6: Wealthbuilding Tip, Is It Still A Good Time To Invest In Real Estate?

Welcome to the Purpose Driven Real Estate podcast. This is where passion meets purpose in an ever changing real estate market. I'm your host, Steve Valentine, former real estate agent turned real estate entrepreneur, speaker and guide to all things real estate. And this is my co host, Paige Tons, former D1 college athlete turned real estate adultrepreneur. Whether you work in the industry or you are a consumer of real estate, with each episode we intend to raise the bar in our industry and show you the purpose behind every piece of real estate in your life. What's up? What's up, everybody? It's Steve Valentine and we are back with another wealth building tip. Today I'm joined again with Ms. Paige. She's having some blepharitis problems this week, but she's good.

Thanks for sharing.

It's all good.

Blepharitis, dentist progs. Yeah, stitches in my mouth, all the good stuff.

She looked like she was falling apart yesterday, but she's back, back with a vengeance today. What are we talking about today?

Today we have a wealth building tip. And that is, is it still a good time to invest?

Invest in what?

In real estate.

You know what? I think anytime is a good time to invest in real estate. And the reason being is that when you invest in real estate, it's all about the deal or the purchase. And it's about the long term play. It's never really about the short term play unless you're flipping homes. And then it really matters is whether or not it's a good time to invest. So it also is going to matter as far as what your goals are as to whether or not now is a good time to buy properties. If you're in your 60s or 70s, probably not a great time to consider buying real estate. You may want to invest in something like a deed of trust investment, which is investing in real estate without actually owning it and having a note secured by a deed of trust on the property.

So will the mark. I mean, this is like the big question everybody asks, is the market going to crash? And what will happen if the market does what it did? You know, all those things, right?

So it really goes back to.

I mean, that's what every investor asks, right?

I mean, that's what everybody that thinks about investing asks. But you know, if you've gone through like what we did in the 2005 upswing and then the 2007 downswing, and then we're going back up again, people are wondering, well, what if that's going to happen again? So people are still a little Gun shy. Considering the fact that this is what happened. Either they lost a bunch of stuff, they had to go through foreclosure, they had to go through bankruptcy. It was all problematic for them at that time. And the difference in today's market versus then is that we don't have a bunch of fake or false loans propping up the market. The reason the market took off so fast when it did was because they were giving loans and money to just about anybody that could breathe. And now the loans and the price increase. If you actually look at the chart or the graph from the year 2000 to now and you take out all the dips and the recession and the ups and downs, it actually shows a steady four and a half to 5% appreciation in that 20 year time frame. So it's still a good time to buy. And I guess I would kind of finish that with the story of my first home had I held it right. So bought my first home in 99, paid $107,000 for it. In 2005 it was worth about 200,000. So I was 23 and extremely ignorant. Not as brilliant as you are, Paige, for keeping your stuff.

Well, I just learned from other people's mistakes early on.

What are you saying? So if you fast forward and go through the ups and downs of it, I sold it at 200,000 and at 23, I'm really not sure what I did with all that money, to be honest with you, because I'm sure I didn't have anything to show for it when everything crashed.

Bought a lowered Tahoe.

I had that before then. Smartass. So fast forward to today. The house went down in 2007, probably down to about the 140 mark, maybe even lower. And then now today, had I kept it, it's probably worth about 250. And here's the kicker, it would have been 21 years paid out. I would only had nine years left on the mortgage.

Right.

So because it was, I didn't look at us from a long term investment standpoint. It really hurt me because it should never be about where it's valued at. It should be about the long term investment opportunity.

Looking at it from a little bit further away.

Right.

So the other big thing right now is everybody's freaking out and concerned because rates are increasing and it seems like prices are always raising at this point. So what does that mean for investing in real estate?

Well, when you invest in real estate, typically when you're putting 20% down, you're going to be about one point over what the standard owner occupant rate. So when you hear rates at 4 and a half, 5% and investor rate depending on credit and down payment would be somewhere in that 1 percentage point over what the consumer's percentage point is. It just means that you have to either put more money down or you have to be willing to maybe have a negative cash flow. And it just depends. I mean, most people would have a disagreement in having a negative cash flow, but it really depends on the time and space that you're at and, or how much money you want to put down. So you can put a lot more money down and have a positive cash flow, but then you've got a lot of cash tied up. That's not really giving you the rate of return.

Right.

And again, it's a strategy. It's kind of like we go through the wealth building blueprint to figure out, you know, with our investors, with our clients, with our agents, how do you want to get from point A to point B. And there's a blueprint for that.

Specifically what makes sense for them and their personal situation, their finances and all that.

Because when you go back and you look at a blueprint, it's very detailed and it really is giving the builder, the framers, the roofers, it's giving them the details on how to get to the end result. And that's the same thing that we do with the wealth building blueprint, figuring.

Out step by step. So what do the rents look like right now?

So rents in the Phoenix market, and I don't know about the rest of the country, I know in the Phoenix market right now we're up, depending on the area, almost 20% over the last two years. And rents are, you know, we work with Valentine Sales and Management, which is a company owned by my mom that was left by my dad. And the rents, people are fighting over lower end homes. People are fighting over rents just as much right now. In fact, recently they just told me that one of my houses in Moon Valley, that was one of my, it was my second rental home that I bought three years ago and it was, we got notice that the tenant was going to vacate May 1, so they're going to be out May 31. They put it on the market around the 15th of May and they had two applications. So the house actually had less than 24 hour turnaround between tenants and it rented for about $150 more a month.

And what, like what causes the rents or like what causes that competitive rental market?

Well, a lot of things. So in Phoenix, think about the fact of so many investors bought in that 2008-2012 time period. And these weren't the big investors that bought multiple properties we're talking about. These are people that would have been like me in my 20s, where all of a sudden, you know, the price has double or tripled and they're going to cash out and go to a different market. And we've had a lot of that. So you see a lot of investors. As you know, we bought a lot of homes over the last couple years with tenants in place. So. So the inventory dwindles, just like in the sale market, causing the rents to rise. And the other thing too that we've really found on the rentals is we found that condition has caused us to have a great demand for the rental properties. You know, some people don't believe in making homes really nice with the tenants. And what we talk about in the wealth building blueprint is so people understand the value of renovating a home, making it nice, and getting it to a point that that new occupant wants to stay there longer, wants to call it.

Home care of it. Yeah, makes sense. So do you have any idea what rents will be like in another five years or is that just like a crystal ball?

That's crystal ball. A lot of that's going to depend on the inventory of rentals. A lot of that depends on the multifamily. So the more apartments that are being built and depending on what their rents are doing and those types of things, I think that rents continue to rise because the single family rents continue to rise because of the single family home prices rising. So if our medium home price is 275, then you're really not going to be able to get to that point where the rents.

Okay, okay. And I know this is another big question that a lot of investors ask is, should I leverage or should I be 100% in? And you kind of touched this a little bit. But what are the downfalls to being leveraged and what are the downfalls of being 100% and what are the good things about?

Well, it really. So again, it goes back to the blueprint and depends on what you're comfortable with. Some people and we've worked with some of those investors that are not comfortable having a lot of leverage. They prefer to have $100,000 down and be 50% debt to income on the property, which makes it cash flow. Now you do have $100,000 sitting there. That's really not doing anything except for getting that Rate of return on the cash flow coming in. So again, it's really dependent on what your risk level is and what you're willing to take on at that time. But I believe that if you're financially capable and you have reserves, you have backup plans, you have a great job or a great source of income that you can leverage, especially where the rates are right now and that gives you the ability to buy more properties which will increase your long term wealth. But if you're that person, that's not a paycheck to paycheck, but you have a certain fixed income and there's not a lot of room for error on this property. But you can put more money down on it, then you probably should put more money down on it just to play it safe.

Right. Okay. So it really just depends on what your plan is and your situation. Same thing that we were talking about earlier. So kind of wrapping this wealth building tip up, are you still investing and where can listeners find out how to make these next steps?

Yes. So we're always investing. I mean there's, there's always. We've talked about actually I don't think we've touched on it. And we'll have to do another wealth building tip on the buy box. So we have a buy box that we specifically approach our property. So if something comes up in our buy box and it fits that need, then we'll keep it as a rental. If it doesn't, then we'll go ahead and turn that into probably short term income as far as a flip would go. Or renovate more business like. Yeah, more businesses. We acquire those things. And then as far as finding things, you know, we've got a great, great opportunities on our website@valentinegroupaz.com and it kind of goes through our exclusive properties where that are for the Valentine Group tribe, I guess I would call it. And those are properties in the background that are being renovated by Wendy a lot of times in a lower price range that our clients can actually pick up. Done completely renovated and used for rental purposes in the future as well.

Okay, awesome.

Where do they get their blueprint in valentine group.com they can. Or valentine group az.com they can also go in there and subscribe and ask for a blueprint console to where we'll take you through the investment process. So we'll look at anything that you own. We'll look at your 401ks, your IRAs to see what kind of real estate plan it is. A puzzle piece. And if you don't understand it, then you can't quite get to the end. And so we really want to speak to you about the end in mind, which is, hey, this is the how much Passive Inc. Which is mailbox money.

Right.

That I'd like to have on my rental properties at the end of the day. So we kind of walk through it.

Backwards and start getting that whole process.

Yep. And it's a process.

Sweet.

We're out. Hope you guys enjoyed the podcast today, and if there's anything we can do for you again, you can reach us@valentinegroupaz.com and make sure you're following us on social, Facebook, Instagram. I'm at Steve D. Valentine, and Paige is at pagetowns.

T O N Z.

We're out. Have a great day.