2022-2023 Real Estate Market and What it Means for Land Investing (LA 1810)
2022-2023 Real Estate Market and What it Means for Land Investing (LA 1810)
Transcript:
Steven Jack Butala:
Steve and Jill here.
Jill DeWit:
Howdy.
Steven Jack Butala:
Welcome to the Land Academy Show, Entertaining Land Investment talk. I’m Steven Jack Butala.
Jill DeWit:
And I’m Jill DeWit broadcasting from sunny Southern California.
Steven Jack Butala:
Today. I’m going to talk about, and Jill’s probably going to listen the 2022 and 23 real estate market and what it means for land investors like us.
Jill DeWit:
Hilarious.
Steven Jack Butala:
Here’s a hint. It’s awesome.
Jill DeWit:
I’m excited.
Steven Jack Butala:
Interest rates are going up.
Jill DeWit:
I hope you’re going to let me share. Am I going to get to talk today? Okay.
Steven Jack Butala:
God, when do you not talk?
Jill DeWit:
Am I just going to be someone on your arm again?
Steven Jack Butala:
Oh geez. Yeah. Yep. My trophy partner, Jill.
Jill DeWit:
Yeah, that’s right. Hey, watch it buddy.
Steven Jack Butala:
Before we get into it, let’s take a question posted by one of our members on the landinvestors.com online community, it’s free and please make sure you check us out on discord, if you’re a member. If you need help outsourcing your mail operation, meaning you know, your blind offer campaigns. Check us out at offers 2 owners, offers the number two owners.com and click around for product we released called concierge data. It allows people who are brand new to help… We’ll help you get that first mailer out or if you’ve been sending 50, 80,000 mailers out a month, like we do sometimes allows you to outsource it there. It’s a great product. It’s getting used widely to the point where we had to shut its down recently, because we couldn’t fill the orders. So by the time this airs, it should be back open or if not very soon after that.
Jill DeWit:
Sweet.
Steven Jack Butala:
Staffing.
Jill DeWit:
Erin wrote, “Is there a reliable way to check out whether a subdivision has an HOA with covenants?” I’ve never known HOA that didn’t have some covenants, but there we go. Anyway. “Sometimes it is easy when they have a website. Are they recorded? For the lot I’m looking at now in a new area, I pulled the recorded plot, but all I could find related to the, is a subdivision name.” There we go. “So far I see no evidence of an HOA, but it isn’t a big subdivision. So what do I do?”
Steven Jack Butala:
This comes up. May I?
Jill DeWit:
Okay.
Steven Jack Butala:
No, go ahead.
Jill DeWit:
No, that’s fine. No, no go ahead.
Steven Jack Butala:
What do you do?
Jill DeWit:
So here’s what I do. This does come up because you’re not sure. Usually if there’s a name like Shady Acres. All right. Shady Acres lot 23. All right. I might need to look into that just to make sure versus just the legal description and no thing like that, like lot, block, unit kind of thing. Even those could be, but usually you’ll have a little indication. It’s something you always want to check no matter what anyway. So how I check is there’s three ways. I do my own Google digging. My Google search for Shady Acres HOA, POA, homeowner association, property owner association. See if everything pops up. Okay. Nothing there. Okay, good. This is good news. Then I go to phase two, which is… This takes a few minutes by the way.
Phase two is I’m going to go out and look for property for sale or sold in that area and see if there was an HOA like, “Oh look, here’s a property in the same subdivision that sold 18 months ago,” I’m going to be looking at the comp anyway, cause I’m checking it out and then I’m going to go through the description and see, “Oh look, it was an agent.” And I’ll look through and see, is there an HOA or POA the box? There’s some information in there. Often that’s where I find it, by the way is doing a little recon to somebody else’s posting and then I’ve got it like, “Okay, noted. There it is.” And then the third one, it’s always an easy one too. It’s call the county and they’ll tell you.
Steven Jack Butala:
Did you have a double shot of espresso with some red bull this morning?
Jill DeWit:
Seems like it. But I did work out. Sorry.
Steven Jack Butala:
Here’s some background on what Aaron’s asking here. Some properties have an HOA, which is an acronym for Homeowners Association. Sometimes it’s an LOA, landowners association-
Jill DeWit:
Or POA.
Steven Jack Butala:
Yeah. So what that is when the person or group or company went in to subdivide a bunch of property, they bought a big piece of property, did the entitlements on it and now it’s a bunch of little lots. They decided to incorporate that in its own little company and charge fees every month for some service to be received, maybe it’s road maintenance-
Jill DeWit:
A guard gate.
Steven Jack Butala:
All kinds of stuff. It could have a golf course.
Jill DeWit:
A dock, boat dock.
Steven Jack Butala:
Oh yeah, exactly. So all those things have to be paid for somehow. So the people that buy the property make a monthly of payment to sustain that, whatever the concept is. The vast majority of people who you talk to about this can’t stand it. But there are-
Jill DeWit:
Because it often comes with a bunch of rules.
Steven Jack Butala:
Yeah. We’ve all seen… To the extreme, it’s like your grass can’t be right longer than an inch and a half.
Jill DeWit:
Your roof has to be this color.
Steven Jack Butala:
Any given sitcom since 1980s has done an episode on at HOAs and there’s children’s movies about these topics. So-
Jill DeWit:
And the lady with a clipboard and a visor walking around.
Steven Jack Butala:
So it can get absurd on the one side, it can get absurd and on the other side it can be actually necessary. Jill and I went to look at a ranch for personal use recently and we drove down one of the most scary roads I’ve ever driven down in my life.
Jill DeWit:
Oh my gosh. Yes.
Steven Jack Butala:
And it single lane it was scary.
Jill DeWit:
Not maintained.
Steven Jack Butala:
Well, I believe that it was [crosstalk 00:05:44]
And I can’t imagine with the heavy rainfall, how much maintenance that requires. So there was an HOA and it said, “The HOA here is to maintain this road.” It’s a bunch of ranchers so that you don’t want any-
Jill DeWit:
That’s all it is.
Steven Jack Butala:
In general, unless you are this type of investor, you don’t want to buy property in an HOA. I have many examples of when we have purchased a property in an HOA and done very well. But Aaron’s point is how the hell do you find out that the property’s got an HOA in it? So-
Jill DeWit:
Usually have to dig.
Steven Jack Butala:
The issue is why can’t it just be in the data set? Why can’t when I’m scrubbing the data out of data tree, just remove all the HOA properties. And I would love that too.
The answer is the assessor doesn’t care. The assessor only cares about statistics and details about a property that make it easier for him to create an assessed value so they can create a real estate tax and they don’t care about HOAs and rightfully so I wouldn’t care either. So you got to dig. Once one comes back, you do Jill’s little three rule thing there, and you’re going to find out and then make a decision.
Jill DeWit:
Whether or not-
Steven Jack Butala:
Here’s good news HOA property is crazy, easy to price. It’s easy to price when you go to buy it. If you know that it isn’t HOA already, like Jill’s little example about Snowy acres or something like Shady Acres. And it’s crazy, easy to price. If you get one back signed, it’s crazy easy to know what you’re going to sell it for. Because there’s usually a lot of comparison values and it’s very, very, very similar like kind of property.
It’s like looking at a house in a master plan community that one across the street just sold for 350. Well, I can safely assume mine’s going to sell for 350.
Today’s topic 2022, 2023 real estate market. And what does it really mean for land investing? This is the meat of the show. So the deal is, we all know, if you’ve been following the news at all, that interest rates have gone up and that we had two crazy years of price escalations in real estate countrywide, almost without exception. So prices have skyrocketed in some cases doubled in the last two years. And so what does that mean for us? Well, that was the cause and somewhat the result of now inflation and all kinds of things. So when international inflation happens like this things cost more, wages usually don’t…
Jill DeWit:
Keep up.
Steven Jack Butala:
Keep up with actual cost of living.
People need money. And when people need money, those people who have a real estate that they’re not using, land in another state or any of that, they tend to be a more willing seller than they were let’s say two years ago when they were watching the value go up. This is my fourth recession as a working professional and I can tell you that when these things happen, there’s people with money that come out of the woodwork, especially in inflationary times.
Jill DeWit:
They’re planning for it.
Steven Jack Butala:
Because land and precious metals and tangible items like that, that have real value are a great way to hedge off inflation. Especially if you can get them at a bargain, it’s nearly impossible to buy precious metals at a bargain. You can buy it when the market’s low. It’s also nearly impossible to buy publicly traded stock under its value. At the time, the only thing you can do is hope that you’re buying it low with an upswing. That’s just not the case with real estate. We buy real estate, that’s worth a hundred grand for $25,000 regularly because seller just wants to sell it. And to make this very short and simple, there are way more willing sellers in a recessionary environment, like we’re going into now, than there usually are on an uptick, same thing with houses.
Jill DeWit:
So I was reading this article today, along these lines about hold onto your hat cause a lot more assets are going to be on the market in a great way, because a lot of people hadn’t… Let’s just say it they hadn’t been paying their bills, right? They couldn’t. They hadn’t. And now with the inflation rates and things, now you got to start paying your bills again. All those, what’s the kind of thing.
Steven Jack Butala:
The fisher rates.
Jill DeWit:
The waiver. No, no, no. The waivers are gone. So it was talking about-
Steven Jack Butala:
You have to pay mortgage.
Jill DeWit:
Well, you do have to do that too, but you know what I mean. It was talking about there were… How do I, remember I sent you a copy of an article and it was basically saying that people are going to be looking to Refi and with interest rates and the inflation so high, they’re not going to be able to afford to Refi and there’s going to be more assets coming up. That’s what they were-
Steven Jack Butala:
Couldn’t agree more. Whoever wrote that I absolutely agree, there’s going to be a lot more acquisition opportunity then we’ve seen in the last two years for us. We are very actively dusting off house academy. House academy we had for years and years, we still have it and we never close it, but didn’t make a lot of sense to buy houses or attempt to buy houses in an undervalued fashion like we’re used to in the last two years.
So what prompted these last two years to make it nuts? Because I think that’s important to understand because every upside’s got a downside, it’s a whole ying, yang thing. So what happened was COVID happened and the whole entire world, me included, thought the bottom was going to fall out financially, that didn’t happen. What happened was people spend a lot more time on their computers at home. They got the opportunity to work at home and still get paid in most cases. And so the really large employers, namely computer companies gained a huge amount of value. And they tend to have younger workers. So that generation is massive. The millennials generation is the largest generation ever in recorded history. And the majority of them or a material number let’s say were allowed to work from home. And they realized they didn’t have to in a big city anymore. They could buy houses where they want. So it caused a lot of positive growth in our country from a real estate standpoint. And that has to be offset by a downturn, which is what’s about to happen.
Now it’s already happening. So there will be a lot more property available for us. It’s a great opportunity. This has happened every single time. I’ve been through a recession.
Jill DeWit:
I’m excited too. Happy to join us today five days a week, you can find us here on the Land Academy Show.
Steven Jack Butala:
Tomorrow’s Jack Thursday and I’m going to talk about the typical classic Land Academy member avatar. Who is the Land Academy member? Who’s the typical Land Academy member. You are not alone in your real estate ambition.
Jill DeWit:
I bet there are people who can say yes.
Steven Jack Butala:
There are people who can say yes
Jill DeWit:
Exactly. I’m sure about that one. Hey, thanks for tuning in, by the way, this is Wednesday, tomorrow is Thursday. Tomorrow happens to be the third Thursday of the month. What does that mean for you? We’re on clubhouse. Join us there on the first and third, Thursday of every month, you can find us live on clubhouse at 12:00 PM Pacific time. So jump on in a clubhouse, go to the Land Investing club. You will find us there. Follow the club, follow us. You’ll get notified. And we’d love to speak with you. We are Jack and Jill
Steven Jack Butala:
Jack and Jill. Information.
Jill DeWit:
And inspiration
Steven Jack Butala:
To buy undervalued property.
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