the rain and the flooding. Lower places got washed or flooded. We had some more students that dealt with some of that stuff. I can think back to actually when I was in college and seeing the power of what water happens. I worked at a restaurant south of Austin, north of San Antonio called the Gristmills in an area called New Braunfels in Kamal county, right on the rivers of the Guadalupe. And they would always say, oh, a hundred year flood with rainfall. Well, 100 year flood could happen every year as we're seeing 100 year hurricanes can happen almost every year too. Right everybody? So I've seen buildings washed away. I've seen just what rain can do. And rain is one of the most powerful factors out there, especially if it's got no place to go because it builds up, it builds up and then it runs. And that's one of the biggest things that we saw happening in Houston is that areas that never been flooded before had 3, 4ft of water inside of them and people weren't expecting that and we've seen some of our friends who have also, you know, lived in Florida. They're on the second floor, they're putting sandbags around their doors. They're putting, they're trying to waterproof and caulk up their doors and windows and things like that. Even on the second floor, based on just a few power of the rain coming in sideways storms and things like that, who knows what the flooding is going to do. So that's the thing to keep in mind is look, first and foremost, be careful, get the heck out of there. If people, if you've got people that have escaped or, you know, evacuated. My mom lived, still lives in Aransas Pass, Texas and went through the hurricane two years ago by getting out and evacuating north to just south of San Antonio. And fortunately for her, her house only had to have the roof replaced, some things done. But fortunately for them, most of the house was okay. And unlike a lot of other neighbors that their houses were destroyed completely. Thing you got to look at when you have 150 plus greater or higher winds, it's like a sandblaster. And that's the one back of her house, one side of her house looks like it was sandblasted from the wind and the rain coming through. And so I expect to see that with a lot of the images we're seeing from south Florida, especially sort of looking at condos and things like that in the water, you're going to see a lot of devastation, a lot of windows broken, a lot of interior stuff. Obviously we know that's going to happen, but what does that mean? Well, for the last couple of years, when the hurricanes came through, the areas part of the especially last 12, 24 months, the areas of the country that have been devastated the most by hurricanes have also led the country in default in foreclosure rates. Harris county has one of the highest foreclosure rates in the country. And also Florida, Texas itself has not been such a high foreclosure rate. But Harris county and the Gulf coast areas where the hurricane came through for two years is still seeing a higher foreclosure rate. Obviously default rate kicks in and Florida has been one of the higher states for foreclosures because of the hurricanes coming through there. Not the just because the major one, but also you have smaller hurricanes that cause damage to go through there. So that's what we're going to see now. What's going to happen immediately? Well, we know devastation, you're going to have water, you're going to have Buildings that need to be torn down, roofs are going to be gone. There's going to be an increased cost of supplies because supplies will be at a higher priority. They'll have high demand, often a little slow getting in the supplies depending on what's going on. So that's what you're going to see happen for the most part is there and we're still afraid of the hurricane. When I'm recording this with Happy Labor Day everybody, for those that listen, you're probably listening to the day after Labor Day or later in the weekend before or later, week or two after everything happens. So let's talk about a couple of things here. Like I said before, you got expected devastation. What's going to happen? Foreclosure. Well, what's going to happen immediately is banks, hedge funds in those areas, real estate investment funds that have mortgages in those areas. They're going to do the right thing. Most of them should be doing the right thing and not sit there and go after the borrowers and now have a damaged house or suffered a travesty or their jobs have been lost. They're often going to give the homeowners 6 to 12 months to get back on their feet. They're going to give some time. They're going to say, okay, let's work with you, let's work with the insurance companies. Let's see what's going to take place and what's going to happen. All right, that's a good thing. I've had people reach out to me, oh my gosh, Florida may be enough sale again. I'm like, well, eh, let's just relax here for a second. First and foremost, you never want to wish that on somebody. But Florida has faced enough hurricanes in the past anyway over the years that you should also always expect stuff like that to happen. I mean if you're living on the coast in Florida, you have to one understand this is going to be a way of life. This is what's going to happen. Unfortunately, it seems like a lot of the storms are getting stronger and stronger and stronger. I know that's because of global warming. We have more moisture in the air, more water out there from the ice caps melting. I don't know. I'm not a meteorologist, okay. Or a scientist, but I think we're starting to, we're seeing progression. Category four, category five, maybe Category six they were talking about is possibly happening. So you're within, I don't know, 50 miles of the coast. You have to expect the devastation of the high winds, the Rain and flooding and it's got to become a way of life. You have to expect that living on the coast in Florida or even really in Texas or any South Carolina, Georgia, North Carolina, you can always, you can see the governors now are also recommending evacuation for those line areas. Even though the hurricane may be two, three days away. They're trying to prepare to keep mass panic taking place. And so that's the thing you look at. Wherever this hurricane hits, wherever it goes, you're going to see increase in default. It's just going to happen. Doesn't mean you can jump on board, start calling banks immediately to start buying that debt. Because the banks know that a they wait around a little bit and work with the borrowers. They don't be the bad guys. We foreclosed everybody that lost their house. They don't want that PR nightmare, okay? They're not going to do that. They're going to wait for the insurance company come in to stroke a check to help them either a get paid off in full or go from there. You're still going to have a fair share of properties where the borrowers just walk away, houses demolished or have trashed. I mean just look at what happened in New Orleans years ago with New Orleans flooding, you still have empty properties for a couple years, right? The go zone or the Gulf zone, you know, that was in place coming in and provided benefits to investors to come in and rebuild those houses and go from there. Will we see that? I don't think we'll see that necessarily so in Florida because of the real estate, the high end real estate aspect of that. But you'll probably see that in some areas, Florida, Georgia, maybe the lower economic areas where people don't have the extra money, where they move and maybe never come back like happened in New Orleans, you don't know. But you've got to expect that. So things as a note in a real estate investor to keep in mind is if you own property, you better be having your insurance taken care of, insurance paid up the date because that's going to be one thing that's going to be costly to invest in. Areas that are hit repeatedly like Florida is your insurance costs. And you got to make sure that you're covered with wind and damage and rain and all that stuff that you get those riders or coverage on there because that alone can hate to say ruin a deal when you're looking at it. If you can pick up something non performing or pick up something that's you're taking over distressed assets in 12 or 18 months from now, because that's the thing to look at your rates. Foreclosure rates have still been a little higher in those areas. They're going to tick up a little bit, but they're not going to be immediately, oh hey, you start seeing foreclosures skyrocket. There's now because like I said before, the banks are not going to do something to start foreclosing. They're going to give the borrowers time, 6:12 months before they start the foreclosure process, start sending out notice of defaults. Now the thing is when you look at the states of like Florida and South Carolina, I'm separating those from Georgia and North Carolina because South Carolina and Florida are both judicial states. So you have a longer foreclosure time frame, let alone those states 9 to 12 months to foreclose. It used to be over two years at one point over a decade to get in Florida. But the online foreclosure and then the court systems have really expedited to get that stuff done over the last 10 years. So it's not nearly as dramatic as it used to or as long as it used to be. But it's still a longer time frame than say Georgia, which has basically a 60 to 90 day foreclosure time frame. It's the second fastest in the nation compared to Texas. So that's the thing to look at. I mean one thing in Georgia that's going to slow you down a little bit is how the state wants you to be a licensed mortgage broker. In Georgia, if you're going to be buying debt outside of your self directed ira, that's the one, I guess you say get out of jail clause. If you use your self directed IRA to fund the deal, you don't have to have it, it doesn't have to be a licensed mortgage broker. Everything else does there in Georgia and North Carolina, relatively faster foreclosure state anyway, you're going to have basically everything from the coast and who knows how far the hurricane goes up the coast or where what ends up happening. But you can start identifying those states if you invest in those states. Start marking, start looking at stuff, start tracking stuff and start making, you know, marking your calendars for six months to nine months to 12 months to start reaching out to banks that are in those areas, that lend in those areas, start reaching out because you can probably pick up some assets that are relatively expensive because they either have been damaged because of the hurricane or they've been paid off because of the hurricane. So you've got somebody that's willing to walk away. Banks will often look to move a portfolio or two in specific areas to get off their books. Depends on what their, you know, the default rate is in those areas. So that's the thing to keep in mind first and foremost. Like I said before, our thoughts, our prayers go out to those that are being affected by this, who are going to be affected by this in a variety of reasons. Not just those that are in those areas, but those that have evacuated other areas. I think of what happened in Houston a few years ago when New Orleans was hit and Houston and Austin and San Antonio were affected. With everybody moving here, FEMA stepped in, provided temporary housing, took over apartment complexes. You're gonna see, that's the thing. If you look in the areas around maybe two, three hours away from the hardest hit areas of this hurricane area, that's the area that's gonna be impacted faster than anything else. And what do I mean by that, by faster than anything else? Well, those are the areas that here over the next six months, next 12 months, you're going to see an increase in occupancy. You're going to see people that, hey, evacuators staying with friends, family, they're doing temporary rentals. You're probably going to see an increased cost in Airbnbs short term rentals. New vacancy rates will go down as people are staying there longer. I've already had people reach out to me this morning who lived in Florida but have a, they've moved to Ohio temporarily or they're out of their, you know, they're out of Jacksonville or they're out of West Palm Beach. They're not moving back for a while. They're gonna give it a month or two before they end up heading back home on a full time basis because there just won't be a place for them to stay. And that's the thing too. When we had stuff that happened here on the Gulf coast in Texas, you know, it hit my, I mean, the eye of the storm went over Aransas Pass, Texas. That's where I grew up. Basically the eye of the storm went over my Ingleside and Aransas Pass, where I grew up, basically my old home where my parents raised us. You can go down and help, but there's really no place for you to stay unless you got a travel trailer. And then you're still gonna need your own electricity and your own gas because things were just devastated. So that's the thing to keep in mind is if you're an investor and You've got properties in those areas. Hey, first and foremost, like I said, I hope your insurance is doing well. Hope you paid up your insurance, you got the extra insurance there. But you're probably going to want to take a look at areas that are being affected, where people are moving to. So that's the thing I would be doing is looking at your maps of your assets. If you got stuff across the country or you're in a market, look at stuff that's basically two hours, especially an hour, two hours, maybe three hours away from where a lot of that devastation is going to hit along the coastline. And that's where you can see the first impact in the first 30 days, actually the first week. You already seen impact in those areas now where people are coming in, temporarily, staying in hotels and family and friends like that. In Airbnb, you're seeing an increase in that spike up. Hopefully we're not seeing people that are price gouging, which happens quite a bit. We've seen it happen. Some resorts, people have been going door. We've seen people go, hey, I live on the coastline. I'm going to Orlando. I'm going to go right out of the resort and see the increase in cost going up on the rooms because of their being nearly booked. So it becomes supply and demand. All right, There's a lot of demand, but less supply. The cost is going to go up. I don't consider that necessarily price gouging. You're not charging $80 for a sheet of plywood, like, or $100 for a sheet of plywood, like, what's happening before some of these hurricanes in the past, but it still leads. There's opportunities, but you also have to keep in mind, hey, what's going to happen? Well, people are going to lose their jobs. People are going to not be working, be able to work because their job back home is gone or it's completely shut down or simply unexpected stuff like that. So this is where I think we are going to see more issues more than anything else. Not just the housing, not just the insurance. We're going to see the default rates increase because of the hurricanes. Yes, but you're also going to see it in people that are staying somewhere right now. They don't have money long term. They don't have saving. I mean, 10% of America is already one month behind their mortgage payment. 85% of Americans are missed paycheck away from being default. So we have to look at those different economic issues of what's going to happen. Yes, it's Going to take money to come in and repair. A lot of people are doing in Houston, people are just showing up to Houston with razor blade cutters and just going door to door and helping people, taking basically where the water level came in at 4 foot or less, whatever, and just running a razor blade there, cutting that sheetrock or that Sheetrock and taking out and everything else that's been damaged or waterlogged. You gotta get that out of the house within the first two to three days. Otherwise you're gonna have a dramatic mold sitting in. And that's never a good thing. So it's gonna take a little while for those houses. The housing markets in these areas that are hit also recover because people are, people are not gonna want to buy in those areas immediately. But what's a beautiful thing is when investors do come in, they'll pick those things up, they'll buy those things. And because they know they put the work in and they're. Especially if they're willing to hold on to that, it's part of their models, holding onto the assets for 12, 24, 36 months. It's an opportunity to come in, pick up those assets at a cheaper price and hold on to them while the market rebounds or recovers. I don't think it's a quick fix or flip fix and flip market for the most part, I think it's more of a buy and then hold on the assets for an extended period of time. And that's why it's important. Like I said, start looking at what's going on in those markets. Start understanding, hey, if you're a landlord and your property survived, okay, great, you should not have a vacancy factor. You should be able to rent that property out. Maybe even a little bit of a premium because I wouldn't say like doubling the rent, but at least a premium because of supply and demand or lack of demand more than anything, or lack of inventory more than anything else. Especially in a lot of areas like here in Austin. It's. They can see factors really low because we have so many people moving the area and we have a shortage of new homes being built. So like we're two, three hours away from the coast. San Antonio's two hours away from the coast. If something were to hit the Gulf coast again, you know, you're gonna see some impact. We get some rain, we get some wind, occasionally get a tornado that's two, three hours out from it. But it's not the same thing as bearing the brunt of the force. It was 150 plus mile per hour wind. So I will tell you a story. I grew up in South Texas. I actually worked down in Port Aransas on the coast. Worked for Royal Caribbean condos there. And what's funny is most of those large buildings that are built large condos, they have a wind factor of about 100 miles an hour. There's not much hold them up. You've got some rebarb, you've got exterior paint, stucco. It's really on a Sheetrock or not Sheetrock, a Styrofoam exterior for the most part. Harder stuff. So you would see spots, just sheet. What is this? This is just foam. Foam board underneath here. Not Styrofoam, but pretty much is. And so that's the thing you keep in mind. You realize they've got insurance on only the high rises, you know, the condos too. Part of the reason I've loved condos in the past, especially on the Gulf coast, because it's pretty easy to fix. You can go in if you've got some water damage, clean everything out relatively quickly and replace it, and be up and rock and roll in 30 days or less, depending on the situation in the unit. But your insurance costs are going to be higher. We've got some friends that have bought some property that have been hit by those areas. They were excited because they were getting the asset at a discount. But the insurance costs have really removed most, if not all the profits from it because they've been had to hold onto the asset for a while and they're carrying these costs on investment property. So that's the thing to keep in mind. You know, you've got friends and family in those areas. Hey, reach out to them, realize something's going to happen. I know everybody likes to stress out about this thing. Oh, my gosh, look, the banks are not going to sit here and start the foreclosure process. If you're in an area, if you're, you've been affected by the hurricane, they're going to, you know, they're going to get a bailout by the government of some sort. Insurance. They're going to be, hey, let's wait a few months, six months at least, see where it's at. If you're in the heavy devastation areas, they're not going to sit there, oh, let's be evil bank. They're going to work with you. So the best thing you can do is if you've got friends and families in the area, just like I said, besides praying for them, make sure to reach out to them and Say, hey, you may want to look into this. You may depend on who your bank is. Reach out to them, let them know immediately that, hey, you're in an area that was hit hard. And they'll be able to see that by the insurance numbers and everything going on. And then also, hey, your job or your employment was affected. It is affected. Okay? Now, if you are a tradesman, that's the thing to keep up. You have friends that are in tradesmen. There will be plenty of work in these areas. Repair rehabs, they're being financed by banks, by insurance companies and things like that to go in. So that's the thing, is that your jobs, we've seen this happen before. We see this happen all in Texas, especially with during the summers when we have these horrible thunderstorms come through, roofing companies are going all over the place. Especially if a tornado hits an area or hail goes through an area, boom, you'll see an area flooded with roofing companies coming through to give bids, to get insurance checks, go to work and then make that stuff happen. And you'll see that happening throughout Florida there. So one of the things you also want to keep in mind, all right, you know, make sure the animals and stuff that are taken care of. I was seeing somewhere in Georgia and South Carolina, they've got a bunch of animals ready for adoption that have been evacuated. They're looking for homes because they're just, you know, they're sitting there in these areas are going to be hitting and these shelters are looking to move these animals out before the hurricane hits because they're going to be with a limited staff and be able to take care of things. The same thing, they're going to run into power being out, water being out, storm surges, things like that, that they got to be taken care of. So best thing I tell you to do, guys, is if you're in an area like that, like I said, hey, our thoughts and prayers go out for you for your evacuation. We wish you the best. We can help anyone. Please don't hesitate to reach out to us. But also, hey, keep an eye out. If you've got property within two hours of those areas, you're going to see an influx. You can see some opportunity if you need to. Those looking to invest back in Florida and other parts that are hit there, you know, you're not going to see a rush of the bank selling notes off. You know, they're going to wait a good six to 12 months to see if they can't get paid off in full. Then you're going to start seeing the opportunities to start hitting as you start seeing, depending on what happens there and how heavy the damage is or how little the damage is in an area, some opportunity there. So keep that in mind. I mean, one of the things you can look at too is you talk to the zoning department. So code enforcement here in the next few months, you're going to see especially specific areas you like. Oftentimes those code enforcement guys and gals are the best eyes and ears in specific cities. So oftentimes they can provide you a list of of properties that have been hit in areas and that may be a list for you to target. As far as the banks that are on those lists, doing some research, tracking down the smaller banks, you're not going to call bank of America, Chase, Citibank, Wells Fargo to buy their debt, but you're going to see smaller banks don't have quite the reserves that might be willing to sell the debt off on some of those homes in the next six months. I wouldn't jump on it here now. I would wait like I said, three, six months before you start reaching out to those banks to see if there's a way for you to step in, become the bank, buy that debt at a discount and then negotiate something with a homeowner. Try to, if either they're still in the house, try to get them back up on their feet. They're not in the house, then, hey, cash your keys, Dean Lieu. But you always want to make sure and put eyes on those assets. That's going to be the most important thing is you may be buying a house, be buying a note on a house, but may all you get, you might all that you get gotten is a slab or a shell or half a house that's been blown away or torn down. So be careful out there, everybody. We wish for the best. It would be great if the hurricane just kind of bounced off the coast and went back out in the Gulf and dissipated. Weather meant it foresee that happening. I don't think they're going to see that happen. So that's what you got to keep that in mind is it's gonna be a little bit more expensive. If you're a renter in the Orlando market, you'd expect that to go up if you're already living there. It's the one thing that people don't think about. I've got some friends that are running in Orlando. Hey, better, hopefully you've got your lease in for another six or 12 months because it would not be surprised if your landlord bumps the rent up when your lease is up in the next couple months, and I'm not talking by 50 to 100 bucks, it may be a 200, 300 different depending on what happens in the market. So be preparing, be working, be ready to rock and roll. That also leads to an increase in money coming into those markets. Two, three hours more restaurants, fast food, entertainment as people are living there, you know, grocery stores, things like that. You're gonna see a lot of basic stuff that'll probably necessities be a little higher priced than they have before because there's been a increase in need in those areas. Somebody made a joke that people in Orlando going to get water looked like something from Mad Max a couple days ago, which we've seen that happen. Two years ago we saw even here in Austin, three hours from the coast, we saw areas ran out of gases. People were getting all extreme. I was like, okay, Austin, we're gonna get some rain. It's a little bit of wind. We're not gonna see the dramatic effects of a hurricane. We're three hours away, no reason to panic. Yes, it's good you got extra stuff at your house in case something happens. But let's not be dramatic and cause a riot chaos in specific areas because you need to get your extra 6 pack or 12 pack of water out there. So once again, Dorian destruction. We wish everybody best prayers go out to them if you're interested in the no business and stuff like that. You're going to see some defaults in there, but it's gonna be 6 to 12 months before anything happens. You're gonna see an increase in cost of housing there, increase across the supplies. Insurance costs are gonna go up dramatically as we already know that they already done that there. Some people will leave and never come back. Others will just rebuild again and will absorb the cost. Realize it's something that happens when you live in Florida. You have to expect that you're getting hit by hurricanes. And that's the thing that's great about news and neurology. You know, something's coming out. It's not like just showing up instantly and no alert. Luckily, the death toll decreases, usually dramatically because we have such great news and weather and radar and things like that these days compared to what it was a decade, I mean to, you know, a century ago, even 50, 60 years ago. Things out there. So anyway, once again, please be safe out there. We got friends and families in there. Our thoughts and prayers go out to everybody out there. Lend a hand, feel free to reach out to people you can help. Help in any way. I'm sure there'll be some funds created and donated. How? Like J.J. watt did with the. His funds that he helped out with. $26 million donated. I'm sure you'll see that. So make a donation there. Your Red Cross. Other places out there as well. All right. Thoughts and prayers go out to everybody out there. Be safe. And we look forward to seeing you all the time, everybody. Bye, Sam.