Now is the ideal time to invest in real estate. As summer ends and holidays approach, the market cools off. Buying during the fall and winter offers unique advantages, with lower demand and increased inventory, opportunities arise to negotiate better deals, boosting your potential ROI. Diversifying your portfolio across different property types and locations reduces risk, ensuring stability and long-term growth. Real estate is a consistent, reliable investment, even during economic downturns. Local knowledge is key; having the right advice helps you make informed decisions and capitalize on market fluctuations. Trust experts like us to guide you through profitable real estate investments.
Brett
0:00:41 – Hey, welcome back to It’s 5 O’Clock Somewhere Real Estate Podcast. Brett Bernard, Jeff McNett, our Wanker producer, Richard. What’s your last name, Richard? I thought it was Wanker, but it’s apparently not.
Richard
0:00:54 – It’s Wankerton. Wankerton. Get it right.
Brett
0:00:58 – Okay. So we are a real estate podcast. We are investment brokers. Our job is we like to work with investors around the world. We do work with investors around the world and across the country buying, selling real estate in the Memphis, West Tennessee market, which right now is number two on the list of the hottest rental markets in the country, if you didn’t already know that. And we are sponsored by Title Assurance and Escrow. It’s a title company here in Cordova that does all of our closings, title work, escrows, and I only use Title Assurance and Escrow because I’ve dealt with other title companies. And that relationship to me is very important because I can get things done for my investors quickly and easily. Title Assurance and Escrow, 901-737-3332. If you call up here, ask for Chris or April. And Cassidy. Cassidy’s here as well So Jeff?
Jeff
0:01:46 – Alright, Brett, let’s talk a little bit about buying properties, investing in real estate with the upcoming holidays. Summer’s coming to a close. Kids are back in school. People are getting into holiday mode. Why is now a good time to invest in real estate.
Brett
0:02:02 – Why do you think it’s a good time to invest in real estate?
Richard
0:02:07 – I can tell you why I think it is.
Brett
0:02:09 – Richard, why do you think it’s a good time to invest in real estate?
Richard
0:02:11 – To me it’s just economics. I mean the year is going to slow down towards Christmas and the holidays and then coming out of next year it’s going to be towards the end of January before we see economics picking up again. And surely that’s reflected in the sales of homes as well.
Why Now Is a Good Time to Invest in Real Estate?
Brett
0:02:28 – Well Jeff, let me ask you a question. Let’s say you’ve got your house, a rental house. It’s rented for $1,000 a month and you list it for $100,000 two weeks ago. You haven’t sold it. Not sure why you’re selling it, but maybe you need the cash or you’re going to do something different. As you get closer to the holidays, are you going to begin to think, well now I’m stuck until at least next April before anybody’s going to buy my house because nobody’s buying right now?
Jeff
0:02:55 – Realistically, yes.
Brett
0:02:56 – Yeah, that’s going to be the mindset. Summertime, the real estate market here just is absolutely ridiculous. I can throw out 20 offers a week out and maybe get one, every single one of them over asking because people are buying like crazy. I call those, I’m not saying this because I don’t think you should buy in the summertime, because you should definitely buy in the summertime. But when you get into the fall and the winter and the holidays, the last thing people are doing is buying property. They’re thinking about Thanksgiving, they’re thinking about Christmas and New Year’s and oh crap, kids go back to school after the holidays, oh wait a minute, summer’s going to be coming around the corner, we need to start planning our summer vacation. Oh wait, we want to move, be somewhere for the new kids, so we, you know, January, February we’re going to start looking for a house. And that naturally kicks off the real estate market and gets it booming at the turn of the year. But during Halloween to February, what do you think is happening? What’s there more of and less of? Well, there’s more inventory, less demand. And less buyers. So what I tell investors is you’re never going to get an over the moon deal in Memphis because of the way the rental market here is set up and the way the market moves and there’s so many renters here. You’re never just going to get a slam dunk, you know, 60 cents on a dollar deal. So write that off immediately. But if there’s more inventory than there is buyers, what happens is that property that would have sat on the market for a week in July is now sitting on the market in October, November for 30 days. When I look at a listing for one of my investors and it says days on market, 45 days, they’re asking $100,000, I go to my investor and say, we’re going to offer them $87,000. Why? Well, because obviously they’ve got nothing working. So will we get lucky and maybe get it at $87,000? Possibly. And now I’ve got a 15% RRI for my investor. Those deals are hard to make work and hard to get, but they’re doable during this time because there is so much more inventory than buyers. Worst case scenario, the guy comes back and says, no, we’ll counter at 95. We go back and say, nope, 92 highest and best, great, they take it. Now, I’ve got a $92,000 house that’s renting for $1,000 a month. I’m at 12, 13 percent gross RRI. You cannot get that deal between April and August. If you do, you got lucky. So right now is the best time to be buying. You should be looking at investment property in whatever market you’re in right now. But when you’re in that investment market, be careful. Pay attention to what that market is doing because a lot of markets are going down. Memphis is stable and actually kind of slightly growing a little bit right now because this summer we had a great summer. A lot of people thought it was going to collapse, housing market was going to tank. Well, guess what? For me as an investment agent, I’ve duplicated what I did last year during the hottest real estate market I’ve ever seen. So if you’re living in California, yeah, your world probably sucks right now. But here in Memphis, if you’re an investor, it’s a good time to buy. Let’s talk about diversification. If now is the best time to buy, I have plenty of investors that, you know, they own, they invest in the stock market, they invest in gold, they invest in bonds, but why diversify into real estate? Let’s talk about that for a minute.
Jeff
0:06:18 – Well, your traditional 401Ks, real estate investments, you know, you put all your eggs in that basket, and, you know, we come up with a downturn in the economy, you just, you lose everything. When you diversify, you offset the risk by investing in different asset classes or real estate, different property types and locations. You can diversify your capital, reduce the risk, total loss, and that one investment falls apart. So, you know, spread your portfolio out to include different types of properties, for example, single family, multi-level, duplexes, etc.
Brett
0:06:50 – Exactly. And so if you’re not invested in real estate, you should be, but you also got to deal with the location you invest in. Right? If you invest in Vegas, I mean, we’ve watched Vegas skyrocket 400% and then drop 500% literally in two years. We watched it happen. It’s happening in California. It’s happening in Florida. It’s happening everywhere, but the one place it’s not happening is Memphis, because we have not seen a steep decline in property values, nor have we seen a steep jump in property values. You know, I like to call Memphis the blue chip real estate investment, because it never tanks and it never skyrockets. It just steadily grows 5, 6, 7% a year, which is where you want to park your money, because if you put your money in real estate, the one thing it does do is hedge against uncertain inflation. It hedges against that because what happens in a real estate market once the economy levels off and interest rates drop, that $100,000 house will immediately probably be worth 115, 120 because the market’s going to take off the other direction very quickly. And that is going to create a lot of demand which is going to create a shortage in inventory which is going to create higher values. So putting your money in real estate, whether you make a dime off of it or not, is still a safe place to park your money. It’s like buying a piece of land. The only difference is land doesn’t appreciate, doesn’t appreciate, it just kind of sits there. Real estate, especially rental real estate that produces income, does appreciate. So yeah, you should diversify.
Jeff
0:08:18 – I was just going to give some examples of how to diversify your real estate portfolio, in different asset types to include different types of rental properties. What I wanted to ask you about was real estate investment trust. Do you ever deal with any of those?
Brett
0:08:35 – Yeah, I’ve actually represented a few of them. I’m dealing with a guy in Israel right now that does nothing but manage real estate trust for families and groups. And we had a long conversation about what he did. And this guy is in his late 60s. He’s been doing this a long time and he’s super intelligent when it comes to the stock market and investing in real estate. He really knows his game. What he does is he actually will take four or five families, wealthy families that have $5, $6, $7 million that’s not invested in the market. They’ve got stocks, they’ve got all the other things and he’ll pull that money together and build a portfolio of real estate for that trust. It may be two people in the trust, it may be a hundred people in the trust. It could be whatever they want it to be. And he said the advantage is it disperses the risk greatly. Instead of you having a million dollars tied up in real estate, you’ve only got a hundred thousand, but there’s nine other people with a hundred thousand in there with you. So if there’s a 20% loss, you lose 20,000 instead of 200,000. So that’s an advantage to getting into a real estate trust. But you’ve got to be careful too. You also have to know who’s managing that trust for you because you pick the wrong guy, it’s no different than getting the wrong stockbroker, it’s no different than getting the wrong financial advisor, you could end up in a quagmire of substantial loss if you’re not with the right person. I’m a firm believer in taking on your own investments yourself. I don’t believe in giving my money to someone else to do that for me. What we’re doing is not rocket science. You’re buying an asset. That asset is performing at whatever level. That asset is growing at whatever level. If you put a management company in place to maintain that and collect your rent and take care of the maintenance for you and become kind of a hands-off investor, you’re making less money, but your asset is still there. It’s still got value. It’s still protected. So being an investor, hands-on or hands-off, is not that complicated.
The Stability of Real Estate for Long-Term Growth
Jeff
0:10:28 – Let’s talk about hold time, adding short term and long term investments to your portfolio is a great way to diversify. Having these investments with varying hold times, does that allow you to take advantage of the market at different performance levels? Can you get into that a little bit?
Brett
0:10:43 – Yeah. I’m a firm believer in buying hold, but let’s use Memphis as a market, let’s break it up. Let’s take Raleigh and Frayser and Whitehaven and Burclare, C-class neighborhoods. They’re going to see steady, slow growth. And let’s compare that to, let’s say, East Memphis. Ten years ago, you could have bought a house in Chickasaw Gardens in East Memphis for $190,000. Today you couldn’t get one that didn’t need rehabbing for less than $400,000. So, buying an asset in East Memphis, you would have bought that home for equity growth, not income because you’re never going to rent it for what it’s worth and you’re never going to pull a 1%, but you’d buy that for equity growth because you know that that area is always going to have substantial growth in equity. Versus, Frayser, you’re going to buy and hold those properties because those properties are going to grow at a much slower pace, but they’re going to produce income on top of that equity growth. So it’s not a bad idea to buy four homes in Frayser, four homes in Raleigh, and then two or three homes in Cordova. You’re only going to get a 5% cap on those ones in Cordova because you’re going to spend $200,000 and you’re only going to rent for $1,500. But that $200,000 five years from now is going to be worth $230,000, $240,000, while that $100,000 house in Frayser is now only worth $115,000, maybe $116,000. So you can capitalize. Now the Cordova house is an easy sell on the owner-occupant market. So you buy that asset, you let it grow in value, and then you go in, clean it up, put some paint on it, make sure everything’s in good shape, and put it on the owner-occupant market at full value and profit from that. I’m a believer in that. But my first recommendation always is buy and hold because I don’t care what expert calls me tomorrow and says you’re wrong, I’ll tell him he’s a liar. Real estate always goes up and has for the last 130 years. It has its dips, but when it dips, it comes back. In Memphis, it comes back quickly. I’ll give you this example. In 2008, we lost 22 to 24 percent value in Memphis while everybody else was losing 50 and 60. By 2010 or 11, we were even. By 2012 we had exceeded our previous 2008 numbers while everyone else still was not even caught up to their previous numbers yet. So that’s why I suggest buy and hold here because it’s just a safe place.
Jeff
0:13:03 – Some of the benefits of diversifying real estate property would be lowering your risk. I’m guessing if you invest your money across different markets and asset classes you reduce the risk of a total loss when one asset doesn’t perform well? Do you recommend your investors spread out over different B and C?
Brett
0:13:22 – Most of my investors have properties here. Frayser, maybe one in Cordova, you know, Rental in Arizona, Rental in Utah. One guy I talked to yesterday has a duplex in Arizona. He paid $500,000 for it. It only produces $3,600 a month in income, but he bought it 10 years ago for I think $190,000. So he’s not going to liquidate that asset until he’s ready to roll that money somewhere else. As long as that market performs, he’s going to keep that asset in place. He’s getting less growth in Memphis, but he’s not stupid. He also knows that $400,000 could dissipate to $200,000 tomorrow in Arizona just like that or in Vegas. But he also knows in Memphis, he’s never going to see that kind of a loss. So he’s mixed his money up with kind of blue chip Memphis type rentals and high risk stuff in Utah and Arizona and Vegas that he knows he could lose substantially tomorrow, but he could also gain substantially tomorrow.
Jeff
0:14:16 – Talk to us about consistency and long-term stability.
Brett
0:14:20 – When it comes to real estate, real estate’s probably one of the most consistent investments you can make. I’m saying that from a very naive point of view which is how most people look at it. And to me what that means is that again real estate always goes up. If it loses, it comes back quickly. So you can buy a high risk stock in the stock market and double your money in six months. But you can also buy that high risk stock and lose everything you have into it within two days. If you buy a house, a rental house, let’s use Memphis market as an example, and you spend $100,000 for it, and Joe Biden goes well beyond his Bidenomics that he’s put out now and we go into a recession and that property becomes $80,000. He loses 20% of it for whatever reason. But it’s still renting for $1,000 a month. It’s still producing cash flow. You can’t tell me that within two to three years that we’re not going to have a recovery and that house isn’t going to go back to $100,000 and eventually go to $110,000 and then $115,000 and $120,000. There’s no scenario in this country other than all out nuclear war and financial collapse that those properties will become worthless to zero. And we saw it happen in 2008. So many people liquidated everything they had in real estate, walked away from their homes and had the bank’s foreclosed on them and screwed their credit up and filed bankruptcy because they literally thought that was it. The real estate market is no more. It’s never going to be the same. Three years later, what happened? The worst recession and what they’re classifying as equal to the Great Depression, what happened to real estate? It bounced right back. I mean, we’re talking about it. It was just 14 years ago. And I can tell you right now, those homes they walked away from, they owed $150,000 on, that’s what they were worth, are worth $300,000-something a day. A little over 10 years later. So, there’s no safer place in my book to put your money other than under your mattress with a shotgun or in real estate in the right market. All right, location, location, location, that’s always the key. Just because a house you can buy for $30,000 and it’s going to rent for $800 a month does not mean it’s a good investment. You got to make sure you’re in the right location.
Richard
0:16:46 – I think one of the things that I’ve picked up on while you were talking is that it’s knowing and having the knowledge base there to advise you on when is the right time to buy and when is the right time to sell. You mentioned the guy in Arizona that has the duplex. Having someone there locally for him would be critical for knowing and staying on the pulse of that market to know the exact time, okay I need to liquidate this asset now.
Brett
0:17:15 – Well, let’s take this, the guy in Israel that I was talking about. How I got in touch with him was through one of my management companies that we work with, manages this portfolio. And Chris called me and said, hey, I’ve got this guy he’s considering selling. So he sent me a list, 15 houses, and Jeff went around and took a look at all of them, took exterior pictures, kind of gave me a rundown on condition, you know, roof, stuff like that. I got on then and looked at, you know, mapping. I mapped it out in Memphis to see where they were located. I looked at the market rents that they had that they should be renting for. I don’t know what they’re currently renting for. I’m still waiting on updated rent rolls. And it had been very easy for me to say, yeah, let’s get them listed, man. $1.6 million, let’s sell them. That’s a nice payday for us. My advice to him was after looking at locations and looking at the growth happening in those areas and the market rents where they were, I said, keep them. Don’t sell them yet. Now is not the time to sell because you’ve got homes in emerging markets, markets that are seeing so much rehabilitation and growth. That portfolio still has a good amount of room to continue in growing and performing. So I told him to keep them. And he was flabbergasted. He was like, holy crap, you’re telling me to keep them. I’m like, yeah, keep them. He goes, well, I’ve never had anybody tell me that before. I said, I’m just being honest with you. That’s my, if it were me, that’s what I would do. And I think that’s why him and I have built a good relationship in a very short period of time because he trusts me because I was honest with him. So yeah, if you’re out there and you’re dealing with real estate issues and you’re struggling with management or struggling with renters or whatever, just pick up the phone and call us, 901-692-7401. You don’t have to hire us as your agent, but I love to talk to people about investing and rental properties in Memphis because I’ve done it for so long. Jeff?
Jeff
0:19:05 – 901-570-0654.
Brett
0:19:06 – There you go. Jeff’s a man of many words. But yeah, look, this is all we do. This is what I love to do. This is what Jeff loves to do. We’re on the clock seven days a week. We’ve helped a lot of young investors become very successful. We’ve helped a lot of old school investors retrain their brain on how to be investors in this modern time and rethink their financial investments when it comes to real estate. We’re always available, so feel free to reach out to us. Go to our website, MyMemphisInvestmentProperties.com. There you’ll see a beautiful picture of me and Jeff and Matt Wheeler. And we don’t have one of our Wanker producer up there, but he’s the one that put it together. But yeah, reach out to us. We’d love to talk to you. We love helping people. We’ve been very successful at it. We’re probably one of the most successful groups in this area, not because we’re experts. It’s because we know what we’re doing and we’re honest with people. And we treat every investor the same, whether you’re buying one house or you’re buying 100 houses. So thanks for listening today. We appreciate your time. Remember to check out our next episode of this 5 O’Clock Somewhere Real Estate Podcast.