Episode Transcript
Speaker 0 00:00:00 Hey everybody. You're kicking it with the homeboys and the Homeboys podcast where we talk everything in the world of real estate investing, whether you're just getting started or a seasoned vet, we're gonna give you over 40 years of combined real estate experience to help you on your investing journey. Today, we've got a very exciting topic along with the young homeboys joining us to discuss, is housing still affordable? We hear it all over. The news, housing is no longer affordable. Well, we're gonna take a look back at history, take a look at what it's been for generation after generation. We're gonna talk to these youngsters and see what they think and what their perspective is. Bryce Bennett, welcome to the show.
Speaker 1 00:00:44 Thank you. Thank you. Yeah,
Speaker 0 00:00:45 Thanks. So what's your initial knee-jerk reaction when I say, is housing still affordable?
Speaker 1 00:00:53 So I think you're crazy, but that's only because of what we see all the time in social media, I guess. And I mean even, even major news is that's all we see is how expensive housing is. And that's just kind of the popular thing right now is that housing is expensive.
Speaker 0 00:01:13 Well, it's kind of interesting because I've sent you over the last week a bunch of charts that break down the behind the scenes that break down the data on housing. So there's these formulas out there that can calculate, quote unquote the affordability, uh, index of of housing. And what it does is it takes the interest rate, uh, based on doing an 80% mortgage over 30 years. It takes that average interest rate, it takes the average median income in the United States and the median home price. And it comes up with a number to determine how affordable housing is. So based on the median home and the median income adjusted for inflation over time, along with what your mortgage will cost you, which is determined highly on the interest rate. And it comes with up with an affordable housing index. And my guess is you were completely shocked to see that we are currently at a pretty par level compared to history going back to the 1930s.
Speaker 1 00:02:11 Absolutely. It just doesn't feel like that. Yeah.
Speaker 0 00:02:15 Well, there was a big spike that we, we need to really cover, which is after 2008 housing became incredibly affordable. In fact, some of the highest affordability index, um, rate since 2008 until recently. And what's really makes it feel, I think, expensive is that the way that the chart falls off a cliff starting in 2020, interest rates were at 2%, which made it affordable all through those, uh, two thousands, 2000 tens, even into 2020. But then suddenly housing just blew up. Right. And in some markets it's unaffordable period. It's just simply unaffordable
Speaker 1 00:02:57 Like the coastal states. Yeah. And stuff, stuff like that.
Speaker 0 00:02:59 Coastal states, some of the big markets, you know, you take New York, even Dallas, a few of the big boys,
Speaker 1 00:03:06 Tennessee
Speaker 0 00:03:06 Probably. Um, yeah, no, I don't think Tennessee Tennessee's actually pretty affordable, even though you're thinking Nashville. Yeah,
Speaker 1 00:03:13 I guess I am. Yeah, you're
Speaker 0 00:03:14 Right. Um, but, but overall as a state, it's, it's, I don't believe it's in the top 50% as far as, uh, home prices. Home prices. I, I'd have to look again, but I, I don't believe it is. But my, the point is, is that in middle America, most of middle America, yes. It's way more expensive now than it was prior to, uh, the last two years. And it's happened very quickly. However, interest rates are on their way up, which has cooled down home pricing and evened out. And if things stay on par with where they are, then we will be at historically normal affordability numbers. Seems shocking. Yeah, seems shocking. I understand that memory for real estate is very short. It's something that we fight, Clint and I often have to pinch ourselves and say, okay, you've gotta look back past 10 years because it's so easy to just get caught up in the short term. But you have to look at real estate as a long-term investment. And if you're gonna look at real estate as a long-term investment, you owe it to yourself to look at the long term trends longer than just 10 years mm-hmm. <affirmative>. Right. Longer than just 20 years.
Speaker 1 00:04:26 And I think that's, that's our problem. And our generation is cuz you know, I was born in 96, so I don't even know what a house was until I was 15. I'm just kidding. Right. But, uh, you know, I only saw that up upmarket. Really? Mm-hmm. <affirmative>, I really only understood we were in an upmarket, you know, at that age. So that's all I've ever known is really cheap houses and you know, obviously before everything. And after 2008, so,
Speaker 0 00:04:52 Well, in 1998 I got my first mortgage. So you said 96? Yep. So in 1998, I got my first mortgage on my first investment property at 9.5% interest. And the house was not that much cheaper than it is today. So in 1998, ho housing was not as affordable as it is today. It seems crazy Right. Even to me. Right. But it's, I can't, I can't argue with the facts. Yeah. The facts are the facts. The data is the data. But if you can somehow get past the idea that, okay, I missed the window of the most affordable period in history, basically after 2008, and look at real estate for its core numbers, it's still an unbelievable performing asset. You guys, we sit down and talk about it all the time mm-hmm. <affirmative> mm-hmm. <affirmative> about the power of real estate and the fact that a tenant pays your mortgage off for you. You get rental income, you get appreciation over time. Historically appreciation exists. That's the cherry on top. So don't plan on it, but you got tenant paying off your mortgage and all that income coming in.
Speaker 1 00:05:59 Well, I think a big thing is, is patience is one. And then I think we focus too much on cash flow because I was even talking to my buddy Scott, um, he's looking into turnkey investing and uh, he lives in California, so he is obviously gonna invest somewhere else. And I sent him a proforma and he's like, oh, I only make 400 bucks a month on this, so I put down 40,000 and I only make this much a month. Like, well, you're forgetting about all the other things Yeah. That you get with at a house, tenant paying down your mortgage. The mortgage stays the same, so the rents will go up. So then you'll eventually be making more than just X amount per month. And, and then you could sell the house when the mortgage is paid off. So it's not like you're just making the cash flow. Yeah. And I mean, even for me, that's hard to, it was hard to understand, but it's just, it, it's part of the long term thing, and that's when patience really, really comes into play. Yeah.
Speaker 0 00:06:53 And, and this is a long game. We don't preach flipping and, and going out and trying to get rich overnight on, on real estate. We believe that it's a great long-term hold investment to build wealth. And it's a great way to build wealth without wealth because real estate is the number one asset you can borrow on. So you can't, you can, but it's very difficult to borrow, to go buy stocks. Say to borrow to go buy gold, you know, real estate, you can use the bank's money to create your wealth. The normal person, the, that's the way the, the wealthy get wealthy is by leverage. You know, they get even wealthier. It seems crazy that people with the most amount of money are heavy borrowers. Like a Robert Kiyosaki, the guy who wrote Rich Dad, poor Dad. Mm-hmm. <affirmative>, he preaches heavy leverage and, and we believe in real conservative leverage, but at the same time, you can get a mortgage in order to build your wealth. Yeah. With just a simple down payment, say 20 grand on $150,000 house, you can buy that and the bank puts up the other $130,000 for you, and then the tenant pays the bank off for you. What other investment is there that's similar to that?
Speaker 1 00:08:04 I can't think of anything. Nothing.
Speaker 0 00:08:06 <laugh>. And it's based on a real world asset that you hold, that's yours. Right. It's proven too. Yeah. And housing over time is one of the most important. It's a need, it's a, it's a, yeah. Human not
Speaker 1 00:08:20 To say that it's always gonna be a necessity.
Speaker 0 00:08:22 Correct. So stock market up or down. And if you look at real estate as a long-term hold, you have to do a shift in your mind too. You can't be worried about what it's worth. That's just a number on a piece of paper in a lot of ways. Real estate's about the accumulation of wealth in the building of wealth. So, you know, if I buy a, a property for $150,000 and it's bringing in $1,500 a month, that's all I need to know. That's great. Return on investment, it's an unbelievable return on investment. Mm-hmm. <affirmative> plus you have the property there when it's all said and done. So we started off talking about the affordability of housing and jumped right into how much we love investing in real estate <laugh>, which isn't unusual, I think, for us. Yeah. Right. But at, at the same time, people need to understand that there is still a great opportunity to buy investment real estate, whether it's in our market or a lot of others. Mm-hmm. <affirmative> in the Midwest, mostly, sadly, even Florida has become priced out as of late. A lot of our clients bought a lot of, uh, rental properties in Florida. And there's a lot of great, um, numbers on Florida that make it a very attractive market, but it's becoming priced out and it's sad that, um, the affordability of housing is, is getting to the point in many markets where it just, it genuinely is unaffordable. But that is not the case everywhere.
Speaker 1 00:09:45 And I think that's kind of what we, we see all the time on social media and the news is they're just focusing on those types of markets and, and which are, you know, a, a majority of the markets that I don't know that are always talked about, at least are the ones that are very hard to invest in. Like, you don't see them talking about Indianapolis ever, like
Speaker 0 00:10:06 Kansas City. Right.
Speaker 1 00:10:08 Boring. But it works. And that's, and we just don't see it. It's just not information being pushed, I guess. Mm-hmm.
Speaker 0 00:10:14 <affirmative>, another thing I see out there that's kind of a falsity is about the, the lack of supply of affordable housing that investors are snatching up all the affordable housing. Now I understand that that's true in some of these most the hottest markets. It's absolutely true. And it's a shame, especially in these markets like you and I talked about recently, Seattle, that's kind of landlocked and they don't have the ability to, to add more housing inventory. So normal people are being priced out of those markets. And it's gross, it's disgusting. I I hate that, that normal people can't afford to live in some of those markets. And there's an inability to provide more housing. However, in the Midwest, there are cities where there is an, an oversupply and abundance of affordable housing and there's not enough rental properties and people that, they just don't believe that mm-hmm. <affirmative>,
Speaker 0 00:11:07 They just don't believe that's true. Even though it's 100% true. The data proves it, it's there. And there's underserved markets where there's plenty of housing and not enough rental properties, whether they be houses or apartments that we focus on. So as an investor, you've got to seek out the affordable places that are, that are badly in need of rental housing. There's 30%, I believe it's like 28, I'll, I'm sure I got the number wrong, but it's between 25 and 30% of people don't want to own. There's a lot of reasons not to own. You're moving jobs, you're, you know, you're, you're young and you're, you know, gonna be moving from city easier. It's easier. Someone like my mom, you know? Right. An empty nester. She doesn't need to own, she needs to be renting. There's a lot of people in the market who need rentals. It is not an evil thing to need rentals. Yeah. And to supply rentals.
Speaker 1 00:12:02 Mm-hmm. <affirmative>, I know the biggest argument is you're taking away, owning a house, you're taking away the houses that people could buy and turning 'em into rentals. Mm-hmm. <affirmative>. So I, I mean, every time I see that on TikTok, I'll comment back, well then just get rid of rentals altogether. Like, where's the line at? I don't understand. Yeah. What, like, you could say pros and cons about both, but why is renting so much worse than turning something into a rental so much worse than buying, like buying it? I don't know. Yeah. I
Speaker 0 00:12:30 Don't, well, it goes back to that, that, um, they, people look at the news and they attribute what's happening to, across all markets when it's just simply not the case. America's so large, these markets are all different and markets within markets are different. So I understand that that's what sell newspapers is, is, you know, hey, housing's too unaffordable and the evil hedge funds are buying it all up. And normal people aren't able to to afford housing. And that's true in many places. And it's gross. I get why people are upset by it, but it's not the case everywhere. And, and, and the other part is, let's fight back this whole generation, the younger generation, starting with millennials and younger, is gonna miss out on the greatest wealth builder that's available in the world if they start taking this negative attitude towards it. Mm-hmm. <affirmative>, there's, there's all kinds of affordable homes across the nation that these kids, even if you live in California and you wanna own a home, like you said, your friend who lives in California, it would be silly probably for him to buy in California.
Speaker 0 00:13:35 Absolutely. Well, who knows? I mean, maybe that his house, if he bought there now would be worth a billion dollars and in four years. Yeah. But, but there's a lot of speculation and it's a lot of risk. So the conservative way for him to own real estate is to own it out of state. Right. And that's the way of the world Now, it can be done from out of state. There's companies like the companies that Clinton and I own that do this for other people, and they're in every market across the Midwest. And it's, um, just a mindset of I want to own quality assets in a quality market, whether it's affordable, but strong rents. And I'm not taken away a house from a possible home. Yeah. Uh, owner. Right. It's doable. It's very easy to do. I say easy, you've gotta have a little bit of savings that's, there's some hacks that you can get through it, but you know, if you have 20,000 to $40,000, there's no reason you shouldn't put it in a rental property. At least one.
Speaker 1 00:14:31 So, and that's, I what you just said, the mindset thing. I think that's the biggest part of it is cuz I, I can't afford a turnkey house right now, so what I'm doing is like what you said, some of the hacks to get into it. So I'm, I'll do house hacking to get my first one, then hopefully my second or third one will be a turnkey property. And I think people just look at the speed bump, which is doing house hacking, which they want to just go straight into turnkey, but they just give up because, oh, I don't have 40 grand, 20 grand for a down payment. So they just don't even try instead of doing something that will get them there. Which it will take longer. But I think that's, I think that's the thing is it's just too hard. So they're not even trying.
Speaker 0 00:15:11 Well, I want you to share a little bit about house hacking, but first I want to tell you something I read the other day that I thought was interesting. It was someone he wrote, he wrote, being poor is hard. Being a real estate investor is hard. House hacking is hard. All of these things are hard. Choose your heart. Right. Choose your heart. I love that.
Speaker 1 00:15:31 Love hard. Yeah. Yep. I love that. Was that, who's that? Who wrote
Speaker 0 00:15:34 Their I feel bad that I don't know. I'm I, you know, two
Speaker 2 00:15:37 Guys, two guys take Yes.
Speaker 0 00:15:38 Yeah. Shout
Speaker 1 00:15:39 Guys, they're on the show. They're great guys. Yeah. But
Speaker 0 00:15:42 Yeah, I love that stuff. Yeah. Their show is really neat. Okay. But it, it's true though. All of this is hard and if you don't have the money, that's no reason to sit on the sidelines. You can start saving as little as a dollar a week. Just build those savings habits and eventually you can get there. It's hard. I'm not saying it's easy and there's other ways that young folks who don't have those savings can do this with less money. Like what you're gonna be doing, Bryce, why don't you share?
Speaker 1 00:16:07 Right. So right now I live in a duplex and um, hopefully it's this one, but the plan is to buy a duplex live in one side and then rent out the other. And I'm buying the duplex with an FHA loan, which means I only have to put down three and a half percent so I can get a pretty decent duplex. Hopefully, like I said, the one I'm in, uh, for a small down payment, rent out the other side live in one half. I don't even have to, you know, spice up the other half or the half I'm living in since I'll be living in it. You know, I don't have to have it at a standard that I'm,
Speaker 0 00:16:42 You can
Speaker 1 00:16:43 Live like a pig, like an absolute just disgusting pig <laugh>, don't clean up <affirmative>, you know, rip the floors up mm-hmm. <affirmative>, um, but then, you know, make the other side rentable and, and ready to rent. Um, and then just my, my mortgage is getting paid off right by the, by the tenant. And then eventually I'll, I'll, uh, rent out the side I was living in, move out to whatever house I decide to whatever situation. And then I have my first rental property that's fully, you know, running on its own. And that's just the first one. And then, like I said, eventually get turnkey, get three turnkey and yeah. So mm-hmm.
Speaker 0 00:17:17 <affirmative>. Yeah. Well, I can't wait to, uh, get a postcard from you sitting on the beach when you're 40 <laugh> collecting your mailbox money, as they say. Absolutely.
Speaker 1 00:17:24 Oh yeah.
Speaker 0 00:17:25 Yeah. Time. Time is the most important factor with, uh, long-term wealth building. It just is, you know, especially if you're, when you're letting these houses work for you and you're letting the bank's money work for you, what a great concept.
Speaker 1 00:17:38 Well, it's just, you guys talked about this last episode, but it's just some of the comments we see are, uh, you know, it took you 18 years to make this much money. Like what do, do you mean? Like if you're, if you're comparing this to not doing any investment vehicles, just, you know, retirement fund and stuff, there's no way you can make that much money off of that. Yeah. Like I, I just, I don't, I don't get it. I think it's, you know, lack of just, you don't understand it and just it's not being pushed enough, I guess. Yeah. I, I'm not sure cuz just baffles me now that I know about it. Now that I'm, you know, out of the matrix. I really, under <laugh>,
Speaker 0 00:18:15 <laugh> making money is really hard. Investments, getting good returns on investments is, is difficult. And there's, what happens is some rare investments that g you know, triple, quadruple, you know, times 500 Bitcoin and, and things like that historically come along every once in a while. And then people go out there and their mindset is, is shifted with false expectations of what returns someone can make.
Speaker 1 00:18:43 Why would I wait this long when I can just do this? Right.
Speaker 0 00:18:46 And I, I get it. I mean, there's nothing like chasing money, you know, it's exciting. It gets you outta bed and I don't knock anyone that's going out there and hustling and doing whatever they can to get the returns. But you gotta be real careful with, uh, you know, risk level inherently is usually exactly tied to your returns. The higher the risk, the higher returns. Yeah. It's just the way life is. And real estate's one of those rare commodities that has a lower risk pro profile with higher returns,
Speaker 1 00:19:16 Which has been proven Yeah.
Speaker 0 00:19:18 Forever, decades, ever decades. It's the greatest, uh, concentration of wealth in the world is, is real estate holdings. And there's all kinds of interesting stats out there. Like 90% of millionaires became millionaires because of real estate and that, that stats a little misleading in a way because Sure. They had other incomes, but real estate was a, was a part. Yeah. For 90% of millionaires real estate was a part of what made them millionaires.
Speaker 1 00:19:42 I mean, almost any millionaire you talk to has some sort of, you know, real estate like for sure. Yeah. And that's why it's always great to see celebrities like Kevin Hard and stuff talk about it and how he thinks it's so important. Yeah. And how he handles money and everything is just, it's why it works. It's, it's why it's a thing.
Speaker 0 00:20:00 Yeah. Ed Sheeran, he's, he's, uh, out there, you know, sharing with the world what he's doing with the wealth that he's building. You know, he, that's a guy who has access to every investment on the planet. Mm-hmm. <affirmative>, he could invest in anything and he puts it in brick and mortar. Right. And, um, I wonder where why. Yeah. Yeah. It's, again, it's that lower risk profile with the higher returns. And if you're patient and you're, and you're looking to build wealth or retire early, and you guys are at your ages, which is 26 and 22, 26 and 22, if you guys built up 10 rentals in the next three years, which is doable, it would take a lot of hard work sacrifice. And then when you're 40, you could literally be sitting on the beach doing nothing. Getting
Speaker 1 00:20:47 Paid.
Speaker 0 00:20:47 Yeah. Getting paid. It's that simple. And I would argue by the time you're 30, if you're on that path, you're gonna end up buying five more and then five more. Yeah. And then five more. This stuff is addictive. <laugh>. Once you start seeing the returns, returns,
Speaker 1 00:21:01 I'm
Speaker 0 00:21:02 Sure you know, and, and you can always ring the register along the way. What, what if you, you know, someone's younger and they're like, well, I don't wanna wait till then. I wanna live. Okay, well sacrifice for a five to 10 years. You'd be amazed at how much wealth you can build up just in that short amount of time. And then you can liquidate. I think it would be dumb to liquidate, but
Speaker 1 00:21:22 That's the option. It's an option. An option. But it's an option. You want a new car, right?
Speaker 0 00:21:26 Yeah. Go do
Speaker 1 00:21:27 It. It's stupid. Well, it depends, right. But, but I see what you're
Speaker 0 00:21:30 Saying. But you can have balance in both. But again, it goes back to, yeah, being poor is really hard, but also sacrificing in order to build wealth is hard too. And it comes down to your, your personal choices. You know, pick your heart. Do you wanna make those sacrifices? Pick your heart. Mm-hmm. <affirmative>, well you youngsters probably have bars to go out to and, and fun things to do now.
Speaker 1 00:21:54 Not after this New Year's, man. Oh my gosh. Yeah. But yeah, I'm still recovering.
Speaker 0 00:21:58 Yeah. Well, that's our show today. And if you've made it this far, we'd really appreciate it if you left us a review on Spotify and Apple Apple podcasts. It really helps us grow our podcast and reach as many people as we can to help them understand the world of real estate investing. You can also find some short form content on TikTok. Our TikTok is at the Homeboys podcast where you can learn even more about the power of real estate. Thanks for watching and happy investing. Happy
Speaker 1 00:22:26 Investing.
