S3 E8 - Transforming Finances and creating wealth through Strategic Real Estate Choices

Would you be ready to unlock the secrets of real estate success? Learn how Jason Wagner transitioned from corporate finance to a real estate powerhouse. His journey is filled with lessons on preparation, accountability, and the immense value of continuous learning. Jason's unique perspective as both an agent and an investor sheds light on the critical role of property ownership and flipping, contrasting sharply with those focusing solely on sales. He also shares how social media has become a game-changer in expanding his business and the importance of building a passive income stream through strategic property investments.

Discover the profound impact of real estate ownership on net worth, especially during turbulent times like the COVID-19 pandemic and the interest rate upheavals of 2023. We discuss strategic opportunities for buying properties even amidst interest rate shocks and the potential benefits of refinancing and increased cash flow. Jason delves into the tax advantages for high earners through real estate professional status and cost segregations, emphasizing the importance of understanding the full spectrum of investment properties, including principal pay-down and long-term gains. This episode also highlights the significance of demographic trends and choosing the right neighborhoods to maximize returns.

Explore the complexities of real estate transactions, ethical considerations in dual agency, and the anticipated industry changes due to new regulations. Jason provides insights into the current housing market issues, such as inflated prices and high interest rates, and their effects on buyers and inventory. We discuss how ongoing bureaucratic delays in the permit process hinder new construction and exacerbate supply shortages. Finally, we address the broader implications of inflation on real estate investments and personal finance, offering valuable insights for both seasoned investors and newcomers. Join us as we reflect on these engaging topics and share our gratitude for the opportunity to connect and share this wealth of knowledge.

Transcript

Real Estate Agents' Perspective on Success

Speaker 2 0:00

I think, a really good point. I was looking at your post over the weeks. We have stuff to talk about in my head, even though I always see them. Yeah Was a lot of your stuff on what you're talking about now and I guess for an agent it's being accountable for your own intelligence, like in what you're saying. Yes, and a lot of the things you're talking about in your Instagram is you know, it's not that it's scary, it's just that you're and this is in the true sense of the word. You're ignorant. Like ignorant gets a bad rap. Ignorant is not anything, it's not saying something mean to you. Ignorance means you just don't know, and I think a lot of your posts and a lot of your messages you know. Don't let ignorance stop. You learn posts and a lot of your messages. You know. Don't let ignorance stop. You learn what's the five P's. Do you remember?

Speaker 1 0:49

it Preparation prevents poor performance.

Speaker 2 0:58

There you go. It doesn't matter how much money we get, if we don't close, it's no money, right? So no clothes is no money. I'm everything that I am because of my dad's death, and I wouldn't be as successful without his death. Jason, give us before we even start. I'm super excited. We're Instagram, social media friends and now we're meeting physically and we're going to have an unbelievable discussion. Jason, give us your spiel on yourself.

Speaker 1 1:22

Yeah, so, Jason Wagner, I am the managing broker and owner of Greystone Realty, which is a small boutique um firm that's now located in Arlington Heights, Um, and so actually just moved out there, uh, just this last year. But, um, our firm is, we've got eight agents there. Our kind of claim to fame is like all of our agents are actually investors, Um and like agents that are out there doing it. Yes, at Greystone.

Speaker 2 1:47

So okay.

Speaker 1 1:47

So it's my own firm. I launched it in let's see 2021. Um, and so we've got eight agents now, and so I may I like to say that I'm an. I'm an agent that is actually out there playing the game at the highest level because I own property, because I have, so I've got 19 units myself. Um, I manage them. I've done rehabs, I've done flips.

Speaker 1 2:08

Um, that's kind of how I got started in the business and, to be honest with you, I never wanted to be a real estate agent. Um, I wanted to be the biggest, baddest flipper in the world, right after HGTV and you know. But prior to actually jumping into real estate, I was in the corporate world and I spent four years really understanding finance and I was in these finance positions head down, number cruncher, learning charts, and then I hated it but ended up finding Rich Dad, poor Dad, read a book and I'm like real estate's the way to go, and so I ended up just doing the whole rehab stuff right away, got my license so that I could sell my own properties. Then I just realized that social media was a big thing and I would talk about the flips and people would come to me and be like hey, jason, can you help me buy a condo? And I was like, oh, yeah, I could help, like that's easy, right, I've been buying properties already myself, I can help you. And then then I realized it was a heck of a lot easier to make a lot more money, um, being an agent than it was flipping, but I still have like the big love.

Speaker 1 3:10

For you know, I try to buy one property per year just to increase the rental portfolio that I have, and so that really helps me and my family. We've developed a nice set of passive income. We bring in $7,000 a month just from cashflow, so that helps pay for our house. And so I like to say that is like I'm actually out there playing the game at the highest level and where a lot of times you have agents that just like they don't do that, they only sell Right, and so that's kind of like my differentiating part. Yeah, you're sleeping with the enemy, yeah, yeah.

Speaker 2 3:41

Yeah, that's exactly how I got involved. Yeah, so I was in finance, I was a trader, and my dad was always like never put all of your eggs in one basket. So since I had so much money in the market, I was like okay, what's the antithesis of that? Okay, the opposite of that is brick and mortar. So then I started buying buildings and my sister would help me, and then finally she's like I can't do this anymore, I have my own stuff to do. Just get your license and you can handle yourself. So I got my license to do my stuff, and then on the trading floor they're like well, what are you doing? I bought this building, it's this and this. This Guy walks up and he goes can you help me find a building?

Speaker 2 4:18

Can you help me find a building. And then at some point the real estate had surpassed the trading and I was like all right, and then, as the real estate, as the trading market went pretty much pure gray box and black box and I was a floor trader. I spent less and less time there. I would trade maybe for an hour, an hour and a half just to have some income come in, but then the bulk of my time was researching, uh, real estate and the same reason.

Speaker 2 4:48

Like you know, you're crunching numbers and in you know a little bit different. In in trading, you're looking at. You know you're more looking at like, where things are going, what could happen, this stuff. So it's kind of the same thing, but more of a I have a, more of a I for myself. I'm more of a demographics person, which is kind of just the backend, and I just went to full real estate and I was like and it was just like okay, so I'm basically trading still, but at a longer timeframe versus you know, at some point I was like 15% of the NASDAQ electronic trading.

Speaker 2 5:24

I'm like, okay, so instead of trading 17,000 times a day or whatever it was, I'm trading once every two years. But the concept is the same finding value, exactly, and creating value and buying under and selling over.

Speaker 1 5:37

Yes, yeah, and just understanding charts and dynamics. And the funny thing is like here's what I respect about you is because you understand the data and there's. So is like here's what I respect about you is because you understand the data and there's so much data that's at our fingertips in the real estate market. Every single agent has access to it, but nobody takes the time to actually like learn it and help their clients.

Speaker 2 5:57

I don't think they have the capacity. I think you're right, right.

Speaker 1 6:00

Because they they haven't done the work, they maybe don't have any type of background or they just don't find it fascinating, right. And so I intrinsically find it fascinating because of, probably, my corporate start, where I was in the finance and I was like, oh, these charts are kind of cool, oh, able to take that and be able to manipulate that data and then interpret it.

Speaker 2 6:28

Okay, this is the trend. Like we always said, the trend is your friend. That was like the comment that when I was training traders, I, the time it turns, you're going to be broke. Yeah, so just, the trend is your friend, get a little ahead of it, but the trend is your friend. It's amazing because, definitely, I always watch your stuff on Instagram and you post. I'm not on Twitter, but you post your Twitter on Instagram, so I have to be and I'll read that stuff all the time and it's always echo, echoing, what, what, uh, what I always have thoughts of too good and I think, I think a really good point.

Speaker 2 7:11

I was looking at your post over the weeks. We have stuff to talk about in my head, even though I always see them. Yeah was um a lot of your stuff on what you're talking about now and I guess for an agent, it's being accountable for your own intelligence, like in what you're saying. Yes, and a lot of the things you're talking about in your instagram is you know it. It's not that it's scary, it's just that you're and this is in the true sense of the word.

Speaker 2 7:35

You're ignorant like. Ignorant gets a bad rap. Ignorant is not anything. It's it's not saying something mean to you, ignorance means you just don't know, and I think a lot of your posts and a lot of your messages you know. Don't let ignorance stop you learn yes, like and don't. And ignorance causes you to be apprehensive, ignorance causes you not to want to get involved and ignorance causes you to miss these opportunities. It's like a lot of your stuff has that theme through it. Hey, let's educate yourself, like, let's educate you. And I think I think people like yourself and I will say myself and a group of other people, they're providing something that a lot of people don't have. And it's interesting because I know how I talk to new investors. When you have somebody that calls you up and says, hey, jason, I want to get involved in what you're doing, I find it fascinating. I didn't know nothing about it. What are the first couple of things? Like, okay, let's sit down, this is what you got to know.

Speaker 1 8:42

Yeah, yeah, I always try to give them the path of least resistance, because a lot of times I'll get somebody who's just like you know.

Speaker 1 8:50

Hey, I want to take on a flip and I want to do this big gut rehab and I'm like I'll ask them like do you really want to do that? Like do you have the resources to actually do that? Because here's what I'll tell you Like you can get more success out of um instead of going down the biggest risk path. My big thing is like let's go find you a two to four unit that you can go live in and house hack, and if you got to update one of those units, you get some construction knowledge, um, from that and you're living in it. It's offsetting your living costs and then, uh, you know, it's just a smart financial thing to kind of like baby step into and you're getting some landlord experience too. It's like I want to ease people into something versus, you know, they buy one property and they completely screw it up, you know, and then they're just in over their head and then it's just like it's a disaster, right. So my advice is always I want to give people. I've been down that round.

Speaker 1 9:41

I started with the flipping and I, you know, I had success, um on my first few projects and then I had one that was terrible, you know, and it was the one that was terrible. That was really the grittiness that I was able to find. But then I found like, oh, you know what, house hacking actually made a lot more sense in this situation. Um, all I had to do was live there. I increased the rents. Um, we had to renovate one of the units and I still own that building and it's a cash cow and at the time, you know, I had a 3% mortgage on it and like that's still concept, like that whole house hacking thing is just such an easy path into it, and so I feel like people just need to understand what's my lowest risk opportunity to kind of get into real estate investing and not necessarily go like jump in the deep end. You know what I mean?

Speaker 2 10:28

Yeah, I mean no one throws on 315 and starts squatting it before they do 185 and move their way up. And I think you know like whenever I get somebody, like if I get somebody that's under 30 and has no dependence, and they're like I want to buy a condo, the first thing I say to them is like no, you don't yeah.

Speaker 1 10:47

Right? No, you don't, because it's not going to appreciate it, it's not going to be a really you gotta, you gotta own dirt, yeah.

Speaker 2 10:52

And then I sit down with them. I said please don't do that. I said you have nothing tying you down by building. Live in the shittiest unit, fix that unit when you're in there and just start going down the units and then turn around. I think I know you've mentioned it in the past and I know people always mention it too that are kind of like where we're at in terms of owning stuff and seeing it. But like whenever when someone comes to me and says I mean I know that you've been doing it now and you've got a bunch of units, or somebody's. Like when I know that you've been doing it now and you've got a bunch of units on somebody's. Like when they start looking at the numbers like I have buyers that look at the numbers and they're like, oh, there's no cashflow here and I said who cares?

Speaker 2 11:30

Right, there's no. You're. You're not going to get rich off cashflow yeah, unless you have thousands of units. You're borrowing other people's money and you're just buying buildings. Cashflow is, I always tell people. You ever go in for a job and someone says, hey, we're going to start you off at 200,000. You have no experience. Let me tell you something there's something wrong and you're never going to make more money. That is your top end dollar and it's never going more. Because if they have to tease you to take the job, if they have to show you a ton of cash flow to buy that building, that means there's no back-end money and the money's in the back-end. It is in the back-end.

Speaker 1 12:12

That's it.

Speaker 2 12:12

If you want to be rich, you want to make money. It's on the three things you said Fixing it up, increasing the rents, and we'll talk about depreciation and all the tax deductions.

Speaker 1 12:23

And the principal pay down that We'll talk about depreciation and all the tax deductions and the principal pay down.

Speaker 2 12:26

Yeah, that's a big thing. The principal pay down to me is like the cherry on top. Yeah, it's like oh, I put 20 grand my cash on cash right. So I put 50 grand down on a $500,000 property. I live there, I move out, someone else goes in and all of a sudden maybe I accelerate my payments. But whatever payments, but whatever. I'm 25 years old. All of a sudden I'm 50 and they're like oh, that 50 grand you gave us 20 years ago here's 500,000. Oh, and on top of it you're still going to get $7,000 a month. Where else is that going to?

Real Estate Agents on Investment Properties

Speaker 1 12:54

happen. Yeah right, I know Real estate is just like it's such the answer. It's the answer for growing your wealth. There is no secret the reason my net worth has increased as much as it has is because I own real estate and the values of those properties collectively have gone up substantially. Because we've gone through a big market boom that was caused by COVID yeah Right. And this whole last year of 2023, where we kind of did see more of a dip because of the interest rate shock.

Speaker 1 13:28

I was telling people this is your moment to pounce. Yes, because we are heading into. We have no supply. Nobody is selling their property because majority of America either has no mortgage or a mortgage that's under 6% and we were up in the sevens, right and there's no inventory right now. And so, if you can find a property, I bought one in February and we were able to.

Speaker 1 13:55

There were two reasons that I bought this one. The cash on cash was not impressive. It was like a base hit, but I understood it from hey, we have upside on this. We could actually build out the basement. We could add an additional unit. There is kind of like a longer term play here, but we're going to be able to refinance this, probably within the next couple of years, and it's going to increase our cash flow, but then also, at the same time, I look at it from if you have people that are high earners, okay, they need to buy real estate so that they can offset their taxes, and so real estate agents are one of the very few people that qualify for the real estate professional status Okay, and I was able to really take advantage of it this last year. I did cost segregations on two of my buildings that we bought last year, and the amount of taxes that I was able to offset was astounding.

Speaker 2 14:41

Yeah.

Speaker 1 14:42

And I was a decent producer last year, right and so it's like, when you think about it from that perspective, there's a lot of agents that aren't really out there helping their cause and maybe they make a good amount of money, but then half of their commission ends up going back in taxes because they're not utilizing the resources that are available to them. In the same game that they're playing, which is buy a building, it doesn't necessarily have to cashflow, but you're getting this massive cost segregation to offset your earned income and nobody really understands that.

Speaker 2 15:11

I never look at cashflow. Never I could care, I'll hold stuff that has a negative cashflow. Because I'm like, well, it's negative, but it really isn't. Like when people look at investment properties and they're doing their sheets and they're like, oh, this isn't cash flow, I'm like, really, I'm like you're paying down. I said your renters are paying down $2,000 a month of your nut. I said where do you think that money's going? I said that's paying down your principal. When you sell it, you're getting all that money. Yes, like I don't understand how people don't see that. I think it's also you were talking about real estate agents owning investment properties. I think for me and I think you would say the same and not everyone could do it I think not owning an investment property or ever owning an investment property and being a real estate agent, I don't think you could be a top agent.

Speaker 1 16:07

No.

Speaker 2 16:08

I don't, because that's like saying I want to race a car but I don't know how it works. Yeah, I mean, you have to know how the car works if you're really going to be a race car driver, because when you're on the road you know what needs to be changed, like when you're in, when you and even in, you know it's a nice. The interesting thing is you saying, oh, you know. Then these people said, oh, can you help me buy a condo? Well, you're not looking. People that own real estate, invest real estate, that are agents we don't look at a condo as a place for you to live. I don't know if you're this. I could care less.

Speaker 2 16:42

When I pitch somebody, I'm like I'm not you. My tastes are different than your tastes, so I'm not like. People are like what do you think? I'm like? I don't know, I'm not living there, but what I will tell you is this is where the neighborhood, these are the schools are, this is where the transportation is, this is what's trending and this piece of property in five years will be worth this much more. Or will be worth this much more when people I want to say five years ago would be like, hey, I'm looking for a one bedroom and you know, I love bucktown, I love this. I'm like don't move to bucktown. On the one bedroom. I said there's not a buyer for that in five years.

Speaker 2 17:16

Yeah, I said, it's all, it's all families yeah I said you want to buy one bedroom, go to logan, go to avondale, go to a place where the youth is moving to. I'm like, follow the tattoos. I like follow that because you're not going to see returns. Because you have one and two bedrooms in Bucktown that are up maybe in the last five years 5%. You have single family homes that are up 50. You have to know the demographics of how that environment is changing. It's the same thing with stocks.

Speaker 2 17:45

Where is the world going? Yeah, you know you invest in print media. Right, yeah, like. How are newspapers doing? Right, like, yeah, you got a good deal on a newspaper. That's great. Exactly it's worthless tomorrow.

Speaker 1 17:58

Yeah, yeah, yeah, I mean you bring up a great point because, like buying a condo, you know, on the lake. You know, I always tell people, like I had a friend of mine and he's like Jason, I think I'm ready, I'm ready to buy real estate, and you know I'm thinking about the condo on the lake. And I said, ok, let's, let's talk about the benefits of buying a condo on the lake. I said, you know, there's not too many that I can think of. I said, honestly, the appreciation that you're going to get is just not going to be there, like you have to own it for five years and maybe you can be able to sell it for what you bought it for. Um, I said, but think about the house hack. And this is a beautiful story, because I told him my whole house hacking strategy and he fell in love with it. And I said, dude, let's do, let's do this for you. And he's like I want to do it, but I'm just too afraid. And I said, okay you know what?

Real Estate Rental Value Increase

Speaker 1 18:48

I'm going to partner with you and I said you're going to take on the FHA mortgage and we're going to go find a building. And we found a building in Belmont Craig and it was turnkey, it was the most expensive Belmont Craig and building out there.

Speaker 2 19:01

All right. That surprises me, because that I would think that that's not the route you want to go.

Speaker 1 19:04

Right, Well, I and here. And here's why the market was able to do this for me, because the rents at the time were only 1200 bucks.

Speaker 2 19:11

Ah, okay, it wasn't stabilized, right right.

Speaker 1 19:14

So we bought this from a, from a developer who had owned it, and um $1,200 for all the rents we have. Now we've owned it for, uh, almost two years now and we've raised all those rents from $1,200 to, on average, they're at 17, 1750. And some and I got one unit that goes in the two thousands, and so it's like we had a huge increase in the rent and now that thing is cash flowing Like.

Speaker 2 19:38

Let me explain that to people. So so the way to make money in real estate is buying stuff that's not stabilized, and stabilized means that it's at for me. Everyone has different definitions of the world, but stabilized to me is that it's completely under-rented and you buy real estate on cap rates. A capitalization rate tells you what the base is producing, basically your dividend. To dumb it down, I always tell people this is a dividend. Microsoft has a dividend of this because this is what they make. The building shoots your dividend. That's what like to dumb it down, I always tell people this is a dividend. Microsoft has a dividend of this because this is what they make. The building shoots out a dividend In an interest rate environment.

Speaker 2 20:12

Let's say it's at 6.5%. This is dummy math, back of the knack in math. I always tell people if your interest rate's at 6.5% right now, every time you raise the rent by $650 in that building, that building to the bank is just made you $100,000. That's back of the map, math map. So like you taking 1200 and going to 2000,. That unit alone has gone up $120,000 in value because you don don't buy outright, you buy leveraged and the leveraged amount is going to be the amount that is on the interest rate. That's the leverage.

Speaker 2 20:53

So if you have a building that you paid 300 grand for and you take the rents up three thousand dollars, I can sell that building for six hundred fifty thousand dollars literally in a New York minute. So that's what stabilized and no one wants to. Here's the best part. No one buys unstabilized buildings. So, like when I send shit to my clients and they're like, oh, look at these rents, they're terrible. I'm like no, no, no, no. This is where you and I kick ass because I can say I know the rents in that area Right, and I go and.

Speaker 1 21:22

I can say I know the rents in that area Right, and I go and you have the Delta there, yeah.

Speaker 2 21:26

Like you have opportunity. Yeah, so like, exactly, so like something that's done well, yeah, like I always say, man, we got to find a building from people that own it from the 50s or 60s. The same renters have been in there for 20 years. Yes, I go, because no one is. So the building inherently dips in price because of the cap rate. So you're buying. If this is, this is like, so this is trading, this is fair value. I'm buying that future down here. This risk right here is built in cushion, so the market can actually dip extremely and I'm still under fair value. Yes, so no matter what happens in the market, because the market moves in three phase waves, and that's a whole other thing.

Speaker 2 22:07

So, no matter what happens, I'm always under fair value and I jacked those rents up and when the market goes down it doesn't matter, because I can sell that on a cap rate basis and I can get out over where the market's at. Yes, yeah, exactly. Did everybody take notes on that?

Speaker 1 22:20

Yeah, yeah, no, that was beautiful. And like notes on that, yeah, yeah, no, that was beautiful. And like we have to understand like what happened with the COVID environment Not only did real estate prices like soar, but rents soared as well. When COVID first hit, rents tanked and then they rebounded with a vengeance and they went higher and higher and higher. Historically speaking, Chicago has always been like 2% increase in rents. Okay, nothing, nothing, impressive, right. And then COVID happened and people left the city but then they came back and there wasn't enough inventory for people we have. It's still very hard for people to find rental units and we've saw rents increase over 20% in a lot of these areas. And if you just think about like the low hanging fruit I was looking at at one point, I was very interested in self-storage and I have a great friend of mine who did extremely, extremely well.

Speaker 2 23:19

He's also my best friend.

Speaker 1 23:20

Yeah, crushes Crushed it in self-storage and like his whole plan was like he's like Jason, we. You know we buy these places. You know they've owned it for a long time. They've never increased the rents. They don't know what the new market is.

Speaker 2 23:32

Yeah.

Speaker 1 23:33

And all of a sudden we've unlocked a million dollars in value because we've raised the rents.

Speaker 2 23:38

And you have dirt that you could hold on to forever. To me it's like almost a land bank. It's like the storage is great and it gives you money yep, but at some point that's a subdivision, that some developer is going to pay you ridiculous amounts of money.

Speaker 1 23:50

Yeah, and so I and I was like man, you know, like I'm really jealous of this because I'm like I spent all this time in real estate. I got all these toilets that are breaking and like all that thing, and but the concept was he didn't really do anything to the building.

Speaker 2 24:04

They did the cosmetic stuff.

Speaker 1 24:06

But it was just the market had appreciated and he was able to buy it and make the move. Better management, and we just went through literally a cycle just like that, which was you didn't really have to do a ton, you could buy turnkey and then, chances are, the person that owned that building had no idea where the new market was. And this is why real estate agents have the most value for people, because we're constantly looking at where the new market is. Dude, we have all the data in our head.

Speaker 2 24:36

If you're as active as you are, that's a. I'm going to be honest, there's maybe. So yeah, I'm going to be honest, there's maybe. And I've been doing real estate for now 22, 23 years. That's my brain fog. You get in your fifties, everything kind of fades out, yeah, but shit, man, you're 50.

Speaker 1 24:55

You look great.

Speaker 2 24:57

Thank you. I think there's like 15 people in total and the whole state of Illinois that understand what we're talking about. That are agents. I'm not even lying 15. See, that's disgusting to me. 20, 20, 20, maybe me pushing it. And when I talk to agents other agents, you know what their answer to me is like well, you, you do that stuff Like dude, like you have to get involved with development because you become a better buyer's agent. It's not just the value that you bring right, all your people at grace. Don't bring now to these people. It's like hey, man, I you know, like I always that term, I sleep with the enemy.

Speaker 2 25:37

I know, I know all the stuff. I know the shortcuts on rehab. I know this, I know. I know that. I know what they could do. I know, hey, you think that's shiny, but hold up, this is what you really need to look at. How about three or four things that are really good? You know a new chandelier is going to cost you a couple hundred bucks. You know that electric that's not done right, there's 7,000. So, like, you want to diddle with this or do you want to really know what's going on?

Speaker 1 26:01

Yeah.

Speaker 2 26:02

And I think, especially with the changes that are going on, Jason, they're going to walk up to you and, like I have to pay you two and a half percent. Okay, Well, you're like this is what I provide.

Speaker 1 26:12

Because I'm an advisor. Yeah, I'm an advisor in real estate. I know a lot more things that you didn't even know existed. Yeah, because I'm going to point them out to you. We're going to go on one. All I need is one property tour with somebody.

Speaker 1 26:31

If I go on one property tour with somebody, and first time I am talking my ass off because I'm pointing out all of these potential things that they should just be looking at and be cognizant of, and it falls from layouts. But then it's also to what you're talking about, which is, like you know, we're kind of looking at the inspection items as well, the major inspection items too. Just to kind of knock those things out, I'm always turning on faucets. Like the biggest thing is 1920s buildings all over Chicago. Ok, chances are a lot of them have galvanized pipe, right, and like how many agents are actually going in there and turning on the faucets Just as soon as you're like, oh, that's coming in on itself, right? Yeah, that's just like okay, this is very obvious. Like, okay, you know, you learn a lot of this stuff in the basement, but if it's a finished garden, you have no idea. Like you, it's really hard to tell.

Speaker 2 27:18

So let's go up to the second floor and let's just see what the water pressure is like Right, and so it's it. Those third or fourth flip it was tough. That was probably the flip that you learned the most on, for sure. Yeah, your failures like everyone's failures in life are like okay. When shit's easy, you're like all right, this is easy. Like you don't learn anything. I always tell my kids when you win a game, you have not become a better player, right, you just haven't. When you lose and you sit back and reflect, what did I do wrong? That's when you've gotten better. Because now you're like okay, I did this, I did that. Everyone's like. When I'm sure you do the same thing, like when you're talking to people and a flip or this, this, like. How do you know that? I'm like well, you know what. I got fucked on this.

Speaker 1 27:57

I got screwed on that.

Speaker 2 27:59

This happened to me. This happened to me. I go. So all this garbage has happened to me, so now I can make sure it doesn't happen to you.

Speaker 1 28:06

Exactly. Yes, yes, yes, yes. And that's the great philosophy, right? It's like I would love to tell you about the time where I flipped the whole house on credit cards and I had to do a bunch of balance transfers because I could keep 0% interest, because I didn't have any money to actually finish that flip, you know, and it's like there was so much stress that I was under in those types of situations, but at the end of the day I got through it. And there's a lot of people that just they don't even want to. Hey, I can't, I can't be a landlord Like it's, it's, there's way too many headaches.

Speaker 1 28:36

Yeah, there's headaches but there's a reward.

Speaker 2 28:39

Yeah, there's, there's a big reward.

Speaker 1 28:41

Yeah, I might. You know you might go through a turbulent time, but if you don't stop, you can't lose.

Speaker 2 28:49

I think another great thing that you were talking about in your house hack thing is that there is that you were talking about that intrinsic value. But there is value. When people buy a multi-unit and they're like I'm going to live in it, I'm like, okay, well, what would you have paid for rent? For shits and giggles. I get emails from like I'm going to live in it. I'm like, okay, well, what would you have paid for rent? Like for shits and giggles. I for shits and giggles. I get like emails from like I'm never going to rent.

Speaker 2 29:09

But I get emails for rental companies and like you know, like this, and I got a, I got something from I. I need to know where full amenity buildings are versus mine, because you know I don't want to push them there. I want to provide value. Yeah, and I saw 1150 square feet and they had one left out of like a building that's 90 towers or whatever the hell, however big it is, and it was 4 000, like 50 bucks. But then you had to pay a tech fee and the tech fee was for air conditioning, oh my God. So you was like and then like it's 4,000, but then there's like another 600 to live.

Speaker 1 29:52

Yeah.

Speaker 2 29:53

Like oh, you know, you want electricity, that's this bundle. You want cable, that's this bundle. You're paying 46,. You're paying $4 and you know, 25 cents a foot. So you have a gym that you never go to, or you have a bowling alley, or you have a pool table. Let me tell you something if you're paying four thousand dollars a month in rent, you don't have time to do anything because you're working at all times. Yeah, because that's four thousand clear. Yeah, so that means you're making seven to eight thousand. That means you're making almost a hundred grand as a young person, okay, the average, I just know. Yeah, if you have to graduate from MIT to afford a two bedroom, what are you doing?

Speaker 1 30:40

Yeah, man, yeah, exactly yeah, and it's and it's a lot of, it is just like it's optics. You know, people love that whole lifestyle, like, oh I've, you know I'm successful because I rent in a very impressive building.

Speaker 2 30:54

Life doesn't start. I'm gonna tell you right now, being 50, life doesn't start till you're in your forties, oh, oh all right, tell us why it doesn't.

Speaker 2 31:03

I'm going to tell you why. If you want a great life, it doesn't. It's two decades of hard work, yeah, and then about 44, 43, you really start to live and at that point, if you have children, you can now enjoy that time with the children because you can do things. So it's either live paycheck to paycheck in your 20s and 30s, go to bars, go to clubs, rip through cash, live on credit cards and then not enjoy yourself when you should enjoy yourself in your 40s, because when you're in your 40s you can enjoy yourself because you actually understand what joy is. It's not a bar, it's not drinking, it's not getting high, it's like I'm able to spend time with X, y and Z and do things that I like to do with these people. Yeah, and people just don't understand that.

Speaker 1 32:05

Yeah.

Speaker 2 32:05

They live really poor and tight because they rip through everything and they never like. You want to do something like. That's extravagant.

Speaker 2 32:14

You have 16 to 19 properties to pull a loan off of, or a home equity loan or this or that and say you know, what I'm going to buy, you know buying in your 20s, unless you're really rocking, which people do but buying a $100,000 car, or no one buys cars now leasing a car for two grand a month or $1,500 a month, man, you know what that car is going to cost you when you're 50. Yeah, that's like a million dollar car. Take, rent, lease a 500. I don't believe in leases period. I buy everything because if I can't buy it, that means I don't. I can't afford it.

Speaker 2 32:53

So that's like my dad taught me that growing up. It's like if you can, if you have to lease it, you shouldn't own it. Yeah, that was like, and I can't get away from that.

Speaker 1 33:01

Yeah.

Speaker 2 33:02

I don't know what it is. It's just like when I was four he would just whisper that If you can't buy it, you can't afford it.

Speaker 1 33:06

Yeah.

Speaker 2 33:07

So you know, like that, 500 bucks, like dude my kids' college, over $250 a month, that's it Since they were born $250 a month. My 16 year old, I wanted to pay one penny for his college, no matter where he goes. Compound interest man, you don't those dumb mistakes. Everyone makes a mistake. Everyone does like I'm going to buy a bottle of this at the bar, like now. I'm not saying don't live your life, but you've got to put money away. And this is what real estate does. It forces you to put money away If you cannot control yourself, if you cannot contribute to a 401k all those homes are 401ks they're forcing you not to spend that money because you've got to put it into your property.

Speaker 1 33:51

It's the only asset that pays you in multiple ways. People want to oh hey, I'm in the IRA game and you know my 401k is tapped out, or whatever you know. Or I have a brokerage account. That's great. You, I mean, you should also have some of those things. But at the same time, real estate is the only asset that I am aware of. Crypto doesn't right. It's the same thing as stocks, basically, but again, it's the four components we were talking about Cashflow, depreciation, principal pay down and appreciation. It's those four things that pay you in so many ways that you just can't get from other asset classes.

Speaker 2 34:32

And people are always like, oh, the market's going to go down. Yeah, it is, but there's utility. You're living there. You're like no one takes into account your utility. No one takes it. Like if I sold my house in Bucktown right now and I made no money and everyone I feel like should have this, I mean, you want to make money, you want your assets to appreciate, but if I didn't and I sold it now, I had five years of, like, some of the best memories living there. Totally yes, totally yes. People and I don't know if it's this younger generation people don't attribute happiness as an asset or as money. Happiness is money, man. The fact that you enjoy where you come home and you have pride in your home, that's an asset. There is utility to that. There is something going on in your body that you wouldn't have. Walking into an apartment that you don't own and you're cutting a check and knowing that you're making someone else rich.

Speaker 1 35:28

I just fully believe that yeah yeah, I have a great story to that too, because I actually just helped a client close. Um, they moved from naperville to lamont and, um, I don't know if you've come across this, but I actually hate when agents do this, um, but we were in a multiple biz situation on this one and the agent said, hey, uh, no escalation clauses. So, like my, my easy, you know easy way to win is, you know, high escalation clause, but you know, we're going five to $7,000 above the next best offer, you know. And then we, we kind of have some of the other attractive things about the next best offer, you know, and then we, we kind of have some of the other attractive things and then the moment that the age I don't allow escalation costs, okay, yeah, yeah, okay, I want to understand why, and I and I and I'm always talking bad about you you end up getting more money.

Speaker 1 36:09

I think you get less, Um, don't? Oh, it's funny, you, sometimes I don't know I I'd have to actually look at the data of, like, where that situation has happened and people end up going to the top of their escalation clause. Yeah, sometimes actually, but I've had it where it was the opposite. They were like, hey, no, like we're, because here's how. Here's how I can structure the way.

Speaker 1 36:31

Tell me so okay, here's how I can structure the win. Um, you know, hey, we're gonna put our escalation clause fifty thousand dollars above the asking price because we're just putting a high value here. Chances are it's probably going to land at $30,000, because that's just where everything is unfolding, but at least we're going to be the ones that are likely going to win that situation. Now, if it comes to the moment where I say, okay, guys, I want you to go $50,000 above the asking price and we don't know what the other offers are going to be, they're going to be like you're effing nuts, but somebody else will do it, maybe I'm telling you.

Speaker 1 37:09

Maybe, and it's a hard situation. But my clients will actually go less. They won't go $50, 50 000 because they know that that's like egregious, that's just it's way too much, but what happened, what happened? So they got pinned on that 50 well then they feel better about it because they got they were. Oh, there was proof that somebody else was willing to pay it. You know what I mean? Yeah, I like that, oh okay, okay.

Speaker 2 37:33

There's other people that are well, that's a herd mentality thing. There's other people that are as dumb as I am.

Speaker 1 37:41

But so we had the situation here going back to the story.

Speaker 1 37:47

We had the situation where they weren't allowing escalation clauses, and so I gave them the. You know, hey, here's where I think the value is. And I said, ultimately, at the end of the day, you guys have a very long term outlook on this home. You don't plan on moving for the next 10 years, and you know, here's what the fair market value is. You know, I think that we'll end up winning here, but you know I'm not going to be mad if you don't think that that's enough and that we got to go. You know, $35,000 high, like 35 above, and they went with the high number because they they just knew they're like this is the dream neighborhood, this brings the happiness, this is the lot we wanted. Like we don't care if we're paying more for this house because we want it. Yeah, and so that's what you were talking about.

Speaker 2 38:34

They understood the value and the happiness factor of it.

Speaker 1 38:35

That's my problem with appraisers. Yeah Right, yeah, and that yeah, yes, that's another conversation.

Speaker 2 38:41

Yeah, right, yeah, and that, yeah, yes, that's another conversation. Yeah, sure, but yeah, I agree with you and I and I, I, I like it's very interesting, we have such a great, the same tactic. I say the same thing here's the value, here's what's going to trade, this is where it should trade. But I always say to them at what point are you not upset that you didn't get the house? That's how I phrase it. Oh nice, yeah, I said if it trades let's say it's a $700,000 house, if it trades at $735,000, are you upset? They're like, yes, I said, then you have to be at $735,000.

Speaker 2 39:10

If it trades at $740,000, are you upset? Yes, $740,000. If it trades, okay, 740 to 745 is where you should go. Because if you don't get the house, we want to have a smile on our face and said we gave it our best, nothing that we did. And if you gave it your best, you're fine, I said. But if you I'm, I said and I'm telling you I've done this so many times if you go at 725 and in your head you're like I went to 735 and you don't get at 725, you're gonna to kick yourself in the ass for the rest of the time. You're literally going to be so upset at yourself.

Speaker 1 39:44

And this is why the escalation clause really works out, because it forces you. If I got to get up there, no problem.

Speaker 2 39:51

I do like how you say it's great for the buyers, because the buyers then feel justified.

Speaker 1 39:56

They feel totally justified. I've never had that thought, but sometimes, as a listing agent, you do get the escalation that ends up winning it. In that situation I always will then say to my sellers hey, chances are they're going to get stage fright and they're going to be ready. So it's just setting the expectation is that typically somebody that does win a multiple bid situation and they do go what looks to be high, there's a higher probability that that deal is going to drop out.

Real Estate Agent Commission Changes

Speaker 2 40:27

When I'm in multiple offers and this will be interesting, I'll get your thought on this. So I'm like a very strict handshake guy. So if I have a client that wants a property and there's multiple offers and we put an offer in, I'll say to the client this is your shirt, this, this, this. If we get the property and that client backs out because now they're scared, I fire the client.

Speaker 1 40:50

Oh wow, Nice Instantly.

Speaker 2 40:52

Yeah, yeah, because I'm, it's, it's and I this, this is something that you have, that that people would probably not see it the way that I see it. I don't fire them because I'm upset, I'm not getting paid. I'm firing them because you just made the next 40 clients that I work with harder to get a home, because every time your reputation and people don't understand this and people that shop without a buyer's broker newsfl, you ain't getting shit, because literally, yeah, it's nothing to do with me. I'm more on the sell side.

Speaker 2 41:27

I'm just telling you, as a person that sells a lot, I will take an offer from someone that's represented before they're not represented, all things yeah all things consistent and if they're consistent, I say to my seller I've done deals with this person, I haven't done deals with this person, I've done deals with this person, I've done deals with this person and they're always like which. It's not about the highest price, I mean, unless it's egregiously different who's going to close and the terms Because I can get an offer for 800 on a 780 property and it doesn't close. It's not an offer. The 790 that's going to close is an offer. Yeah.

Speaker 1 42:08

Yeah, dude, I'll tell you this and I'm sure you have a lot of situations that you've come across but like to do the whole dual agency thing whenever I think that there's easy money on the table. It never happens.

Speaker 2 42:18

So here's never I know. So everyone, it's so funny you say that. So, like I have a really good friend and I'll say his first name when I was last, but Ken, and he'll laugh when he hears this because he listens to the podcast I, about three years ago we were talking and he was asking about my numbers and we're talking about rankings and I'm like you know, I'm like he's like you know, if I would take dual agency, I would have been like 13th versus 17th or this, this. And he's like you don't do dual agency. I was like never, yeah, I said everything is non-agent. Or before it was a ministerial act and they changed Everything's non-agent, yeah, but then you don't get the credit. I go, I don't need the credit, man, yeah, I go, I don. Every time you do dual agency. For me it is an absolute nightmare.

Speaker 1 43:01

It's a shit show man. Yeah, you turn from. This whole conversation is about how we're advisors. You can't advise. No, you've lost it.

Speaker 2 43:12

You're just a mouthpiece, and now you're collecting both sides. Yeah.

Speaker 1 43:14

It's actually. I'm in the same boat. I always have my sellers check. They don't allow it Because, at the end of the day, I'm just going to refer it into somebody that's at my brokerage Right and and I'll still be able to get my cut on that. Right but they're going to be represented and we've had that happen a number of times within and it's like, all right, within house, it's great, but that, Um, but that's. I just don't want to. I don't even want to do that.

Speaker 2 43:39

I don't even do that Really. I'm like. I'm like you came to this open house, you don't have an agent. First off, all those people think they're smarter than God. So, right there, I don't want to buy it. I don't, I just don't.

Speaker 1 43:52

I don't have time for that, that's true.

Speaker 2 43:53

I don't have time for that. You are than me. I don't got time for that. Like you know, I could tell you the professions that that are always are always looking to represent themselves. That's great. So then I'm like here's, here's non-agency. I said I'm going to process all your stuff, answer all your questions. I do not work for you. Yeah, anything you tell me, I can tell my client.

Speaker 2 44:16

So don't tell me anything that's going to jeopardize yourself. But but, and I'll just be like you know. You came in, seems like you know what you're doing. Here you go and let's, let's, let's, let's get at it, and then, you know, I give up a decent amount of of you know. No, like productivity on the stuff. I don't care, it's not worth it, man yeah it's just not worth it yeah, yeah, no, I and.

Speaker 1 44:39

and it's also illegal in other states. You know, I know it's just not worth it. Yeah, yeah, no, and. And it's also illegal in other States. You know, I know it's just not illegal in Illinois, yeah.

Speaker 2 44:45

It's really it's. It's just where every issue that that and rentals are the two things that are just a nightmare in terms of legal stuff, yeah, but that kind of leads us into this Saturday, which this podcast will air in a week.

Speaker 2 44:59

So last Saturday, which is this Saturday, we change how we do business and I think it's going to be a situation that we're talking about where people are going to be coming in and it's going to be, you know, unfortunately, buyer beware, I. I am of the opinion that people are going, people like yourself, your clients. I don't think it's going to change. I think people are still going to pay for your services. You're going to ask for a credit at closing and a contract, yes, and hey, I got two. I didn't get two and a half. You owe me half. Yes, exactly, I think it's going to be completely the same.

Speaker 2 45:37

I think the prices are going to do exactly opposite. So like, let's just say anything, the government does the, the product, the product that's going to happen from the government is opposite of what they want, because the government's full of idiots. So like, the government's doing this to lower prices, basically to compress commissions. That's kind of their whole thing is that everything's negotiable all the time and hopefully everybody gets beat up. That's the whole thing. And keep the prices down when you train and you do enough research and you get ready for this Saturday.

Speaker 2 46:10

I believe the exact opposite is going to occur. Agreed, I believe selling agents are going to make more money because they're going to be like hey, commissions are compressed, you don't have to pay the buyer, right. Okay, oh, the guy said that's great, I'll give you 3.5%. I'm not paying the buyer 4%, whatever it is. But now people have buyer's agreements that say you have to pay me 2% or 2.5%. So now the 3.5% is fixed in the price to the seller, right, and now the buyer is paying 2.5% to their broker. So the average listen, the average it's like 5.1 or 5.2 is the average commission in Illinois that people pay.

Speaker 2 46:53

It's like right around there. Now it's going to be 6. And the only person paying that 6 is the buyer. Six, and the only person paying that six is the buyer, because the buyer is going to pay the two and a half and the buyer intrinsically is going to pay the three and a half that I'm getting. So now we've gone from five to six consistently, and this is to help the buyer. And now, if the buyer doesn't want to sign this agreement, they got to go around themselves.

Speaker 2 47:19

What happens? If you don't have that? Or if you're FHA, you need credits. So anyone that's shopping FHA, anyone that's the lower end that can't afford this, is literally going to be walking around blind Blind. And I'm not just saying this because I'm a real estate agent. I'm saying this, I'm removing myself from the situation and I'm reading it like as if I'm reading a philosophy book, a psychology book or a business book, like I'm reading this and I'm saying this is going to create the exact opposite. And if you don't think it is, you have not looked at the ruling and what has changed? Yeah, yeah. So like, let's just put the example, you're just ignorant. To it.

Speaker 1 47:54

Yeah, let's just put the example of kind of what you said is that you know you can ask for a credit and that credit can be paid for your buyer's agent. Like that's actually how I'm trying to phrase it yeah.

Real Estate Market Dynamics and Trends

Speaker 1 48:05

Yeah, and I and I think there's a lot of value there for a buyer's agent to say like, hey, it's kind of business as usual for now. Um, they might offer a commission and if they, if they offer partial, um, you know, I'm I might, we'll have to basically just put it into a credit and chances are we'll probably be able to get that. If we have an appraisal problem, we kind of cross that bridge as we get there. But what does that do? Even if there is no commission, that's being offered. And now I have to inflate this price by $10,000 it's still inflated.

Speaker 1 48:34

It's inflated. Prices are just going to go higher. And who's paying it? The buyer. Yes, it's so ridiculous, it's like yeah.

Speaker 2 48:44

It's because it's the government, yeah, the Department of Justice. Whatever the government does, the action will create the opposite reaction. Right, because it's literally a bunch of clowns, yeah, and so this is going to be a bull market?

Speaker 1 48:59

Yeah, because we don't have inventory. We still have interest rates that are like high. They are trending downward and as they kind of get into the fives, like you'll see more buyers come out. But honestly I am not convinced that we are going to see this huge influx of inventory coming to the market, if we have five if we're at five and a half percent or a little higher on rates. But you are going to see more buyers. We're already starting to see more buyers coming into the market.

Speaker 2 49:30

You can't get a permit. Oh true, Right.

Speaker 1 49:31

Yeah, so I've been building, I've been harping on.

Speaker 2 49:34

Instagram, like I just did an interview yesterday from my buyer, from my seller, my interview yesterday from my buyer for my seller, my developer in northbrook, and just to do like when you submit a site plan, just to do the elevations, how the water needs to go off the house, just that is one year, one year. So at a minimum, a house from mental conception to door opening is two and a half years now.

Speaker 1 50:02

That's insanity.

Speaker 2 50:04

The city of Chicago. The permit process is 3X from where it was during the pandemic. That's insane 3X. It's gone from two months to six months to get a permit.

Speaker 2 50:16

So you cannot create supply Even if you have self-certified architects, doesn't matter that's how long it takes you to get it, wow, and you're going to have revisions, yeah, and that revisions at least two months. It's. It's so contradictory, like everyone's like let's do this, let's do this, and here's the problem. They're and I did something on this they're saying let's create buyer incentives. No, buyer incentives creates higher pricing. Yes, they don't fucking understand supply and demand.

Speaker 1 50:49

Can we get an economist in the state of Chicago? Well, that's when Biden had the State of the Union. He was like we're going to offer what?

Speaker 2 50:53

5K. I'm like no, no.

Speaker 1 50:57

We don't need that, we need more supply bro. We need you to build. Build like crazy, like go back to this. Uh, you know the natural dynamics of the market, which is supply and demand, and we still have a lot of demand and we don't have any supply. You got to fix the supply part.

Speaker 2 51:13

When is that gonna happen, when everyone was like I want to say like two years ago, when I started getting really, when I started really doing social media and I had like I used to do a chalkboard and like I literally would have a supply If you go back, if you go on Instagram and go back, I have literally supply and demand chalks. I'm like this and people are like you know, the market's going to crash. Rates are at 8% and some person I will not steal it, I will, I don't know Someone said this the most perfect way. They said supply is so low, which it still is now. Supply is still so low that at, let's say, there's 100 homes, there is 2,000 buyers for that home, for those 100 homes.

Speaker 2 51:52

At 3%, there are. At 4%, there's 900. At 5%, there's 900. At 5%, there's 600. At 7, 8, 9, and he says the problem is at 12%, there's still 200 buyers for those 100 homes. Because people could not grab the concept that, as rates were jumping astronomically, pricing was following, and I'm like it doesn't matter, was following, and I'm like it doesn't matter, I go. There's you have to have. Until demand is under supply, you will never have price depreciation. I don't think we're going to have that for another three or four years? Yeah, yeah, we're four and a half million homes short.

Speaker 1 52:30

Yeah, I agree, and it actually makes me really nervous for people as we talk about the renters and you know, paying so much in rent, honestly, dude. They are creating a permanent renter society. Well, they want that, they do.

Speaker 2 52:45

They want that. They want that. That's control.

Speaker 1 52:48

Yeah.

Speaker 2 52:48

You strip everyone of their belongings.

Speaker 1 52:50

These prices are just going to take off and nobody expected the average person didn't expect prices to go up over the last four years, when interest rates were high and they certainly did 're just like wow, this is crazy. My house, the house down the street, is so there's nothing in the suburbs. Everybody wants to be in the suburbs. There's like one and a half months of supply in the suburbs, meaning that if there's no new listings that came to market, every single property that was in the suburbs would be sold in one and a half months.

Speaker 2 53:20

Yeah, there's under three months in the city of Chicago.

Speaker 1 53:22

Yeah.

Speaker 2 53:22

A size of Chicago in three months. There's no homes, yeah.

Speaker 1 53:25

Yeah, and so that is a upward pressure on prices and as you get more buyers that come into the market with all this momentum of lower interest rates.

Speaker 2 53:36

Listen, that's why I don't want them to cut interest rates.

Speaker 1 53:38

Yeah, I'm the same way I was with you. I'm like, do not yeah.

Speaker 2 53:40

I'm like, let that spread will naturally come in, because the spread is the natural spread is about a point and change, and we were at two, yeah, and I just called that the Biden spread because no one knew what the fuck was going on.

Speaker 1 53:51

Yeah, yeah, yeah yeah.

Speaker 2 54:01

Yeah.

Speaker 1 54:01

Yeah, so it was up at three. It was up at three.

Speaker 2 54:03

Now it's a two and a half. Normal is two. So we've got 50 basis points there and that's all you need. Yeah, you get rates under. In my opinion, you get rates under the fives. It's lights out. Yeah, it's like it's going to be like cause now Cause more buyers are going to enter. But does that? But does that entice sellers?

Speaker 1 54:17

Does that entice sellers? I don't know if that does. I'm not convinced that it does.

Speaker 2 54:21

I think what it does is it and what I think will happen is it's going to entice people to become landlords.

Speaker 1 54:29

Yes, yeah.

Speaker 2 54:31

Because why am I giving up? If so, like everyone's like. If so, like, for instance, and people, you think this way, but people don't think this way yes, or the inflation number is 2.9. Okay, whatever, it's two and a half or two, nine, that's including food, energy. So inflation's at 2.9, unless you have to live. So people are like these numbers are so stupid, yeah, but let's just say, for argument's sake, it's 2.9. So everyone, just I'll back up again. So. So everyone, just I'll back up again. So everyone knows, when you get inflation number, it's X food and energy. So like, when you're saying inflation is going down, that's everything except food, energy and housing, ok, anyways. So if inflation is at 2.9 and I have a 2.5 percent loan, that means that every month the house goes up 0.4 and just 0.04, just in value. Oh yeah, that's a good way to look at it. Just in value.

Speaker 1 55:20

Oh yeah, that's a good way to look at it.

Speaker 2 55:21

Just in value, Just because your dollar, so like when I I'm going to get off track here, but you'll love this. When I talk to people buying a house, I go. You're not buying a house.

Speaker 2 55:37

You're buying the US dollar at this rate and you own $1.8 million fixed at 3%. So when interest rates go higher, I've made my rates 2.75 in a 15 year. I don't believe in 30s, it's a whole other discussion but I'm at 2.75 on a 15 year. When inflation and rates went up to six the value of my house and rates went up to six the value of my house, my dollars increased double because I own that dollar at such a lower cost and think of this to people as I try to break it down to people. My background is economics, so when I try to break it down to people, I'm like I go milk and eggs Just because you now make a hundred grand, you really don't make a hundred grand because milk was a dollar 50. Now milk is $7. We've all actually lost like 25% of our wealth unless you own real estate over the last four years. In 2019, $1 is now worth how much you think. I just read this so I know.

Speaker 1 56:44

Oh, I don't know.

Speaker 2 56:46

Yeah, I don't even want to guess 25 cents, 25 cents Wow.

Inflation Impact on Real Estate

Speaker 2 56:48

So if you're retiring, if you have a retirement, like inflation is the hidden tax, like it is the killer when they print money, they are killing you. So $1 or 25 cents. So if you have a hundred grand in your retirement account in 2019, it is now worth 25,000. And you're like no, it's not, like it is. Because you need to go apples to apples. Like I always say to people like oh, what's the highest grossing film of all time? You can't go to your phone and say it's star wars 19. No, it's gone with the fucking wind and it'll always be gone with the wind, because you have to adjust for inflation, because the dollar is not worth what a dollar is. Yeah, that hundred grand doesn't like my developer be like oh, my god, I can't believe we got 1.1 million.

Speaker 2 57:35

This is a true story. We got 1.1 million in west belmont, crane or like in that area on Springfield, on a house. He's like I never, when we thought about this, when we, when we, he's like, he's like. This is a great example. When we thought about this house and what we're going to sell it at, we were at like 900, nine and a quarter at the most. I said, okay, lawrence, we sold it for one one. We thought nine quarters. He made an extra $175,000. He goes how much more extra did it cost you to build that house? He looks at me. He's like about $150,000.

Speaker 1 58:06

Just in inflation, Just in price inflation I go then you didn't make that, bro.

Speaker 2 58:10

You made an extra $25,000. Like people don't think that way, but with real estate you're buying. When you get that 30-year mortgage, those dollars are there, they don't move. You're owning US treasuries. I don't know if you've ever said that to people. To me it's like I'm buying this because I own treasury. So when people say that real estate is a hedge against inflation, what they're saying is you're buying those dollars and they can't move. All the other dollars move, but you own those dollars. So when your house, you buy a 1.8 house in 2019, and now it's worth 2.7. It ain't worth 2.7 because the dollar has been so devalued. Maybe you made a little bit of money, but you'll always own those dollars from 2.75.

Speaker 1 59:01

And most people don't understand that. Well, they don't understand it because we haven't really seen inflation happen since the 70s or so. Yeah, and I think that that's always been the tune is like oh OK, inflation adjusted, but it's only, like you know, two to three percent per year. You know, as long as my salary is going up three and a half percent, if inflation went up three, I'm okay, right, I'm making more than than what it's costing me to live.

Speaker 2 59:29

Um, but then, all of a sudden, people weren't ready for this 10% inflation that we, that we saw, and then people like I can't afford groceries, no, can't afford food, right, I mean I don't, I have three kids that are I have three boys. I mean I don't, I have three kids that are I have three boys. I mean like my groceries are $500 a week, yeah, and I always say to my wife I said I'm like you know, I'm like I don't understand how people do it.

Speaker 1 59:47

Yeah, and I'm not shopping at.

Speaker 2 59:48

Whole Foods.

Speaker 1 59:49

Yeah, exactly yeah. Did you listen to the spaces with Trump and Elon?

Speaker 2 59:54

No, I want to listen. I've listened to like 20, like 20 minutes of it.

Speaker 1 59:57

Okay, all right. Well, elon just talks about like he wants to be a part of a government efficiency program, right, and he wants to really analyze the spending that is going on in the US government.

Speaker 2 1:00:09

Oh, forget it, dude.

Speaker 1 1:00:10

Right, yeah, and so he wants to be able to cut, but if you think about it, he bought Twitter and he just whacked all of these people.

Speaker 2 1:00:20

Yeah, like 75%.

Speaker 1 1:00:21

He bought Twitter and he just whacked all of these people and realized that, hey, I can operate this whole business with a quarter of what's actually here, yeah, and so, if you think about it, if that were to actually happen in the US where they were to, because that's where inflation comes from right, it's government spending. Yeah, it's overspending, right. And so if we had a guy like Elon who comes out and is able to really analyze what's going on in the government? My wife used to work for the government and she's like you know, they call it the $400 hammer. You know, a hammer cost in the government is 400 bucks, versus the average person it's $25.

Speaker 2 1:00:52

Do an Elon live? When Elon was in San Francisco, they were going to build public bathrooms. Do you know, Do you remember the story? Look this up. And it was going to build public bathrooms. Do you know, do you remember the story? Look this up, and it was going to cost the city of San Francisco I may be off by a little bit, but I'm pretty damn close Like $2 million a bathroom to put them out there. And Elon's like hey, listen, I can do the bathrooms for like 150,000. And San Francisco is like you can build the bathrooms for 150,000, but there's still this, all this permit process that's going to still cost this much money it's it's insane.

Speaker 2 1:01:24

I mean, I read today they just, they just did an audit and they realized that they sent 233 million dollars to the wrong place and it went to the taliban. Oh right, yeah, they don't know what and and how about the fact? I mean, I don't want to get too hard into politics because I'll just like, it's just like. Oh, my god, this is where I think people love being ignorant, and just because it's a safe place to be, yeah, how about the fact that the people that are in charge of spending at the same time can print money? And that's why they got off the gold standard? Yeah, there's a, there's, there's a, there's a.

Speaker 2 1:02:01

A large percentage of people, I mean a lot of people think Kennedy was killed from the Bay of pigs and other things that I do with the mafia and casinos and Cuba, and they shit. The second, the second movie on uh, what's the gangster movie with Pacino, the old one, godfather, godfather two is all about killing Kennedy because the mob was going into Cuba. But a lot of people say Kennedy wanted to get back on a standard and a lot of people said that that was one of the main reasons he was also killed because then they couldn't print cash. I mean, think about the fact that. Think if, as consumers we have a credit card, at any time we overcharge on our visa, we can just move our credit limit and visa doesn't have a problem with it.

Speaker 1 1:02:48

And we don't have to pay the interest.

Speaker 2 1:02:50

Yeah, and that's what we're doing. Yeah, exactly.

Speaker 1 1:02:54

It's like literally insane.

Speaker 2 1:02:55

Yeah, it's so insane. And the byproduct is every time they print money, your money is worth less, and they know that. There's no reason that they don't know that.

Speaker 1 1:03:06

Yeah it's the fundamentals. I learned that when I was in economics class.

Speaker 2 1:03:10

Yeah, Well, we're talking right now. We're creating supply, so we're just devaluing. The prices go down. If I build 1,000 homes, it's going to be a lot. The prices are going to be lower than if I only have 10 homes. Yeah, I mean, you know, the spending is. The spending is going to be the killer, and that's all I talk about a lot of times when I do my little two-second things and so I'm just so nervous because some people say, hey, we're starting to see the unemployment rate increase and so they should be cutting rates.

Speaker 1 1:03:46

But what's going to happen specifically for real estate is that we're going to cause another inflation period for real estate the moment we start cutting rates, and if it's again, we're just going to get a lot more buyers into the market 2025 and 2026 will be a disaster if we cut rates Totally.

Speaker 1 1:04:01

It'll be an absolute disaster. I mean, the people that own real estate are going to get richer, yeah, no, and it's going to be, and it's going to be. The people that don't own are going to be so handcuffed to get into the market. They won't know how they won't be able to afford it and that's like the biggest problem that we have. Like we are in a really big pickle because we had low interest rates for so long, because we have majority of America has no mortgage or something that's in under four.

Speaker 1 1:04:31

Yeah, I think 70% are under four. Yeah, it's. It's insane man. So if you're telling me that as we get into a 5% range where we're going to see a lot more buyers again, I don't think we're seeing the supply come.

Speaker 2 1:04:44

No, there's too much red tape to get stuff done.

Speaker 1 1:04:47

Yeah and they will and Brandon Johnson like came out and said, hey, we're going to be really favorable to developers and like they're going to cut regulations. Like I was actually pretty impressed with that whole plan. Did you see any? Of that, let's see it, but like is it? What you're telling me is like no, it's not happening.

Speaker 2 1:05:01

Well, I mean, if he just said it yesterday, that's fine, but I would like to see it. What they, what they really need to do and I've done TikToks on this and had discussions across the nation that's the best platform for people talking. Oh man, People just get involved in TikTok.

Speaker 1 1:05:16

Man, I got to get on there. I'm still on the whole phase.

Speaker 2 1:05:21

like China's stealing my data, everybody's stealing your data. Yeah, that is true.

Speaker 1 1:05:26

This is stealing your data.

Speaker 2 1:05:26

There's little microphones in there. The Affordable Housing Act is what's killing supply and people don't understand. Like when you try to increase density in a piece of property, if you go to a certain density, there's a certain percentage of that density. That has to be affordable housing, which is great. The problem is, which people don't understand is that those units have to mimic the other units, so you can't build four, three bedrooms, four two bedrooms and then six small studios that are affordable for people to live in.

Speaker 1 1:06:09

Oh yeah, you can't do that.

Speaker 2 1:06:11

Right. So the project is non. The project doesn't work. You actually lose any time that you go to affordable housing. Unless you get the land for free and sometimes Chicago will do that unless you get the land for free, it does not work. That's why no one does it it.

Speaker 2 1:06:37

If they said, hey, we just want you to build units that are affordable by the low end of the median income in that area and you can build a unit that at least scratches, then people would do it. They don't want the density. They tell you. They want the density so that they could be on the podium and say affordable housing, affordable housing. But how they've written the laws, you can't build it. And they know that because the aldermen are told by the people that put them in office. This is my million dollar home. You better not put a multi-unit next to me. You better not take that R3 lot. First off, every lot was R4. Every lot was a three unitunit buildable or whatever. They downzoned All of Bucktown was R4 when I moved here in the 90s because they wanted to attract builders. As soon as a neighborhood gets established, they go to the alderman and they're like downzone and everything went from R4 to R3. Wow.

Speaker 1 1:07:32

Oh, I didn't know that.

Speaker 2 1:07:32

So they down zone Any area that becomes attractive. They down zone Because they don't want density, because the neighbors, the constituents don't want density. It's all NIMBYs, it's all not in my backyard people Right. So we want affordable housing. It just can't be in Bucktown and it can't be in Lincoln Park. It can't be an old town, it can't be here. Why don't you put it 40 miles northwest, in Carpentersville, where they put everybody, like all the deals? When they tore down Cabrini Green, yeah, they structured deals and shipped all the affordable housing out to the suburbs and they cut checks to those suburbs?

Speaker 1 1:08:08

Wow, yeah, yeah, I've heard that story. I need to look into more of that.

Speaker 2 1:08:11

Yeah, there was massive deals that daily cut and shipped everybody out. Right, because the population density that's occurring, the migration away from the city of Chicago, if you look at that, it's low income that's moving out because of problems with zoning. Because of problems with zoning, if you want housing, if you want houses to go cheaper, let them build multiple houses on properties and smaller. If I got a 25 by 125 lot. Let me build row homes. Let me build two row homes.

Speaker 2 1:08:49

They won't do it. Yeah, so it's all speak, because when it comes comes down to it how they've structured the laws, you're it's like saying hey, you could drive 100, but this car only goes 65. And you can only buy this car, but you could drive 100. Yeah, well, the fastest car only goes 65.

Speaker 1 1:09:04

Though, that's exactly what it is yeah, yeah, it seems like um zoning is a really big problem.

Speaker 2 1:09:11

It's a huge problem.

Speaker 1 1:09:12

That's a red tape thing, right? That could be changed by the right person.

Investment Properties and Property Management

Speaker 2 1:09:17

Well, a person coming into office and saying we need affordable housing. Right, we'll let you build affordable housing, we'll upzone on major streets and we'll allow you to build X amount of units and X amount of eco units, and this, this and this, Because what they say is that it's not fair that someone lives in a building. Think of how screwed up this is. They say it's not fair that someone lives in a building and has a smaller unit than someone that paid fair market value. So I paid $500,000 for this unit and'm paying 150 for the same unit, and it's not fair for them to be in a smaller place. Dude, what are you talking about?

Speaker 1 1:09:59

What are you talking about? Make it make sense, you know, you just then, you then then no one gets anything.

Speaker 2 1:10:03

Yeah, I can't say. I can't say well, this guy's got a 5,000 square foot home. He paid $2 million. I can only buy a $1 million home. That home should be a million bucks. That's what the government's saying. Then you're stopping the fair market system from providing that inventory. All you're doing is stopping people. No one's going to retire off a 12-unit building, but no one is doing anything if they're not going to make some money for their effort and the risk? The risk is the market could turn while he's building this and he's broke.

Speaker 1 1:10:41

I mean there's a lot of people that won't even touch Illinois and Chicago. I know investors that are just like the big guys?

Speaker 2 1:10:48

No one that's big touches the state. No one. They don't want to Big money, I'm talking big money. They don't want to Like big money, I'm talking big money.

Speaker 1 1:10:54

Right, they don't want to because of just all the regulatory stuff. And it's not a landlord-friendly state it's, you know, there's just there's so much extra stuff, they can just go elsewhere.

Speaker 2 1:11:06

I'm surprised, like do you do mostly condos or single families or this or that, so a lot of stuff.

Speaker 1 1:11:11

I've been doing a lot more single families lately. I had a really great stint of condos and so, like I've been, I'm all over the board there.

Speaker 2 1:11:18

Because you just brought up RTLO, so I only do Airbnbs now. Oh, because I don't want anyone staying in my place for longer than 25 days. Okay, as long as it's a month and shorter, rtlo doesn't apply, right? So at 25 days, I can come into the sheriff or myself.

Speaker 1 1:11:33

Yeah, so the Airbnb license is only good for if you are a primary residence or you're building there's like there's specific rules for it.

Speaker 1 1:11:41

Yeah, yeah, I mean you can get around some of that stuff Talk up here, but but yeah, yeah, so I do, but yeah, yeah, so I, I do, I do, I sold everything okay, and I went straight into airbnbs airbnbs yeah, and I just haven't like and you have, you have single families, you have single families that are doing it, or I have, uh, yeah row homes, townhomes, and then I have partnerships, gotcha, and everyone has an airbnb under the partnership agreement yeah, right so you can spread it out yep and I'm like, hey, let's, I'll bring you in on a, you know, like you know, 10% equity or 15% equity, and then we'll do an Airbnb and you can get the license.

Speaker 2 1:12:18

This, this I just don't want. I don't. I don't know how you deal with RTLO.

Speaker 1 1:12:22

Yeah, yeah, Well, it's always changing Right and it's like there's there's notices.

Speaker 2 1:12:26

Now all of a sudden residential tenant law ordinance.

Speaker 1 1:12:29

Sorry rtlo yeah it's very difficult to be a tenant so yeah, so like, if, uh, you know, I sign one-year leases and so in every year there is going to be a rent increase that incurs, okay, but if my tenant has been there for more than three years, I have to give them 120 day notice of what the new rent increase is going to be. 120 days is four months. Man, that is like it's hard for me to even see, like what's the market going to be, because I always look like, okay, how much has the, how much has the rent gone up? Or like you know what can I stretch it to if these guys want to leave, you know, and it's just, it's, it's just so much harder. So that's the. If you've been there for more than three years, you have to give them four month notice. Same thing if you're terminating the lease.

Speaker 1 1:13:17

It's just like it's so long, it's so long. And then if you're less than three years, then it's 60 days. So that's the biggest challenge is just aligning those schedules. And at first I thought like, okay, well, this is new. You, you know, tenants don't really know what's going on. Well, now they just changed the lease, so now it's in the lease. Yeah, for what the notice is like it's very like it's so, it's so obvious that it's at least, and so like, okay, there's a lot more tenant protections there, and uh, so anyways, it's, it's just navigating that stuff and it's constantly changing.

Speaker 2 1:13:46

Yeah, it's just so I had one bad experience. I mean in my whole life I had one bad experience and it was just like I was like, yeah, I'm done yeah, I'm like I just can't deal with this. I can't deal with.

Speaker 1 1:13:56

You know this, that this I mean, and, and I mean from the covid, no one paying, and this yeah, yeah, certainly, yeah, that was, that was a problem, right, and so, like I've, I've gotten out before covid.

Speaker 2 1:14:08

Oh okay, airbnb and everyone's like oh, airbnb is not gonna do.

Speaker 1 1:14:11

Airbnb during covid was was a goldmine because people didn't want to be in hotels. Yeah, yeah, right.

Speaker 2 1:14:18

They wanted their own space where I'm not going to talk to anybody instead of this. Yeah.

Speaker 1 1:14:22

So I I do have a mix of midterm rentals and that works. So it's that's longer than 30 days but less than a year, and that's worked out quite well. And it's kind of like Airbnb. It's just you're on Furnished Finder and Airbnb. I was always concerned about the operations behind Airbnb. I don't do it.

Speaker 2 1:14:40

I have a person that does it Gotcha yeah.

Speaker 1 1:14:42

Because that's like a real business, Dude it is a yeah, I'm on it.

Speaker 2 1:14:46

So I see what he sees and they're worth what they want to get, I mean it's it's probably. You're probably answering 50 dms a day and that's just my properties. Yeah, I mean, and he manages, he's like I can get to about 16 properties. He goes and then I can't do it anymore.

Speaker 1 1:15:06

Yeah, yeah, see, like. Yeah, I'm glad to hear that you don't answer those, because you probably get a hundred messages from like yeah, no, I wouldn't, because you probably get a hundred messages from like yeah, no, I wouldn't.

Speaker 2 1:15:13

I mean, I get a hundred messages a day Like I didn't manage my own condos. I didn't want anybody to have my phone number.

Speaker 1 1:15:18

Gotcha. So you outsourced to a property management company all the time.

Speaker 2 1:15:21

Okay, I never. I was like, you know, I was like and, and on top of it there is a being being the owner, and I didn't even rent my own properties. I wanted a buffer, legally. I'm like I don't see anything, I don't know anything. I'm not discriminating.

Speaker 2 1:15:39

Nothing, I didn't rent my own properties. I didn't anything. I just was like I'm just the owner, you don't know who I am and I don't know who you are. Yeah, so like if I did get sued which you get sued in rentals all the time, like if not you, but like people do if I did get sued I'd be like dude, I have never met this person, never saw them, never. I went on their credit scores and I went on their job verification, that's it and their debt to income ratios. I said that's it. Yeah, I was wanted to completely result, like completely pull myself out of that space like my sister's. My partner, I have my. I never go to showings, I have my sister.

Speaker 1 1:16:11

So that's a good. That's a good thing, man, because there's so much emotional attachment to your own property that, like you get fogged, no matter how good you are, and even knowing that like hey, I'm selling my own property and I'm not going to get fogged on this, you do like it's. It's impossible to defeat that. I'm glad that you said that because, uh, uh, I've had that same instance where I've tried just doing my own properties and like I can't.

Speaker 2 1:16:33

I got to hire somebody else to do it because you're just so emotional about it.

Speaker 1 1:16:36

No matter who you are, I know enough not to do it. Yeah, yeah, you're smart, yeah.

Speaker 2 1:16:41

Yeah, I know enough not to do it, um, but we have to wrap up. This is great. We're definitely going to do this again. Um, give us some of your uh tail up information in terms of how people can reach out to you and your uh your Twitter, your X handle, your Instagram handle. You guys want to know. Um, we're actually going from chart person to chart person. The next person coming in is is fantastic at charts.

Speaker 1 1:17:03

Oh, you know.

Speaker 2 1:17:03

Chris Delaney, I don't know. You should follow him. He has, like he's extremely chart based. He's a mortgage lender.

Speaker 1 1:17:14

Like, very like, oh, I love that man. Yeah, yeah, no, I w I want to be able to, uh, to meet more people that are into the numbers and stuff. Um, but, yeah, no, I mean you can. You can find me on Instagram. Uh, it's Jason Wagner, underscore real estate. Um, that's, that's I'm posting. I'm literally, yeah, I post on my ex, but then I always post it on Instagram because, I just can't grow a following on on X at all.

Speaker 2 1:17:35

I don't know how that whole thing, I don't know how that works at all. So yeah, I never posted on X and I'm banned.

Real Estate Networking and Contact Information"

Speaker 1 1:17:40

Really oh boy. That one post you had was pretty bad. I never had one.

Speaker 2 1:17:45

I opened up account, you know, and then, and then, like I didn't touch it for like two months, and then I came back and it was gone.

Speaker 1 1:17:52

Yeah, wow, interesting. And then, if you want to just reach out, call me or reach out, yeah, 847-997-1639. My email is jwagner at graystonerealtychicagocom. All right, thanks so much, you guys. No, thanks for having me. That was great, great discussion. That was great Great discussion.

Speaker 2 1:18:11

Thank you so much. Subscribe, download run obviously all the apps, the Jason theory, and we'll be getting this out. Let's see, does it? What's today, the 15th? Yeah, august being out next week, probably mid August in the twenties, and looking forward to feedback. So we'll talk to you soon. Bye, all right, thanks.