Month: March 2022

Mistake # 2: Waiting for the “perfect time” or being fearful of investing “too soon” and then missing out on the opportunity

Although timing is important in making any investment decision, smart investors realize that timing cannot be tied into a calendar, or into past behaviors or trends. The best investors know that all timing must be tied into a well-planned future. Many great business opportunities disappear while an investor sits on the fence, rather than planning and then executing a systematic and disciplined investment into their future.

The most demanding investment decisions for cross-border investors involve choosing between alternative investment vehicles for the commitment of both investment capital and business time. Timing, political realities, social/economic conditions, and expertise challenges all play equal roles in decision making. Productive investment timing is not a calendar-oriented activity. It is an alternatives-oriented activity. Accurately assessing alternatives is precisely why a company such as Investing Across Borders powered by e-Council Global is an essential partner for investors considering cross-border investing.

Now is the “perfect time” to embark on your path and to consider your cross-border investment timing concerns, and then transform your timing concerns into planning successes. Don’t miss out on invaluable opportunities because of doubt or past fears. Good timing is nothing more than being prepared to make a decision when the opportunity is presented to you,

with the right professional assistance. All successful investors let go of what happened before or what might happen – and plan decisively to live and invest in what IS HAPPENING.

Article Series by Lauren Cohen, Cross-Border Lawyer & Real Estate Expert

e-Council Inc.’s blog, website, newsletter and other forms of communication contain general information about legal and related matters. The information is not legal advice and should not be treated as such. You must not rely on the information on this website as an alternative to legal advice from your attorney or other professional legal services provider. If you have any specific questions about any legal matter, you should consult your attorney or other professional legal services provider.

We’re all aware that the COVID-19 pandemic has significantly impacted real estate investments—it’s a reality many of us face on a daily basis. As a result, many investors have been forced to change their real estate investing strategies to deal with the economic effects of the crisis. 

And, investors are also facing new challenges as the country emerges from lockdown restrictions. One of the biggest challenges right now is soaring inflation rates. According to Trading Economics, the inflation rate hit 7.5% in January 2022—the highest inflation rate in 40 years. Adding to the issue is the fact that energy costs are skyrocketing—and there is a widespread labor shortage to contend with as well. 

So how are these economic trends affecting real estate investing strategies? And after the country shakes off the shackles of COVID restrictions, what do these trends—and the subsequent strategy shakeups—mean for property investment, especially in the rental property market? Well, while it’s not entirely clear what will happen to the real estate market post-pandemic, the good news is that investing in real estate post-COVID will almost certainly be a good idea. Here’s why that is—and information on what types of real estate investments may be a good idea after the coronavirus pandemic is over.

The effects of COVID-19 on the rental property market

The pandemic brought many uncertainties with it—and not just for investors. With shelter-at-home orders in force throughout the country, many people were confined to their homes, unable to go to the office, visit friends or family, make a quick trip to the grocery store, or take their planned vacations.

And, many people lost their jobs or saw significant decreases in income, which meant that rent was tough to pay for many tenants. To help avoid another economic crisis, eviction control measures were introduced on the federal level. These measures were meant to help renters avoid being evicted from their rental units. 

In turn, open units were a scarcity. According to a 2021 report on the pandemic’s effect on the U.S. rental market, rental listings were 26% lower in the first half of 2020 than they were just one year prior. Home sales transactions in large metropolitan areas also fell by 50%—and average sale prices declined by 18%.

And, according to some analysts, there were certain real estate investment market sectors were hit harder than others. For example, investment in senior care facilities, hotels, and gas- and oil-related properties posed a greater risk to investors than residential properties, and the sales data is evidence of these issues. This was almost certainly due to the uncertainty plaguing certain industries, like travel, at the height of the pandemic, but it had a big impact on how investors chose properties.

Much of the pressure on these industries has decreased significantly in the time since, but questions remain as to what the real estate investment world will look like after the pandemic is over. It also begs the question of what the best types of real estate investments will be at that point. While it’s difficult to predict what exactly will happen, there are a few real estate trends that may be worth keeping an eye on in a post-pandemic world.

3 real estate investment trends to watch for after the pandemic

What types of real estate investments have the potential to excel in 2022? And what are the trends to look out for as the country recovers from the pandemic? Here’s what you should know.

1. Real estate investment in rental properties will likely remain strong.

Despite eviction moratoriums, multifamily properties performed relatively well during the pandemic. At the height of the pandemic, many tenants received rental aid assistance and direct aid to pay monthly rent—which kept these types of investments appealing to savvy investors—and rental units have remained in very high demand in the time since.

Also, many landlords worked out payment plans with tenants to ensure that they continued to receive rent, and this also kept the rental market tight with few evictions. Furthermore, the ban on evictions didn’t wipe the slate clean with rent debts, so landlords who did not receive rent during that time will still be able to collect the rent they are owed from tenants. 

This is a good sign of what’s to come for multifamily units, as these investments weathered the tough times and are now incredibly lucrative for the right investor. And, it’s likely that these types of real estate investments will remain strong post-pandemic, too.

2. Commercial real estate will continue to recover.

There were mixed fortunes for owners of office and retail properties during the pandemic. Many offices were deserted as people were forced to work from home. There was talk that investment in office space would never recover.

However, the complete shift to working from home never happened—and it appears unlikely that it will. As such, office and retail properties are likely to be a good investment in a post-pandemic world, as the demand will likely be higher than once expected.

Another good sign? Retail properties stabilized as stores were able to open and resume trading during the last quarter of 2021—and will likely continue that trend throughout 2022. 

Related: A beginner’s guide to investing in office buildings.

3. Industrial real estate investments will remain strong.

During the pandemic, some of the best real estate investments in the commercial real estate sector were those connected with logistics and shipping. One of the main reasons for this was that e-commerce businesses were doing more business than ever thanks to an uptick in online shopping, and, in turn, needed a lot more storage and shipping space.

Many analysts say that the demand will remain high for commercial properties thanks to continued growth in e-commerce—which had been occurring well before the pandemic. The lack of in-store shopping options simply added more fuel to an already burning fire.

Other notable real estate investment trends in 2022

While industry experts agree that the pandemic affected real estate investment strategies, real estate and property investment remain a target for many investors. We’re already seeing positive trends in the first few months of 2022, including:

A shift in investment strategies

Right now, many real estate assets require repurposing and redevelopment due to the changing landscape. This is requiring investors to have robust strategies that allow them to understand the core aspects of their investment targets. In most cases, this means they are gaining access to data-driven analysis and in-depth marketplace insights—which helps to heavily inform their strategies. 

For example, one thing that the pandemic made clear is that rental property owners need to make analyzing tenant risk profiles a top priority to avoid losses whenever possible. After all, there was a potential for a crisis in the rental market at the start of the pandemic—which could have caused huge problems for many investors.

However, a surprising number of renters kept on top of rent payments—likely due to landlords and investors doing their due diligence on potential tenants. Thorough screening remains one of the best ways to protect your investment assets—and given the uncertainty of the future, will likely remain a trend in real estate for some time.

Demand for flexible spaces

The demand for office space is increasing as workers return to the office. However, commercial tenants now want flexible workspaces because hybrid models have become the norm. This requires repurposing existing office space to make it more accessible for hybrid work, which requires room for collaboration and meeting spaces. It may also require commercial property owners to redevelop office space with flexibility in mind.

Environmental, social, and governance (ESG) is a top priority

Sustainability and ESG are becoming priorities when commercial tenants are looking for new space. In addition, corporate clients must provide their socially-conscious investors with guarantees about operating sustainable businesses, which means there’s even more demand for these types of spaces. And, with many cities having ambitious net-zero emission targets, the demand for energy efficiency, cool roofs, and reducing wastewater continues to increase as well. 

Technology informs the way buildings operate 

The COVID-19 pandemic forced many investors, property owners, and tenants to rethink how they use technology. For example, many residential landlords switched to online rent payment and collection methods. They arranged virtual tours for potential tenants and started using e-signatures on electronic documents. In turn, landlords found that these new technologies helped to streamline their rental businesses. 

Related: Ways technology is overhauling property management.

Technology will continue to be essential in meeting tenants’ demands for commercial properties. Take, for example, the fact that during the pandemic, it became evident that robust air-filtration systems were important to help prevent the spread of coronavirus. There is also increased demand for touchless technology in buildings—which includes everything from hand sanitizer dispensers to automatic lighting and motion sensors. 

This shift in technology could lead to more workers using apps on their smartphones to control various systems in the office, whether the elevator, heating, or lighting controls. As such, investors who invest in smart building technology and ESG principles can typically command a premium for rent. 

Final thoughts on real estate investing post-COVID

While there’s no question that the pandemic has had a major impact on real estate investing, many of the long-term effects it had on real estate investment strategies remains to be seen. Time will tell how the downtown office sector adjusts to a hybrid working model.

That said, there are already some prevailing trends to take note of. For example, residential landlords will continue to invest in new technologies to provide high-value tenants with a premium service—which may help to shape the way you invest, too. The trend of rising rental prices also means that landlords should recover losses incurred during the pandemic in time. 

And, it’s almost certain that investment in real estate will continue to remain attractive for many investors. That trend is not going anywhere in the near future—even if strategies shift over the long term.

Do staged homes sell faster, and for a higher price? The short answer is yes and yes. Even in a hot seller’s market, smart sellers seek out ways to give themselves an advantage. This includes engaging an experienced, professional real estate agent, evaluating market demand and comparables, setting the right price, and then staging the property to appeal to the biggest pool of buyers.

Do staged homes sell faster?

According to a study by the Real Estate Staging Association, staged homes spend 73 per cent less time on the market than their un-staged counterparts. Truthfully speaking, even an un-staged property can sell under the right market conditions. A seller’s market, characterized by high demand and low inventory, generally means buyers are likely to scoop up what they can get. In a buyer’s market, there are more homes for sale than there are buyers, which means competition is greater among sellers and buyers have the upper hand. Under these circumstances, staging your property could tip the scales in your favour.

Do staged homes fetch a higher price?

The same Real Estate Staging Association study revealed that 85 per cent of homes analyzed sold for five per cent to 25 per cent above listing price. The answer to this question isn’t always black and white, as the final selling price can depend on a number of factors, including buyer demand, competition and the condition of the property. With all else being equal, a staged home is more likely to leave buyers with a better impression than one that hasn’t been staged, with the potential to fetch higher offers.

What is home staging?

Home staging is the process of preparing a home for sale by increasing its appeal to a wide range of homebuyers. Home staging isn’t as involved as a renovation, and can involve decluttering, depersonalizing and deep-cleaning; painting the walls in a fresh, neutral hue; updating hardware and lighting; rearranging existing furniture or renting some new pieces to help show the home in the best possible light. When a buyer can see your home as their home, they are more likely to make a competitive offer.

Since the majority of homebuyers start their home hunt online, it’s critical to make a good impression through your digital listing photos. Buyers will weed out the homes that don’t meet their criteria, and proceed to an in-person tour of the homes that they are seriously considering.

Decluttering and depersonalizing the home of family photos and other personal items can help. Also consider that potential buyers need to think beyond what their eyes are showing them. Staging helps them to visualize themselves living in and using the space. Is the home an ideal place for a growing family, as a live-work space, for recreational pursuits or to enjoy retirement?

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Virtual Home Staging

A new twist on home staging is “virtual” staging, which leverages technology to digitally enhance photos in order to demonstrate the possibilities. Virtual staging is ideal for vacant properties, which pose added challenges for sellers and the buyers who are trying to imagine it as their new home. Virtual home staging eliminates the need, effort and cost associated with renting or buying furniture and accessories.

RELATED READING: 5 Areas To Focus On When Staging Your Home

Staging a home doesn’t have to be complicated. Evaluate every room and be critical, because prospective buyers will be. Viewing your own home objectively can be difficult, especially for those who have lived in their home for a long time. A professional home stager and your real estate agent can give you an honest opinion as to what works in your home, what doesn’t, and what the seller might consider changing in order to appeal to homebuyers.

When you’re ready to sell, work with a professional real estate agent who can help identify market demands, navigate conditions and turn that For Sale sign to Sold. Click HERE to find a RE/MAX agent near you.

If you’re a home-buyer, owner or seller, you’re probably wondering how to maximize your investment. The answer depends on a number of factors, such as market conditions, your current circumstances and long-term goals, but there are some home renovations that pay off on the resale market, whether you’re looking to stay in the home or sell it.

Renovations on the Rise in a Hot Housing Market

In a seller’s market, there are more buyers than homes for sale, so technically you don’t need to renovate to turn that For Sale sign to Sold. However, the right renovations can help sellers secure a homebuyer faster, and potentially for a higher price. On the buying side, renovating a fixer-upper may allow buyers to get into their neighbourhood of choice at a lower price. Meanwhile, for homeowners who aren’t quite sold on moving or who find themselves challenged given limited inventory of listings, renovations have become a way to get a bigger, better home without having to tackle this competitive market.

According to a 2021 RE/MAX Canada report, more than half of Canadians renovated their home for personal enjoyment. According to a survey, three in 10 Canadians renovated to enhance their lifestyle, such as recreation and entertainment projects, while another three in 10 renovated to maintain their home. Last but certainly not least, 16 per cent of Canadians said they renovated to increase the market value of their home in order to sell within in the next one to three years.

Regardless of their reasons for renovating, 59 per cent of Canadians said they always consider the return on investment that a renovation will have on their home’s market value. So, home renovations pay off on resale? We surveyed RE/MAX brokers across Canada about the top renovations that give home sellers the biggest payouts.

8 Home Renovations That Pay Off on the Resale Market

#1 Kitchen – 93.5% of RE/MAX brokers said kitchen renovations give the best ROI, including new or updated cabinets, countertops and appliances. This can be attributed to the scale, cost and the general inconvenience (albeit a temporary one) of a kitchen renovation. Yes, renovating the kitchen yourself once you take possession of the home will be cheaper, however many homebuyers simply don’t want to put themselves through it – especially if they just completed a kitchen renovation on the home they are selling. The “move-in ready” factor is significant.

#2 Bathroom – 61.3% of RE/MAX brokers identified bathroom renovations as a great high-return renovation. By the same logic as the kitchen renovation, homebuyers who want move-in ready homes with all the bells and whistles generally don’t want to take on expensive, time-consuming and inconvenient renovations, such as bathroom.

#3 Paint – 58% of RE/MAX brokers said a fresh coat of paint is the simplest and cheapest investment, and it pays off on the resale market. Aside from giving the home an instant refresh, home stagers also recommend light and neutral paint colours to make a home appear bigger, brighter and cleaner.

#4 Flooring – 45.2% of RE/MAX brokers said new flooring is a popular upgrade among homebuyers. Homebuyers largely prefer hardwood or tile over wall-to-wall carpets, which tend to trap stains and odours, and can really show a home’s age. This is a must, and if the seller is lucky, tearing up that old carpet could even reveal a hardwood floor underneath that just needs some TLC to bring it to its former glory.

#5 Finished basement – 16.1% of RE/MAX brokers said finished basements are a great selling feature on the resale market. In fact, any renovations that add liveable square footage to a home are always in demand. A lower-level family room, home office, an extra bedroom or bathroom in the basement can all give your listing a significant boost at the offer table.

#6 Outdoors/landscaping – 12.9% of RE/MAX brokers said outdoor projects can provide good ROI. As a result of the pandemic, people have been spending more time at home and thus, large years, pools and hot tubs, decks and patios, and landscaping are all appealing on the resale market. Depending on the scope of the project, this could be one of those low-investment, high-return upgrades that pay off on resale.

#6 Roof – 12.9% of RE/MAX brokers said roofing was a good option to invest some renovation dollars before listing a home for sale. New roof tied in sixth place with outdoor projects and landscaping.

#7 Open-concept floor plan – 9.7% of RE/MAX brokers said redesigning a home with an open-concept floor plan can pay off. This isn’t a small or inexpensive project by any means, but removing wasteful walls and halls can instantly modernize an older home and make it live larger than its actual square footage would otherwise allow.

#8 Windows – 6.5% of RE/MAX brokers said new windows net higher offers on the resale market. While this isn’t exactly the sexiest of renovations, astute buyers will appreciate the tens of thousands of dollars that new windows will cost, so having these replaced before listing can benefit both buyer and seller. Furthermore, new windows can give your home an understated refresh, inside and out.

Need Some Home Renovation Inspiration?

Watch this video to see how you can update and upgrade your home before listing it for sale.

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The financial returns that sellers may reap on resale depend on a number of factors, including buyer demand and market conditions. If you’re planning to sell your home, thoughtful, targeted renovations can help you maximize your investment. A professional real estate agent can give you an advantage, by zeroing in on market demand before you dig into your renovation. Click HERE to find a RE/MAX agent near you.

It is no secret that the Fraser Valley housing market has been one of British Columbia’s hottest for the last couple of years. But did this area, which consists of Abbotsford and Chilliwack, really break a century-old record? The pandemic housing boom in this western province and across the entire country highlights how hot the Canadian real estate market has become.

But it might not be exactly shocking. Considering how desirable British Columbia real estate has been, it was only a matter of time. And it is not only Vancouver that people are clamouring over now.

Whether it’s the Lower Mainland or the North Coast, BC has been experiencing sizzling sales activity and meteoric price growth. Many factors support this bullish real estate market, from low supply to low borrowing costs. Can it slow down any time soon? This is the debate happening among experts from coast to coast. For now, Fraser Valley real estate is celebrating a monumental milestone that may not happen again for another 100 years.

Let’s find out more!

The Fraser Valley Housing Market Breaks a 100-Year Record

According to the Fraser Valley Real Estate Board (FVREB), residential sales soared 39 per cent in 2021, totalling 27,692 unit sales. This level of transactions broke the previous annual record established in 2016, when nearly 24,000 sales were completed. Put simply, sales activity of this size has not been witnessed in its 100-year history.

In December, demand was strong for every property type. Sales of detached homes advanced by 31.8 per cent year-over-year, townhomes enjoyed a 33.7-per-cent spike in transactions, and apartment sales generated a 68.9-per-cent gain.

While sales dominated headlines, price growth was also notable in the Fraser Valley real estate market. FVREB data show that the benchmark price for single-family detached homes surged at an annualized pace of 39 per cent to $1.5 million. Townhomes swelled 32.9 per cent to $765,800, while condominium apartments increased 25.3 per cent to $549,200.

Last year, new residential listings gained 12.4 per cent to 35,629 units, the second-highest level on record. But industry observers are also pointing to new housing construction data, highlighting that additional supply could be the relief prospective homeowners in Fraser Valley need to get into the market.

According to Canada Mortgage and Housing Corporation (CMHC), housing starts in Chilliwack skyrocketed 63.5 per cent year-over-year in 2021, totalling 1,362 units. Abbotsford’s housing starts have remained steady, topping more than 1,000 units for the second consecutive year.

Will this be enough supply to satisfy demand? This might be challenging to answer, especially since few could have anticipated the region’s enormous growth since the early days of the COVID-19 public health crisis.

“No one could have predicted how the pandemic would impact the real estate market. Our region’s relative affordability, combined with a newfound ability to work from home and the value for housing dollar in the Fraser Valley, attracted buyers in numbers like we’ve never seen,” said Larry Anderson, President of the Board, in a news release. “Whether helping sellers list or helping buyers complete a sale, our Board averaged over 5,200 transactions every month. And even though our volume of new listings was also high, it just couldn’t keep up with the demand.”

Indeed, the practices homebuyers have become accustomed to in the major urban centres, such as bidding wars, have become more common in markets like Fraser Valley.

So, are more record-setting gains on the horizon, or is relief on the way?

Many British Columbia housing markets are likely to record notable growth in 2022, the RE/MAX 2022 Canadian Housing Market Outlook found. For example, Nanaimo real estate prices are forecast to grow eight per cent to nearly $608,000. The Kelowna housing market expects to see a nine-per-cent jump in prices this year, potentially topping $830,000.

“Canadians recognize the value and investment potential in their homes. However, market challenges such as rising prices and limited supply have impacted local markets from coast-to-coast, causing angst this past year among those looking to get into the market and those hoping to move up in it,” said Elton Ash, Executive Vice President, RE/MAX Canada, in the report. “Despite this, it’s encouraging to see that many are feeling confident in the housing market in 2022 and view Canadian real estate as a solid investment.”

Record low inventory volumes, rising prices, historically low borrowing costs and strong demand will likely be substantial contributing factors across the Fraser Valley housing market. But while these trends are prevalent in the Lower Mainland, they can be found all across the western province, whether Vancouver or Surrey.

Can the Bank of Canada (BoC) ease prices with a 25-basis-point rate hike? This will be on the minds of market analysts throughout the country for the coming months.

Sources :

David Greene: This is the BiggerPockets Podcast show 578.

Rob Abasolo: When I built my tiny house, I was like, “Hey, if I can just build this cool tiny house and breakeven, hey, all good news over here, right?” But then it actually ended up being a cash cow and that was just a bonus for me. And I was like, “This is great. I get this house that I can enjoy, or theoretically, I can enjoy. And it pays for itself, and I make money on it.”

David Greene: What’s going on, everyone? This is David Greene, your host of the BiggerPockets Podcast, here with a very special episode for you today. But before we get into that, I want to let you know that if you are looking for a way to build financial freedom through real estate, if you want to have more control and autonomy over your life, if you value the time that has been given to you and you want to use it in ways that you feel are best for you and your family, this is the place to be. BiggerPockets is a community of over two million members on a journey exactly like the one that you are on, trying to accomplish the same things you are. And our goal here is to bring you as many resources, support, and assistance as we possibly can to help you meet that goal.
One way we do that is with this podcast, where we bring in different guests, where we bring in different speakers, where we bring in different experts to share with you what they did to accomplish exactly what you’re trying to do, the niche, the strategy, the style that they use to get where they’re going. We also have an amazing website with forums where you can ask questions that people will answer, with blog articles where you can read and gain other people’s wisdom and with a lot of support like real estate agents or different support pieces that will help you achieve your goal that you can find through the website. Now, on today’s podcast episode, I am here with my good friend and co-host, Rob Abasolo.

Rob Abasolo: Now, close.

David Greene: Rob Abasolo.

Rob Abasolo: There we go. There we go.

David Greene: That was the thing when Brandon did the show, he always messed up people’s last names and I think that curse has been given to me. I just messed that up.

Rob Abasolo: But hey, for you, I will go by Rob Olasolo. Don’t worry.

David Greene: That’s funny. I wonder Abasolo, why I couldn’t get it. Maybe it’s because the band Abba, it just feels wrong. So, today will be a solo show with Abasolo himself. We are going to be bringing you more episodes where we dive deep into a specific strategy, property niche, giving you more detailed and nuanced information so that you can follow in the footsteps.
And today, I’m being joined by Rob, because he and I are actually partnering on buying short term rentals. And we are going to break down, this can be the first of a three-part series, the process that we are using to put them under contract and manage them. So, today, we’re going to be focusing on choosing a location, a strategy, and a property type specifically for short term rentals. And I couldn’t think of a better person to join me than Rob. Rob, welcome to the show.

Rob Abasolo: Hello, hello, hello. Man, I am really excited to do this, because there’s so many questions and apprehensions I think about getting into short term rentals. It’s all the new rage for a lot of people right now. And this episode, we get into some pretty nitty gritty stuff. I mean, we really talk about the concepts that we abide by ourselves when choosing a market, proximity to locations, availability of vendors, boots on the ground, all that stuff. So, I think people are going to have a pretty good understanding of where to get started after listening to today’s episode.

David Greene: Yeah, and we can get into it right now. Basically, what we’re going to be sharing with everybody is how to choose a location, a strategy, and a property type. So, this is where it starts when you’re trying to say, “Hey, I want to get into short term rentals. What do I do?” This is what Rob and I believe is where you should start. We have a five-step system that we’re going to be sharing with you today. And step number one is going to be looking into the strengths of different markets. So, Rob, in your experience, what is the way that you categorize different markets?

Rob Abasolo: I’d love to tell you all about it, my friend.

David Greene: And now we will get into today’s show. Rob, as you were.

Rob Abasolo: Yeah. So, there are a lot of things for me that I really take into consideration when I’m starting to narrow down my markets. Obviously, there are certain markets that are very vacationer friendly, I suppose you could say. And this would be places like national parks where people are always visiting, a beach town, ski towns, all that stuff. But also, one of the things that I like to consider is not necessarily an up and coming market, but is it a market that is getting a lot of appreciation year over year?
And that’s one of the happy accidents of a lot of my portfolio over the last couple of years for me personally, is a lot of my portfolio has really grown pretty significantly, specifically in the last two years. Not really something that I had anticipated because I was really aiming for just having high cash flowing units, but that’s always like the upside of real estate, right? The appreciation, the compounding interest as you were in the real estate industry.

David Greene: Very nice. So, if I’m hearing you right, you’re looking at, “Why are people visiting the area? And is it likely to appreciate?” So, what are some of the factors that you feel lead to markets appreciating?

Rob Abasolo: Well, one of the things for me is like I think for the most part right now, we’re in a travel surge and so a lot of people are traveling like never before. If you look at a lot of the data, if you look at even Brian Chesky, the CEO of Airbnb, he said that this year alone, they were going to need millions of new hosts in this upcoming year, because they can’t keep up with demand. So, for me, I’m starting to look at very specifically, “Where are people starting to travel the most?” And honestly, it’s like a tried and true method for me, but I’m always looking at national parks, because a lot of people have really been sleeping on national park for a long time, I think.
And it wasn’t really up until the whole pandemic and everything where people stopped really traveling to some of the more known places like the Disney Worlds, right? And they started hopping in their car and driving to the Gatlinburg or the Arches or the Grand Canyon, Yosemite, Zion, Joshua Tree. All of those different places now are seeing such a surge in visitation right now. I think the Smoky Mountains specifically saw one to two million more visitors in the last year than ever before, which is huge.
So, just in general right there, now that the amount of traffic that’s going to those different places means that there’s way more demand and because there’s way more demand, well, now investors are starting to catch on and get into those markets. And that right there starts driving up prices quite a bit.

David Greene: That’s a really good point. So, we typically break it down into three types of places or three types of ways people will visit an area. The first is they get in a plane and fly there, that would probably be Disney World. You’re going to go to Disneyworld. You got to go to Orlando to get there. You’re going to fly there, you need a place to stay, you look for a short term rental. The next would be a place you would drive for a weekend vacation. These would be national parks a lot of the time, like what Rob was mentioning. If you live in Tennessee, you’re going to go to the Smoky Mountains. If you live in Southern California, you’re going to go to Joshua Tree. So, those are places where people also look to find a place to stay while they’re there.
The states might be a little bit shorter, but they’re typically frequented by people who live somewhat close to that, at least within driving proximity. And then the third would be career-related reasons or occupational-related reasons where you’re traveling for work. Maybe you’re a traveling nurse, or you’re going for a business meeting somewhere. You’re going to attend a conference and you have to stay somewhere and you don’t want to stay in a hotel. So, just understanding that from a high level. Which of these areas your tenants are going to be coming from will help?
We also look at, “Is this a market that is stronger at cash flowing right now, or is this a market that we think has future growth?” We think that there’s going to be equity that’s built in both the revenue that comes in in the future, as well as the value of the property itself that you’re going to be buying. So, Rob, what are some of the things you look for in both of those two different strategies to try to maximize your efficiency?

Rob Abasolo: Well, if I’m being honest, when I got started in short term rentals in general, my MO was cashflow. That’s really all I cared about, right? Because a lot of people getting started in short term rentals and just real estate in general, we all want to leave that W-2, so that we can focus on being a real estate investor. And so, for me, my whole strategy was buying a place at a very fair price, right? And then having a huge cash-on-cash return. That was always the gold standard, but really, it hasn’t been until recently, where once you settle that up and once you establish a pretty good lifestyle and you’ve got a good budget and you stick into it, then that’s when appreciation really starts being a lot more important.
So, I’ve really shifted my mentality a little bit. It’s not that I don’t like cash flow, obviously, like we all do. But now I’m really starting to target places that I think have a little bit more appreciation. And so, obviously, you want both. There’s like a balance, right? But for the most part, I’m trying to look at where people are going, right? So, if you keep up with a lot of the trends, obviously, one of the big one right now, a lot of people are leaving California, and they’re going to a bunch of different places. They’re going to Arizona, they’re going to Texas, they’re going to Florida, and so many other places.
So, for me, I started asking myself questions like, “Well, where are they going? And what are the different locations that I can really start to capitalize?” And one of those for me was Arizona. That’s where I started putting a lot of emphasis on it because it’s really close to California, right? That’s one of the logical steps, but obviously, Texas is a really big place too right now. So, for me, I’m looking at not just travel trends, but overall trends in where people are migrating to in and around the US.

David Greene: So, what type of investor should be looking for a more cashflow heavy opportunity, and what type of investor should be looking a little bit more for future growth and appreciation?

Rob Abasolo: The people that are starting out, they’re going to be a lot more focused, I think, on the cash flow side of things and I get it. I have a couple students who they’re so focused on the cash-on-cash metric. Though, obviously, that’s the metric right? But I’m like, “Guys, there’s a little bit more to real estate investing than your cash-on-cash return. There’s tax deductions, there’s appreciation, there’s pay down and all that stuff. So, again, as someone that was there and not too long ago, I understand that cash flow is really important.
So, I think it’s important when you’re first starting out, for a newbie investor to aim for that, because it helps you just build up your amount of cash that you can then put into the next investment. And obviously, there’s an argument for focusing on appreciation first, too. But for me, as someone that did that at the very beginning of their portfolio career, I think that newbie investors are a little bit more prone to take that cash flow side of things.

David Greene: Okay. And probably also, I would say, people that don’t have as much cash, right? Cash flow is more important when you don’t have a lot of cash flow in other parts of your life. But maybe if you’re a little more financially successful or comfortable, that isn’t as important to you. And that’s typically why the wealthier people tend to look at appreciation. I’ll leave a little cherry on top of the sundae of step number one, by saying that the thing that a lot of people don’t consider is the time they’re going to put into the property and the energy they’re going to put into the property. So, that’s another thing.
If you have 90 cash flowing properties, what you’ve done is created another job. You’d have to manage 90 properties. And if you’re not managing it, you’re managing the person who’s managing it. So, there is a point of diminishing returns, where if you just continue chasing after the same type of property, it starts to have a negative effect on your life, and you lose the freedom that you’re trying to gain in the first place by getting these deals. Anything you want to add on that?

Rob Abasolo: Yeah, so I want to turn it back over to you, because this is something you and I have talked about quite a bit in this first deal. And obviously, you’re a big fan of appreciation. So, I’m curious just hearing it from you. When do you think an investor or what kind of investor should really be focusing on appreciation versus cash flow?

David Greene: The first thing I want to address is the belief that appreciation is not guaranteed at speculative, but cash flow is guaranteed. If you’re looking at it from that prism, no matter what I say, you’re just going to throw it off to the side and say, “That’s heresy.” Cash flow is not guaranteed.
If you are an investor who owns a lot of properties and you try to live off the cash flow, you know how difficult it is how many things go wrong that make cash flow wildly inconsiderate or inconsistent, I should say. And then the other thing I’ve noticed is my best cash flowing properties got there through appreciation of the rent. What it was renting for when I bought it is not what it’s renting for now, and that’s why I’m getting a lot more cash flow. So, you have to break yourself out of the cycle of looking at an investment like it’s a one­-year decision. It’s not, it’s a many year decision. And so, if you look at a property and how it’s going to perform over a long period of time, properties that appreciate more are going to make you more money.
Now, it’s not the concept of appreciation that I’m saying that you chase. It’s the area or the asset type that is going to increase in demand. If more people want the type of asset that you own, it will naturally appreciate. And in that sense, it’s not speculative. Buying a very reliable thing that everyone’s going to want is not a speculative move that you’re just, “I hope it appreciates, because if it doesn’t, I’m going to lose it.” You make sure you can afford it. You make sure it cash flows enough so that it can support you, but you don’t get rich off of cash flow. Making 100 or 200 bucks a unit is not going to make anybody wealthy. It’s just a lot of work.
So, I started off chasing after properties only looking at ROI just like everyone else did, because I was in a job and I wanted to have enough cash flow coming in that I could leave the job. It wasn’t the cash flow to make me wealthy. It was the cash flow to support me breaking that connection between needing that job. And once I did and I became a real estate agent, I didn’t have a consistent income that I always knew would be the same. I started to shift a little bit more into our long term investments, delaying gratification.
And then as I became more successful as a real estate agent, I built a team and then I built a loan company and some of the other businesses I have. I shifted even more into delaying gratification. So, maybe a better way than saying appreciation, which has a stigma of speculation, is how long can you delay gratification. If you’re going to get cash flow right off the bat, it’s going to stay that way for the rest of time you own the property, you won’t do as well as if the property becomes a little more desirable every year than it was the year before.

Rob Abasolo: 100%, man. For me, really the big lightbulb moment here was one of my first two Airbnb’s and short term rentals was the house that I bought in LA. I moved to LA. I bought this house, it was really expensive. It was $624,000. And I really spread thin when I bought that I probably shouldn’t have, but I was taking a bit of a risk because I was like, “I think this is going to work out.” So, this house had a little 279 square foot studio apartment under it. And I was like, “If I put this on Airbnb, I think I can make $2,000 to $3,000 a month.” And so, it was like a house hack, if you will. And then I was renting a guest room to my best friend and I was making 800 bucks a month off of that. And then I built a tiny house in my backyard. Now, I make $2,000, $3,000 a month on Airbnb with that as well.
So, I’ve added all that up. Since I’ve owned that house in the past three, four years, the cashflow on it has been between $180,000 to $200,000, which is awesome. That’s nothing to complain about. But when it hit me, I was like “Whoa, that property has doubled in value. It is now worth between $1.25 and $1.3 million.” So just that appreciation right there is three times more than I’ve made in cash flow. And that’s when I was like, “Oh, David, you’re making a lot of sense now, man.”

David Greene: Yeah. And here’s the part that you start to see when you get deeper into investing. When you take that appreciation, that’s three times more than the cash flow and you reinvest it into a different cash flow and property, you increase your cash flow by three times. That is way, way faster than if you were just to save up money and keep buying cash flowing properties to try to build it up to where your cash will be three times as much. So, I don’t like people looking at it like cash flow or appreciation. They work together, right?

Rob Abasolo: Sure.

David Greene: As you get more appreciation, you exchange it for more cash flow. When your cash flow starts to get stagnant because it’s gone up too much, you can then sell it and you can upgrade. This is how real estate is designed. So, typically, when you start off, you’re asking yourself, “Am I going to buy a property that skews more towards cash flow or skew more towards appreciation?” But your portfolio shouldn’t be determined by only one thing. So, that being said, let’s move on to number two, which might be the most important part of our entire process. Step two is choosing your location, that location that’s right for you individually. We’ve got quite a few steps here. So, I’m going to let you run with that, Rob. And you can just tap me in for backup when you think you need it.

Rob Abasolo: When I need to breathe a little bit. Sure thing, man. Well, okay, so obviously, the world is your oyster when you want to get started in Airbnb. I’m genuinely a believer that pretty much any market, you’ll find success in the short term rental industry. But when you’re starting out, obviously, it’s a little bit more daunting to just throw a dart at the US map, right, and just pick something that’s long distance. So, for me, what I typically preach to a lot of people is I want to see people starting out if it’s possible in their backyard. Now, I don’t necessarily mean literally in your backyard, although I did actually literally start in my backyard.
But what I mean by this is I want people to be two to three hours away from the actual place that they’re investing. And there are a couple reasons for that. Two to three hours away, when you’re at home and you’re working a full time job, that’s still enough for you to get to that property if something happens. If there’s something major or catastrophic, if there’s a fire, if there’s a roof leak, or whatever there is, you can feasibly get there in a night. And then also, during the weekend, you could also just go and visit and you can go and spruce things up. You can go and replace furniture. You can go and do touch up cleanups, all that stuff, right? So, I think there’s a lot of benefits to starting in your backyard, because you’re in close proximity.
So, I think it makes you feel better. It feels a little less risky that you can actually go and get there. Whereas I still think it’s far enough to where you’re not going to be dependent on having to go there. And I’ll give you an example of what I mean by this. When I first started on Airbnb, I was doing what’s called rental arbitrage and I lived 10 minutes away from the apartment that I was subleasing on Airbnb. And every time something small happened, I would go. I felt obliged to go, I felt like I had to go and take care of it. If it was battery, by the way, it was always batteries. But if those batteries dying in the remote, I would go and replace it. If it was the thermostat wasn’t working, I would go and click it up or down for the guests or whatever it is.
Then you just feel this certain obligation to say like, “Well, it’s not worth me hiring someone for 20 bucks off a TaskRabbit to go and figure this out.” But obviously, that’s not going to be as feasible. My other property in Joshua Tree, two and a half hours away from LA. It’s not really feasible or realistic for me to go and do that. It forces me to take the crutch away and let my team step in.

David Greene: Jordan Peterson has a quote that at one point I thought was offensive. But then as I listened to it more, it made more sense. And as a parent, you might understand this. He said, “Never let your kids do something that will make you dislike them.” So, his argument was that when your children are acting in a certain way that just really, really bothers you and you start to despise them, what we think we’re doing is loving our kids by holding it inside. But what happens is that resentment leaks out, they sense it and then they’re damaged by the fact that mom or dad does not like me. There must be something wrong with me. It’s a much more big problem that if you step in and say, “Stop banging that pot, I’m taking it away from you,” right?
That little momentary stigma that the kid feels from getting admonished is better than the resentment that flows out of, “I just can’t stand you because you keep doing this thing.” And I feel like that translates pretty nice into real estate, because what I’ve learned is that if I do any of the job that I don’t like, I take it out passive aggressively on real estate. I have a relationship with real estate, okay? So, if I have to do too many of the things that cause David to be burned out and take away my energy, which for me would be driving to the house to change out the batteries or the thermostat or dealing with like minutiae is what I would call them, those are just challenging for me.
I will subconsciously stop putting my time into real estate. I will stop respecting it, I will stop cherishing it, I will not honor that relationship like I should. Whereas if I say, “This is really bugging me, I need to find someone else to do it,” my relationship gets better. I treat it better. I’m happier with real estate, and then I put more into it. So, I just want to encourage everybody, if you like doing those things, keep doing them.
Brandon and I have gone back and forth, and the ultimate conclusion I came to is there certain things he likes doing in his house, right? He likes fixing stuff. If it energizes you, do it, because you’re going to want to buy more real estate. But if you don’t like doing that stuff like me, hire the person on TaskRabbit and let them do it. Because that energizes me and then I will buy more real estate.

Rob Abasolo: Man, that’s so true. And also, let me just say, I didn’t even have to tap you in, man. That was very seamless. That was a good back and forth there, but it’s so true, man. That first apartment was really a life changing apartment for me. It really paved the way for financial freedom, but I’ve got PTSD. I got PTSD from going there and my guest saying the remote’s not working. And I’m like, “Are you sure?” And they were like, “Yes, I’m sure.” And then I went, I was like, “Well, it seems to be working.” And they said, “Oh, I was using the other remote.” And I was like, “Yeah.” So, there’s so many moments like that that happened. And it’s because I live so close to it that I just felt beholden to that apartment.
But the moment I started really assembling my team and my Airbnb Avengers, as we’ll call it, when we’ll get to that later, but the moment I started doing that and not being so in the weeds of my business, that was the moment that I was like, “Oh, okay, so it’s not a grind, actually. It’s actually really quite fun. It’s a puzzle that you have to figure out.” So, I think, for me, being two to three hours away is that distance where you’re like, “Okay, I’m not going to drive there after work. I’m not going to go and fix that. I’m going to just find someone that can help me with that.” So that’s why I really dive headfirst into if you can be close, that’s great. But obviously, there are going to be instances where investing long distance makes sense.

David Greene: What are some of those instances? Let’s move on to number two there. When would you see that as making sense?

Rob Abasolo: Yeah. So, this would be in an instance where, for example, there are a lot of turnkey markets out there. And what I mean by turnkey is you buy the property and it already comes fully furnished. So, a couple examples of this would be the Smoky Mountains, Blue Ridge, Destin, a lot of beach places that are like very popular STR locations. Typically, people are selling those Airbnb’s as a turnkey rental. And so, really, you do have to fly in to go and make sure that the place is actually what you bought, and the furniture is nice. And you’ll have to go and spruce the place up and replace furniture here and there, but it’s so much easier.
And I mean, so much easier than buying an empty house in the middle of wherever, Chattanooga, Tennessee, driving out there, going, finding all the furniture places, setting it up. I mean, that’s a real hustle. That’s a real grind to go out and furnish a long distance unit. Because A, if you’re like me, I buy in areas where there are national parks, there aren’t necessarily furniture stores or anything like that around. So, it’s like very tough to find furniture for different Airbnb. So, I think if you’re looking to start long distance and you don’t necessarily want to start close to you, I would try to identify some of those turnkey markets where short term rentals are encouraged, they’re welcome, they feed the economy.
Then, like I said, the Smoky Mountains is a really great one that would do that. Another instance in which I might consider investing in a long distance place, especially if I’m just starting out, is if we have what we call boots on the ground. And that just would mean that you have some connection or someone that you know in the city that can help you out if stuff happens, right?
And so, this would mean if you have an aunt or an uncle that lives in the same city or a best friend or an old college roommate that you keep up with, anything like that, where you can say, “Hey, I’m thinking about opening up this Airbnb in Akron, Ohio, for example. I’ll need someone to help me occasionally I’ll try not to call you, but would you be interested in helping me out anytime that someone burns down my house or something like that?” And usually, if I have some connection like that, that immediately mitigates a lot of risk for me, because I know that I can call on someone if anything ever happens. So, I think that’s when you should start maybe considering doing the long distance thing, although it’s not particularly necessary.

David Greene: That’s actually in long distance real estate investing, that concept. I call it a competitive advantage, or sometimes we call it an unfair advantage. But it’s when you have a person local that has a skill set or at least that you can trust that gives you an advantage over the other people that are trying to buy in that market. When I wrote that book, a lot of people’s questions were, “How do I find the market that has the highest ROI? I just want to know the best one and I’ll figure it out from there.”
What I learned at least from the way I did it was that if you’re trying to find the best market, you end up just following the crowd and you’re always in a super competitive area that everybody else is trying to get into. I could go back over the 10 years I’ve been investing and remember when Phoenix was the hot market and then it moved into Memphis was the hot market and then Atlanta became the hot market and then it moved into Tennessee and Nashville. Everyone just followed the same. Huntsville, Alabama had its moment. Madison, Wisconsin had its moment Austin, Texas had its moment.
Now, South Florida is having its moment. It’s super challenging when you just throw yourself in the mix of every other investor, that’s all converging on these market like locusts at one time. Instead, what I recommend people do is find the market that you could be the most successful in and make it work there, instead of following the crowd. So, that’s definitely something I’d encourage people to do. Now, we also have four categories that we consider when looking into short term rentals. You want to go over those? You mentioned them briefly, but let’s cover them again before we move on.

Rob Abasolo: Yeah, let’s officially state the POV here. So, four categories here. And again, there’s no right or wrong here, but this is just a very concise way of explaining where in the country I’m looking at. It helps me locate, it sets some beginning parameters, right? So, number one is going to be national parks. Number two is going to be state parks. Number three is going to be eclectic towns. And number four is going to be vacation destinations. So, what I mean by all of this here would be national parks, I think we know what that is. It would be like your Grand Canyon, Smoky Mountains, Zion, Yosemite, all that stuff. State parks would be smaller, but they still receive a decent amount of visitation from the actual state itself. And then we get into eclectic towns.
And so, what I mean by eclectic towns is small towns that have some draw or some reason that people go to. So, if you think of places like outside of San Diego, there’s an area called Julian. A lot of people love going there, apple picking. They’ve got good pies. There’s just a draw. People love it. It’s an adorable little town, right? Waco in between Austin and Dallas, that’s in between two very big cities. It has been popularized by-

David Greene: Chip and Joanna Gaines. Yeah.

Rob Abasolo: Yeah, exactly. So, it’s a pitstop in between those two cities. Eureka Springs is another one that’s like there’s cute shops and everywhere. One shop is vintage Italian sodas, and another one’s like vintage candy, that stuff.

David Greene: Yeah, we’ve got a couple out here in California. I think Copperopolis is one. They have this old Western fake city where you can go in through swinging doors. And I remember as a kid, we’d go there and they’d be rock candy, and they had these fake horses you could sit on. So, there are people that do like to visit those places. I think like a little bonus, quick tip we should throw in here is look for places that kids want to go. As I grow, if I ever move out of real estate, what I will get into is either selling something involved with nostalgia or selling something that kids want, because I believe those are the two things that drive people to make decisions more than anything else.
When the first Transformers movie was shown, you might have been too young to remember that, but I remember seeing that big Transformer leg come down and be like, “Oh, my God, they are doing Transformers.” And I knew at that point, I would pay anything to go see it because of the nostalgia factor. And then the other one is kids. Kids just beat down their parent’s will just asking for the same thing over and over and over. And when you finally let a kid have what they want, everybody feels so good. That finding properties in areas near where kids want to visit. That’s why Disney World’s so popular, Disneyland, some of these things. So, I definitely think those are things to consider. Moving on, the next thing you have is a place that you would want to visit occasionally. Tell me more about why you think that’s a good factor.

Rob Abasolo: So, it’s very important to have some draw or something that you like about a market, A, because you have to go there. You’re going to have to go there and actually visit it at least once or twice, every couple of years, right? And so, you want to have a reason to go there. But ideally, for me, if you follow a lot of the trends and a lot of the investors in this space, a lot of them aren’t necessarily full time investors, they are just people that want a short term rental. Maybe they can’t justify the expense of a second home, right? And then they’ll go through a second home or vacation home loan and put down 10% to get into a property. And they’ll be there for maybe one or two months a year, but they can’t justify paying for the other 10 months, right?
And so, these are the types of investors that are really getting into the game right now. And so, if you’re buying a second home, because you want to use it, ideally, aside from the actual investment part of it, it is nice if you could actually go visit, stay, and enjoy it as a guest. I don’t do this enough admittedly. When I built my tiny house in Joshua Tree, I was like, “I’ve built the ultimate tiny house. I’m going to go and stay there all the time.” And I really only stayed there once or twice. It’s fully booked. I love it. It’s really great. I have kids now so a tiny house makes it a little bit tougher. But if I could, I would.
I have probably 14 Airbnb’s or so. There might be 15 right now, but we have 14. I’ve visited seven of them. The other seven, I still actually haven’t visited. They are long distance. But I have aspirations too. I’ve picked out locations that I was like, “I would like to go here one day,” because I hear good things and I want the option to go and enjoy my own property.

David Greene: Here’s another reason that I like that. I feel like it mitigates risk. Now, hear me out. If you’re buying a property solely for cash flow, you’re only buying a business, you’re putting a lot of pressure on that property and yourself to perform having maximum vacancy, and then you’re going to spend a lot of time trying to find the perfect property. Then when you find the right one, you’re going to have to spend a lot of money to fix it up. It’s just making your job hard the higher your expectations are, what you expect of that. I’m going back to the real estate relationships thing. If you have very high expectations of what you need from a partner, it’s going to be very difficult to find someone that can meet those needs.
If you’re a relatively stable person that just want someone to share life with, it’s not that much pressure on your partner, and they’re going to perform better, right? I don’t like putting a lot of pressure on real estate to change our lives, to meet all of our needs. And that’s when people have the problem when they’re saying, “I want to property, the 40% cash-on-cash return, 70% of ARV in gray day schools,” and they go through this list that they’re never going to find. If you’re finding a property that you want to use and then the fact you can rent it out at the same time is like… I can’t think of the word I’m trying to look at here, but basically handle some of the responsibility for your mortgage. There’s a lot less pressure that’s on you, right?
You’re going to buy it because you want to use it and then you’re going to have the mortgage offset by other people. So, it’s like a super cheap vacation home or maybe it even pays for itself, even if it just broke even. Over 30 years of it going up in value and you paying off that mortgage, you’re going to make a buttload of money, even if it never cash flowed. And so, I like maybe having at least one property your first property, being that vacation home. You can get 10% down if it’s a vacation home. You’re going to use it, you can have family events there. And then when you’re not using it, you can rent it out.
That’s my ultimate goal for what I’m doing for myself is to have probably 10 to 15 short term rentals throughout the country in all the places that I want to live. And I will just bounce around from place to place wherever I want to go. When I’m not using it, I rent it out. I mean, that’s one of the most beautiful things about the short term model is you have that flexibility. It’s hard when you try to take that model and force it to only be a cash flowing cow. That also gives you passive income. Would you agree?

Rob Abasolo: Oh, yeah, 100%. When I built my tiny house, I was like, “Hey, if I can just build this cool, tiny house and breakeven, hey, all good news over here, right?” But then it actually ended up being a cash cow and that was just a bonus for me. And I was like, “This is great. I get this house that I can enjoy, or theoretically I can enjoy. And it pays for itself and I make money on it.” But I agree. I think that if you’re getting into it and you just want to step into it, you want to de-risk it a bit. Buying it as a second home, where it breaks even, it’s still a great investment over 30 years. There’s no question about it.

David Greene: And you will develop the skills to get cash cows like what Rob and I are looking at now, but you can’t do that in your very first try. It just doesn’t make sense. You have to lower your own barrier to entry. All right, next one, we have proximity to you. We’ve covered that. I like this next one, availability of vendors. Can you briefly cover why having available vendors close to a short term rental is so important?

Rob Abasolo: Yes. So, you’re not going to be the one that’s actually necessarily managing it. I mean, there’s a couple of schools of thoughts here. I’m big into self-managing. So, let me clarify what I mean. The person that’s actually going to be managing your property for the most part is going to be your cleaner. They’re going to be the ones that are reporting back to you. They’re going to say, “Hey, Rob, your toilet wax ring is not good. It’s leaking. Your sink is leaking, your light bulbs are out,” whatever, right? So, they are effectively like a pseudo property manager, but you still need to be in a market where there are cleaners available. You need to be in a market that’s relatively populated.
That’s something that I look at quite a bit is like, “Can I find a handyman? Can I find a contractor? Can I find a pool service, a lawn service, a cleaner?” To me, this is so important, because these are the people that are going to be managing your house, maintaining it, making sure that it’s up to par. And if you have a tough time finding a cleaner or that person, it’s a really tough for you to ever actually run a business, because what’s going to happen whenever something breaks? You can’t fly there, right?

David Greene: There’s two components that I see to a business. One is the customers, and they have to be the focus. And that would be that your tenants that are going to rent it from you in this case. The other would be your employees. And that would be your handyman, your cleaners, your boots on the ground, people that are needed. You got to have both components, would you agree, to make a business work?

Rob Abasolo: Oh, yeah, especially in the short term rental space.

David Greene: Okay, awesome. So, the next one we have is boots on the ground. We’ve covered a little bit earlier as to why that helps having a competitive advantage. So, we’ve got five steps to go. I’m trying to get through here. I like your statement here of how competitive is the market. Rob, you and I look at this very frequently. Hey, how competitive is this market? We want to try to go where other people aren’t. I think I probably covered that a little bit earlier as well. Talking about how you don’t want to follow the flock. The next one would be year-over-year projections of the market. Can you share what you’re looking for and why we are looking for those things?

Rob Abasolo: So, this goes back to the cash flow versus appreciation conversation that we had earlier. But theoretically, it’s similar to what you’re saying with like long term investing. You want your rents to theoretically follow appreciation or you want to raise rents slowly over 30 years. Same thing is really going to be true for short term rentals. And I just want to make sure that year over year that I’m making more money. Now right now in 2022, it’s going to be a little tough to follow up 2020 and 2021 because of the COVID spikes that we had and all the travel surging, but theoretically, that’s going to be the case for us for the next couple of years. People are going to just be traveling more and more and more, because we’ve just realized as a nation that, oh, we miss traveling.
Let’s get back to the ancient art of migrating across the country, if you will. So, I want to see a property that I buy is going to make more money from a gross revenue standpoint, and there are a couple tools that you can use for this. I use the AirDNA has a little chart in there that will show you year over year, I think, over the past two years, how much money a certain property has made and how much it’s growing every single month. And so, that’s been a really helpful way for me to analyze properties.

David Greene: Beautiful, and we do look at that. It actually is very helpful, especially when we’re trying to take away to take two properties and make them apples to apples. I find that in my investing career, much of what I’m doing is that as I’m saying, “All right, we have all these options. How do we find a way to reduce all the variables and try to draw them down to where they have all these things in common?” And from that point, see which one stands out as the best. And that’s where some of those tools help. The last one that we have here under choosing your location is going to be seasonality. Can you tell me what you mean by that?

Rob Abasolo: Certain markets have highs and lows. A really good example of this would be a lot of destination markets, right? When I say vacation destinations, I was talking about things like beach towns, lake towns, ski towns, mountain towns, everything in between those, right? And so, if you look at a beach town, for example, one of the markets I was recently looking at was Destin. Destin is on fire basically from March to August, but then it really slows down pretty significantly, especially November through March for the most part.
And so, if you’re a new investor, seasonality is something that I really want you to keep in mind, because it happens all the time, where I’ll have a student buys a really great Airbnb that comes out, but they close in January in the Smoky Mountains, for example. And then they’re like, “Rob, the bookings aren’t coming. Did I make a bad investment? What do I do? What do I do?” And I’m like, “No, no, it’s fine. You just bought a place in the Smoky Mountains in January when no one is traveling to the Smoky Mountains.”
And so, I really encourage people to look at what the seasonality is and really predict how much they’re going to make every single month and say, “Okay, if January and February are slow months, let’s take advantage of that. Let’s use that as an opportunity to renovate our cabin or whatever we have it.” We’re actually doing that right now in Gatlinburg.
We shut down our listing for January, February, and March. And we’re just going to do all of our renovations now. I mean, we could have made some money in March, but not as much. As I said, “Well, hey, since it’s going to be a dead zone anyways, why don’t we go ahead and get in there remodel the kitchen, change out floors, paint everything?” So, my partner’s like, “Okay, sounds good.” And then that way, once the hot season comes.

David Greene: It’s going to be even hotter.

Rob Abasolo: Yeah, exactly. We’re going to make more money. So, I think that’s an important thing to keep in mind that just so you’re not stressing out when you’re not booking.

David Greene: Yes, two things I’ll add on that. It’s very similar in other businesses to have similar patterns. So, in my real estate sales business, spring and summer is what I call the Hunger Games, especially in the Bay Area. It is brutal. People are sacrificing their grandmothers to get into a property. It’s so, so hard to build and buy. So, we are all hands on deck. Every person that we have, we’re trying to keep this thing going and go as far as we can. Then wintertime comes and it becomes a much slower, much more manageable, we spend more time regenerating. That’s always where I work on improving the business. That’s where we get better systems, better training, better curriculum. I get most of my book writing done at that time.
I pour into the employees at that time, so that they are ready when springtime comes and summertime comes to be better. So, that’s a great business tip that you just shared. The other is when you’re buying a property that will have fluctuations and seasonality, it’s only a problem if you’re pulling out cash flow. This is actually a cash flow problem. And when I say cash flow, I’m not meaning the ROI on your return. I mean, literally, like a business, how cash flows in and out. Construction companies have this problem where they have profitable businesses, but at any given time, they might have all their cash out on a project and then they can’t pay their guys. They can’t be payrolled. This happens all the time.
Learning to manage your cash flow, money coming in and out of your bank account is crucial if you’re going to be in the short term rental game, because you will have seasons that are very slow and seasons that are red hot. What I find humans tend to do is take a red hot time and say, “That’s normal. That’s what I expect all the time.” And then when they have a normal month, they say, “Well, this is terrible. And things aren’t going well.” Not so. This is why when we evaluate short term rentals, we always use the metric of yearly revenue, not monthly revenue like a long term rental where the lease specifies the same amount, is paid every single month. So, be aware of that, and then seasonality won’t be a problem.
Okay, moving on to step three here, location is probably the most important one to start with and that’s why we spent so much time covering that, but this next one is important too. And this is strategy, and they’ve chosen their location. Now they want to find a strategy within that location. What are some of the things they should be looking at?

Rob Abasolo: Well, when you’re starting out, you really aren’t necessarily going to be the best manager of your money. And so, I think this is where we need to really get into the nitty gritty of cash flow. How do we want to spend that cash? Do we want to take a paycheck from this? Do we want to let it stack up? Do we want to reinvest it in? For a lot of new investors, I really do encourage most Airbnb investors not to spend their money for the first year, because it’s a learning process. And it’s the ebbs and flows of seasonality and you’re still figuring out how much a property is going to make.
And so, if for example, seasonality, if you’re not really attuned to this thing and you’re like, “Oh, hey, man, I just made 15 grand last month in Destin,” and then you spend it all in the next month, you don’t make any money, then now you still have to pay all of your bills and everything like that. So, I think you need to really start diving into, “How do you want to actually allot your money? Do you want to keep it invested anywhere? Do you want to keep it in your bank account? Do you want to have reserves?” What about you, Dave? Are you usually putting any reserves on any of the types of properties that you require?

David Greene: I started that way, then I got so many properties. Literally, the bookkeeping of trying to keep up with that cost more money than it was worth to do. So, I moved from a specific strategy of X amount of money for every property into a general principle. So, now the way that I have things set up is that all the cash flow from every property is going to go into the same account. And out of that account is where I make repairs on specific properties. And then throughout the year, I track which properties are profitable and which ones are not through the accounting. And I trim off the ones that aren’t doing well. And I 1031 or I sell a move into bigger areas.
And the ones that are doing well, I ask myself, “How can I make it do better?” So, you and I have talked about this many, many times. Hey, this property here would do this much money at this time if we first buy it. Let’s look into pursuing this one, make it profitable, keep buying. And then when we had a slow season, this is that pattern where you’re talking about, fluctuations. Let’s say that there’s nothing to buy, because everyone knows that’s going on right now. It’s hard to get deals, right? That’s when we put our time towards, “Well, let’s take what we already have and make it work better.” Where could we invest into it, rehab it, do the backyard, do some landscaping, add some fun things to it?
We talked about ideas of adding a car that someone can rent on tour when they go there. That’s where the creative stuff comes out? How do we make what we already have better? That’s how I run my portfolio. When it’s green light time to buy, that’s the most important thing is you do everything you can to put stuff in contract and grow. And when you can’t do that, just like with my real estate team, that’s where I focus on improving the efficiency of my agents, I do the same thing with my properties.

Rob Abasolo: That makes sense, because all of that basically comes to time, right? It’s all time management to get into that, which I think is actually our next point here. And it’s like, how much time can you actually commit to your short term rental? And I think this is a question that you really have to decide pretty early on. Because if you’re working a really busy job and like in my past career, advertising, it’s very common to work 60-, 70-, 80-hour weeks. If you’re doing that, you probably don’t want to go buy a farm on 40 acres that has a couple campsites, right?
This is a deal that you and I talked about. There’s a house that had eight different cabins on it. It was pumping out a net of $200, $250K. You and I had to have the hard conversation of, “Can we actually give the time to this property? Even though it is a cash cow, can we actually manage eight units at once?” And I think we decided, let’s try to find an equally expensive property, maybe it’ll be a little bit less of a return, but we’ll spend less time in the weeds of that.

David Greene: That’s a really good example. I thought about that earlier, when you were talking on the same topic is if you’re only looking at ROI, how much money will it generate? What’s my return going to be? The decision becomes very easy. You buy that eight-cabin property that’s way off in the middle of nowhere and it’s very hard to find vendors. It’s very hard to get boots on the ground, the cleaners are going to be really difficult, getting someone to go out there and look at the septic tanks, all of that stuff. You don’t think about it. You’re just like, “Oh, that’s the highest cash-on-cash return. All systems go, let’s do it.”
And then you get married to that property and you’re unhappy with your relationship with real estate, because it’s not treating you very well. It’s demanding, it’s nagging, constantly fix me, fix me, fix me, pay attention to me, I need something. And you’re like, “Why did I ever do this? I hate it.” That’s not what you want, right? So, we just had the wisdom to look at that and weigh all the factors and recognize, “Hey, if we spent less time but get a smaller return somewhere else, we’ll use that time to make much more money than it would have been spent fixing all the issues that are going to come from that one property.”

Rob Abasolo: Yeah, man, I brought you that property. And basically, you shook me and you’re like, “Rob, your time is worth more, man.” And I was like, “You’re right.”

David Greene: We did have a moment, didn’t we? I have spoken to you like with Goodwill Hunting. Remember that? The Matt Damon and Robin Williams. It’s not your fault. It’s not your fault. I am worth more than that. That was a good talk. I appreciate you sharing that.

Rob Abasolo: And then we put it on YouTube and then recite it at lunch. We’ve rehearsed it, man. It’s great. Aside from that, I mean, that’s on the extreme side of it. But I do want people to really sit down and say, “All right, how much time am I willing to put into managing a property?” Because if you say, “I don’t have any time,” it’s really going to dictate your strategy, because that means that you then have to go and give it to a property manager. But if you have 5 to 10 hours a week, then it’s very feasible for you to get in and manage it yourself.

David Greene: And there was a time that people got used to, 2010 through 2016, 2017 or so, where you can just buy a property that was a long term rental. And one of the benefits of that was they take less time. Property manager runs it, you answer a couple emails. There’s not much to do once it’s fixed. And so, the returns were lower than what you could get, but there wasn’t much time. And now if you don’t have time, it’s harder to make money in real estate right now, because many of the asset classes that still work will take more of your time. Okay, next one up, how much risk are you comfortable with? Stuff like regulations and HOAs, what do you have to say about that?

Rob Abasolo: This is going to really depend person to person. I typically am a little bit more of a risky fella, if you will. But there are things to consider. HOAs, for me, aren’t necessarily deal breakers, but they can be. I mean, 90% of the time, they’re a deal breaker. If I go on to Redfin or Zillow and I see that, it’s got a $15 per month HOA, that’s not really going to scare me quite as much as an HOA that’s like $150 or $300 a month, because I know that probably if it’s 15 bucks a month, probably they’re maintaining-

David Greene: You don’t have as much control or power over the community if they’re only bringing in that.

Rob Abasolo: So that’s where I’m like placing my focus is like, “How active is this HOA? Are there actual bylaws?” For the most part, it does kill a deal for me, but I’ve made exceptions to this many times. And then obviously, regulatory risk is something that’s like, I think, the biggest risk in most short term rentals, is the city friendly? Is it receptive to short term rentals? Does it have outdated laws? Does it have laws that outlaw short term rentals that aren’t actually being enforced? That’s something that I’ll look at too and say, “Okay, well, they were written in the ’90s. They weren’t really thinking of Airbnb.”
And so, I might still make that decision. But for the most part, for people starting out, I have a very diversified portfolio. And so, that’s why when it comes to seasonality or regulation, I don’t really have too much risk, because I have such a well-balanced… I have a little bit of everything. Whereas if you’re first starting out, it’s your first deal. You don’t really want to get into anything risky, like an HOA or regulation or seasonality, because you don’t really have a portfolio to back you up whenever stuff starts to dip.

David Greene: Very good point. Okay, how about the next thing? How fast should someone scale? How does that factor into strategy?

Rob Abasolo: That will mostly depend on how fast they want to quit, which all of us obviously, always want to quit our 9:00 to 5:00, but I think it’s a marathon, not a sprint. It feels like a sprint for anyone getting into it. I mean, setting up your first Airbnb, it can be a lot of work, right? You got to go, you got to get it pre-approved. You got to get an offer in. You got to get accepted, inspections, furnished, automations, hire your team. So, it’s very common for a lot of people to do that. We get that adrenaline rush. And we’re like, “Yeah, let’s do it again and again and again. Hurt me.” But for the most part, I always tell people to slow down a little bit.

David Greene: That was me, man. I was just a bird phenom for a while there, right? Every day was cold, just bird constantly. And then one day, I woke up. And I was like, “I have adopted 55 problem cats from a shelter. And I’m trying to control them all.”

Rob Abasolo: I know, I see them in your background on there. I think you want to scale up according to how quickly you can save up any reserve.

David Greene: Very good point.

Rob Abasolo: I tell people, six months is a really nice padding that you can have for reserves. If you can do that and save up your down payment, it’s probably time to move on to the next one.

David Greene: I have a video on my YouTube where I talk about portfolio risk management that would be really good to check out here with what I do to scale fast but still be conservative. Okay, last one would be remodel pros and cons. What do you have for us there?

Rob Abasolo: Well, I pretty much go into any specific Airbnb purchase or short term rental purchase, hopefully not having to do too much remodeling. I’m very picky about this. And when I was first starting out, I was all about the value adds and I was all about like, “Yeah, let’s fix everything.” But now for the most part, unless it’s going to add significantly to the value like you and I have looked at a couple properties, that would be a burst or write a burn into an STR. And that to me would make sense if it’s going to add significant amount of money to the ADR, the average daily rate. But for the most part, when I’m looking at a property, there are only a few things that I’m actually willing to do.
And honestly, I probably don’t even I would rather just move on. But I’m willing to paint the interior of a house and the exterior of a house. Well, no, I’m willing to do that. I’m willing to change the floors in the house. And I’m willing to possibly paint the cabinets of a kitchen and put new hardware. But for the most part, that’s it and then maybe doorknobs. If I want to change doorknobs, I might do something like that. But that’s all I really want to do on a short term rental, because it’s already hard enough getting the short term rental setup and furnished and automated and all your teams hired out.
But to have to manage a remodel on top of that is not something that I want to do as much these days. Although I do have a team that does assist me with that stuff. So, if it’s something that’s like sub $5,000 to $10,000 as a remodel, I’m willing to do it.

David Greene: What’s your logic or rationale behind why you don’t want a big remodel?

Rob Abasolo: Just the time needed because I’d rather move on to a turnkey property that I can get functioning as quickly as possible.

David Greene: I’ll give you an example of how this works out in real life, because this is a good point. I bought a place I’ve talked about earlier, the East Bay, almost 1.9 million. And it’s a 5,000 square foot house that’s going to basically be broken into smaller units and rented out. During the remodel, it’s a little over $10,000 a month that I have to pay to carry that property. The permit process was not started when I was told that it was going to be started. So, we’re three months behind. So, take $30,000 plus, whatever, the four to five months of rehab is going to be, plus the actual cost of rehab itself. It will be years before the cash flow ever recovers, many years for that initial money that I spent up front.
Now, if this was a property bought as a short term rental to be a cash flowing cow, that would be stupid, but it already just doesn’t work. I made a mistake. In this case, I’m looking to refinance it after some of the work is done. And that’s how I get my cash back out. But if it’s not a burster, like what we talked about, this is why Rob is saying, “I don’t want to do a big rehab,” because the time it takes to do it as well as the money putting in is going to steal money from you that you would have been generating when you were renting it out to different people. So, very good point there.

Rob Abasolo: If you could add a treehouse or some feature like a hot tub or a treehouse or a crow’s nest around a tree.

David Greene: In my case, I’m converting a garage into 2,000 extra square feet of living space. That’s going to make the property worth quite a bit more, right?

Rob Abasolo: That would make a big difference on Airbnb, extra rooms. You can now hold… How many people can fit in that? … 10 people.

David Greene: It’ll be a ton, but what I was more saying is when I go to refinance it, that extra 2,000 square feet is going to up the value of the property. I will get that money back. Now I don’t have to wait however many years it takes to make back the 200,000, 250,000 I lost, I mean to get that back on the refinance. And now the time can start, the clock can start from that point versus if you’re not able to do that and you’re just making a house look prettier and it’s already at the top of its value. You’re starting from way behind if you try to do a big remodel on a short term rental, and that’s one of the reasons people can sell them for a premium if they’re already ready to go. And it still makes sense for the buyer to pay that much money.
All right, I hope you have enjoyed this show so far on how to buy your first short term rental property. Now, Rob and I got into so much detail that we actually ran out of time. And rather than trying to make you listen to a two-hour podcast, we are going to air part two a couple of days from now.
Now, what we went into today was some pretty important things that you want to start with if you’re looking at getting your property, the strengths of different markets, how to choose the location, which is really important, and then what strategy you’re going to tackle going forward. In the next show, we are going to talk about picking the property type, choosing the timeline that you want to operate on both if you’re going to be in a partnership or with the property itself, and then a bonus step that we didn’t know we were going to give you or you didn’t know we were going to give you I should say, how to divvy up the work involved and what work to expect.
Now that’s not going to be the end of this series. We’re actually going to have two more episodes at least where we dive even deeper into how to analyze these properties once you’ve got an individual property in mind and then how to manage the operations of a property once you got it. So, this is going to be pretty close to a short term rental workshop. You’re getting a lot of information that’s all free. So, I hope you’ve liked it. Please let me know in the comments what you think so far and keep an eye out for the next show to air in a couple days. Rob, anything you want to leave people with before we get out of here?

Rob Abasolo: Man, that was fun. That’s the river flow. I thought when you give me a mic and some topics on Airbnb, you know I’m going to talk a lot. So, hopefully, it wasn’t too rambley. But then if people want to hear from you, if they want to be enlightened on the social medias, when it comes to anything, Airbnb, how can people find you, my friend?

David Greene: They can find me @DavidGreen24. I’m actually in the process of hiring a social media manager, because everyone has told me how bad it is. So, keep an eye out for that. It’s going to be better pretty soon once we find the person we’re going to hire.

Rob Abasolo: I’ll take it.

David Greene: I should have just handed you the reins. That’s a great point. But yeah, that’s where they can find me and then keep an eye out because I’ve got some changes that are coming. If they want to know what I’m doing, I actually have a text letter that we’re going to be putting out every single week that tells people. So, if they go to DGTlive/textletter, they can sign up for that. Just like Brandon Turner has one and you can see what he’s up to, what’s going on in his world, they can follow me there. How about you? If people want to learn more about this amazing insight you shared, where can they find out?

Rob Abasolo: There’s always the YouTubes. I just actually released a video called, “This is exactly how much your short term rental is going to make,” which will give you a little bit of an insight of what we’re going to be talking about a couple episodes from now when we actually deep dive into the nuts and bolts of analyzing a short term rental. You can always find me on Instagram, @robuilt and Tik Tok, @robuilt.

David Greene: All right. Well, thank you very much for joining me. I could not do this without you. And let me just say, I don’t think I could have picked a better partner. I am very happy and proud that you and I are going to be looking at this together and that we get to share our experience with the masses so that they can learn from it too.

Rob Abasolo: I won’t let you down, cap.

David Greene: Appreciate that. This is David Greene for Rob won’t let me down Abasolo, signing out.

David:
This is the BiggerPockets Podcast Show 580.

Daren:
Foreclosures are actually providing almost a refurbishing of housing inventory. And again, it’s a small piece it’s not going to solve the affordable housing issue that we have or the housing supply issues completely. But it’s one piece of the puzzle that is taking these properties and putting them back into the market.

David:
What’s going on everyone. It is David Greene, your host of the BiggerPockets Podcast here today with my amazing, awesome and fun co-host Dave Meyer. If you are here because you want to find financial freedom to real estate, you my friend are in the right place. BiggerPockets is a community of over two million members that are all on the same journey as you. They want to improve their lives, get back freedom to live life the way that they would like and build wealth through real estate. We help you by bringing on stories of other people that have done the same thing. People that are experts in the areas of real estate investing that would benefit you, people that made mistakes so that you can avoid them. And guests like today, where we have Daren Blomquist, a VP of marketing and economics for Auction.com, who is a foreclosure expert.
So Daren spends the majority of his day looking at data of how many foreclosures are hitting the market, and then trying to connect buyers of those foreclosures with the inventory that’s being released. So Dave and I get into some pretty deep information about how many properties are going to foreclosure, what happens once they get there? If you want to buy those, what you need to do as well as what we think is going to happen in the future. So this was a fascinating conversation. Make sure you stay all the way to the end because we give a take [inaudible 00:01:45] that you don’t hear very often that has to do with the psychology of human beings that are all sitting in the seats that we’re sitting in and how it tends to move back and forth very strongly, depending on what the masses are doing and how you can capitalize on that to build your wealth. Dave, so glad you’re here today. What were some of your favorite parts of today’s interview?

Dave:
Oh, thank you so much for being here. I’m glad to be back. And I think the favorite part was what you talked about. You just said, it’s so interesting because I’m person, I’m not an economist, but I do read a lot about economics and look at a lot of data. And while data is super helpful in decision making, there is this element of psychology that you really have to take into account and you have to factor in in doing your research, and you and Daren both talk about that really well at the end of the show. But I also just think this topic is something I’ve wanted to dive into for quite a while, because there is a lot of data about it. I’ve looked at it a lot myself and I wanted to get an expert’s opinion on whether foreclosures are going to cause either a crash or maybe they’re going to help the housing market because there’s going to be more inventory. And Daren was great and provides all that information. So everyone’s going to want to stick around for this.

David:
Great point.

Dave:
So the interview with Daren is great, but David, I also have a surprise segment for you coming up before that interview and it’s going to be really fun. We’re going to talk about some news, we’re going to talk about major headlines and I actually have a pretty big announcement so everyone’s going to want to pay attention to this first segment we’re about to do.

David:
All right. Today’s quick tip is follow us on YouTube at BiggerPockets. There’s a lot of content we’re making on YouTube that isn’t only being shown on the podcast. So Dave’s got a channel he puts a lot of information. I have a channel for BiggerPockets, I do more videos. There’s a lot of different people on there, so if you’re needing more real estate information and there isn’t a new podcast to listen to go check us out there. Here’s what’s even better, you can leave us a comment on YouTube and tell us what you think. So we’re doing shows like this today because we’ve committed to going deeper and giving more factual and specific information on literal topics in real estate.
So today would be the foreclosure game. We want to hear what you want to hear more from us about. So tell us what topics you’d like us to cover, we will put a show together for you, we love that. And then also don’t forget to leave us a comment on iTunes. We still check that, that still really matters as far as how popular the podcast becomes. And we want this information to get to as many people as possible. So please leave us a rating and review on iTunes, leave us comments on YouTube, tell us what you like to see more of and we will get to it. Dave, any last words before you hit me with these surprise questions that you’ve got?

Dave:
No, I’m excited to bring on my surprise segment. All right. So today, David, first of all, I love that you’re just letting me take over the show and have no idea what I’m about to propose to you. But what I’d like to start with is a new quiz game, I like to call it news or noise. And basically what I’m going to do is read some recent headlines from the world of real estate investing and get your opinion on whether this headline is in fact news or if it’s noise. And not that you’re not great on your own, but I’ve also brought in some extra firepower for this game. We have Mr. Henry Washington and Mr. Rob Abasolo joining us today. What’s up guys?

Rob:
How’s it going?

Henry:
What’s up buddy?

Dave:
Awesome. Thank you guys so much for joining us here. I feel like we’ve got the all star team and for our first headline Redfin released data this past week showing that a record 32.4% of their users looked to move to a different metro area in January. This is an all time high and represents a 25% increase in people who are looking to move over Q1 of 2020 right before the pandemic. So Henry let’s start with you, is this in fact news or is it noise?

Henry:
Oh man, this is news. The world is changing with the pandemic forcing the world to get comfortable with virtual working, with virtual learning. You don’t just have people with jobs that can relocate to areas that they maybe feel like are more affordable because the housing prices are increasing across the country. And so you’ve got people moving to areas where they feel like they can afford more because they know they can continue to work at their current job. You’ve also got students moving and I just think this freedom of where you work is going to continue. And I don’t see housing prices coming down anytime soon. So this is absolutely news, it’s going to continue to happen. It’s the new norm for right now.

Dave:
All right, David, I saw you nodding along there. What is your thoughts? Is this news or noise, and what are some of the implications of this?

David:
Well, this is absolutely news. It’s just not news to me because as a realtor, I’m watching this happen constantly. I would say that I think it’s probably overall healthy for our country to have a variation in what different states can offer. This is just my personal opinion, I don’t want to be speaking for anybody else, but there’s obviously going to be a difference of opinion in how things should be run politically. And when the federal government tries to make every state work the same, if they’re going against what the individual wants to see, they’re going to be very frustrated. If they become unpatriotic, then it becomes negative and bitter. But if you have a state that will have a set of rules or be governed politically according to what you like, and then other states that you don’t, you have freedom of choice.
You can go to the state that does things the way you like things to be done. Like Dave, you’re an Amsterdam. It’s notoriously known for not having laws when it comes to the entertainment industry, so to speak. So it draws people that are looking for that, and I’m not trying to imply that that’s why you’re there. It’s not a big rich party. I just think Amsterdam’s a really good example of that. If you’re super conservative, you don’t want to be around anything like that, you go to Singapore. If you’re looking for a little bit more of a party, you go to Amsterdam, it’s nice to have choices. So I think what we’re seeing is people are recognizing, like Henry said, I can move. I’m not tethered to my area because of my job.
Maybe my family could keep me tethered and as kids are moving out of the house and people are retiring, they’re saying, “Hey, I want to be in this type of political environment instead of that type, I want less sales taxes on me or state income taxes on me.” And other people are saying, “No, I like high state income taxes because they pay for programs that I like to support and that’s what I enjoy doing.” So I think what we’re seeing right now is this is how people would have been acting all along. But some of the restrictions that stopped it have been removed, like what Henry mentioned. And I think as an investor, it is so important to pay attention to what we’re talking about because I am specifically going to those areas as long distance investing that I believe more people or wealthier people are going to be moving to and I’m trying to buy properties in those areas before they get there.

Dave:
All right. We’ve got two for news. Rob, are you going to agree with everyone? And I’m curious as well, I’m going to throw an extra bonus question for you.

Rob:
Ooh. A curve ball.

Dave:
Yeah. I got to test you early. Is this going to be a long term trend or do you think this is just a blip after the pandemic?

Rob:
Okay. Let’s do this thing. News, it’s definitely news. Dave, I’ve moved three times in the last year. Literally-

Dave:
You’re contributing to half of this statistic, Rob.

Rob:
I am the statistic. I moved from Los Angeles to Tennessee to pursue building a tiny house village out there. I lived there for a year, then we decided, “Hey, we miss home. Let’s go back to LA.” We lived there for a month, and then we were like, “Hey, you know what? Let’s move to Texas.” And we’re currently in Texas at the moment. So I don’t know when we’re going to move again or if we’re going to move again. But to answer your question about if this is temporary or permanent, I think it’s permanent. I think it’s here to stay. You have to really consider the culture shift in the paradigm here. For a long time, all we knew was working in an office 9:00 to 5:00 and this is so common with so many different things out there. So let’s just take taxi cabs, for example.
Our whole life, we thought taxis were our only option and they were. And then Uber came around and people could then hire a taxi on demand, and now Uber is the new taxi. For a long time, we all thought long term rentals were the way to go. And then this whole thing called Airbnb came by and now that’s a whole new shift in the real estate market. But on top of that as a consumer, we thought hotels were our only option because for many, many years they were. Then Airbnb comes along and now people say, “I don’t want to stay in a little creaky, old nasty hotel. I want to go stay in a cool Airbnb where I can split really big house with my family for half the price.”
I think this is the exact same way with office and corporate culture where we thought we had to stay in the office 9:00 to 5:00 our whole life and be on the grind and work 40 years and then retire at 65. But I think what the pandemic has given light to is that things are important in a different way, we give importance to certain aspect to different things. So before money and security was something that we were all so married to, but I think the pandemic has helped a lot of people realize that, “Yeah, you know what? Maybe I don’t want to be working in the [inaudible 00:11:09]. Maybe I want to be closer to my family and if that means I make a little less, then hey, I’ll just move to a different city where I make a little less so I can be closer to that family.” So I think this is just the very beginning of a very huge culture shift in America. Thanks for coming to my Ted talk.

Dave:
I thought I was going to throw you off with that curve ball, but you nailed that one. So I’ll actually just come back to you with the second headline and we’ll do this one a little bit quicker, otherwise we’re going to get in trouble. But number two headline here is Zillow has emerged from its post iBuying shame, hiatus, whatever they call it, and is now claiming to be building a super app where home buyers can manage the entire home purchasing process in one place. Rob, is this news or noise?

Rob:
So can I get some clarification here. When you say noise, does this mean this is not truth you just made this headline up or?

Dave:
No, this isn’t two truths and a lie. No.

Rob:
Okay. Just making sure-

Dave:
Is this something that real estate investors should be paying attention to?

Rob:
Got it. I’m going to go noise on this. I think Zillow’s best interests and effective every capacity to try to come up with this really big thing that’s going to save them from this giant hole that they dug themselves into. Did they make an app? Maybe, but calling it the super app that’s going to help you do everything from start to finish, doesn’t necessarily mean it’s true or that it’s going to be really that super. So I’m going to go noise on this one.

Dave:
All right. David, what do you got?

David:
I think Rob nailed it. I think in general, every time somebody tries to convince you that things are easier than they are, they’re making money and you’re not. So this has been very common for a long time. Zillow will tell the people who are cruising on their website, “Hey, give us your information and we’ll get you in touch with an agent.” And then they go sell that information to five different agents and your phone blows up by these people that you never really wanted to talk to in the first place that paid money like $200 for that lead. And so they’re all going to just call you forever.
And I think Redfin had a model where they’re like, “Hey, we’ll credit you back to commission.” And what ends up happening is that agent basically makes no money and so their argument was well, every agent’s the same. So you might as well get your commission back and then you end up getting an agent that’s not as good or doesn’t understand your needs as much. And so it wasn’t true that all agents were the same. Side note, if you want to get a good agent, use BiggerPockets Agent Finder and find an agent that actually is on BiggerPockets and understands what we’re doing.
So this new idea that, hey, we can solve all the mystery and complexity of real estate investing with one app that you could just get in and get out and buy a house is just nonsense. It won’t work. Those of us that do invest in real estate know that it takes a massive commitment. That’s why we’re here on this podcast several times a week, putting out information because that’s how important it all is. So I would hope that it might be useful, it might be helpful in accomplishing some of the elements of a real estate transaction. I can’t say that it wouldn’t be, I haven’t seen the app yet. And so I would look at it from that perspective, but I wouldn’t assume that buying a house is ever going to be something that you just, it’s like buying groceries at the store. It’s never going to work that way.

Dave:
Yeah. All right. I’ll reserve my opinion, but Henry what’s yours?

Henry:
I wish I had some maracas or a tambourine, something to make lots of noise. This is total noise. You think about Zillow-

Rob:
Okay man, I’ll be your maraca.

Henry:
That was awesome. No that’s noise, man. Look, Zillow’s a publicly traded company and they’ve had a rough year. They’re down 66%, their stock price is down 66% over the last year. And so they’ve got to try to do something to get that stock price up. They are trying to stay face in the eyes of their shareholders I’m sure. Now are they great at what they do? Yeah, they’re a big real estate information, even some would say technology company. And so sure they have the power to do great things. Is this that? No. To me, the sounds like they’re trying to rally the people behind them, get that stock price up a little bit, get some more momentum. And so nah, noise to me.

Dave:
All right. No Zillow boosters in the group today.

David:
Dave, can you give us a quick take on if you think this is news or, you may have a contrarian opinion I’m concerned.

Dave:
No. I think it’s the same thing that Henry was saying. I think that it’s a publicity stunt. What does a super app even mean? Wouldn’t they already have been trying to do this for years? It doesn’t sound like they’re actually doing anything differently, they’re just rebranding their app.

David:
That’s a very good point.

Rob:
Is Zillow not the super app? It’s like they’re going to make a whole nother thing that’s different?

Dave:
Yeah. Well, we’ll see what happens.

David:
Maybe we should all do that. Can we rebrand ourselves? I’m going to now be Super Dave, Super Rob, Hammer and Henry

Rob:
Super Henry, Hammer and Henry.

Dave:
Hopefully you’ll get as much press as Zillow did for this.

David:
Yes.

Dave:
But for our last headline, I have a very special one and it reads, the BiggerPockets Real Estate Podcast is very excited to announce that Rob Abasolo will be appearing on the podcast weekly as the new regular co-host of the podcast alongside David Greene. And in further excellent news, Henry Washington will be continuing to be an important part of the show appearing regularly as a guest host alongside David and Rob. Rob I’ll just start with you, is this news or noise?

Rob:
This is news. Oh my goodness, I can’t believe that we’re here. It feels like just yesterday I was making my very first appearance as a guest on the BiggerPockets Podcast. And six months later here I am getting to share the mic with one of my real estate heroes here, David Greene, and Henry you’re one of my heroes too, man. So I’m honored to be here-

Henry:
[inaudible 00:17:01] Henry there I did.

Rob:
I’m doing my best here guys. And I’m going to do my best here to share all the knowledge that I have to the world and hopefully make real estate just a little bit more approachable for everyone looking to get started in this journey.

Dave:
Awesome. Henry, what are your thoughts?

Henry:
Hey man, this is absolutely news and I want to congratulate Rob. That’s super awesome, this is so much fun. And I just can’t appreciate you guys enough for even providing this opportunity for us. I have been this BiggerPockets follower for a long time. And so right when I started investing, I put on my vision board a picture of the old podcast tile that had David’s face and Josh’s face and Brandon’s face. And then the BiggerPockets logo, because I had a goal to try to become a guest on the show and they gave me that opportunity. My second year in real estate, I had done 30 deals and they were like, “Well, come on the show and share your story.” And I was just so taken aback by that because I didn’t think what I was doing was that special.
And they saw something in me that I didn’t even see at the time and provided me this opportunity to share on the platform that inspired me so much. And that was only my second podcast interview that I had ever done. And so them believing in me and giving me that opportunity. And what’s funny was I just never took that off of my vision board, it’s still there today. And then all of a sudden you look back a couple of years later and I’m getting this opportunity to become this reoccurring host and share my journey and my insights and knowledge and information with people and hopefully inspire even more people to get in this game of real estate and to have a heart for people as they do it. So I couldn’t be more thrilled. This is absolutely news to me, and thank you so much for the opportunity.

Rob:
Your sound bite was way cooler than mine. Did you rehearse that in front of a mirror, what the heck?

Dave:
Rob, I’d give you another crack at it, but I think they’re going to tell me that this is already going too long. But it’s big news, I think it’s worthwhile. This is really exciting guys and both extremely well deserved from you, but let’s hear from the big honcho, the big cheese. David, what’s your thoughts on this?

David:
I am very excited to be having some backup firepower here. In all seriousness, hosting a podcast like this comes with a lot of weight. There’s a lot of people that listen to us and make decisions based on the information and the guidance and the influence that we have. And so I feel very good that Henry and Rob are two people who will be throwing in their two cents, because I don’t believe that they’re going to lead people astray. I think that they both run sound businesses, they’re both men of integrity. That’s very, very important when you’re picking who we’re going to be putting up there as giving advice. So I was very worried about this decision because it could have an amazing consequence or it could have a terrible consequence. Either way, it’s going to be big. And I think we got the right people, so I’m very excited. Welcome to the family boys.

Dave:
Welcome, this is awesome.

Rob:
Happy to be here. Thanks.

Henry:
Thank you.

Dave:
And before we go, before we end this segment, I do have a couple other pieces of news that are very exciting as well. First and foremost, I will continue to join the show monthly to co-host the Bigger News Show, so of course I think that’s exciting. And if you like the Bigger News Show, which I hope you are, because you’re listening to it right now and you like this news or noise segment, we have a lot more of this coming in the near future. We’re actually developing an entirely new podcast designed to help you understand today’s changing market dynamics and help you make informed investing decisions on your journey to financial freedom.
I actually am going to be the host, Henry is going to be super involved and we have a bunch of other experts who are going to be joining that show as well. So make sure to stay tuned for more announcements as to when this is launching, it’s going to be a lot of fun. So that was a lot of announcements, but I’m done now. So Henry and Rob, unfortunately I have to kick you out, although this was a lot of fun. Super excited for you guys. You guys have done an incredible job and really deserve this. And with that, David, I think you and I are on to interview Daren.

David:
Yes. I can’t wait to be doing this show with you. This is one of my favorite projects that we’re doing, the Bigger News Show. And Dave, here’s what I’d like to say to you because I only got to talk to Henry and Rob, Brandon and I may have had history, but you and I have chemistry.

Dave:
Ooh, I’m going to blush. Can you guys see this right now? I know, I got little chills right there. That’s quite a compliment, but David, I do love hosting this show. I think it’s so much fun and we’re getting such a good reaction to this and I don’t know, hanging out with all you guys is something I look forward to every single month. So I’m glad that we’re all going to be doing it together.

David:
Me too. This is awesome. Guys, welcome and I will see you soon.

Dave:
All right. Well that was a lot of fun. I’m very honored that I got to make that very big announcement and excited for you, but we also have a great show today. In addition to this announcement, we now have a great guest who’s going to come on and talk all about the state of foreclosure. So if you’re like me and you’ve heard a lot of news out there about foreclosures and what’s coming down the pike, you’re going to want to stay tuned to this one, because Daren’s going to drop some really good information for us. With that, let’s welcome Daren Blomquist who is the vice president of market economics at Auction.com. All right, Daren, thank you so much for being here. Before we jump into the meat of all the data and information I know you have in store for us, can you just tell people really quickly what it is that you do, what do you spend your time looking into, the type of research you’re up to at Auction.com?

Daren:
Yeah, absolutely. I’m vice president of market economics here at Auction.com. So what I spend my time doing each day, I spend lot of time just in the data, in our own data. We have a rich data set of folks coming and bidding on properties on our platform. So as you can imagine, that’s a pretty rich data set almost real time. And then also just looking into a lot of other data that we’ll talk about today, I think, and trying to figure out what that means for Auction.com as well as for our sellers, which are the banks and the servicers and the lenders who are selling these properties as well as our buyers, those are probably more aligned with your audience, folks who are looking to buy these foreclosure properties. And so what’s coming down the pike for our company, for our buyers and sellers is a lot of what I spend my time doing and it’s really fun.

Dave:
Great. Well, thank you so much for being here. I’m sure our audience is going to be super interested in learning all the things that you have to share with us. One of the things that I’m really excited to talk to you about is just foreclosure volume. And there’s just been this narrative in the real estate media recently, or if you watch YouTube a lot about a foreclosure crash and people have all this fear because there has been a moratorium on foreclosures. And once that has been lifted, is that going to cause a huge ripple through the whole housing market? And I want to get into all of that first, but before we do, could you just share with everyone a little bit about the history of foreclosures. Probably over the last 20 years, what happened in the great recession and relatively where are we today compared to everything that happened back then?

Daren:
Yes, absolutely. Especially right now and during the pandemic, that’s a lot of what you talked about first there, which is, is there going to be this huge wave of foreclosures is a lot of what I am looking at and trying to answer for because that makes a big difference for Auction.com. But the historical perspective, the way that we look at it is what we call foreclosure BTA, which is foreclosures brought to auction. And I think most people would understand that as just properties that are foreclosed on, properties that complete the foreclosure process. And there’s one of two outcomes, which is at that auction there’s either the property is sold to a third party investor who’s buying the property or it goes back to the bank as an REO or real estate owned by the lender. So that foreclosure BTA number is what I’m going to hang my hat on for using this for the historical perspective.
And we could do it as percentages, but this is actually going to be raw numbers. So at the height of the last foreclosure crisis, it was 2010, we saw about a million foreclosure BTA, foreclosures brought auction, in 2010. And that was the peak of the last crisis. We saw about five years there where it was well over 500,000 half a million a year from 2008 through 2012, 2013. Those were the worst of the foreclosure crisis that I think is still pretty, even though it was a decade ago or more, is still pretty fresh in folks’ memories. And there’s a lot of concern or anticipation that this could happen. And so to put that in perspective, what we saw in 2019, the last year before the pandemic, which is a whole different animal was we saw about 215,000 foreclosures brought to auction in that year. And so we’re at less than a quarter of that peak year in 2010.

Dave:
What would you consider normal? So on one hand we add a million around 2010 and then right before the pandemic, you said about 215,000. Is that what you would normally expect to see in a year?

Daren:
Yeah. It’s a little tough, because of course the whole market is expanding as we go. But prior to the last crisis we were seeing about 200,000 a year in 2004, 2005, 200,000 to 250,000. So I think 2019 we were getting back to about normal. Now we could talk about, and maybe we’ll do it later or now, but there was still a fairly healthy percentage of these 2019 foreclosures that were still tied to the last crisis. And so there’s an argument there that it probably could have gone down a little bit more, I’m waffling obviously on this answer here, but I think normal is around that 200,000 level when we look back over the last two decades.

Dave:
Okay. So 200 about normal and then walk us through what has happened in the last couple of years. We all know the housing market has been nuts, but can you give us a little bit of context about what has been going on in the foreclosure market in the last two plus years?

Daren:
Yes. What we saw after the pandemic hit was there’s a pretty immediate response politically and policy wise to prevent another wave of foreclosures. And so there was a foreclosure moratorium that was put in place pretty much at the end of March through the Cares Act, that had a lot of other impacts on the economy and the housing market as well. But we saw one big one was the foreclosure moratorium and then also a nationwide forbearance program. So one thing on the moratorium, it wasn’t a true moratorium, but there was still some foreclosures happening, but basically it did stop most foreclosures. The big exemption was properties that were vacant or abandoned. And so we saw foreclosure activity really almost dropped to nothing for a couple of months. And then slowly has started to come back as banks got more confident that they knew that properties were vacant and they could foreclose on them.
And then of course in the last few months, we’ve actually seen the expiration of that foreclosure moratorium, which we can get into a little bit more, but also the forbearance program, which allowed people to basically… It was actually a financially savvy move to go into forbearance some could argue, because you could basically get up to 18 months without making your mortgage payment and really no penalty, and just start making your payments at the end of that. And then the unpaid balance is put into a non-interest bearing, basically loan that goes to the end of your mortgage. But anyway, the forbearance program also those 18 months are expiring for many people. And so the majority of people have exited forbearance and there’s another few hundred thousand that will be exiting over the next six months. As those protections expire, we are seeing the tide of foreclosures start to lift.

Dave:
That’s a great point. I just want to make clear for everyone who’s listening to this what the forbearance program was and what it exactly does, because you made a really good point there. Basically at the end of March in 2020, there is a program that allowed people to basically stop paying their mortgage. And this doesn’t mean that their debt was forgiven, it means that they basically put it on pause. And the payments that they skip for most parts, it’s not the same for everyone, for most parts, just get added to the end of their mortgage. You have a couple more months or years of payment, 18 probably.
And I think this is a really important point because we saw this huge amount of people going to forbearance. And I think that is a root cause of a lot of the fear that people have, that there is going to be a foreclosure crisis. But if I’m getting you right, Daren, it sounds like what you’re saying is some people were just opting to go into forbearance even if they weren’t in a poor or difficult financial situation, they were just doing it because they didn’t want to pay their mortgage. They said we’ll just stack some cash for 18 months. Is that right?

Daren:
Yeah, absolutely. I think you see that happening with the proactive and early on in the pandemic, people didn’t know it was going to happen. And so, hey, I take this payment off the table that I don’t have to make just in case something bad happens. But what we saw is that from the vast majority of those people, the worst case scenario did not happen. They didn’t lose their job or they got their job back fairly quickly. And so that resulted in the vast majority of those forbearance… According to Black Knight, 8.3 million homeowners entered forbearance over their entire life have entered forbearance of the program. And of that 8.3 million, we only have 578,000 that have exited forbearance and are not in any type of loss mitigation, which would also protect them from foreclosure. And so that 8.3 million, if that were to be the number that were to hit the market, that would be a lot scarier, but we’re talking more along the lines of less than a million folks who are still in what I would consider that high risk category, that 578,000.

Dave:
That’s great. And I want to jump into that number, but would love David, to hear what are your thoughts? Are you seeing any foreclosure activity in your market? Do you think the forbearance program largely was successful?

David:
I think it was successful from the sense that it was popular, people really liked it. It gave people the sense of, “Hey, you’re going to be okay.” It’s hard for me to comment on how useful or necessary it actually was, because I don’t know how many people did lose their jobs. I’m seeing zero foreclosure activity in the market that we’re working in. And frankly from my position, it’s very difficult to see how we could have foreclosures when asset prices have risen at the degree that they have. So in order to have a foreclosure, from my perspective, you need two things. You need the inability to pay your mortgage and the inability to sell your house.
And what we saw in the last crash was that was happening is people didn’t want to pay their mortgage or they couldn’t pay their mortgage and value of the assets was dropping. So they were stuck with it and they just let it go. But nobody would do that now, you would just make a bunch of money by selling the house, even if you just bought it a year previous. So I wanted to ask you, Daren, there is a huge contingent of people that are banging the drums saying there’s a wave of foreclosures coming, don’t buy real estate, don’t jump in early, the white walkers are approaching the wall and they’re all coming and we have to be ready. What are your thoughts on what you would need to see before you could put more credibility towards that position?

Daren:
To your point just a second ago, we’d have to see home price correction or crash. And that it’s a two-pronged thing, you’re always going to have foreclosures because you always have folks who get into a difficult life circumstance, but typically you have to have a double trigger to get folks to actually get to foreclosure. And so you have that life circumstance, but then you also have little or no equity in the home, as you mentioned. Now, I do want to jump into that because there’s actually some research out there that pushes back on that a little bit. It’s like equity is not the panacea for foreclosures, we actually see people going into foreclosure with equity.
And I think that maybe speaks to people, we all know humans are not completely rational beings, so they don’t always behave rationally despite economics suggesting that they should. But anyway, that may be a separate topic, but I think by and large, for most foreclosures, you do need that combination of unfortunate shock life event and then also lack of equity to see that wave. And it’s funny, I hear a lot about it but I’ve actually never encountered anybody that I can remember who’s arguing that we are going to see a wave anything along the lines of what we saw last time. And maybe I just need to get out more and talk to more people, but we’re definitely not seeing that in the data.
However, we’re also not seeing the zero foreclosures that you talked about in your market. We’re seeing right now in the fourth quarter, basically every quarter, every month, since the second quarter of 2020, where we saw our numbers drop dramatically, we’re seeing now record numbers of, I shouldn’t say record numbers, but pandemic highs in terms of foreclosure level. So in the fourth quarter of 2021, we saw foreclosures up 97% from a year ago from a very low number, but they’re still at 38% of what they were prior to the pandemic. So I just want to nuance that a little bit we’re not seeing the wave, but we’re not seeing nothing either.

David:
When I say we’re not seeing them, what I mean is they’re not making their way to the market where a person would see that house in the MLS as REO or a foreclosure. I’m sure people are going through foreclosure. It’s funny you said that because my very first venture in a real estate was working with my first mentor Tim Road. And we would find people that had been issued notice of defaults, and we would go try to buy their house from them before it foreclosed. And because they did have equity and they didn’t know what to do, they were just frozen or sometimes they didn’t have enough time to get it ready, put it on the MLS, get it a 30 day escrow to close. They would’ve lost the house before then because they waited too long. So we would target those people and buy their house so that their credit wouldn’t take a hit and we’d get a deal that way.
So I’m sure that it’s still happening, like you said, in cases. It has to happen at a large systemic level before actually that inventory makes its way to where the public, who just looking on Zillow or Realtor.com would see, “Hey look, there’s foreclosure right there.” The people that are very savvy that are in the game, that are maybe looking at Auction.com, that are going to the Courthouse Steps, they’re going to be the ones grabbing those type of deals. Side note, pick out BiggerPockets book, Bidding to Buy, if you want to get into the auction game. They wrote a book about that very topic. But I think Daren, what I would like to see or to know from you as someone who tracks this data all the time, at what point would you be concerned that there’s going to be for… What do you think historically would need to happen maybe in our overall economy before we would be getting into that danger zone where a wave of foreclosures is likely to be coming?

Daren:
Yeah. I think right now the biggest threat I see, the biggest risk I see is inflation, which I know gets a lot of press and a lot of talk time. But I do see that as a risk, even if we look back over the last decade, which has been a very long housing boom, the points of weakness in that housing boom were when we saw mortgage rates rise, it’s extremely mortgage rates sensitive housing market. And so to the extent that inflation would push up mortgage rates, which they already have, or at least the threat of the Fed raising their interest rates has done that. We would see weakness in home price appreciation. And we saw that there’s two examples of that if we look back at about 2013, 2014 mortgage rates went above 4% for an extended period of time, as well as 2018, 2019, we saw that same thing.
And actually I look at the public record data shows we actually had a very, very slight at least flattening and even 1% decrease in home prices at least nationwide in 2019 and the NAR numbers don’t show that. But that was another point where we saw an extended period in 2018 and 2019 where mortgage rates went above 4% and went above even 4.5%. And that did definitely cool demand and cooled home price appreciation, at least at the very least slowed it down. And so I see that as a big threat that not only would trigger that slowdown in home prices, but also psychological factors are very important. And then everybody thinking, oh, the market is slowing down. And that becoming almost a self-fulfilling prophecy as well is the biggest risk I see right now.

Dave:
So it sounds like, basically summarizing the first part of this conversation, we are seeing an uptick in foreclosures after the forbearance period ended, but you’re not seeing a lot that suggests we’re anywhere near 2007 levels. And frankly, as David pointed out, it’s not really hitting the market in any way where it’s really impacting inventory. We’re seeing inventory numbers in January and February right now that are near all time lows. So I think hopefully that addresses some fear that people or our listeners have about foreclosures, but there’s also this other part of foreclosures that are really relevant to real estate investors, and David hit on this, and that’s the role of investing in foreclosures. And Daren, I’d love to get your thoughts, but before you do David, I’m curious, can you just give everyone a little bit of a primer about how you invest in foreclosures, why people do it and what role it plays for real estate investors?

David:
Yeah. Well, basically the reason you want to be investing in a foreclosure is because you’re getting a distressed asset so you’re probably getting it at a better price. That’s a short answer. Most foreclosures are not in the best condition that they would ever be in because the person who’s losing them probably wasn’t taking care of them very well. And the person who’s selling it we should also probably define there’s the foreclosure process, which is the act of taking a property, the title back from the owner and giving it to the person who lent on it. And then there is a property that has been foreclosed, which is owned by the lender who gave the loan on it. We typically would call that REO or real estate owned, because most of the time the lender would be some kind of bank. So there was a time when a bank owns a lot of real estate and they’re not very good at owning it, they’re not property managers, they don’t know what to do with it.
They’re usually going to sell it at a discounted price because they want to get out from under that. They want to turn the REO on their books as an asset that the bank owns into money that they’ve received back, that they had lent out and put it on their books in that fashion. When there’s not a lot of them and there’s still a lot of demand for housing, a foreclosed property goes back to a bank, a bank hires a real estate agent like me, I go put it on the MLS and I sell it just like any other house. And so that is misleading when you think that foreclosure automatically means great deal, that’s not the case. It’s when it’s distressed asset that you’re more likely to get a great deal or the seller is in a time where they need to get rid of the house. So something in the foreclosure process, the owner still has title to the property, the bank has not taken it, that could mean distress.
There’s absolutely an opportunity there where they would let it go for less than it’s worth, because they’re going to lose it anyway. But once it goes back to, I’m saying bank because in most cases the bank is the lender on the property that will take the title, it only becomes a distressed asset if that bank wants to get rid of it very badly and is willing to let it go at a lower price. And that’s only going to happen when it’s sat on the market for longer than the average days on market. So in 2010, 2011, we were seeing houses would just sit there forever and they were owned by banks. So you were getting them at better prices than the regular seller, they were also in worse shape. But today man, it’s like pouring a glass of water on sand at the beach. That inventory just gets sucked up so quick that the fact that it’s REO or in the foreclosure process or a house that isn’t there, it’s all the same to the end buyer.

Dave:
Yeah. That’s a good point. And just to be clear, there are some challenges with foreclosures too. Usually it’s site unseen and you have to pay all cash, is that right?

Daren:
Yeah. I can jump in on that one and I think that’s a good distinction, a good overview by David about the difference between foreclosed versus in foreclosure. And those foreclosed properties that are on the MLS are going to be more like a typical sale. And those would be you wouldn’t have some of those challenges, but if you’re buying and you’re going to get that distress discount, there are some challenges that basically come along with that. And if you’re buying at the foreclosure auction, typically in most states, you have to pay on the spot cash so people are bringing cashiers checks to the auction. We do have a remote bid now on our app where you can actually put funds in an escrow account and pull out of that to pay at the auction in many counties, which we’re trying to bring foreclosure auctions into the 21st century a little bit.
That’s one challenge. And then related to that, the reason that you’re paying cash is because you’re buying these properties. The property is transferring from that distressed homeowner to you, and so up until the point of the auction, they own the property. It’s going to be very hard to go in and do an interior inspection of the property, get a full appraisal of the property that would even qualify it for financing. And even if you could, the condition of the property often is such that it’s not fanciable. And so that’s why we love our buyers is because they’re not just Joe or Sally buyer down the street, they’re the ones that are ready, willing, and able to take on these challenging properties and renovate them and return them back into the retail market six to 12 months later, a lot of times. So I would say it’s three pronged to the cash piece related to the financing piece, which is related to the condition of the property and the renovation required.

Dave:
Yeah, that makes sense. And I think as we talk about on the show all the time, if you’re going to look for a deal, you got to do a little bit of extra legwork. It’s pretty hard to just find an excellent deal. And so just like with driving for dollars or doing bar with a rehab, you’re going to have to do some work to find a deal. And this is just one example. Daren, I’m curious given everything that we’ve talked about, the condition of foreclosures today and the housing market and the state that it is, what do you see the role of the foreclosure market playing in the broader housing market, the broader housing picture in 2022?

Daren:
Yeah, I think it plays a role. It’s a small, it is a little bit like pouring water on the beach, but it is adding some inventory back into the market and it’s taking these properties that tend to be much older, when we look at the average age of these properties, in poor condition and the folks who are buying them on our site are then rehabbing those properties. And typically in most cases, not all the cases, sometimes they’re holding them as rentals, but what we found in the majority of cases, our buyers are actually selling them back to an owner occupant and these properties tend to be on the lower end of the market. And so in my view, this foreclosures are actually providing almost a refurbishing of housing inventory.
And again, it’s a small piece. It’s not going to solve the affordable housing issues that we have or the housing supply issues completely, but it’s one piece of the puzzle that is taking these properties and putting them back into the market. And so we see 71% of our buyers who then renovate and sell back to an owner occupant and even in low income since this tracks, it’s 68% sell to an owner occupant and in minority tracks, 70% sell to an owner occupant. So we see that as actually a good thing in the long term. Of course, it’s never great to talk about someone losing their home, but when you see what’s happening to those properties over six to 12 months.
And we would argue that our buyers do a lot better job than the banks. And one thing I wanted to mention to what David said earlier is one huge shift with the pandemic we saw is that at the foreclosure auction, I talked about there’s two things that can happen, it can go REO, or it can go to an investor. Prior to the pandemic, only about 40% of properties were selling to an investor at the foreclosure auction and the rest were going REO. It’s completely flipped during the pandemic, which is why you’re seeing that fewer of those REOs, what we call our sales rate is now 60 plus percent going to investors at the foreclosure auction and the remainder going REO.

David:
And that makes sense because there’s more demand for these properties.

Daren:
So there’s a lot of demand, yeah.

David:
That’s exactly right. People are going to want to buy them at the auction more, whereas before they probably only just took the cream of the cup and everything else went to REO.

Daren:
That’s right.

David:
So here’s a question for you, Daren, if somebody that’s listening here wants to get into the auction game, they want to buy these properties before the title transfers back to the lender, what are some things that they need to be aware of as they prepare for this so they’re walking in with their eyes wide open? Just as far as how they need to be prepared, how the process will differ from traditionally buying?

Daren:
I think the number thing is you do have to have some dry powder, some cash to go into this with. And so it’s not one of those things where you… Now that said, there’s some very low price properties and there’s new people getting into this. We have some great buyer stories you probably don’t have time to get into, but people I’ve talked to who have actually started doing this during the pandemic and had never been an investor before. So it’s possible, but you do have to have some foundation in terms of capital going in typically.
And you can sometimes work with hard money lenders or private lenders to help with that. So I would think that would be the number one thing. I would say, anybody who’s considering this, I would advise to go to a live. These foreclosure auctions are in-person events. Now we have the mobile app that allows you to participate remotely, which is really cool, but I would encourage someone going to just attend the in-person auction, usually at the Courthouse Steps. And just to go there observe a few times and see what other investors are doing, what other buyers are doing and get a feel for it before jumping in.

David:
Do you have any examples, Daren, of what a deal at Auction.com done right would look like?

Daren:
I pulled some data here just over the last few years of properties that have been purchased at foreclosure auction, which is where you do tend to get the better deal. Sorry just a quick side note, we do also the REO auctions where it’s almost immediately after the foreclosure auction if it doesn’t sell, then some of the banks and also HUD does this what’s called second chance auction. And so those are still good discounts because they’re not going back on the MLS, they’re REOs but they’re auctions almost immediately after the foreclosure auction. But when I looked at our data with the foreclosure auctions and I just did as a benchmark compare the properties’ sale price to the 2022 AVM automated valuation investor terms that would be the after repair value.
And what I’m showing is those properties were selling to our buyers at auction for about 54% of the 2022 after repair value. And this is over the last five years, and then they’re selling for 88% of the after repair value. And so to put it in dollar figures the average price is $136,000 purchase on our site. The average resale by the fix and flipper is about $224,000. And that’s over the last five years. So hopefully that helps. I can’t give a specific example, but we’re seeing basically in percentage points, the value gain go from 54% to 88%. And in terms of dollar figures going up by close to $100,000 between when they buy it on their site, renovate it and then resell it.

Dave:
But that’s great, Daren, thank you. I think that’s really excellent data and for everyone listening out there and you’re considering entering a foreclosure, this could be a really good option. Or if you’re just looking for deals right now, foreclosure could be a really good option because deals are not the easiest they have ever been to obtain right now. Daren, before we jump off, is there anything else you think we should know or our listeners should know about foreclosures, what’s happening in the market or the opportunity there before we let you go?

Daren:
To circle back to what we talked about early on is you are going to see some pretty big percentage increases and they might be in the headlines. And so at first blush that might look like confirmation that there’s this foreclosure wave coming. But for instance, I just looked at the Black Knight data and January there was a 700% increase in foreclosure starts. So when you look at that, you’re going to think, oh, maybe there’s another foreclosure wave and just be very cautious with that because we are seeing foreclosures come back, but they’re coming back from almost nothing. And so it does spell more opportunity, but at this point, at least we’re not seeing it be this overwhelming wave that’s going to pull down the rest of the market with it at all. It’s more of just finally there’s some of this inventory that’s becoming available that investors can access, but just be wary of those headlines coming out over the next few months and weeks.

Dave:
I was going to say, well, that’s a perfect tie in with our first segment where we were talking about news or noise and, Daren, just for reference, we were talking about whether certain real estate stories were important or not. So I think that was a great way to summarize this conversation that foreclosures are coming up. But if you hear that, keep in mind that this is a recovery from almost all time lows or basically artificially low. And that does not mean that there’s going to be a huge wave of foreclosure. And after everything we’ve learned today, keep in mind that there is a lot of stuff that would have to happen to see a big foreclosure crisis in the US, at least in the next six months to a year who knows what’s going to happen after that?

David:
Yeah. I think that’s a perfect precursor to the point that I was thinking of Dave. Daren, you said something incredibly insightful I don’t want to get passed up, you mentioned that it was something along the lines of the psychology of the buyer plays a very big role when you see a foreclosure crisis. So we had that in 2010 and this is something I just… Because I sell a lot of real estate, I own a lot of real estate, you realize how few human beings make decisions based off empirical data and how much emotions go into it. And one of the huge things that affects people is the herd mentality. When you don’t know really well what you’re doing, you just follow what everyone else does and it feels better. So we had a run up in prices from say 2000 to 2006 or so based off of really bad lending, everybody was buying houses. None of them had any idea what they were doing.
They did not know if a property would cash flow, they didn’t know how to manage a property. It was literally just buy it, wait and you could sell it later, because it’s going up. So that was herd mentality on the offensive side. And then a lot of those loans started to reset. And so people couldn’t make the payment anymore and they would sell the house if they could, but enough of them resell at the same time that too many houses hit the market for sale and people didn’t buy them right away. And then they started to foreclosed, which meant more inventory was hitting the market. And you saw this little shift just went right over the edge where it went from there’s not enough homes and everybody’s buying them to, I don’t want to buy a house what if the prices are going to keep going down?
And so what happened is it’s not like 10% of the market backed off and said, “Hey, I want to wait and see if prices stabilize.” It was 98% of the market backed off and said, “I’m not touching a house because I think prices are going to come down.” And then prices started coming down So even more people said, “I don’t want to buy a property prices are going down.” And then people that worked in those industries, the lending industry, the real estate industry or people that worked in luxury markets, they sell boats or they sell time shares or that type of thing. No one’s taking out money on their house to go buy that RV or that new car or that boat. So now they’re losing their jobs and now they’re starting to lose their houses to foreclosure. And it just went so fast as everybody did the same thing. They all said, we’re not going to buy and prices kept coming down and it never slowed down. They just plummeted because nobody wants to step in and catch the falling knife, so to speak.
And it wasn’t until it hit the bottom and investors basically changed it. They said, “I could buy that house and it could cash flow and it doesn’t matter if it keeps dropping in price, I don’t care. It’s going to cash flow, I’m going to buy it.” And then investors started to buy, houses started to come off the market a little bit and then the masses said, “Oh, it’s time to buy.” And everybody came in again and boom prices shot up just as fast as they had come down. So while we talk about the individual owning real estate and we want them to understand the skill of operating a property, the metrics involved in its value, how to make sure that you’re making money, individually those things matter. The way that property values go up or down is largely psychological. It’s what the masses are all looking at. And most of them are not listening to this podcast, unfortunately that’s the case they should be. And so they’re just following what the herd says.
And you made a great point. The foreclosures are coming, but they’re not going to overwhelm the market because the psychology of the buyer right now is there’s a lot of inflation, I want to invest in real estate, it’s a limited supply. I need to get it before there isn’t any of it. Our population continues to grow, so there’s still a big demand for housing and we’re not building enough of it. And so the things that make somebody think I want to buy real estate psychologically are still very, very strong. And on the other side, if that changes, it changes quickly. It’s not something that, oh, we’re starting to see a slow down in prices and they tick back down over a five year period. So people like you listening to podcasts like this is very important, because you want to be one of the first people to know if it looks like it’s starting to hit that tipping point going over the edge.

Daren:
Yeah, totally agree. Good stuff there. And we do have a scenario, our most likely scenario, our forecast is seeing over the next five years, about 200,000 to 250,000 foreclosures per year. But we do have a scenario if that psychology turns. If home prices drop, we see that falling knife scenario we are seeing in that model, the volume go up to over 400,000 foreclosures a year, which actually still is not the recession level or last recession level, but the path could vary, it’s certainly not set in stone. If we knew that for sure, we probably wouldn’t be talking about it here.

Dave:
All right. Great. Daren, thank you so much for joining us and sharing all this information with us. It’s super helpful for us and for our users. Really appreciate you being here.

Daren:
Thanks so much for having me. It was great.

Dave:
So Daren now, before we go, where can people connect with you or learn more about Auction.com if they’re interested?

Daren:
Yeah, absolutely. Auction.com, you can just go there and there’s no subscription fee or anything like that. Just to look at properties and to actually bid on properties. Of course, you have to have the cash to if you’re the winning bidder. So check it out Auction.com. And then a lot of the research I’m doing if you go to auction.com/inthenews, you’ll see that. We have heat maps about where we see foreclosures emerging and things like that, that could be very useful to the audience. As well as some great buyer stories of people who’ve been in the business for decades as well as people who’ve just gotten into investing over the last couple of years and are specifically buying at foreclosure auction or bank owned REO auction. And so I think those are some great resources, that’s auction.com/inthenews to see all of that.

Dave:
All right, good stuff. Thank you, Daren.

Daren:
Thank you.

Dave:
All right. David, well, there you have it. There dropped a lot of information. What are your thoughts on all this?

David:
It was a lot of data, which I think frankly we needed because there’s so much controversy about this issue. I think this was the perfect guest to give us some clarity on it. It sounds like though many of us that are investors are hoping for a wave of foreclosures. It’s not very likely to happen and that the market fundamentals for real estate still seems strong even as the price of it continues to rise.

Dave:
Yeah. I’m glad to see this and hear it from someone who’s as engrossed in this data as Daren is, because I put out a lot of YouTube videos and I’m on YouTube a decent amount. And you see these people who are screaming about a foreclosure crash and a forbearance crash and all this stuff. And frankly, I’ve always thought it was overblown and I’m glad to hear that that’s the case. Now there’re of course additional challenges to today’s housing market, but there is one last thing you have to worry about is a foreclosure crisis. So if we’re going to round this whole show out, I would say that thoughts of a foreclosure crisis is noise and not news.

David:
All right. Well, thank you very much audience for listening to us, and Dave, thank you for doing a stellar job with the interview that we just took down of Daren Blomquist. You are getting better and better at this the more you do it. Everybody, go check out Dave on YouTube, he’s got some really good stuff. You can also follow him online on social media at thedatadeli-

Dave:
Thedatadeli.

David:
There it is. You can follow me at DavidGreene24 on all social media. Dave’s name is way cooler than mine. [inaudible 01:00:19] the datadeli is awesome because Dave loves sandwiches. So thank you very much. This is going to be the end of our show. So go check out another BiggerPockets Podcast or follow us on YouTube and see what you think there. This is David Greene, for Dave, thedatadeli Meyer signing off.

 

 

If you are investing in real estate, you’re probably intending for your investment to be a success. But, this isn’t always in your control. What is in your control, however, is the ability to practice due diligence to ensure you are much more likely to have a successful investment.

Due diligence is crucial for any investment or large purchase, whether you are buying a condo unit or an entire apartment building.

Equiton knows a thing or two about due diligence. The firm has a long track record of successful investments in commercial and residential properties due in part to their thorough due diligence practices. We talked to Ryan Donkers, VP of Acquisition at Equiton, about their approach to due diligence when buying property and the role it played in Equiton’s recent acquisition – the Riverain District developments in Ottawa.

According to Donkers, due diligence is “of the utmost importance” to “the Fund”.

“If we didn’t do it, we’d essentially be guessing the value of an asset,” said Donkers. “We are looking to achieve certain returns on our investments so our job, when we buy an asset, is to make sure the returns we are forecasting will have some merit. To date, we have been very successful in achieving the returns we have forecast.”

“It’s all very fluid,” he continues. “And each market is different. So you have to really roll up your sleeves on each acquisition opportunity to make sure it all comes together and makes sense for the Fund at the end of the day.”

For someone just buying a home to live in, they may think that due diligence means simply getting a home inspection before buying. But, when you are buying for investment purposes, at any scale, there are many more aspects involved that can play a big role in the performance of your investments. While the physical aspect is naturally a factor, things like market trends and financial analysis are equally as important.

Listing just some of the many aspects that go into a thorough due diligence process, Donkers enumerates: “We do physical condition inspection which includes looking at the roof and the underground parking garage, so it’s a little more complex than buying a house, for example. We do environmental studies to make sure there’s no contamination of the land.”

“But the other aspect is making sure we’re comfortable with the expected revenue – what’s there today, what could be there tomorrow, and also be sure we have a great understanding of the operating costs. We have to be very mindful of the simple things like property tax increases. It’s especially tricky coming out of COVID because there have been a lot of increases on some of the operation costs, so you really have to be cognizant of what’s coming down the road because a lot of other individuals will be playing catch up in some of these operating costs that we have to have our eye on.”

Especially in today’s market where properties sell fast and the market is seemingly changing all the time, competition is at an all-time high. While at the same time, the need for due diligence is as important as ever. An investor who hopes to make returns must still conduct their due diligence – sometimes with much less time to complete the process.

“These days, the market is really aggressive, it’s competitive, “said Donkers. “So these time periods have really shrunk, and in most cases, you only have a short amount of time to do your due diligence before a bid date, and that’s really because of the market demand.” 

“We have a very thorough process to ensure we dot our “i’s” and cross our “t’s” before committing to a deal. The last thing we want is to have any unknown surprises coming our way.  It’s very exciting and fluid how it all comes together in short order.”

In terms of what to watch out for the most, Donkers warns that even “little things can add up to a sizable decrease in your expected return” if you don’t account for everything in your purchase.

“You’ve got to be very conscious of your costs. Even the simple things have shown great increases in cost over a short period of time. I often see people underestimate these costs, so you have got to be very careful.”

For Equiton, due diligence has no doubt played a role in their success. Most recently, the firm announced plans to partner with Main and Main on a massive residential development project in Ottawa. Later this year, construction is planned to begin on the development of approximately  1,000 rental units across three towers in the 4.2-acre Riverain District, along the shores of the Rideau River. The firm has invested $30,000,000 into the project, with an estimated value of $500,000,000 upon completion.

“It’s a really nice way to create value for investors because we are able to develop units for a lower cost than purchasing a completed building.”

Donkers explains that new developments offer their own challenges for due diligence as it requires a very forward-thinking look at the market and where it will be years down the line.

“It’s a little more complex because you need to be forecasting what’s going to happen in the next couple of years. One of the biggest components of risk is going to be what our construction costs will be. So it’s not only about getting comfortable with the developer and the general contractor that they hired, but also making sure there is a contingency involved because developments often require some change orders along the way and economic conditions can change for material costs.”

Equiton’s team boasts an average of over 20 years in real estate investing and has an impressive track record of success in the field. Their aim is to bring the benefits of private equity to investors through their various investment funds. Visit Equiton online to learn more about what they do and how they can help you achieve your financial goals.

Well, it happened. The Bank of Canada (BoC) finally raised interest rates. The question now is what impact higher rates will have on the sizzling Canadian real estate sector.

Many market analysts anticipate the central bank will raise rates several more times in 2022 to help combat swelling inflation, which could lead to a myriad of consequences, including the potential to slow the Canadian real estate market.

There are varying opinions as to whether the BoC pulling the trigger on rate normalization could result in a correction in the red-hot housing sector. Indeed, one of the contributing factors to the exceptional growth in the Canadian housing market has been near-zero interest rates, giving borrowers more purchasing power and enabling them to compete in fierce bidding wars for residential properties.

Can Rising Interests Rates Help Ease the Canadian Real Estate Affordability Crisis?

Housing affordability continues to be a pressing issue in Canada, both at the national and regional levels. More prospective homebuyers are being pushed to the sidelines, waiting for a chance to purchase a detached property, a townhome or a condominium unit. Could higher interest rates be the solution to this ongoing concern?

BMO recently released a report discussing how Canadian real estate prices will struggle to keep up with recent trends in a rising-rate environment, particularly with many homeowners taking advantage of variable-rate mortgages.

The BMO anticipates that mortgage rates could increase significantly: 50 basis points for fixed-rate and 100 basis points for variable. Ultimately, this could result in shrinking credit demand across the Canadian housing market.

“For housing, the shift into lower-rate variable mortgages in 2021 kept the fire going, but the market will no longer be able to hide from higher rates this year,” BMO economist Robert Kavcic said in a note to capital market clients. “Incomes will grow too but, all else equal, it will be hard for prices to keep powering through that given where valuations already are.”

Canadian mortgage payments have accelerated in recent quarters, with the average new mortgage payment hitting $1,621 in the third quarter, up 11.7 per cent year-over-year. In the last five years, average payments have increased by 20 per cent.

And many people are concerned that rate hikes will affect their mortgage payments.

A new poll by the Angus Reid Institute found that more than half (53 per cent) of Canadians say a two-per-cent increase in their mortgage rates would have an impact on their finances. The same survey also revealed that 83 per cent of Ontarians think the provincial government has done a “poor” job reining in housing affordability.

“High housing prices have divided Canadians into three groups: the haves (40 per cent) who want the boom to continue lifting their assets, the have-nots (39 per cent) who hope for the market to tank so they can get in, and the status quo (21 per cent) who don’t mind prices staying right where they are,” BMO reported.

At the same time, housing experts believe that the latest surge in home prices in the last couple of years has placed prices too high for the typical household, especially in major urban centres and popular hot-spots. So, with higher borrowing costs and tighter mortgage lending standards, many prospective homebuyers could still face an uphill battle to accomplish their home-ownership goal.

But who says that prices will even start falling in this economy in the upcoming year?

Canadian Real Estate Prices Expected to Rise

Despite all the prognostications and expectations that Canadian real estate market prices could ease this year because of interest rates, many forecasts suggest that home valuations will continue their upward trajectory through the end of the year.

According to the RE/MAX 2022 Canadian Housing Market Outlook report, home prices are expected to rise 9.2 per cent in 2022 as low supply and high demand continue to support sky-high prices. Moreover, the report highlighted that many of the trends of the last couple of years would persist in 2022, such as inter-provincial relocation, as more Canadians search for less dense cities and neighbourhoods.

“Without more homes and in the face of rising demand, there’s potential for conditions in these regions to shift further,” said Christopher Alexander, the President of RE/MAX Canada, in a statement.

Sources