Kailyn:

And the award goes to the BiggerPockets podcast on the market.

James:

That is really good.

Dave:

So good. That’s right. Everyone on the market has won an award. We’ll tell you about that in just a minute. And today we’re going to be doing our own award show to talk about the best and worst performances of the housing market this year. What’s going on everyone? I’m Dave Meyer. Joined today by Kathy Fettke, James Dainard and Henry Washington. Everyone is all dressed up and looking good. Ready for the award show. Henry, who are you wearing today?

Henry:

I am wearing Jasi Penne.

Dave:

Ooh, what is that?

Henry:

That’s what we call JC Penney out here in Arkansas.

Dave:

I was like trying to, he was like, he’s making a joke, but I don’t get Josie Penne very fancy.

Henry:

Yes, yes, absolutely.

Dave:

Well, I think like me, you’re probably doing the same thing. I’m wearing a tuxedo on top and sweatpants on the bottom because we’re in a podcast and I don’t have to wear a full tuxedo.

Henry:

I feel like James Nards in a full tux though. I feel like he’s got tux pants on.

Dave:

Yeah, if your eyes are all listening to this, James is wearing a sequin tuxedo with, I think it’s a bow tie made out of money.

James:

Well, yeah, your bow tie has to be made out of money. Well,

Dave:

Yeah.

James:

This is my recycled mc coat from BP Con. Actually, my daughter picked it out for me. She’s like, this is the coat you’re wearing on stage. I was like, really? This is what you picked out? She’s like, this is what you’re wearing. And so now I think this is my new award, mc. Lucky jacket.

Dave:

Good for you. And I should have asked Kathy, because she’ll actually have a real answer, but Kathy, what are you wearing to this fine event? Well,

Kathy:

I am wearing, I don’t know if you noticed my diamond necklace that I wore to the Taylor Swift concert that I picked up at CVS, but I’m pretty sure it is real diamonds,

Dave:

Very elegant. I mean from across the world. And on a Zoom screen it looks as real as can be. Thank

Kathy:

You.

Dave:

Well, if you are all wondering why we’re dressed up and wearing tuxedos and nice outfits and diamond necklaces, it’s because on the market was recognized as an honoree for the Webby Awards. This is an award that gets given out every year. 13,000 different podcasts applied this year and we were chosen as one of the top 10 podcasts in the business category and we’re super excited about it. So we’re getting all dolled up and we are taking a little victory lap on this show. So before we get into our content for this episode, I just want to say Kathy, James, Henry and Kailyn our producer, congratulations on this award and thank you all so much and thanks to everyone also the rest of the BiggerPockets team who you don’t get to hear from who also make this show possible all and we didn’t just get dressed up and come to this recording to just pat ourselves on the back.

Although we are proud, we are also going to be doing an award ceremony on this show and we’re going to be giving out awards for our 2024 winners of the best housing region, best strategy for new investors, best strategy for experience investors, and stick around to the end because we’ll be giving out a razzi for the worst performance of the year, which I think you’re going to want to hear about during the award ceremony. You’re going to hear our commentary on the winners and the losers and why we think the academy selected the winners among all the nominees. Alright, well let’s just get into our award show here. Our first award is for the best region to invest in the United States,

Kailyn:

And the nominees are the Midwest, the West, the Pacific Northwest, the southeast. And this because are making me laugh.

Dave:

I couldn’t hold it together. Just for everyone listening, we have Kaylin, our producer who we made her be the voice of the nominees and I thought you were doing a great job, Caly, but we’re keeping this all in the show for the record, but now you have to do it again.

Speaker 6:

Okay,

Kailyn:

I’ll take it all again. And the nominees are the Midwest, the West, the Pacific Northwest, the Southeast and the southwest.

Dave:

All right, so those are our five nominees. We did not nominate the Northeast, just no one wanted to nominate it. Alright, so with that, I wish I had, I need a little envelope to open this up. We should. It wasn’t enough time, but the winner four, the best region to invest in the United States, 2024 is the Midwest.

Henry:

We need like applause.

Dave:

Henry, I’m going to nominate you to accept this award on behalf of the Midwest.

Henry:

Unfortunately, the Midwest could not be here in person to accept the award, but I

Humbly, except on the Midwest behalf, and I mean I believe it is the Midwest has continued to be an affordable place to invest while gaining appreciation. So I believe the Midwest deserves this recognition because it’s often been poo-pooed on as a place where nobody wants to invest, but the unsexy markets have made a comeback. People have not only been able to afford to buy property, they have been afforded to cashflow that property and they have now gain some appreciation along with it. Maybe not enough juice for James Dard, but there’s enough juice for the normal guy in the Midwest.

Dave:

Oh, I love it. That’s why you’re a perfect acceptance person for this Henry. But seriously, I do think Midwest is a great 2024 region to win this award because we all know that the Southeast is very popular. It’s experiencing the biggest migration, but once everyone knows something, it’s often too late to take advantage of it. And so we’ve all heard about the southeast, it’s been growing for years and the Midwest might just be the great next thing. James, are you feeling snubbed? The Pacific Northwest got snubbed here by the academy. You

James:

Know what? I kind of feel like we did get snubbed and you know what, this maybe wouldn’t have been our year, but I think 2024, it’s going to be the year and I actually think the Midwest Southeast might slow down and we might see the expensive markets explode in 2024.

Dave:

All right, we’ll just have to see. Kathy, what do you think?

Kathy:

My vote was for the southeast, but the academy wins.

Dave:

Alright, well let’s dig into this a little bit. Kathy, why would you have voted for the Southeast?

Kathy:

Well, it has the highest growth. There’s the more migration moving into those areas. There’s a lot of jobs moving into the areas. There’s low taxes and you can still get properties for under $300,000, even under 200,000 if you look hard. And yet the appreciation has been pretty solid over the years. So I like to follow the migration patterns and the migration patterns are moving to the Southeast. With that said, I do love buy and hold in the Midwest, it just doesn’t see generally the same kind of growth and you have to be careful because some of those markets are actually losing population.

Dave:

That is sort of the challenge with these regional awards or regional discussions is that within each region there are just so many nuances in so many different markets. But are there any areas in particular within the southeast you like Kathy?

Kathy:

So many, but definitely Florida. We like parts of Alabama, the Carolinas, so just that whole right bottom quadrant of the US is really growing. It’s a warmer climate and still affordable and a lot of those states have low taxes still.

Dave:

Do you think that one of the considerations that this prestigious academy considered in this thoughtful award was how much insurance premiums have gone up in the southeast over the last year and how that might be impacting cashflow? Henry, since you’re in the southeast, what do you think about that?

Henry:

Yeah, insurance has definitely been going up. Not too terribly high where I’m at, but pretty much all over the country we’re seeing insurance rates go up and in some places it’s just hard in general to get any kind of coverage or to get enough coverage to cover your investment. So I think that’s just going to be something that every region’s going to have to watch out for going forward.

Dave:

Alright, well I do want to again congratulate the Midwest on their well-deserved award and hopefully we’ll see some of these nominees back next year on the market Housing Market awards. We do have to take a quick break, but when we come back we’ll be giving out the award for best strategy for new investors. Stick around. Welcome back to the first annual on the market awards ceremony. Let’s move on to our next award, which is for the best strategy for new investors

Kailyn:

And the nominees are short-term rental arbitrage, house hacking, the Brrr strategy and crowdfund investing.

Dave:

I think CA’s got a career as an announcer. I think so the person who reads out the stops on the subway or the bus, I feel like she’s got a perfect voice for all right, well we have four nominees. We have short-term rental arbitrage. If you’re not familiar with that strategy, basically what it is is signing a lease on an apartment that you do not own, furnishing it and then renting it out as a short-term rental. This is not legal or possible everywhere, some places it is and it can be a good strategy for some people. The second one is house hacking, which is basically just an owner occupied rental property where you buy a small multifamily live in one unit, rent out the rest, or you buy a single family home and rent by the room. We have the Brrrr strategy, which is buy, rehab, rent, refinance, and repeat, which is sort of flipping a house but you hold onto it at the end. So basically you do all this value add, increase the value of the property, but you hang onto it and rent it out. Or we have crowdfund investing, which is either investing in a syndication or a fund or basically one of our more passive options. And the winner for the 2024 OTM awards goes to house hacking. Of course it goes to house hacking. This is just a layup. James, why do you think house hacking won?

James:

Well, I mean, house hacking is one of the best ways to get going in investing for any investor. It doesn’t require a lot of money. You can utilize a first time home buying loan program where you’re putting three to three and a half percent down and then also you get a lower interest rate doing an owner occupied. And so it allows people to get cheaper debt, a lower payment and less money in, which is always a great thing for investors. And I mean house hacking is a great strategy. The only concern I have with it is it’s hard to find inventory right now and you’re competing against a lot of different people with that low first time home buyer market. And so inventory is a little light hard to find a deal.

Dave:

Yeah, that could be true. But do you think it because house hacking doesn’t necessarily need to cashflow to be a positive financial decision for you, do you think that makes it a little bit easier?

James:

Yeah, I think it’s all about that affordable savings on your rent and rents are high right now. They’re at record levels, so as long as you can get it to where your payment is flush with your rent or you’re gaining some equity in the deal, it’s a no brainer. And especially because you can get on that journey of that owner occupied tax gain and tax benefit to where you get in the game with very low money down, you subsidize your housing costs, put some money back in your pocket, and then you can sell it tax free in two years and walk with a hundred percent of your profit. And so it really allows you to scale and grow as an investor.

Henry:

Yeah, I mean I think house hacking also is the clear winner because of the flexibility that comes with house hacking that maybe a lot of people don’t talk about, but a lot of people are doing. People think of house hacking as buying a multifamily and living in one unit and renting out the other. But house hacking is really just finding a way to monetize your primary residence. And you can do that a number of ways. You can rent out amenities within your home just renting out your swimming pool. You can rent a single room, you can rent a single room short term, you can rent a single room, not long-term. You can rent out storage space in your house. And a lot of people are starting to do this with certain apps on the market where they’re able to just rent out extra garage space. And so there’s a ton of ways to house hack and allow somebody to essentially either utilize their house as an investment or to save money on their mortgage payment, which then they take that savings and then go invest in real estate.

Kathy:

Oh my gosh. Yeah. I started my career in investing as a house hacker and I am still doing it today. You guys, as you know, we Airbnb parts of the house, we put a tiny home on the property. We’ve used peer space where you can rent it for photography or filmmaking. So I love house hacking and love it so much. I’m still doing it.

Dave:

I am with you Kathy. That’s how I got started. It’s what I always recommend to people and I do think that actually right now in 2024 house hacking is sort of having a resurgence because it really makes sense right now. Like everyone’s said already, rents are really high and there’s all sorts of different ways that you can get into it. And I was actually just talking to someone on the BiggerPockets podcast or sister podcast about some lending programs that are also making house hacking easier now. For example, you can now use income from an a d accessory dwelling unit towards your qualification. So if you wanted to buy a house that has an apartment above a garage, that has actually become a lot easier and they’ve also reduced the down payment requirements for small multifamily investments. And so there are a lot of new financing options that actually are making house hacking more attractive than maybe it’s ever been. And so that’s I think why the academy selected house hacking this year.

Henry:

And I would like to say, I know a lot of people are probably looking at Brrrr and thinking, man, that probably got snubbed, but I do really think that the widespread adoption of house hacking makes it the winner. Brrr is a great strategy for new investors, but the barrier to entry is higher because you have to be a fundamentally sound investor to pull off a winning brrrr deal in this economy. You can’t just walk into something that’s going to cashflow on day one. You really got to put in the work to get there. And so although bur is a great strategy, I believe it’s a whole lot easier for the everyday normal beginner to walk into a house hack deal.

James:

I think you should bur and house hack at the same time, buy it cheap, refinance, it saves your down payment and your cash out of pocket. I like a blend on this.

Dave:

It is

James:

The best way to maximize yourself as a new investor.

Dave:

I like that idea. That’s nice too because if you’re living in it, you might not be under the same time crunch to Brrrr. I kind of like the idea for new investors of buying something, moving into it and then maybe doing the renovations over time once you get a little bit comfortable with your investment. Or would you recommend it immediately, James?

James:

I would rather just do it immediately. You can utilize leverage and you can get the rehab component added in and once that property’s been improved in value, you can refinance all your cash back out. You’re going to have a lower rate and no PMI payment. And so all those things are going to make it more affordable, create more equity, and then also you get way faster to that tax-free two 50 or 500 gain in two years and that is where you can get big impact in your portfolio growth.

Dave:

All right. Well now James, you need to brand that. We need a name for it. What’s the house hack? Bur hybrid going to be called

James:

Cold House. Cold House. I don’t know. Let me think of that.

Dave:

Cold House. I like what you’re thinking. Alright, we’ll get back to you on that one for next year award.

James:

I’ll think of some sort of name for it.

Dave:

Alright, well let’s move on to our third award, which is for our best strategy for experience investors. Just as a reminder, the previous one was for new investors, now we’re moving on to experience investors

Kailyn:

And the 2024 nominees are flipping syndication, private money lending and seller financing.

Dave:

That might be the snub for Bur. Bur didn’t even make the list of nominations this year for experienced investors, but the academy does. What the academy does. We’re not here to debate them. And the winner this year for best strategy for experienced investors is private money lending. James, as a private money lender yourself, can you tell us a little bit about why you think this was either a good or bad decision by the academy?

James:

Well, I think it’s the best decision you can make if you have saved up your capital. That’s why it’s so important. Don’t spend your money, save it, compound it, and then start being the bank because everyone thinks it’s private money lending is you make interest in points and that is true. You can make 10 to 12%, you can make two points. But one of the other beautiful things about being the private lender is you can also get equity in properties and flip homes passively. You can get brrrr properties passively and you can just get yourself involved and really get to financial freedom. And so that’s why if you’ve saved up cash, there’s an old saying, the man with all the gold makes all the rules. That is true. You can dictate terms, get into deals, and also just collect that cashflow and that mailbox money without having to do a lot of the work.

Dave:

Got it. That makes a lot of sense. Kathy, have you ever gotten into private money lending?

Kathy:

Yeah, yeah. I think it’s kind of when I started investing, I met some mentors who said, this is where you want to get to me. It’s kind of the ultimate end place for an investor because now you don’t really have to do the work anymore. You’re just lending the money. The money is your resource and you make money from your money, so you get to let someone else do the work. Yes, we’ve done it, but you have to be careful and you have to know what you’re doing. Don’t be given your money to just anybody. I have someone who borrowed it who hasn’t paid it back yet. Again, there’s a lot of due diligence that goes into private lending. Don’t be casual with it.

Henry:

To me this had to be the clear winner just with, I mean the higher interest rates go for everyone else. That means the more interest that private lenders are able to charge. And so look, we’re doing it’s tax time and I have to pull the statements and see what I’m paying each of my private money lenders for every deal that I’ve done. And it is the cashflow that they get far supersedes any cashflow I’m getting on these rentals that I’m buying. And so it is definitely the pinnacle of real estate investing because it’s truly passive or it can be truly passive if you can get somebody in there to help coordinate the transactions for you and it’s literal mailbox money.

Dave:

Yeah, I mean it seems great. I invest in private money funds, which has been fantastic. I haven’t done it directly yet, but I just read a great book by BiggerPockets called Lend to Live. If you guys want to learn anything more about the 2024 winner of the OTM best strategy for experienced investors, you could check that out and learn a bit more about it there. But it does just seem like if you know a lot about real estate, which is a requirement, it’s kind of hard to get into. It seems like if you’re not experience with buying deals yourself and understand how to underwrite deals. But if you’re doing it, I think it could be a great strategy for all of you. And the academy seems to agree. Do you think any of these other ones were snubbed or should be considered Henry flipping syndication seller financing,

Henry:

Potentially syndication, but those are risky too. You really have to get in with the right operators, experienced operators, ones who are more focused on making sure that their investors are getting paid, then lining their own pockets in the beginning, but that can also be pretty passive and lucrative in terms of a more experienced strategy. Flipping, I would never say flipping is the top strategy. There’s just a lot of work in flipping. It’s just not for everyone. You really got to be built for flipping. So no, I think this is a good list.

Kathy:

Yeah, I would say that syndication could definitely be at least tied with first place. Definitely in second place if you were a syndicator. It is a way to kind of have unlimited resources to be able to acquire more things because you’re bringing in investor dollars, but you better be experienced and you better be able to return that money to the investors if you hope to continue to syndicate. And if you are investing in a syndication, we’ve had some deals that have returned 35% returns annually, so it can be very lucrative. But like Henry said, you can also lose all of your capital if you’re an equity investor because the debt gets paid. Remember, the debt gets paid first, which was why private money lending takes first place because if you’re an equity investor in a syndication, debt gets paid first.

Dave:

Yeah, I am an investor in syndications. I think they’re great. I don’t think 2023 or 2024 is the best time to get into syndications. Personally, I think there are less good deals than there were in the past. It’s a little bit riskier than it has been, which is why I support the academy’s decision here. But I do think for going forward, syndications can be great, especially if commercial real estate continues to see values decline in the next few years. There’s going to be a lot of good opportunities. We do have one more award for you and we’re going to be giving out a razzy award for the worst performance of the year when we get back. Stick with us.

Alright, let’s move on to our final award for the OTM awards. It is a razzy, if you’ve never heard of a razzy, it’s an award show that goes on every year where they basically just give out awards to the worst movies of the year. It’s like worst film, worst actor, worst actress. I think Tom Green was the first person to ever show up and accept the award for a razzy, which is hilarious. But we’re going to be doing that this year. We’re going to be giving an award to the thing that is negatively impacting investors the most. Kailyn, what are our nominees?

Kailyn:

And the nominees are lack of housing inventory, high interest rates, inflation, YouTube crash bros.

Dave:

Okay, so our four nominees are the lack of housing inventory. We’ve covered that a lot on this show. We also have high interest rates making things less affordable inflation, which is just damaging spending power throughout the economy. And YouTube crash bros, which is a term that we are borrowing from our friend Logan Moe, basically to describe people who facelessly are inspiring a lot of fear about crashes in the housing market that have yet to materialize. And the winner goes to

YouTube Crash Bros. Yeah, I love this. I love it so much. I’ll start with this one because I don’t think there’s anything wrong with saying that you think the housing market is going to decline or to crash if you genuinely think that. But the YouTube crash bros are a particular breed of individual that just no matter what happens, they say that the market is going to crash. And even though there is evidence and logic to the contrary, they keep saying the housing market’s going to crash. And to me that is dishonest and it is negatively impacting a lot of people who could have gotten into the housing market previously or are still waiting on the sidelines because they believe these people despite the evidence, and frankly they’re probably just trying to get clicks and views for their channel and don’t care at all about the people who are actually watching their videos.

Kathy:

Yeah, I’ve seen some of these guys actually do believe what they’re saying and they just don’t have the data. So make sure you get the charts and you can see what’s backing up their decision. If it is, prices have hit all time highs, well that is a data point, but that’s not one that’s going to, that really means that the housing market isn’t a bubble. There’s a whole lot of other factors, but it seems like that’s what a lot of people have been saying is, oh, prices just can’t keep going up. Well, they are due to supply and demand.

James:

Well, eventually they’ll be right because

If they just beat that drum for long enough, I mean it could be in two years, it could be five, it could be 10, but eventually they will be right. But I think it’s that doom and gloom that everyone likes that it’s always that the flames in the background, what’s that story? Market’s going to crash, market’s going to crash. And also people got to understand that that’s just a lot of clickbait on the internet go to factual sources and not all opinion pieces. And as an investor, dig into the data, dig into what’s going on in your market, and then make a logical decision and just ignore all the noise out there. But eventually they will be right.

Henry:

Yeah, they will be right. But I think what’s holding them back is probably the number one nominee on this list, which is probably the most disruptive thing on this list that people talk about, but not really, which is the lack of housing inventory. I mean, if there’s a lack of housing inventory, it’s hard to see how a crash is going to happen. But that lack of housing inventory is having an impact, a major impact on the housing market. And I think it’ll continue to because it’s not just housing inventory, but it’s affordable housing inventory. And so I don’t know that a lot of people aren’t really talking about what happens if this problem doesn’t get solved? How does that impact real estate for the normal home buyer and how does that impact real estate for the investors like us? That to me is the one on this list. You got to keep your eye on.

Kathy:

You either have to wipe out a huge amount of the population or you need to bring on a bunch of new supply. And hopefully neither

Dave:

Kathy, let’s not get into the first stop. Let’s not get into that first stop. Let’s not want to hear about wiping out.

Henry:

Let’s not, let’s fano the country and just figure out how to buy more.

Dave:

Yeah, this is the plot of the next Avengers

Henry:

Meeting and they just build houses like Captain America just gets a bunch of dudes and they just build houses super

Dave:

Fast. That’s actually what America needs. We need Captain America to just start building affordable housing.

Kathy:

But if one of these tech companies actually does find a way to produce housing really inexpensively, and if cities go along with it and there’s enough resources, water, electrical, there’s a whole lot. Besides just building a house that goes into providing housing, you’ve got to have the hookups there. You’ve got to have the water and the electrical and traffic. You don’t want to overwhelm cities with traffic. But if we overcome those things and suddenly are able to bring on a whole lot of new supply, well then prices would come down. But so far you hear all kinds of numbers, but the last number I heard is we’re three and a half million homes short of demand. And that’s not going to change anytime soon. Yeah,

Dave:

That’s a great point. Kathy, I do want to get back to something that James and Henry were just talking about that they’ll be right eventually, I guess kind of, but it sort of depends on your definition of a crash because I think people just start to say that any decline in housing prices is a crash to prove their point. And they’re like, oh, in one market it went down 1%. That’s a crash. No, that’s a normal correction or a normal fluctuation in housing prices. To me, a crash unquote is like 10% decline, maybe even more 10% decline in housing prices on a national basis. And for my data, that’s happened exactly one time in US history. So they might be right. They also might not anytime in the next decade. So who knows. But hopefully you’re listening to this podcast and although we are not always correct and we’re often wrong, we do, I like to think that we have a lot of integrity and try to bring our honest opinions about what is going to happen and we actually do the things that we are talking about on this show and back it up with real action and not just saying things for the sake of saying things and getting downloads.

Maybe that’s why we won an award. I don’t know.

Alright, well, thank you all so much. You all look so beautiful today. This has been a very fun podcast, Kailyn, thank you so much for putting this together and most of all, thank you all for listening to this show. If it wasn’t for you, we wouldn’t get to do this several times a week. Have all the fun that we get to have and win awards like the prestigious one we just won for 2023. If you want to further our victory tour and give us a little extra bump of love, we appreciate a honest review on either Apple, Spotify, or YouTube. And to make sure you are getting all of our episodes right when they drop or any bonus episodes that we put out, make sure to follow us on Apple or Spotify as well. Thank you all so much for your support. We’ll see you for the next episode of On The Market. On The Market was created by me, Dave Meyer and Kailyn Bennett. The show is produced by Kailyn Bennett, with editing by Exodus Media. Copywriting is by Calico content and we want to extend a big thank you to everyone at BiggerPockets for making this show possible.