The Wisdom Wall

“in real estate insider trading is legal. Insider trading, meaning not doing anything to break a fiduciary duty, but insider trading, meaning I can learn more about the property than the market knows about the property. So therefore I have unfair information and, and that is something that, you know, obviously you can't…”

“However, a bit of knowledge In, in real estate or just aligning with somebody who has a lot of knowledge in real estate, uh, moves you from four and a half percent to conservatively, 60% or 70%. And that, uh, even a lot of knowledge moves you essentially from 10% backwards.”

“I would also argue that, that, that using that rule, that rule which is to go where it's all right, already regulated Gives you more certainty rather than less certainty, and that's important. And then also in that example, let's just say that they were allowing 10,000 homes to be, uh, in the lottery. Everybody got one…”

“People with equity don't get foreclosed on. They sell and they cash a check. No forced sellers. No flood of inventory. No crash.”

“Prices aren't high because of greed. They're high because we never built enough houses to accommodate the growth. That's the whole story.”

“In order for there to be a crash, you have to have four sellers and a flood of supply. Right now, we have neither.”

“being an absentee landlord, Trying to control a property across the country, pretty much a recipe for disaster. I haven't seen that work out well in the long run for, for lots of people.”

“At what point? I can't tell you exactly what point that's going to flip, but you know, definitely somewhere in the 10% range is already going to have, start to have an impact more than 10%. Uh, ownership by, by major corporations is going to have, is going to start to have a really huge impact.”

“the macroeconomic factors, which are, which are important and influence real estate as a general rule, real estate, um, have far less impact on a single piece of real estate than Then the deal you're getting.”

“Real estate is so deal specific that there's never a good time, by the way, and there's never a bad time... Whatever you think is the best time to buy, people are buying and losing money. Whatever is you think is the worst time to buy, people are buying and making bundles of money. It is deal specific period.”

“What I'm going to say is let's negotiate the commission upfront. Um, I want to pay you full commission. Um, that's my negotiation. Um, I may, I may want to pay you a bit more than full commission. If you're used to getting two and a half, I know a high watermark is three. I'd like to give you three percent.”

“If I'm not, if I'm, if I'm not paying full commission, it's not a good enough deal. And, and the proof of that goes like this. You're the realtor. You come across this deal. That's a great deal. Um, you might want to buy it yourself, uh, but you can't buy every great deal that you see. So then you're going to go to…”

“I almost think that a place that is regulated is safer than a place that's not regulated, because you never know what the regulation is going to be, and so if you come in and it's all, and they've already Put the brakes on, then at least, you know, you have a sense of where that, where that is.”

“Every time you buy a market property, you have paid more than anyone else is willing to pay at that moment in time. And that's the way I bought most of mine. And, and people that are looking to make real money in real estate do not need a steal.”

“When people try to chisel a realtor on a commission, if they're able to chisel a realtor on a commission, that is a sign that it's not a great deal.”

“I believe, conversely, that if you're going to buy a house, you can learn more about that house in the course of A couple of weeks or a month, then, then the best experts will know about the, about the tech sector.”

“If you're buying a class a apartment building, There's no room to add value.”

“You're not even sure what you're going to do with it yet, and you don't need to know. And this is a terrible thesis for someone that's going to have investors,”

“go look at listings that are more than 60 days old and call those, call those realtors or have somebody, have a realtor that represents you that's going to do that work. That's the real work. That's what they should be doing. And, you know, call, call the listings that go over 60 days, and even though the headline…”

“Invest more in the areas that are likely to create the Instagram ability moment and spend less to a point just so long as the, the, the, the customer's not going to complain.”

“what they're really doing is they're looking at a buyer is looking at what, what is my, what's my monthly payment. And so the monthly payment to live in one that's, you know, 40% larger, but is so generic as opposed to this one that I love and the monthly payment is exactly the same or maybe even a little less. I'm…”

“Going out and finding a realtor who represents developers in that area so that realtor knows how to, how to underwrite those deals and can give you real, real guidance. Not the realtor that you like the best, not the realtor that sold the most homes in that area, but the realtor who's made a lot of money for developers…”

“Bad jobs report, by the way, can be good for the real estate market because as there are more and more jobs, that's an inflation pressure and also a pressure on the interest rate.”

“The deal structure and risk allocation matter as much as the headline price, and what I mean by that is a three percent loan is structure, and it's often worth more than a price cut.”

“So, I, I prefer to stress test at seven percent, because if the deal itself works at seven percent, the buy down is Total icing on the cake. If it only works at the teaser price, then generally it doesn't work unless that incentive is for the full life of the deal.”

“That's the good thing, but you've got to underwrite this new purchase at today's rate, not as a hopeful rate. So a deal only works After a future rate cut, that is not a good deal.”

“and in every case, your first line of defense isn't the entity. Instead, it is boring, and that is adequate insurance. That often will include an umbrella policy, but having a really solid insurance policy up to a certain level, then you get an umbrella policy over top of that. The umbrella is generally very…”

“And if the deal works only at some future lower rate, you don't have a rate problem. You have a deal problem and waiting won't fix it.”

“my strong bias is to buy local because information And control are real advantages. You know which block is actually improving, and you hear about the roof before the invoice lands in your email. When you buy 1500 miles away, every one of those advantages gets outsourced to someone you're paying, and in addition to…”

“The case for the ADU is there's no land cost. You already own the land. There's no new market to learn. Talk about investing in your own backyard. You are literally investing in your own backyard, and that's a big information advantage.”

“if you're buying a value add somewhere else and you need permits, the time for permitting is going to be a holding cost. But when you're building it in your own backyard, you're already paying the holding cost because it's in your backyard.”

“The rescue is not coming. Plan on today's numbers. If something better ends up showing up, that is a bonus.”

“A seller sitting at three or three and a half percent Is holding something a buyer wants more than a discount.”

“when buyers get scarce, contract terms get rich. So, sellers who won't cut the price will still concede on inspection windows, credits, rate buy downs, and closing timelines. That's where the deal lives in a standoff. In the terms of the deal, not in the headline price.”

“The investor who knows the neighborhood, or even better yet, knows the individual location or house, they beat the investor who knows the headlines every single time.”

“If the answer is only if the Fed cuts, then you don't have a deal. You have a lottery ticket with closing costs.”

“When you buy value add, which I, I try and do, I know you also try to do, um, you know, you make that big money when you add the value. And then as soon as you add the value, you could sell it for quite a bit more. But then when you hold, when you hold onto something, you're effectively the buyer, right?”

“really good, really good businesses pay a lot more than really good real estate because Real estate is such a stable asset relative to, right?”

“when my portfolio was built like that, it created, uh, it created a lot of safety in, it created safety in a, in a, in a, in a, in a, you know, disaster scenario, as opposed to, You know, luxury apartments were, were, were struggling, you know, but, but not these.”

“never underwrite on a rate cut that hasn't happened. That's the difference between data and hope.”

“in real estate, you can, you can learn a market very quickly. You can learn a lot about a particular home. It's another way that I, I like to say it, it's the, it's the one area where, you know, insider trading, and I don't mean hiding it from the public, but this is the one area that insider trading is legal, and what…”

“The war sets the oil price. The oil price sets the gas price. The gas price drives inflation, and inflation handcuffs the Fed, stops them from acting. The Fed and inflation Drive the ten-year treasury. That's the government bond whose interest rate, mortgage rates track most closely, and the ten-year treasury sets your…”

“So, if your investment plan requires the Fed to rescue you with cheap money this year, you don't have a plan, you have a hope, that's not the way to invest or buy. So, underwrite a purchase, underwrite an investment at today's rates, and if you get a decrease, that's icing on the cake.”

“I believe that gas prices have a psychological effect on buyers and sellers more so even than, even than its weighted average in the consumer price index.”

“The people who win in markets like this are not the ones who time the headlines. They're the ones who know their numbers, know their neighborhood, and act while everyone else is still scared.”

“AI is disrupting office real estate, but AI cannot and will never disrupt the fundamental need for housing.”

“historically, geopolitical crises hurt markets for about a month and then recover.”

“the deal itself is so much more important than these other factors, and you can often find a deal close to home, but we're looking outside of the close to home because I get so many questions from online.”

“What I'm talking about is almost every time I buy a piece of property, There's some upside in it, um, that, that the public is either not aware of, But probably could be aware of if they did the hard work to find out. So zoning would be one of them.”

“the fact that the museum of modern art has purchased, this one has not yet affected that price, but that would be a clear indicator that something is going to happen with this artist.”

“As a general rule of thumb, bad economic news is pretty good for real estate, and really good economic news is generally bad for real estate because it affects the interest rates and what the Fed is willing to do with interest rates in the opposite direction.”

“The new edge is not I predict rates. It's I buy the right asset at the right price with the right down payment and the right debt.”

“You still have to work in at least a five percent vacancy. Here's why. Somebody is eventually going to move out, and you're going to have to paint, and you're going to have to make it fresh.”

“a really good rule of thumb, uh, it can be as high as 35% of your effective rent.”

“when you're at an entry level Into a great neighborhood. Here's what entry level into a great neighborhood is. You're basically, you have the nicest unit for the least amount of money into a great neighborhood. And when you've got that, you have lots of demand.”

“I really, I, I really haven't bought a building where you, you go back and you look at the pro forma and you're like, oh, you know, wow, the expenses are exactly what they projected. The expenses are, you know, a little less than they projected. That's just not happening.”

“However, if I'm looking at a deal I would not do a hotel deal or if somebody came to me and they said, Hey, I've had all the success in multifamily. It's great. I'm looking at a hotel deal. I'd be like, stop. Um, You must have someone on your team that knows hospitality very well.”

“They're taking a four, they might take a four cap, you know, that's a value add, figure out how to make it, you know, a six cap, and they've only put down 40%. I mean, you can almost do that math in your head. You've now increased the total value of the building by 50%, right? Because you're going to take it back down…”

“It doesn't have to cash flow, but you've got to have a real straight line, not like a, you know, change the entitlements in order to make it work. You know, you've got to have like, okay, so I buy the value add, it's underwater. It's not cash flowing. But I have the money set aside and I'm going to do this. I'm going…”

“when you're at 20%, you can still buy the shack, and, and, and I have this formula, which is like basically, you know, if you're at five percent, meaning like five percent of the neighborhood has like been, you know, Been, uh, uh, done up again. You know, it's too early, but there's a certain point where, where, you…”

“Every deal is different. Um, you can do it any way you want to do it, but there is a rule of thumb and that rule of thumb is that the general partners really must have 10% of their own money in it.”

“splitting the upside fifty-fifty sounds crazy to an investor that's used to the usual deal, but when you take no fees, it very much washes out, but it depends on how good of a deal it is.”

“there's a 100,000 dollars worth of problems. You should be able to buy that house for much less than 500 grand.”

“If it's 200 units or more, you're not, it's, this is not a mom and pop seller. They are, they're, you don't door knock those, ok? If they want to sell it, they're going to put it on the market, they're going to market it properly. Every investor that's at that level On the planet is going to see that deal.”

“the business that I'm in is a great, the brokerage business is a great business, but it's so high volume, Low margin. That if you get a little bit of a shift in, uh, in the income, it can be, it can be really disruptive.”

“if you have credit that's screwed up, uh, even if it's legitimate stuff, you can do amazing stuff in six months. But you can't do very much in six weeks. Almost nothing.”

“So for starters, it has to be a value add. There has to be something about the house that is chasing away The buyers. Yeah. And so one of the things, one of the terms that I use is brain damage. There's gotta be, there's gotta be significant brain damage. Uh, otherwise, in a hot market, and it's not an off-market…”

“you want to be near a great school, because that raises the value of a house. If you're, Next to a great school, that's bad. Because, you know, there's recess, there's whatever, there's kids screaming, there's traffic is terrible at drop off and pick up, you know, near a great school adds a lot of value. Too close to a…”

“developers don't want it cause it's already done and done poorly. Okay. That wipes them out.”

“Everything that looks terrible, everything that is a bummer. Is easily fixable. And the one thing you can't see, if that's not right, run.”

“You've got to get the 465,000 dollar house that really only needs 50, 60 grand worth of work to make it into the 600,000 dollar house. And you absolutely can do that. It's not going to be this disastrous thing, but it's going to be the stuff that doesn't look right. It was put in wrong. There's a lot of stuff you can…”

“If you're, if you're buying an investment property below market value, because It has stuff that needs to get done. You've got to get that stuff done right away or you're not going to get the rents that you want to get. When you're living there yourself. I mean, I've been there two and a half years. I love it. I…”

“So I would say a great realtor that knows that particular area knows when I say market knowledge knows that neighborhood. Like the back of their hand and also has rep developers.”

“what I figured out was that, that a, a proxy for the 24 hour city is you now go to a city that's not a 24 hour city. Like for example, you, you know, Indianapolis. I do not, but I know Pittsburgh, which is where I'm originally from. Pittsburgh is certainly not what this billionaire would consider a 24 hour city. Um,…”

“this is when I see people lose big money in real estate, is they're the people that are buying, and developing. They may, they may buy a great, uh, you know, a terrible house on a great piece of land. They tear the house down, and now they're in the middle of this great big, uh, uh, development. And then the market…”

“one thing I also noticed is that there was not a correlation between how much money they made and how much wealth they built. Sometimes it went in opposite directions, which means, you know, the more somebody made, maybe the more debt they had, uh, being independent contractors, taxes are generally not taken out.”

“One thing that people don't understand is even when I know we're at the top of the market, closer to the top than the bottom, after you've had appreciation for a long period of time, probably the best indicator is the affordability index.”

“So the sweet spot, I would say these are just rough numbers, you know, 20 to 25%. It's already are already gorgeous by the time you're at 75%. So now, now, you know, seven out of the 10 houses on my street are like Totally amazing. Now that one ramshackle one that's still there. Boy, the, the price, all of the price of…”

“Well, first of all, uh, savvy investors, um, will not invest in a deal unless the principles have, uh, Really a rule of thumb is 10% of their own money.”

“my first thing is invest where, you know, or invest, invest where you live really nearby. Um, but if I were going outside the area and I, and I were doing, and I made a decision to go outside the area, I would think about buying a few in the same area so that you then don't have to worry about finding, like, Numerous…”

“War keeps the price of oil volatile. Volatile oil prices feed the risk of higher inflation, and inflation risk pushes the rate of the bonds higher. Higher bond rates equal higher mortgage rates. So that's how the war ties directly to your interest rates.”

“when these huge luxury part properties start trading hands again, it tells you that liquidity and confidence are coming back into The whole system and that confidence eventually trickles down to the move up buyer, then the first time buyer, then the renter who's looking to buy.”

“You don't want the busiest person. You also don't want someone that doesn't have a lot of experience representing investors and approach that person, uh, and, and see what kind of deals they're finding for their clients and then become a very easy client for them to sell the deal to.”

“There are some very specific added benefits to do it with your own house. You know, you can get into it, you can get into this investment being your own home at better rates with less money down and all that sort of thing. So you can, you can add, you can add a decent amount of leverage without, you know, without…”

“I came up with a mantra for it, which is, ah, the more you can do, the more you can do. So, you know, as I get better and better, now my pose gets a little, you know, I, I bend the knee closer to 90 degrees, and I could be, you know, 10 times better than I was when I first started, and I come out of there, I might, I…”

“a great way to do it would be to uh, physically walk into a brokerage um, in that area and ask to see the manager. And then say, Hey, I want, you know, I'm a potential buyer. I'd like five minutes of your time or 10 minutes of your time... And I would walk into that office and Of whatever brand it is that has major…”

“If they're like, well, you know, next couple of years, two, three years, you'll need it. I'm, I'm treating it like it's happening now or certainly budgeted into the next three years. Future expenses. Yeah, that's right. I'm taking the total expense of full rewiring and I'm dividing it by three.”

“In a mail situation, mailing situation, I would say that You know, you're not sending out thousands of these. So I would, I would hand write the address on the envelope so that it doesn't look like junk mail.”