This is The Norris Group's real estate investor radio show, the award-winning show dedicated to thought leaders shaping the real estate industry and local experts revealing their insider tips to succeed in an ever changing real estate market hosted by author, investor and hard money lender, Bruce Norris.
Bruce Norris:Hi, thank you for joining us. My name is Bruce Norris and today our special guest is Lenska Bracknell Lenska is a real estate nvestor and broker, rehab ducator and entrepreneur. She's een an independent broker in an Diego working with real state investors. She's a When do, when do I have time to sleep? landlord and investor herself involved in over 100 fix a d flips, Lenska's background and expertise makes her a valu ble resource in understanding r al estate markets, prope ty evaluations and acquisit on. Lenska offers monthly invest r tours for over 12 years n different San Die o neighborhoods, evaluating hous s and searching for deal
, teaching investors about:Fix Flip, Buy & Hold in San Diego Out of state investing, Priva e Lending, Vacation Rental, Accessory Dwellling Units small multi-family investi g. Lenska is also SDCIA boar member.SDCIA is Southe n California Real Estate largest investor club. SDCIAs mission i to Unite Members in a common bond to further their education and promote their success in real estate investment. And on the side, Lenski loves flying airplanes, drones and doing Zum a Zumba to J-Lo songs! That' what it says When did you get into flying airplanes? That's, I wanted to ask that.
Lenska Bracknell:So, thank you, Bruce, for, for having me. And yes, my flying career goes actually back to being married to a helicopter pilot.
Bruce Norris:Wow.
Lenska Bracknell:And we started an aerial photography business. And 30 years ago when I came to this country, I didn't speak much English, but I understood as much as when I went out with my portfolio back then we had those 8 x 10 glossy photographs.
Bruce Norris:Right.
Lenska Bracknell:Um, and everybody was asking me, 'Are you the pilot? Are you the pilot?' And by the fifth time I had enough, I literally turned around I didn't even answer that guy. I turned around, went to follow my airport, I said 'Sign me up. I want to get my private pilot's license.' And here, here we are 30 years later. Now it's all up to drone flying.
Bruce Norris:Yeah, now I was asking, you know, so now you operate drones that go, how far away to take a picture?
Lenska Bracknell:Now, if you go by the FAA rules, you have to believe it in the line of sight.
Bruce Norris:Okay.
Lenska Bracknell:And you only can go for 400 feet high. And there are a lot of restrictions on drones. Like for example, I flew over San Diego, downtown, but drones are not allowed. So, I still use then the helicopter with a different camera.
Bruce Norris:Okay.
Lenska Bracknell:I'm sure I get a call from the FAA saying 'Hey, you, this video on YouTube looks like you are not allowed.' So, I'm waiting for that call.
Bruce Norris:So, how far, away can a drone be from where you are? I mean...
Lenska Bracknell:It could possibly without interference of Wi-Fi and stuff go I mean, they are rated about two to three miles.
Bruce Norris:Okay, well, that's closer than I thought. I was wondering how far they could take off and...
Lenska Bracknell:People have lost them in the ocean.
Bruce Norris:Yeah, I could see that. Someone, someone our family circle got one. He says'You want to use it?' I said, No. I could see a crash landing over in a park somewhere.
Lenska Bracknell:Yeah, and for me, since I am, you know, kind of a real pilot. I obviously, since I've been flying for over 30 years, and photographing for SANDAG, for Caltrans, and for all the Home Builders and that's actually how it ties into real estate, right? I actually, I'm still upset with myself to this point as today because I was flying all the site selections for Walmart.
Bruce Norris:Wow.
Lenska Bracknell:Nobody knew about where Walmart was going. But back in my younger years. I you know, I, you weren't around or I wasn't listening to you yet. And so in the 90s right, it's, yeah, I could have probably options, some good land around Walmart selection sites. All right. So, that's why when I teach investors it's I always try is there an edge for you because of your daytime job possibly.
Bruce Norris:Interesting. I've never thought of it that way but that is actually like an appraiser. You know, a lot of times investors have a background as a, as appraisers because they, that's what they do. They look at values and they can understand, you know something that's harder for other people. Let's go, I'm gonna take you back. Let's go back to about 13, 14 months ago so we're done with 2019 and 2020 starts. What was the real estate market like in San Diego, pre-Coronavirus?
Lenska Bracknell:Pre-Coronavirus? We have the hottest, best selling, fastest selling holiday season in about in, in November and December.
Bruce Norris:Okay. Now, was that consistent through 2019? Or was that just really kind of kicked off? And for some reason...
Lenska Bracknell:We had pretty strong holiday season, selling seasons the last two or three years, actually. So, we obviously we still had that seasonal dip in inventory. And that even then fueled higher prices because the real buyers like we always say the real buyers don't take a break at Christmas.
Bruce Norris:Right.
Lenska Bracknell:And investors don't take a break just the opposite. They're hoping for less competition.
Bruce Norris:When the Coronavirus happened about let's say a little over a year ago. What did you think would happen versus what actually did happen? Did you have an opinion? Oh, wow, this is gonna change, be a game changer one way or the other?
Lenska Bracknell:Yes. I actually watched the inventory daily.
Bruce Norris:Okay.
Lenska Bracknell:I did my own spreadsheet, because I felt I owe it to my investors that will call me and say, 'Oh, my God, the whole...' I mean, we're all agreed that the real estate market will crash and home prices will go down, okay? So, and but after watching it for maybe four weeks and six weeks, and nope, there was no price reduction, no nothing and even here in San Diego, not a lot of withdrawals or cancellations. There was a pause for about four weeks, but that was it.
Bruce Norris:So, you're saying the inventory levels did not radically change in a tight, in that time period?
Lenska Bracknell:Correct.
Bruce Norris:Now, that's interesting, because California as a whole, inventory was down. Something like 45%, which is a lot.
Lenska Bracknell:Yep. But that is because it got bought up quickly. Not...
Bruce Norris:Okay. I think okay, let me just think about that. Because I think a lot of the volume. I mean, the inventory is still way down in San Diego, it keeps going down. It's amazing. It goes down 50% a month. Pretty soon you'll have three houses for sale.
Lenska Bracknell:Now, actually, this is a good point you're making, Bruce because right now we have and we had for the last year 2700 listings.
Bruce Norris:Okay.
Lenska Bracknell:And that includes condos, attached, mobile homes, townhouses, everything. So, if you look for a three bedroom, two baths, 1500 square foot house with a two car garage, and a medium home price you qualify for, let's even take it 750, 800. Do you know how many houses available between our northern boundary and our southern boundary?
Bruce Norris:Not many.
Lenska Bracknell:175.
Bruce Norris:And what will that, what volume of sales will take place in the next 30 days for that...
Lenska Bracknell:Every home that is listed we, were very consistent with the new listings, pending listings, and sold listings pretty much equally so if 700 homes come on the market, 700 home go pending, 700 homes will be sold. We have not reached the lowest we have gotten I think was 2611. Today we are 2730 or something.
Bruce Norris:Okay. Um so, what's it like being a real estate agent? Now, you still deal with clients and list their homes? Is that correct?
Lenska Bracknell:That, that is correct. So, last last year, I heard myself constantly whining and complaining and I'm telling you whining was more of the option.
Bruce Norris:Okay.
Lenska Bracknell:About, there are no houses for sales, investors on, you know it's hard to get a fix and flip, it's a, cash flow is practically impossible unless you add an ADU or possibly actually built from the ground up. So, I said I need to reinvent myself. So, if I can't buy it, why not build it? And then suddenly a good friend of mine, we had a discussion and she said, 'Why don't you help people build ADUs?'
Bruce Norris:There you go.
Lenska Bracknell:Because also because of the ADUs people, people are not selling their property. So, that's also one of the reasons why people are not listing it. And so, they have the option now to make that nest egg even bigger.
Bruce Norris:Right.
Lenska Bracknell:And if I'm getting a 3% interest rate or three and a half or even, you know, any even if it will go up to five, they still would be it...
Bruce Norris:Interesting.
Lenska Bracknell:So, that's why I decided you know, I still have clients that actually, I do broke price opinion, I help people maximize their rents and so on but that doesn't pay the big bucks like you know, the real estate commissions.
Bruce Norris:Right.
Lenska Bracknell:Not only obviously we have 15,000 agents, so I always say 10, 12 years ago we had 5000 agents and 15,000 listings. So, today we have 5000 listings and 15,000 agents. So, you can do the math plus we have iBuyers in all this.
Bruce Norris:Right.
Lenska Bracknell:So, and not only this, the commission structures are also diminishing. So, buyers, buyer agents commission's now is down to 2%. Now, yes, given the prices are going up...
Bruce Norris:Yeah.
Lenska Bracknell:...right? And sellers say hey, Redfin does 1%. Can you do it for 1%? So, that is a lot of commission pressure on the entire real estate industry.
Bruce Norris:In San Diego, if you're a seller, what can you expect?
Lenska Bracknell:Not quite, 122 offers, but like this one, one house got up in Fresno, I believe.
Bruce Norris:Okay.
Lenska Bracknell:But it is not unheard of about 40 or 50 offers.
Bruce Norris:Inside of a very tight timeframe?
Lenska Bracknell:Oh, yes. And if you don't see I mean, currently into, it's kind of we also do a little K-shaped recovery. So, if you're talking about Chula Vista, which is one on the closer to the Mexican border, right? So, you have a time on market or an inventory of about half a month.
Bruce Norris:Right.
Lenska Bracknell:Half, you have, we have seen a price go up from last year to this year. So, year over year 20%. Now, if you go to Rancho Santa Fe, where, you know, the glitz and the rich live.
Bruce Norris:Right.
Lenska Bracknell:It's actually very interesting. That last year's inventory was 12 months. And prices actually have been declining 20% so, when we see, when we say the average appreciation right now in San Diego is 14%. If, if the high end homes drag us down, then you can see that actually the low, the median home price or the lower end of the market is actually probably appreciating more than over 20% and the Fed is telling us there is no inflation?
Bruce Norris:You're, now you're trying to get out of the box here.
Lenska Bracknell:Oh, I'll get back in it.
Bruce Norris:Okay, so sellers, what are they doing when they sell now? Are they staying are they leaving? And where are they going?
Lenska Bracknell:So, my last sales were all moving kind of out of state.
Bruce Norris:Okay.
Lenska Bracknell:Or they are renting.
Bruce Norris:Renting? Wow. Cashing in, cashing in their chips thinking they'll buy when it comes down type thing?
Lenska Bracknell:Uhm, not necessarily because they want to maybe travel and don't know so they're, you know, they're in the position. Thank God that they don't, you know, they could buy something later on but they don't know where, where they're going and maybe traveling for a year or two.
Bruce Norris:Okay.
Lenska Bracknell:And then actually, I have investors who are cashing out and paying the capital gains tax.
Bruce Norris:Instead of...
Lenska Bracknell:1031 because 1031 you can't, it is so hard right now to find replacement properties. So, if you have other debt, you can pay off with that or your own mortgage. And as a baby boomer sets you up debt, debt free. That's a very good plan, too.
Bruce Norris:Yeah. California real estate can do some amazing things. And it's been, it's been doing that this last couple of years. If you're, if you're a buyer, do you rep...if you list their properties, and do you represent buyers, what? How do you prepare them for what they're about to see?
Lenska Bracknell:I, you know, I'm probably one of the brokers that I talk myself out of a lot of commissions. But that's probably why my reputation is pretty good back in the days when I know I'm not answering your question. Let me answer your question first, and then switch over to the investors. I prepare buyers as in you need to, if you make an offer, he needs to put 20 to $40,000 on top. Okay, so we currently list price to sales, a sold price is at its highest as ever has been at 102%.
Bruce Norris:Right.
Lenska Bracknell:Right? So, meaning everything is being bid up. So, the highest bid up was$500,000. Half a million dollars.
Bruce Norris:Wow.
Lenska Bracknell:In San Diego, so if you want to be in that game, and that, that's what you have to prepare buyers for. And it is very discouraging people looking at all these homes, you know, it's one offer after another. And some buyers don't believe me. So, they kind of have to submit to offers, you know, and then say, Hey, you know, I'm not driving up the price. But sometimes they don't believe me. So and then they have to come to realization.
Bruce Norris:Yeah. Have you ever seen a market like this?
Lenska Bracknell:No.
Bruce Norris:So, if you're an investor right now, so that's really what we both do and who we work with? What is the suggestion for them ass far as'Okay, how do I spend the next 12 months doing the most profitable thing?'
Lenska Bracknell:So, for me, the most profitable thing is if you have rental properties to add, ADUs.
Bruce Norris:Okay.
Lenska Bracknell:I mean, you know, Mike Cantu, bless his heart. He was on the our sister club North County yesterday. And I had that question. And his, and his reply was, he does not want to have the current tenants put up with the inconvenience of adding units, right. So, there's, there's all different way and but some people have huge properties, they have 10,000 square feet with a duplex all the way in the front. So, you can actually yes, cut into a curb and increase your ROI tremendously, because you already own the dirt.
Bruce Norris:Yeah, you know, Mike is a very unusual investor who had a plan for the last 30 years to land on the exact square he's at. And so, that, Mike Cantu's answer would probably be very unique to Mike because he's already done exactly his plan. And so he's, he's good. Do you find that adding an ADU somehow changes the quality of the tenant in the residence that's already there?
Lenska Bracknell:I always tell my investors I prefer they're doing it so it does not diminish the quality of the current tenant. Okay. So, you can create great backyard spaces, and maybe do a shared laundry and some of the, you know, tight, tighter spaces. But if you're doing it right, and you have the property, I mean, I have seen people put a two story ADU in a footprint of a 18 by 38, I believe...
Bruce Norris:Okay.
Lenska Bracknell:...because you had to observe the setback. So, two stories are practically that tenant will look down into somebody's living room all the time, and then just blast some J-Lo music like I like right and so for me that And would must love J-Lo!
Joey Romero:Well, who's renting those ADUs? Lenska if I can ask?
Lenska Bracknell:As in who is the renter profile?
Joey Romero:Who's the tenant in those?
Lenska Bracknell:Obviously, we have such a diverse market here in San Diego, that we, I mean, it is really all over the... I mean, it's practically determined by the size of the ADU, right. So, some people are at 450 square feet, because they want just a single person professional in there. We have a lot of tech job, medical jobs, you know, and, and this is why San Diego is so great. We still have, you know, good colleges, and I don't see how the colleges do the online teaching yet, right? medical you can't do from home. And we have a lot of biotech and biotech, you can't do from home either. So, there's a lot of quality professionals moving into San Diego.
Bruce Norris:I guess that's what I wanted to know. Did the buyer profile change because of the pandemic? Did you have migration from people that were given permission? Okay, you don't have to, let's say live in San Jose. You can you can be elsewhere, and they brought this has happened to Florida. You know, you sell something in New York for a million dollars, it was hard to find something in Florida for a million dollars. So, your money goes further. But yet you came from a big check. And your mindset is I just want to get one. So, that urgency prevents negotiation. It's like that's not even a, it's just can I get what I want? Is, did that happen in San Diego?
Lenska Bracknell:Yeah. And we have two profiles. We have people coming down from San Francisco and I assume that$500,000 over asking price was somebody from San Francisco because 2 million was still cheap for them, right?
Bruce Norris:Yes.
Lenska Bracknell:And then we had several people from Los Angeles to escape, the smoke, the traffic and everything else. And also even further up the coast. Because you know, if airplanes fly back, and they even have to fly maybe once a week up there for meeting or something, the quality life in San Diego is, is still a pretty good plus, we do have really good jobs, I would say.
Bruce Norris:I was wondering if that happened. I know I spoke in front of a, was in San Jose, there was a group of was a Chinese investor, investment group. And so, the audience was three, 400 people. And when I spoke, did a Q&A afterwards. And I found somebody comment really enlightening. He had originally bought about a million dollars of property in China and went up 10 times he sold it made $10 million kind of came to San Jose with that this is probably got to be five or six years ago. And he was nine... He said to a realtor basic I'll take $10 million homes, because his assumption was that it was going to do what Chinese' did. And it really that was his assumption. Maybe it is actually happened. But he didn't, he didn't care about the price level. He cared about getting them.
Lenska Bracknell:Yeah, and I mean, you know, the, the Chinese and that's another reason to you know, our foreign investment was pretty high all those years, right? it slowed down now, but foreign investors are also never selling the real estate. So again, that, that contributes to not having enough inventory. So, besides all the you know, the demographics, the job placements, and so we will really have haven't wrapped our head or numbers around real estate prices yet.
Bruce Norris:Do you think the interest rates dipping below 3% so somebody could have had an opportunity to refi was something that started with a 2, do you think some of those people said you know what, I'm just staying... at this rate.
Lenska Bracknell:Now, especially if people see that there. So, I have a, I went on to a listing presentation in I believe it was February. Okay, so a house a house in Mira Mesa, I won't tell anybody the address because otherwise tomorrow, they will be inundated with a line out the door. Okay. And so in February and the median home price was 650. In their house, I think I counted at about 860, okay, I always do a little lower and I practically told them'Let's wait for the spring season, I believe prices will be pushed up so your house will comp to the spring sales.' Right? S,o the last two comps, I just pulled it yesterday was 940. So, by waiting, but you see that's me as a real estate agent. Nobody else would ever, anybody would say let's list, let's list you know. So, practically between February and end of April, those people made$80,000.
Bruce Norris:Wow.
Lenska Bracknell:Just by doing nothing. Right.
Bruce Norris:And that's a tight timeframe for that return. Holy cow.
Joey Romero:Well, that's gonna do it for part one of our interview with real estate investor and broker, Lenska Bracknell. Please tune in next week for part two. Thank you.
Narrator:For more information on hard money, loans and upcoming events with The Norris Group, check out thenorrisgroup.com. For information on passive investing with trust deeds, visit tngtrustdeeds.com.
Aaron Norris:The Norris Group originates and services loans in California and Florida under California DRE License 01219911, Florida Mortgage Lender License 1577, and NMLS License 1623669. For more information on hard money lending, go www.thenorrisgroup.com and click the Hard Money tab.