EP NNA 87 - Putting Your Money In The Right Markets: The Best And Worst Of 2021 With Nicholas Gerli

Foreign.

This is the no Closer 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 panties 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 nodes, Scott Carson.

We are honored to have you guys here. Join us on the number one webinar has been running out for 10 years straight on just about every Monday night. Welcome to Note Night in America everybody. I know we've got people from all across the country. Even got a couple international people I see on the call here listening to us live. If you're watching this on a replay, hey, make sure to type in your questions in the chat roll. Make sure to answer those questions or in the comments. Make sure to get to them afterwards. We're just honored to have you guys here. It is Monday night. It is a beautiful day here in Austin, Texas which is awesome. Hopefully it's beautiful where you are unless you're in Denver or someplace that had 4 foot of snow dumped on over the weekend. I hope you're safe, warm but having a blast enjoying that white snow on a peak. So but anyway, ladies and gentlemen, honored to have you. We've got a very special guest tonight. I think you're really going to love tonight's content on the best and worst real estate markets of 2021. Before I get in to our magic man here who's going to deliver some stuff for you guys. Be here to answer questions, really share some great insights so that you can a pull the trigger, shoot the thrill baby and really make some great things happen on the money side there for you. Want to make sure and give a big shout out to our sponsor for tonight's call, Baldwin Advisory Group, Dickie Baldwin. Amazing man. Got a great company, great context if you guys are looking for vendors of any sort, any type of services, third party appraisal, title, legal, collateral review, property maintenance, whatever it might be you want to check out baldwin advisory group.com we'll have Dickey Baldwin probably peek his head in as we get to the end of this evening's call. But big shout out to Dickey for being a sponsor here of Note Night in America. But anyway that's, you know, it's great. Dickie does a great job here to her. But we all know you're here everybody for some great stuff tonight. We want to give a big round of applause to our very special guest. You may have seen him on LinkedIn with his amazing videos about individual markets. You may have heard him on the Note Closer show podcast, or you may just know this guy is the resident badass who knows what's going on in different markets out there. He is, as I'll tell you this, he is the previous. He's a previous underwriter at U.S. funds, where he's done hundreds of millions of dollars in underwriting on commercial projects all across the country. This guy really knows how to identify markets. He's the CEO of Reventure Consulting here in Austin, Texas, which is nice. Got a chance to actually hang out, have coffee with this guy during everything that's been going on. So it's been great. Nick works with investors of all sizes, whether it's commercial, residential, helping them identify opportunities. I know that's why you guys are here tonight to figure out, hey, what are the best places to go? Which ones do I need to avoid? And we're honored to have Mr. Nicholas Burley join us here on Note 9America. What's up, Nick, man? How's your Monday going?

How's it going, Scott? My Monday is going great, as you said.

It's like 85 degrees here in Austin today, so got to enjoy some of the weather.

Yeah, I know. I went outside for a few minutes in between things this afternoon and I was cracking up because Steph is out at the Oasis Shoes meeting a friend out there. And on the like the best day, they got an hour and a half wait in Lake Travis. So people are dying to get the heck out of town. In other houses they have some margaritas on and on sunset on, especially on a Monday night, which is interesting. But anyway, we're so glad you are here. I know you and I have been working on this for about a month, month and a half to get you on here on both of our schedules and just really jacked up. And you know, we met originally because I saw your posts on LinkedIn about I think was the Austin market last year. I reached out to you, you shared some great insights on the no Cliche podcast about a month or two ago. And then we, you know, we met for coffee one more. We're talking about some things and I'm really excited. I mean, we're talking now and we're coming to the end of the first quarter. We're already starting to see some things hit the market. Post Covid or you know, well, I guess I won't say post Covid but with everything being like it is. But so many people are wondering, you know, where to put their money, where should they be looking for deals? And you have kind of a unique approach. You want to talk a little about how you approach markets and exactly what you're doing for investors out there, Nick?

Sure.

Yeah. So I started Re Venture Consulting a.

Little over a year ago.

And the whole goal of Re Venture Consulting is to help real estate investors, home buyers, to help them understand what the best markets are to buy into. And so often when you see people refer to real estate, like in the news and on tv, they, they always refer to the US Real estate market. And that's really a misnomer. There is not a US real estate market. There is tons and tons of different regional real estate markets that are all behaving differently at different points in time. And that's never been truer than right.

Now during the pandemic. Right.

We have a recession where there's 10 million job losses. We have a situation where like different parts of the country, different states, different cities, have different rules on economic activity. So understanding the economic and demographic fundamentals and how those impact real estate markets across the country has never been more important. Because basically right now there's a segment of markets that offer security, affordability and strong future growth potential. And then there's a whole other segment of markets which are overvalued, I think, on the precipice of a real estate bubble and one that real estate investors should avoid. So at Reventure Consulting, I help clients, whether they be investors, home buyers, some institutional, some just starting out. I help them understand what are the markets that they should be focusing on when they buy real estate.

Yeah. Now I love it. When we were talking about this, you mentioned something called the Holy Trinity investing. And so for those that don't know, it's the first time I've heard of it for the real estate. But let's talk about it. Cause this is what you're doing on basically a day in, day out basis. What's the holy Trinity? Right.

Before we just get into what it is specifically just to address, a lot of people think about real estate in really general terms and their perspective, perspectives of markets are influenced by chatter, right. Like brokers, realtors, local owners. Everyone always thinks that like their market is the best market, that the growth that we're going to have is just unbelievable and that that justifies any value. What the real estate holy Trinity aims to do is really give context to different markets in terms of three factors. The first is economic growth, evaluating job growth and income growth objectively across different markets to see which ones are performing the best in terms of economic growth and which ones are performing the worst? Right? Because you want economic growth, you need jobs, you need income in order to see rent growth and real estate appreciation. So you're going to want to be in markets that have economic growth. That's really, really important. And it's important to understand that growth with context. Now, the second pillar of the Holy Trinity is related to security and real estate security. And often you'll see this at odds with economic growth. So what security is referring to is principally, how affordable is it to get into this market? What are you having to pay upfront for your investment, property or your home? Because the more that you have to pay upfront relative to how much people make in the local economy and relative to what rents are in the local economy, the more you have to pay upfront, the less secure your investment is going forward. If you go back to the last housing crash, the markets that got hit the hardest were the ones where values were really high relative to incomes and rents, right? So a more secure market is going to have actually a lower ratio of values to incomes and rents. And so you want to prioritize, especially at this segment of the cycle where we feel like we're in the 11th inning, right? You want to prioritize markets with economic real estate security. That's number two. Now, the final segment of the Trinity is related to housing shortage. And this is where maybe a state like California begins to make a little more sense about why values and rents in California are so high. This is why California, it doesn't have a ton of economic growth. It certainly doesn't have much security when you look at real estate values relation to income. But it does have a major housing shortage. They're not permitting enough new homes and apartments relative to how many jobs were created over the last five to 10 years. So housing shortage is really evaluating the relationship of job growth to permitting for new homes and apartments. You want to prioritize markets where there is a shortage of housing. Right now, there's some markets that have a shortage, there's others that have a glut. And what a glut is is too many homes and apartments are being produced relative to how many people who live in the market and how much, how many jobs are growing. And if that's the case, you're not going to really see long term real estate appreciation. So it's really finding the markets that best embody these three pillars of the Holy Trinity.

Now, question for you. I know, I think we've Talked about this before, but I'm sure people are like curious out there. How are you finding information? Are you using leveraging a multitude of different websites like your labor statistics for. For job growth would make anything specific that you're kind of. Because I know you're pulling stuff from different websites and different things that you track.

Yes, it's a great question. So it's really important to have real time data. That's really key, especially right now when some markets are losing tons of jobs and others are gaining tons of jobs. It's really important to have real time data. And in terms of especially economic growth, the Bureau of Labor Statistics is great. They come out with monthly real data on jobs and wages in every single market across the country. And Reventure Consulting has specialized in taking this data, which can be kind of difficult to gather and to aggregate and to analyze. Reventure Consulting specializes in taking all of that data and making sense of it. So the Bureau of Labor Statistics is one source. The U.S. census Bureau is another. So they track permitting. You know, how many permits for new homes and apartments are pulled in every single market every single month across the country. So you could take that data from the BLS on jobs and compare it to the permitting data from the US Census by month, and you can start to really get a good picture of what's going on in these markets.

Wow. I love what you said about how everybody seems to think that their market is the best out there. I would love to know what your opinion obviously depends on a city by city, state by state, as we talked about there for it. But what is your insight and what's your opinion on Are we going to see a big downfall? Are we going to see a big bust or boom? I mean, are things continuing to keep skyrocketing, going up across the country? What's your hourglass tell you, Nick?

I'm not one of these doomsdayers. I don't think that there's going to be this massive housing bubble like There was in 2009 that affects most of the country in a really negative way. But there's certainly certain markets, specific markets that I think are in a housing bubble. Probably the biggest example of this would be Boise, Idaho. Boise is a market which, let's just go back to the holy trinity. Boise has great economic growth. You can't argue with that. Its job growth is some of the best in the country. That's a great thing. However, when you look at Boise's valuations relative to how much money people make and what rents are in the local market. You see some crazy numbers like home values in Boise are higher than Austin. And you say to yourself, how is that possible? And home values in Boise have gone up by 25% year over year, according to data from Zillow. And then the housing shortage element. Boise is permitting, next to a couple other markets, the most new housing of any other market in the US So when you have runaway value growth, high value to income ratios, with lots and lots of new permitting and development, that is a recipe for a bust. The other thing I'll say, in a market like Boise, and a lot of markets saw this in the late 2000s, they'll have good economic growth, they'll have good job growth, but a lot of that will be related to all the construction they're doing for new homes. So it can kind of be a double whammy sometimes. If all of a sudden the music stops in terms of builders and building new apartments, that will actually lead to lower job growth because a lot of the job growth is construction. So market like Boise, I think is very risky right now. That would be my number one market that's facing kind of an imminent housing bubble and that I would not want to invest in. Cool.

Well, you were kind enough to send me over the list of the worst markets in the best markets. Yeah. And I guarantee everybody's like, what are the better markets? We're going to wait before we share those. We want you to stick around because we know there's some great stuff. So you sent me over the list of the worst markets of the top five or six there. I think we're just going to take them one at a time here. But I was really surprised to see the very first one on here. Our hometown.

That's right.

Surprisingly. Talk about.

Yeah. So I do think I'm crazy sometimes.

When I say Austin's in a bubble, but you get caught up in the hype when you're down here. Obviously, Tesla is opening a gigafactory here and Oracle is relocating their headquarters. Again, like Boise, Austin has great economic growth. You can't argue with that.

However, Austin is permitting so many new homes and apartments, it's hard to even comprehend. They're permitting the most new homes and apartments for construction compared to any other city in the US and it's not even close. There's a metric I like to track, and I call it permit to employment ratio. And what that does is it divides the annual building permits simply by the number of jobs in the economy. Just as kind of a quick and dirty way of seeing how much new building is there. And Austin is at 3.6% over the last 12 months. Permitting to employment ratio. Do you know what the U.S. average percent is?

What is it?

1, 1%. So Austin is permitting on a relative basis, four times more new housing than the average U.S. market. Not only that, the fifth highest market for permitting, which is Charlotte, is permitting 1.9% permits relative to how many jobs. So Austin's permitting double the fifth most market. So that just gives you some perspective about how much new building and permitting. And this is something that I like. When I look at the data, it makes sense because when I talk to all these real estate developers, these institutional developers, they're all like, oh my God, I want to be in Austin. We got to go in Austin at all costs. So all these people are saying that right now it's resulting in record setting permitting in Austin. And just what that means is that in the next year or two, as these permits get delivered, typically it takes 12 to 24 months for a permit to end up in a completed house or apartment building. There's just not going to be enough people to fill these apartments. And I know that some people have cognitive dissonance about that. They'll be like, no, Austin is growing jobs so much that they'll definitely. It's not like Austin has never experienced as much permitting before. And it's going to result in softness in the market. When you combine that with the fact that values in Austin are going out of control right now, things are going for 50 or 100,000 over ask. That's a recipe for downside. So Austin's not a market that I would buy in right now.

Yeah, I think everything is. I think the medium home price is over $400,000. Now here in Austin, it's just become really unaffordable in a lot of cases. For there we have very low inventory in the mls, which means, like you said, things going over list price. I just don't think it's a good market to invest. I haven't bought anything in Austin in the last couple of years because I think there's better, better places. You know what I mean?

I remember you saying that. I'd like to actually address what you brought up, the inventory. And this is something that a lot of people will respond with. They'll say, oh, what are you talking about? Austin has a major housing shortage right now. The active inventory is less than one month. Remember that is only describing what's happening right now. That does not tell you really anything about what's going to happen over the next 12, 18 and 24 months? Right. There's unique circumstances going on right now because of COVID Not as many people are listing their homes at the same time. A lot of people wanted to buy a home and get more space because of COVID So there's kind of a temporary situation going on right now that's pushing prices up and inventory down. Not just in Austin, but Columbus, Ohio, Portland, Oregon, lots of markets across the country. That doesn't say much about what's going to happen in the next 12 to 24 months. That's why you want to look at the ratio of permitting to jobs. Gives you a much better structural look at the inventory in the market.

Makes a lot of sense. Let's move on to the next one here, one you were mentioning about before. Boise already.

Yeah. And so Boise is another market where I think people are believing that the growth story is so good that it just doesn't matter how much people build or what prices go up to. And anytime that that type of group think or thought process takes over, it means stay away. Animal spirits are taking over. In Boise, home price has gone up by 25% in a year. You ask yourself, like, how's that even possible? There's no way that the actual demand in the market is justifying that. There's a lot of speculation going on. So you combine a 25% value increase with lots and lots of new permitting and wages which just aren't that high. I'll give awesome credit. Wages and income in the economy are pretty high. Boise, it's not that high. You're setting yourself up for pain. If you're a home buyer or real estate investor going into Boise, you're buying at the top, which is not a good thing to do.

Yeah, it makes a lot of sense that way. Reno, this was actually surprised to see on there. Don't hear a lot about Reno a lot of times.

Yeah, yeah. And Reno. Reno is an interesting market. This is one that got crushed in the late 2000s. I think Reno lost like 60% of their value in Reno from 07 to 2011. It's kind of got a little Boise flair going to it. Right. It's attracting a lot of California transplants and there is like some good industry going on there. Tesla has a factory out there and it's an industrial hub. Again, Reno's typical home price is like 420,000. Like Dallas is 270. How is Reno 420 when it has acres and acres of space, tons and Tons of new permitting and wages which aren't that high. How is Reno at 420,000 when a place like Dallas is at 270? Right. So it's just again, a similar situation. Looking at what I like to look at as value to income ratio, what's the typical home price? What are the typical annual earnings for workers in the market? That relationship tells you a lot about the direction the market's heading. A place like Reno would have been a good place to get into five or six years ago. Right. If you could have gotten into at a lower price point five or six years ago, same with Boise, that would have been good. But the market has changed, prices have changed and permitting has changed to the point that Reno has lots and lots of risk.

Our friends live in Reno and they seem echoed it completely. Appreciation their houses, people moving in the woods. But they were there. They've been there for 20 years, so they've seen a big upside to it. And I would agree with you there. It does. It just doesn't seem to justify some of the numbers out there.

People are paying.

Yeah, easy, man.

Come on. It's like Covid central right there, man. Wrong with gumbo and hurricanes. What's up?

I know, I know, it pains me.

New Orleans had a lot of issues over the last 20 years. So, you know, you kind of. You're rooting for New Orleans, right? You want New Orleans to do well. But you know what's amazing is a.

Lot of people have forgotten about Katrina 15 years ago, but Hurricane Katrina, like New Orleans still hasn't recovered from Hurricane Katrina. After Hurricane Katrina, New Orleans lost 25% of its jobs, 25% of its jobs in a year. The Great Depression, that didn't even happen. Right? Like that is just something crazy. And today New Orleans still hasn't gotten back to that 2004 level of jobs. That would be one thing on its own of like, I don't want to be in a market that just has long term secular decline. But the other thing is that New Orleans got hit very hard, as you said, by Covid. Both fundamentally by Covid. Like lots of people died of COVID in New Orleans and contracted it. But then its economy also got hit really, really hard. Big service based economy, lots of tourism. Obviously that's not happening in the same way. So New Orleans is one of the leaders in job losses in 2020. So when you combine long term secular decline with huge job losses in the short term, it's just back to economic growth. You're just not hitting economic growth at all either in the short term or the long term. That's not a market that you want to be in.

Sorry, Big Easy, you're going to have to wait.

Good gumbo.

Good gumbo, man. Yeah, exactly this. Now, your number five there, New York didn't really surprise me. I can kind of understand that based on what you're talking about.

Yeah. So where New York struggles, it struggles in two areas of the trinity. The first one where it struggles is security. Right. When you look at the relationship of values to incomes, people in New York are having to pay lots, like a ridiculous amount of their annual salary to housing. You might be tempted to say, well, that's justified because there's a housing shortage in New York, which there was for a long time, but there really isn't any more. New York, especially even in 2020, permitted lots and lots of new units. New York permitted more units than I think, except for Houston, the second most units in the country in the New York metro area. And we still don't know exactly just how bad the exodus is from New York City because of COVID and all that, but the tea leaves are saying it's pretty bad. So if you have a lot of high earners moving out either to upstate New York or Long island or to Austin, I've met quite a few people. I'm originally from New York. I'm in Austin now. When you have a lot of people moving out, that's bad for demographic growth. Values are high already and they're actually permitting more than you would think in New York. And there's rumors now that all the vacant hotels and office buildings are going to try to convert to apartments and condos. I wouldn't be surprised if you see the housing supply spike in New York just as people are leaving. And that's obviously not a situation that you want to be in. Especially when I was actually just looking at the zip code in Williamsburg, 11211 in Brooklyn. The typical home price there is over a million dollars. The median household income is 80,000. How do you rationalize a million dollar typical home price when the middle class earner in the zip code makes $80,000? This is not something that a value driven investor should get involved in.

One of the things that just screams me right now is that old mortgage broker in me looking at people moving in. And as a mortgage broker, we would look at, you know, people wanting to be at roughly 40% of their annual income or less, you know, what their payments were, and those numbers just scream way over 40% to be able to afford something, which is a risky thing. It's really not a smart investment. It's hard to maintain that even with rents being high, like in the Big Apple. Still hard to justify cash flow. Especially when you start looking at hoas and things like that in the neck of the woods too, that add to that.

Yeah, 100% in property taxes as well. To actually circle back to a place like Austin. That's another reason why a place like Austin might have problems is because I think a lot of people are buying in Austin, not really thinking about how high the property taxes are. Maybe they see it on paper, but then once, especially if they're buying an investment property, they buy it. They realize the apartment market's soft.

Right.

Like get two months free in a lot of different places in Austin, they realize, oh, I don't have a tenant, but I'm paying this high property tax bill. You know, that's a place like in New York and Austin, anywhere with high property tax is going to have that issue.

It's crazy. And then all the other stuff that gets added on as well, right?

Yeah. A lot of hidden costs.

That is definitely the truth. And poor mass commuter too. If you don't have a car and you want to hang in traffic, that's fine. But I think Austin makes sense if you can work from home. I think you mentioned that you sold your car. You've been working predominantly from home here in Austin, correct?

Yeah, so I used to live in Boston. I lived in Boston for eight years and I never owned a car in Boston. And so I actually didn't buy my first car until a year ago when I was in Columbus, Ohio. And so I'm a virgin car owner. I've only owned a car for a year. I can already tell the traffic in Austin's getting worse. I was on mopac today and so, yeah, people got to be ready for that. If you venture too far outside city center, you're going to be sitting in some traffic.

Exactly 9am to 3pm If I have to drive after that, I leave an hour over an hour before, I've got to be there. Otherwise it's 100%. It's a parking lot. It's not quite like the next city on the list here, LA with eight lanes, who knows what will happen. So let's talk about the City of Angels.

LA is special when it comes to its traffic. It'll be Sunday at 2pm and there'll just be a traffic jam. Where does this come from? It's just normal. But yeah, the traffic is not why I put LA on this list. Again, LA is actually kind of similar to New York in some ways. So the typical home price in the Los Angeles metro area, which includes LA, nice places like Santa Monica, but then also East LA and Inglewood, the typical home price is $750,000 across the metro. That's the second highest or third highest in the US after San Francisco and San Jose. Prices are so high. And again, it's a situation where incomes are not high enough to justify it. And people forget about this in the last crash from 07 to 2011 because it was like a four year decline in real estate values in a lot of markets. LA and lots of California got crushed. And people forget about that. They think it's like, oh, Las Vegas, Phoenix, Reno. But no, no Louisiana and lots of areas in California also got destroyed because when values are that high, it just creates all this downside risk. Another element of risk in LA is economic growth. So Louisiana in 2020 lost 9% of the jobs in its economy. Austin lost 1%, Indianapolis lost 1%. So LA lost nine times. For every one person lost a job in Austin or Indianapolis, nine people lost a job in LA. And you talk about outward migration, lots and lots of people are leaving la. And I know that that's kind of a headline. It seems like something that could be overstated. I can just tell you from my personal experience here in Austin running several meetup groups and meeting people. I'm meeting tons of people from LA who've moved here in the last six months. So in LA, high real estate value 750,000, average price, 9% job losses, outward migration. Granted they do have a housing shortage, but those first three things probably going to mean significant pain in that real estate market in the next year or two.

You know, the thing that we saw a lot of being a previous mortgage broker was a lot of the negative amortization loans is how people justified being able to afford the huge house. And on the lower income where they're only paying, you know, one to one and a half percent for an owner occupied house, their interest rate was obviously higher than that. And that 5%, 6% difference between one and a half and whatever their interest rate was, was going to the face amount of the loan and they're like, oh yeah, values will keep going up and we'll be fine. But a lot of people don't realize is that when shit hit the fan and things started hitting that 125% LTV, that a lot of the negative names are, that caused it to reverberate to a full interest only or full year payment. And people couldn't afford that. And we're very lucky that we have low interest rates right now. But still though, like I said, it's a house of cards in a lot of cases.

I'm curious to get your take on this.

And it's one thing I think about.

I suspect that the lending environment, it seems like it's better now. Right. It's more safe now than it was 15 years ago. It was like the wild west. But do you sense that some of those kind of more riskier loans are starting to creep back in in certain.

Markets we were seeing more of it pre Covid. There was a lot of non prime, they don't call themselves subprime, it's non prime now loans. There was a lot of them do 100 financing. And that's what I think when you look at a lot of the FHA loans because the FHA is the number one distressed really mortgage out there right now peaked at like 18 of all FHA loans were in default because a lot of the banks, while they weren't doing these negative ams, they were doing donating the down payment on an FHA or paying up to 10 grand in closing costs or they were coming in starting to prove people with lower FICOs, high percentages and a lot of those when everything hit the fan in a year ago, they just kind of closed up shop because they're like, okay, so I'm really waiting to see what happens with that. We've been basically having the government kick the can down the road for over a year now.

Yeah, right. All those backlog foreclosures. Eventually, I guess eventually they're going to come and tenant evictions, that doesn't get.

Gobbled up first by U.S. note investors. It's where it's probably going to happen first and foremost in a lot of cases. I mean I think there'll be a spike depending on the markets, depending on the classification. One of the things that we did last year was looking at a lot of the markets and the area that was hit prior to them really not having any foreclosure data was all that first time home buyer, you know, that first, you know, 200 grand or less or 300 grand depending on the market was what was the ones that still having the most amount of defaults out there. And that's just been kind of kicked down the road. So it's very interesting to see what will happen here over the next 90 days.

Sure.

I think you're right. Like maybe they're buying enough time. But you would think that somehow it's got to result in more listings and supply on the market, Right. Maybe it's not through foreclosure, but maybe it's through short sale or maybe. You know what I mean? Or it's like, I suspect somehow that we're going to see a spike in listings in the second half of this year.

Definitely depend on. I think you're going to see a lot of that in a lot of the college towns that were hit hard with COVID that people weren't going to the universities anymore, hanging out there. So let's. All right, so people are like, get to the good stuff.

What are the best smart.

Where do we need to look all night?

I'm like, okay, all right, all right. Just calm down, everybody. We got some good stuff coming to you. So let's talk about the best markets that Nick is recommending. And the first one is Hotlanta, man. Let's talk about Hotlanta.

That's right. So, okay, just right before we get into these, I just kind of want to explain. So when a market does well in the Holy Trinity, again, economic growth, real estate security, housing shortage, it's rare that a market will be great in all those things, right? Because, you know, if you have a lot of economic growth, chances are like maybe developers have figured that out, are going to permit, right? But you're looking for a market that strikes a balance, that you have decent growth, values are still affordable, not too much permitting. That's the sweet spot. That's the arbitrage sweet spot that we're trying to find with the holy Trinity. And Atlanta is one of the best markets for that. So Atlanta is top tier economic growth, maybe not quite at the level of Austin, but pretty really good job growth, good wage growth. But what's really great about Atlanta is that the typical home price in the metro is 260,000. Right.

Say that again one more time.

260,000 typical home price. Compare that to 420 in Reno, 400 in Austin. You're at 260 in Atlanta for comparable levels of economic growth. The other thing that Atlanta has going for it is a housing shortage. And this is something where that's changed in Atlanta. Back in the late 2000s, Atlanta was permitting a lot. Mid to late 2000s, Atlanta had a housing glut. They were permitting lots and lots of new units each year. Atlanta is one of the markets where after permitting and new construction went all the way down, it never really rebounded so it bounced back a little bit, but not nearly to the levels it was in the mid 2000s. So now Atlanta has a persistent housing shortage. Right. So you say good growth, affordable real estate, housing shortage, that's what you want to market. Atlanta has all of those things.

Yeah, Atlanta was hit hard in between 2008, 9 and it was really hard. And the average income isn't as much as like Austin or anything like that as well too, as well.

You're right. Atlanta got crushed. Atlanta was in that. Not quite like Phoenix, but Atlanta got hit really hard. But I think, look, home values today are still lower than they were in the mid 2000s and they're not permitting nearly as much new supply. So that just gives you a lot more security, a lot more downside protection.

We got some people here love Atlanta. Maltrice out of the Atlanta market. Yeah, Atlanta atl. Good stuff.

Atlanta.

Exactly. Go next one. This one kind of surprised me. Birmingham, Alabama.

Yeah, yeah. Birmingham, baby. Birmingham. Not the greatest growth story. You're not getting crazy amounts of job growth, you're not getting crazy wage growth. But what you're getting is really solid value. So typical home price of 190,000. So especially if you're getting started and you want to be able to scale stretch your dollar, buy more units or buy higher quality, you can really do that in a market like Birmingham because the typical home price is 190,000. In addition to that, Birmingham is not permitting nearly enough new housing for even it's marginal job growth. So when you look at the relationship of jobs added to permits, Birmingham, despite its lower job growth, actually looks pretty good. Just because they're not permitting enough new housing supply, Birmingham flies under the radar for a lot of institutional developers and. And as a result, you're just not seeing much new supply.

Well, and it's also too got a pretty good decent rent rate. For those that are landlords, we've got some couple team friends who run some turnkey stuff and they've been big on Birmingham for a couple years because of exactly, like I said, affordability. And when you start looking at those numbers out there, it definitely made a lot of sense for them on their cash flows and stuff like that.

Higher yields for sure.

And that's yield, baby's always nice.

Yield is great.

Definitely. All right. That then brings on Austin cities. I was actually kind of surprised to see this on the best markets with Nashville.

Yeah, Right. So Nashville shares a lot of similarities with Austin. Right. It has some key differences. Right. So Nashville is one of the top growth markets in the US Its job growth basically is at Austin's level for the most part over the last five years. Really strong wage and income growth. You have companies like Alliance Bernstein from New York relocating their headquarters and Amazon HQ2. Part of that's going to Nashville. I just saw NTT from Tokyo. They're opening an office in Nashville. So lots and lots of really good jobs going there. Values are more affordable. So the typical home price in Nashville is around 300,000, whereas it's close to 400,000 in Austin. So it's 25% cheaper, which is a big deal if you view Nashville and Austin as somewhat equivalent in terms of economic growth. But you can get either a home or an investment property for 25% cheaper and then rent it out. That's huge because that's going to, like we were just talking about, your yield is going to be much better off the bat in Nashville, which is huge. And then in terms of housing shortage, I'll be honest, Nashville is permitting a lot of new apartments and homes. That is something to watch, maybe something to be somewhat concerned about. But fortunately it is not at the same level as Austin. Right. Nashville is in that top five in terms of most new, permitting most new construction, but is not at this level that Austin has where it's going to have a major housing glutton.

Watching a few episodes, I walk in and Steph over here is watching Marriage or Mortgage, which is all based in Nashville.

Oh, nice.

Like, oh, my God, look at that house. Oh, my God, look at that house. And I was like, wow. Yeah. Get a bigger bang for your buck in Nashville.

Yeah. A lot of people don't realize is Nashville, especially you go south of Nashville into Franklin, Brentwood, there's areas there. Nashville has its own Williamson county south that is one of the wealthiest areas in the US and so Nashville has a lot of wealth and income there already. And it's just adding to that. A lot of people think of Nashville as like, oh, like music party city or something like that. But it's actually really, really well established.

Yeah, we've got some friends that redeveloped empty warehouses, you know, meat packing plants, and turn them into apartments and they sold like hotcakes. They were really worried about it because they were coming on the market right around the beginning of March and they sold out. And yeah, there's a big shortage of apartments there. So it keeps the demand up. And I mean, with prices still being affordable, it's a great investment place.

Was that like in like Nashville proper or was that outside? Oh, great. Yeah.

All Right, next city, big D. Come on now.

The big D. The Big D. I feel like Dallas, like obviously everyone knows that it's huge city, huge growth. People take it for granted, I think, because you look at Dallas, it's one of the top four largest metros in the area. In the Metro, there's over 7 million people, which is crazy. When you look at Dallas, Fort Worth, go up to Plano and Frisco, 7 million people. So it's really large, which gives it just good fundamental security and downside risk. What Dallas has, it's like Atlanta. And then it has everything. It has strong economic growth. The typical home price is around 270,000. So especially if you're just starting out and trying to scale, you'll be much better able to do that in Dallas in a place like Austin. And of course, the less you pay up front and the higher yield up front, just the less risk there is in your investment going forward, the less that needs to go right for you to succeed. And then Dallas is permitting, especially in multifamily. It had a huge drop off in multifamily permitting in 2020. Literally, it went from I think 30,000 permits in 2019 to 15,000 in 2020. So I wouldn't be surprised if Dallas has some type of housing shortage in the next year or two. And then it's also getting a lot of corporate relocations. I believe CBRE relocating their headquarters there. And so Dallas is just a really strong fundamental market. Might not appear overly sexy, but like Atlanta, it just gets the job done in all three pillars of the trinity.

What's great is there's pockets that have popped up. Plano, Flower mouse, the Aries, McKinney is really. Growth has moved into big. I mean, done a big job there in different areas and. But you also, you've got banking, you've got the oil, gas industry, you've got technology up that neck of the woods and other things out there that it's really kind of a nice blend versus being in like one area where only may have one type of, you know, one primary employer.

It's diverse. But you're right about Plano and Frisco. Back at, when I was at UC Funds, we underwrote a deal there and I was shocked at just the amount of corporate headquarters that were there. It was like Liberty Mutual out of regional headquarters, Toyota, Fannie Mae, there was all types of stuff there. So yeah, you're right. Dallas, very diversified.

A funny thing is I'm friends with one of the top short sale agents up in Dallas and what she's seen. This is also similar for Houston. You're seeing a spike in short sales actually in that second move up home price like 400 to 500. That's where they're seeing days market dragging out because it's really kind of outside of people's price range especially they've lost their job and they moved into that market and seen a big kind of spike in short sales.

It's interesting you say that. I have a YouTube channel for re venture consulting and I post market deep dives on different markets and I did one for Dallas a couple weeks ago and looking at by zip code where the most home price appreciation is and those markets did not do as well. If you look up in Denton, Plano and Frisco, the appreciation there over the last five years is not so great. But you're right, the typical price is in that 400 to 450 range. Dallas's appreciation is actually much more centered towards the urban core over the last five years. So it's interesting that you brought that up.

Yeah, definitely. All right, that takes us to Indianapolis. It's March Madness right now. Couldn't think of a better tweet there. Not that you meant that, but anyway, let's talk about.

That's right. Almost forgot about March Madness. Yeah. So Indianapolis definitely fits that profile of a market that just slides under the radar. You know, it's in the Midwest, people don't really pay attention to it. What's really impressive, which sticks out in 2020 where basically every single market lost jobs. Even if you were the best growth market, Indianapolis actually was flat. So Indianapolis did not lose jobs in 2020. I think that says a lot about where an economy is going. Maybe a little bit has to do with what the COVID policy was. But if you didn't lose jobs, that's huge. Especially when you have places like LA and New York that are losing 10% of their jobs. If you were flat, that shows that you had positive mom prior to Covid.

And you're going to probably have good.

Momentum coming out of COVID So Indianapolis might be. Whereas its job growth in the previous five years wasn't great, the fact that it didn't lose any jobs during COVID it's gaining momentum. I think from economic growth standpoint, Indianapolis is going to do pretty good over the next five years. And that's great is you can acquire a real estate property or a typical home price, 200 grand, super affordable. You can get lots of bang for your buck, lots of scale, high yields and so that makes it, especially if we enter some type of downturn over the next year or two, it makes Indianapolis really resilient. So that's definitely a market that I would target.

I hate to say the word, but Indianapolis really learned its lesson after the last downturn, because Indianapolis was hit hard previously. And a nice thing about Indianapolis, most people know you can evict in 14 days on your rental properties. It's one of the fastest eviction areas. So it's nice.

And I didn't know that. Yeah. Certainly helps, especially in current climate.

Exactly. And then Phoenix. Let's talk about Phoenix.

This is a controversial one. A lot of people are really scarred from what happened in Phoenix in the late 2000s, and it was really bad. Typical home price went down by 60%, so lots of people got wiped out. But I think Phoenix has really matured as an economy and also a real estate market. So, couple of things. One of the top job growth markets in the country right up there with Nashville and Austin, which is especially impressive for Phoenix's size. Right. So, like, Austin and Nashville are a little smaller, easier to grow jobs from a smaller base. Phoenix is really big and has job growth rates right at the same level as Nashville and Austin. And it's a much more diverse economy now than it was 15 years ago. So when you look at the percentage of the jobs in construction back in 2006, amazingly, close to 10% of the jobs in Phoenix in 06 were in construction. Now it's like 4 or 5%. So when 10% of your jobs are in construction, creates a lot of downside risk. Now it's four or five. Phoenix is really diversified, starting to have a burgeoning tech scene. Actually, electric cars are a big industry there. It actually has a surprising growth in Millennials. A lot of people view Phoenix as just retirees, but actually the biggest growth segment demographically is Millennials over the last five to 10 years. So Phoenix has a lot of really legitimate growth going on. From a security standpoint, there are some concerns. Prices and rents are just going out of control over the last five years. Definitely outstripping income growth. But Phoenix has a legitimate housing shortage. It's not permitting nearly as many new homes as Austin and Nashville, despite comparable growth rates. So there's some justification for that run up in values in rents over incomes. So Phoenix is a market. It's definitely one to watch. Right. If you get into it, I think really focus on your location and make sure that your location is strong. But with its growth rates and with its housing shortage, I like it going forward. I think it's going to do a lot better this time around if we enter a downturn than it did 15 years ago.

Yeah, it was buying a lot in Phoenix back in 2010. At one point, 14,000 REOs that they were releasing slowly because if they left them all, you know, foreclosed, hit the market, it would have wiped it out and been ground zero. And so I remember buying the $300,000 house for 30,000 bucks.

Wow.

Totally ridiculous. You're right about construction. There was whole, like, communities where the builders just walked away.

Yeah.

Because they weren't getting paid. I mean, I saw housing especially up by Camelback Mountain when you fly into Sky Harbor. It's just ridiculous. I'm very keen on Phoenix because I think you do have a lot of people. I think Phoenix is one of the bigger markets. It's not as number one like Austin is, but I think it's second or third for people leaving California, Louisiana, because it is more affordable and they get a bigger bang for their buck.

I wish I had an eye for real estate investment like you in 2010, because to $30,000 for a $300,000 home.

I can share some crazy stories, man. Stuff I saw in Phoenix.

I wish I never. You'll never see stuff like that again, probably.

No, I hope not. And I hope we do.

Yeah. The angel on one shoulder, the devil on the other.

Exactly. Exactly. Out there. Now, Nick, let's talk a little about more of your services and stuff like that, because there's a lot of people that are worried about or curious about their current markets. You do a lot with residential. You also do a lot with commercial. I think we're going to see a big commercial foreclosure boom, more so than on the residential side these days. Talk a little more about your services and how you kind of help investors out there.

Sure. So, you know, I'll start with saying real estate's always local. Right. So there's always going to be specifics to the home you buy or the apartment property you buy or the retail property you buy. But you cannot change the market you're in. And picking the right market at the right time is what I would say is the most important thing. I love giving this example. Phoenix versus Philadelphia eight years ago. Those were cities that the consensus real estate experts thought were kind of equivalent in risk and future growth profile. Phoenix ended up kicking Philadelphia's ass. Like, if you had invested in the worst location in Phoenix eight years ago, you'd have done way better than the best Location in Philadelphia. So it's really important to understand what, what you're getting into when you buy in a real estate market, especially now in 2021. So what I help investors, home buyers, commercial developers do is come up with a strategy. Right? Most people are flying by. Come up with a strategy to figure out what your goals are with real estate investment. What's your risk appetite, how much growth do you want? And let's find the markets that most fit that profile that you want to be in that are going to maximize your returns going forward. And I typically do that in a couple different ways. One would be market reports. That's typically more of a commercial institutional client wants market reports showing them what the best markets are. For smaller investors, people who are starting out, I offer one on one coaching where we'll actually like in a screen share and a zoom screen share like this. I will walk you guys through all the data in the markets you're interested in. We'll talk about your goals and by the end of the coaching session, you're going to have clear direction about where you want to be from a real estate investment standpoint.

Yeah, it's a great thing out there. And the reports, oh my gosh, great. Such great stuff, stuff that you sent me on some of the different markets out there. Absolutely worth. I mean it is such a great packet to put together, especially when it comes to talking about markets or even, hey, we've done the research, Mr. Mr. Investor. This is why we're investing a specific market. Because A points to B, B points to C and C points a good return.

That's right.

What I like to tell people is, look, buying an investment property or buying a home, that is the biggest financial decision most people will ever make. Hundreds of thousands of dollars, millions of dollars. Real estate's a little bit behind compared to stocks. Real estate's a little bit behind in terms of the data and the analytics to understand what you're getting into. If you're buying a stock, you would.

Never buy a stock or your broker.

Would never buy a stock without knowing all the ratings, all the metrics on the industry that you're getting into. But people do that in real estate all the time. For some reason, they just trust what local brokers tell them, even though the.

Local broker incentive is to just buy it.

Don't ask questions, buy it. If you're spending hundreds of thousands or millions of dollars on real estate, you need to know what the data says about the market you're getting into.

Further, what I also offer clients who.

Are, let's just say you're in a specific market already, you just are.

And you want to know what are.

The best areas in that market? What are the best zip codes in the best neighborhoods in terms of demographic growth, in terms of income growth, what are the best neighborhoods to invest in? That is also something that I provide services on. Looking at data down to the zip code level from the US Census, understanding growth patterns, income, things like that, that will tell you what are the best neighborhoods. That's a further level of service I provide through reports and one on one coaching.

Yeah, I love it. You do such an amazing job providing that and really giving people some of the nuggets. You're not showing people how to buy property, you're giving them the nuggets on where to do the micro information target. And that's so important these days. You know, it's like, like a city like Memphis that varies by city by city or zip code by zip code block by block. You know what I mean? You can get into some really bad things or somebody was talking about, oh, I bought this great deal in one city the other day and I was like, where's it located? And I pulled it up, I was like, is that the hood? Oh, I don't know, I've never seen. I just bought it. I'm like, oh God, yeah.

I mean a place like Memphis, for example, a place like that, where you would want to know what are the poverty rates in the zip codes that I'm buying into. Is my zip code seeing population growth? If it's high poverty, if it's not seeing population growth, well then, okay, maybe you feel happy with the yield you're getting. But there's going to be all these hidden problems. High poverty, no population growth. That means there's going to be softness when you try to rent it. That means there's going to be bad debt collections, there's going to be issues with repairs. So that's really the benefit of looking at that micro neighborhood zip code level data gives you.

Nick, what's the best way for people to reach out to you? Is it via email? I did put your email in the chat roll for everybody so that you.

Yeah, yeah, email would be great. What I would encourage everyone to do is go to the Re Venture Consulting YouTube channel. I post content there twice a week, different markets across the country. I show you guys how I use this data to come to these conclusions. And if you watch the YouTube videos, you're going to get a really clear perspective about how this data is going to be useful for you. And then after you watch the video, why don't you email me or submit a contact form on my website, ww.reventureconsulting.com and we can talk in more detail about how I can help you achieve better real estate returns.

I love it, man. Thanks so much for being on here on Monday night, man. I know. Night in America, bud.

Yeah, Scott, thank you for having me on. This is a blast.

Yeah, we'll definitely maybe have to have you back on in six months as we get to the fourth quarter and see what predictions are going to perfect.

All right.

All right, guys, don't go anywhere. I want to bring on good buddy Dicky Baldwin, our sponsor for tonight's event. Let me bring him on here.

I'm here.

Oh, there he is. Okay, if you guys don't know Dicky Baldwin, 40 years of experience in real estate. Guy knows exactly what he's talking about. And when he came to me a couple years ago, told me what he was doing, his Rolodex to work for everybody and help him be really the one stop shop for all your due diligence. Needs the website to really kind of be your Rolodex. His Rolodex is your Rolodex if you want it to be. I was really excited. And first of all, how's it going in Montgomery, Texas today, Dickie?

Absolutely. Wonderful. Wonderful. Had my second Covid shot today, so I'm raring to go.

You're raring to get out there and mingle, huh?

I sure miss the mingling, don't you?

Yeah, I'm looking forward to some things. So tell everybody they're here tonight because we got people all across the country that kind of talk a little bit more about Baldwin Viceroy Group. I'm going to bring up the website for you and share it here so people can know where to go.

Okay. Appreciate it, Scott. Fantastic talk from Nicholas. I guess the best thing I can say is most investors, especially note investors don't deal in their own backyard.

Right.

And so here we talked about the best and the worst areas. Well, after you work with Nicholas and you find, let's say that you live in Austin, Texas, but you want to buy that property in Atlanta, and you have all the details about the zip code, etc, etc. But now you need to drill in on that specific property that you're wanting to buy. That's where I come in to help you with your due diligence. If you'll notice on the website, Baldwin Advisory Group goes by bag and it's one bag for all your real estate services. So what does that mean? Real quickly, I just want to sort of show a little bit of all the different services that are available. You want to find the value of that property. I mean, you've done all the work with Nicholas, but now you need to drill in. What is that value of that property? I'm able to help you there. If you want to know about the taxes, liens, judgments, et cetera, I can help you there with your title search, better known as an O and E report. Once you get that property and you want to maybe do a seller finance on it, I can help you with a nationwide rmlo. Or if you have that property and you need to change the door locks and you need to cut the grass or you need to winterize it, I can help you there. If you need money to get into the industry, I've got vendors that can help you there. If you're doing a traditional closing, I can help you there. If you have a title issue and it needs curative work, I can help you there. You have a big stack of papers in front of you called a collateral file, but you don't know what you're looking at. I can help you there to go through and let you know what you do have in that package, what you do not have in that package, and what you should have in that package. In order to make an intelligent decision on purchasing that asset once you buy it, you need to do the assignment and the recording. I can help you there. When you have a whole bunch of files, you're an experienced investor now and you've got hundreds and hundreds of files. Are they in your bedroom closet in a box? Well, I've got a vendor that can hold those original files for you. Once you have that asset, you need to have it serviced. I can help you with your mortgage servicing. You've got all this money, but you don't know where to put it in the beginning. Well, you need to look into a self directed ira. I can help you there. You run across an issue with either yourself or the people that you're trying to help in the house, they have issues with the irs. I've got an IRS tax attorney that can help you. Going back to the original statement. You live in Austin and you want to buy something in Atlanta, you want feet on the ground. I have a whole network of investor friendly realtors that not only can list, sell and property manage for you out of state investors, but they can change your door locks, they can clean an empty house out, they can winterize, they can cut your grass, they can rehab it. You run into an issue legally. I've got a nationwide network of investor friendly real estate attorneys that can help you with foreclosures, evictions, reviewing documents, preparing documents. You got a non performing note, you want to try and track down the homeowner. I can do skip tracing, find who they are, where they are and in a lot of cases even some of the relatives to help track the people down. You notice a big blank right to the right of the skip tracing websites being redone as we speak. But I can also do force placed insurance, I can form an llc, I can do door knocking, I can do credit restoration as the list goes on. I'm your team member, I want to be part of your team. I want to help you be successful. And by using the people that I've accumulated over the last 40 years, I can help you get there and your.

Services cost those that are reaching out to you. How much extra, Dickie?

Absolutely nothing. Classic example. Real quick, I know we got to go but typical investor will probably do 5 to 10 BPOs and title searches a year. Bag does hundreds every month. So what does that mean for you as the individual investor? I call it strength in numbers. So it's not only for the brand new investor though. I've got hedge funds that are bringing me hundreds of files at a time to do title searches, property inspection reports, et cetera. And because of the strength that I have with the vendor, I'm able to help them in their pricing as well as you as an individual.

Yeah, that's awesome. Best way for people to get a hold, you go straight to the website Baldwin Advisory Group.com or what's the best.

Way to make Baldwin Advisory Group.com or dbaldwynaldwinadvisorygroup.com is the email phone number 936447-4170.

Now once again folks, that's 936447-4170. Dickie, thank you so much for coming on sponsor tonight's note night in America with Nick Gurley. Such great stuff man. Glad to see you buddy. You're looking good.

Appreciate it. Thank you, thank you, thank you. And success to everybody.

Exactly. All right everybody. Hey, that is going to wrap it up for tonight's note night America. Hopefully a lot of got a great content, great information from Nick and you got a great vendor with Dickey, his Rolodex. If you know what a Rolodex is taking it back today, it can be yours and the leverage having somebody to be able to reach out to you. They can help you in every step of the way. Just a great way for you. So, yeah, it's Baldwin advisory group dot com. Stephen Baldwin advisory group dot com. Just spell it exactly as it is or shoot me a message. We'll make sure make an introduce introduction for you. But Baldwin Advisory Group.com go to the website and everything's right there for you.

So enjoying me on LinkedIn and Facebook.

Exactly. All right, guys, have a great evening. Enjoy your week. We'll see you off the top, everybody. Bye.

Bye.

Sam sa.