Ep 73 – Inflation, Appreciation, Rent Growth, and Analyzing Real Estate Data with Bigger Pockets’ Dave Meyer

The real estate climate has changed drastically in the last 3 months. Returns have been squeezed, rents have been rising, and we’ve seen inflation spiking. But, fundamentally, things are still strong, assuming you’re investing in the right places.

Adam Schroeder and Zach Lemaster talk with Dave Meyer, Vice President of Data and Analytics for Bigger Pockets and host of the On the Market Podcast, about what’s happening today and how real estate investors can align themselves for successful investing.

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Transcript:

Adam 00:22

Hey rent to retires it’s Adam Schrader here with another episode of podcasts. And I am once again joined by the CEO and founder of rent to retirement, Zach Lemaster. How’re you doing today, Zach?

Zach 00:33
Doing great. We got an early morning star talking about economics, which always gets me fired

up Monday morning. Dave is a criminal veteran here. Yeah, no better way. We got a great show.

Adam 00:43

And so to help us with the economic part we are bringing in Dave Meyer, he is with bigger pockets. He’s the vice president of data and analytics, and host of their newest podcast on the market. Dave, welcome. Would you tell us a little bit about yourself kind of how you got started and how you joined them with that little teeny tiny organization, the bigger pockets?

Dave 01:06

Sure. So first of all, thank you for the early morning. I appreciate it. I live in Europe. So I

appreciate you both waking up early to accommodate my schedule. I got started investing in real estate back in 2010, after moving to Colorado, and I did so because I was interested in financial independence. Even before I’d heard that term, I sort of saw my family struggle financially a lot growing up. And you know, my parents worked hard and still had a lot of issues financially. And I felt very motivated, especially graduating into the Great Recession, as I did to find alternative sources from any form of income other than my full time job. I fell into real estate just because a friend was doing it. And I was jealous of all the money he was making. And so I decided to try it myself. And I did that for four or five years and ultimately decided that I wanted to marry my passion, which was real estate investing and my full time job, which was at the time working in technology. I have a master’s degree in data analytics. And so I was doing that. And so honestly, I just Googled real estate technology and was looking through all these different jobs and found this thing called bigger pockets. And I was on the website, I was like, this is kind of cool. It’s kind of a rinky dink thing, but I don’t know what and I don’t know how big it is, I started looking into it. And I just saw books and podcasts and so much things. And so I decided to apply and thankfully, well, it wasn’t immediate, I waited about nine months, actually till there was a job that was appropriate for me then finally applied and got the job. And I’ve had a few roles now at bigger pockets. I started and growth and marketing. And now I focus almost entirely on data and analytics both internally where you know, I do the normal business intelligence stuff that’s required for a software company. And, as you said, host a economics and data centric podcast called on the market, which talks all about the data news trends, economic impact real estate investors.

Zach 03:22

That’s outstanding. Dave, thanks for that background. And obviously, you’re the guy to talk about economics. You know, this is this is something that you’re I mean, do you also have a education background in that? Or is this something that you Okay, kind of developed? No,

Dave 03:37

yeah, it’s something I I’m really I consider myself and really just a data analyst. I’m not an economist, but I’m very interested in investing and like taking an analytical approach to that. And if you do, like the numbers and data and want to be an investor and sort of naturally leads to economics, and macroeconomics, and so for the last several years, I’ve been just reading a lot of books. And just so everyone understands, I am not a formally trained economist, but I do spend a lot of time thinking about this and doing my own original data analysis and research into the economy.

Zach 04:14

Excellent. But you are a real estate investor. And you’re you’re living it day in day out, like we all are, and watching the trends. And you know, I think that’s very important. So let’s talk about some of the data. And what we’re seeing today is kind of this unique time where there’s a lot of question marks out there. There’s a lot of turmoil. We have inflation, I think, what did we see Adam? Last time? I last week, we saw it was over eight and a half or something. Yeah, they they admit eight and a half right now. Right? And that’s not even including food and energy. So I mean, true, you know, true inflation. Who knows? Anyways, it’s 40 year plus high inflation. We have interest rates that are going up, probably back to what what we would consider the norm however, it feels this pressure that interest rates are getting in You know, a little bit unreasonable from what we’ve seen over the past couple of years. But I think what a lot of people do, Dave, and maybe you can agree with me or expand on this is that sometimes we tend to be hyper focused on what’s happening right now, and not take a global viewpoint of where we’ve been and too likely see where we’re headed. And just I think so many people live in the now. And this is why we really wanted to bring you on is to kind of hear about where we coming from what’s normal. How is this? How should we be thinking about investing right now? And what is the future potentially look like? So I know, I’m throwing a lot of topics out at you, but maybe we can talk about, you know, those those things, inflation interest rates, you know, how does that compare to previous history? And what’s what’s your mindset right now?

Dave 05:43

Great questions. I’ll start by just saying that in a historical context, we, over the last several years have been in what is a very abnormal period. And so when people see a reversal in recent trends and interest rates, or inventory, and start to panic, and think that that’s a sign of a problem in the economy or the housing market, I think it’s actually quite healthy. What’s happening, because what’s been happening over the last few years is very abnormal. And we are probably just entering a period where interest rates, as you said, are returning to a much more normal level, we haven’t seen inventory start to approach a much more normal level, but that, in my opinion, is likely what’s going to happen. To me, I think the real story about the housing market is really everything that has happened since the great recession has really spurred and growth in the housing market it back in 2007, we saw that the Fed adopted a very low interest rate, easy money position. And this has actually been happening since about the early 1980s. We’ve been on this long decline and interest rates famously back in the 80s, interest rates were 15%, they were 18%. To fight inflation, that was a very different economic time. There’s a lot that we won’t get into, of why it was that high. But it’s been going down very consistently, ever since then, what happened in the in back in 2008, is that interest rates really never went back up to a normal level, like we saw them go down to start to spur the economy after the Great Recession. But even in 2019, pre pandemic mortgage rates were still generally below 5%, or right about 5%. Before the Great Recession, interest rates were never below 5%. Never, it just never happened. And so when you see interest rates going back up to me, that is a healthy good sign that we are returning to some sense of normalcy, because even as an investor who owns a lot of property, sure, it’s great to see the appreciation appreciation that we’ve seen over the last few years, it adds a lot of equity to your portfolio to your net worth. But I don’t think personally, it is good for investors, for homeowners, for American Society for for interest rates or property values to for property values to go up at this rate. And so I actually think what’s happening is relatively good, even if it is causing the short term uncertainty. And you asked about long term and we can get into all this details to me, even though interest rates are going up causing short term uncertainty, and that makes it daunting to invest in real estate, especially if you’re new, I totally understand that the prospects for growth for the housing market over the next like 10 years are extremely strong for a bunch of reasons we can get into. But so to me, my mindset is to take a long term view, I try and look past uncertainty. And just look at the things I do know, which is that there’s a shortage of housing units in the United States. People still want to buy houses, despite what people say about millennials and Gen Z. That’s just not true. They want houses. And so I think there’s still going to be demand for housing. And I think that’s a good reason to invest. And people need rental units. And as an investor, you can provide that product to the marketplace. And I still think that’s a good strategy if you’re trying to build wealth.

Zach 09:24

That’s excellent. So if I could summarize kind of what you’re saying just in a few bullet points, generally speaking, you would say that we’re probably returning back to some normalization, in where we’re seeing, you know, in the market with interest rates, you still have a strong outlook for real estate in general, you’re still personally investing and you are still encouraging people to still actively participate in some type of investing, especially real estate right now. This is not something where you’re concerned and putting a pause on your investing, correct?

Dave 09:55

No, I’m not. I do think that I’ll be honest, I do think there is A chance that we see the housing market go flat or even slightly negative in the next year or two. But I don’t know, no one knows is the real answer. And I personally think that we’re like looking at a plus minus 10%, over the next two or three years, could go slightly down for a little while, could keep going up for the next couple of years. But I think we’re going to see a lot of moderation. I personally have not ever thought there was going to be a crash. Over the last few years, I still don’t think there’s going to be a crash, I’ve looked at a lot of data. And it just does not suggest that a rapid or a significant decline in housing prices is very likely over the next couple of years. Of course, it can happen, you know, it’s probably a bigger risk now than it’s been over the last 10 or 15 years. But frankly, I am not really worried about that. Because timing, the market is extremely difficult. My personal approach to real estate investing is one of dollar cost averaging, I just continue to buy real estate, relatively independent of market conditions, even though it’s my job to look at market conditions. Because if you look at the trend over the last, since the history of time, real estate prices go up, and they at least track inflation, which right now is super important. And often in recent years, they’ve surpassed the rate of inflation, and they have actually had appreciation and so will that happen over the next year? Two years? I’m not 100% certain it’s very murky economic picture that can happen over 10 years. Yes. And it’s going to be a good investment. And so I try not to think too much about the short term. And really just think about where I want to be in 1015 20 years.

Zach 11:40

So someone, someone sorry, one more Adam here, for Dave. So someone who studies analytics, and does this for a living for specifically around the real estate market, you’re telling us you don’t pay too much attention to where the markets at at one point in time you consistently invest in real estate, because really, we all know that this is a long game. What we’re talking about today really is is price points, right? I mean, we’re not even where people build real wealth in real estate and are able to obtain financial independence over time is through all the other ancillary benefits, in addition to appreciation, right, we’re using leverage, we’re scaling our portfolio with that letting the tenant pay the loan down. For us, that’s a return on investment, your cash flow. Obviously, the tax benefits are my favorite thing to talk on. And so all those other things combined are really reasons to regardless over the markets that still invest in real estate and still stay on that path. No one that’s real Successful in Real Estate that we’ve talked to said, Oh, I just time the market perfectly. I mean, maybe you want to go in time, however, everyone says that is successful investing in real estate, I’ve stayed consistent and continually buy year after year.

Dave 12:45

Yeah, I completely agree. And if you if you are an investor in real estate, stock market, crypto, whatever, like, you have to expect the market to fly and go down a little bit at some points. Like, I don’t know when that’s going to be but when it happens, yeah, it’s gonna suck a little bit. But it’s like a paper loss, you know, it’s just, you’re not actually losing any money out of your pocket as long as you don’t sell. So it’s like, it sucks. It’s, you know, you don’t want to see your net worth on paper go down. But in reality, that’s just going to happen. And I think we’ve gotten used to this bull market that has gone on for 15 years, both in the stock market and real estate, like it has to come to an end. Is it this year? Is it five years from now, I don’t know, it has to come to an end. But I’m not going to obsess about it. Because over the long term, I do think it’s a good idea. Now, why I look at real analytics, so much is like strategies should change based on market conditions where you invest should change based on market conditions. So I’m constantly thinking about, you know, how I’m allocating my capital within real estate, you know, what kind of strategies I’m employing, right now based on market conditions. But to me, as an asset class, I’m continuing to invest in real estate for sure.

Adam 13:58

And so one of the you keep mentioning that you’re looking at the data, where are you getting most of your data? Because I mean, this is one thing, you know, especially as people get started, and they want to really dive into a market or where they’re investing. I mean, you can go into the Bureau of Labor Statistics, if you want. But where do you look, whenever you get there, you can go into the Census website and look around there, but what do you look at whenever you’re there? So what are the big places that you go? And what do you look at whenever you’re analyzing what to do next in your real estate journey?

Dave 14:31

Good question. It depends on what exactly I’m trying to look at. If I’m looking for my own personal investing. There are two websites I really liked that are free that people can use. One is called Fred. It’s the Federal Reserve. St. Louis. It’s their Economic Research website. I forget exactly what it stands for. entirely free,

Adam 14:49 maybe.

Dave 14:50

Yeah, there you go. It’s super. It aggregates a ton of government and private party data. So they have like BLS, like you said To data but they also get data from NAR, the National Association of Realtors, local governments. And so if you you know, I primarily invest in Colorado. So if you wanted to check out the unemployment rate population growth, the number of construction permits in Colorado, you can find that all there. And it’s updated relatively easy. It’s super easy to use. It’s a website I use multiple times a week. The other one I really like right now is Redfin, honestly, they have great data, if you go to redfin.com. I think it’s slash data center or something like that, just Google it, they have great information about the strength of the housing market. And something I look at a lot these days is just the fundamentals of the housing market, which is all about supply and demand. And they have a lot of really good information about days on market inventory, new listings, all of that data, which tells you a lot about what’s going on and in the individual market. And so I look at that data a lot. There’s also quite a lot of data on bigger pockets, itself, we have rent estimating tools, we just launched some new rent data that you can get for free if you sign up for a free account. So you can definitely find that on bigger pockets as

Adam 16:12

well. And so one of the things about the Freda website is Good lord, you can make a chart for anything. So you can you maybe give people three or four different charts. I know you mentioned some of them. But you know, if you’re gonna go there and just do a scan of, you know, Denver or you know, any of the markets that we’re in as well, what are for quick and easy charts, they can look up on there. Because I mean, you can literally for those of you who haven’t been on the website, they have like a search box. And it’ll give you pretty much anything on earth you want to look at when it comes to economic data. So what are some, like just quick charts they can make, that’ll help them with their, their way.

Dave 16:47

That’s a great point, they have so much data, it is very, it can be very overwhelming. It depends on what you’re looking for. But if you’re trying to say, screen, a market in which to invest, I would recommend looking at the unemployment rate. And if you want to you can dig in further and look at what types of jobs are available in that market. For me, I think it’s really important to just have diversity of employment. And you can find that on the fret website as well. I don’t like any particular market, that’s super dependent on one industry, for example, a lot of people invest in Las Vegas and love it not for me, it’s very tourism dependent and hospitality dependent. I like seeing diversified economies. So that’s something you can look at in the Fred website, construction permits. And if you can compare that to population growth, I think is a really that’s a little bit more advanced, but it’s something that’s really helpful to see, you know, are they building more than people are actually moving to that area, because that could have a negative impact on the supply and demand dynamic, or, you know, it maybe they’re under building compared to how many people are moving there. Those are really like the two high level things I think are the most important are population growth. You know, that’s a big indicator of long term demand. And just economic growth in general, economies are growing, people are gonna move their housing prices are likely to go up in those types of economies.

Zach 18:13

I mean, that’s really what it boils down to is supply and demand. I heard you talk on another show previously about I pose a question and I think this is a common, a common misconception, or at least a common theme that people just naturally assume out there is interest rates go up that prices must come down. Obviously, you know, that’s one metric we’re looking at Adam and I did another show where we looked at some analytics over the past 30 years, where interest rates rose and looked at what happened to housing prices, the years following that. And in most cases, they either stabilized or even increased higher than the year preceding when there was lower interest rates. But I mean, this is just one thing to factor in. Dave, so I mean, can we talk a little bit about just what we’re seeing right now, in terms of supply and demand? I think we have, you know, National Housing shortages in a lot of locations. You know, and what’s what’s driving the demand? Because it seems like we still have all things considered quite a bit of demand, which could give us you know, potentially strong outlook on where the housing market is, is headed over the next few years.

Dave 19:16

Yeah, we’ve seen a very large increase in demand over the last couple of years. And I think there’s a common perception that that is driven entirely by investor activity and investor activity has increased pre pandemic, it was about 16% of all home purchases. Now it’s about 19% of home purchases. So that is an increase. We’re also seeing an increase in second home demand with people working from home. It’s about up 80% over pre pandemic levels. So those are two sources of demand that it has are pushing up the economy or prices and demand in the housing market. But the housing market is still almost entirely dependent on homebuyers. It’s about 75 percent of all homes are by people who just are looking for a place to live. And the reason demand has increased among that group in my mind is twofold. The first is the very difficult to quantify impact of COVID, which is that people, you know, now value space and their preferences for shelter have changed. And I think that is not going back, in my opinion. But I think the fundamental thing here is just demographics. Like it’s it’s not sexy, and it’s kind of boring, but Millennials are the largest generation in the United States. And they are reaching their peak home buying age. And so there is this narrative that millennials don’t own homes because they don’t want to. That’s not true. If you look at surveys, millennials want to own homes at the same rate as every other generation. But speaking as a millennial, we graduated, many of us graduated college right around the time of the Great Recession, then we had the COVID pandemic, that’s two black swan, economic crises that have impacted the many millennials ability to purchase homes. And so it’s not that there is no interest among millennials to to buy a home, it’s that they had a really hard time doing it. And during the pandemic, they are reaching their peak family formation years at a time where interest rates were dropped to historic lows. And that’s an opportunity. And I think many, many millennials saw this as their opportunity to get into the housing market and pounced on it. And that has led to extremely, extremely strong demand over the next couple of years. And if you just look at the like age demographics that is likely to continue for another two or three years.

Adam 21:49

Yeah, I mean, you’ve got millennials, like you were saying, You came in, right at the Great Recession. So that was one piece of PTSD. And then you had a student loan payment that was, you know, at least the cost of a mortgage that at this point in time, you know, some millennials, they still haven’t finished paying it off if they took the 2025 year pay off Route. And then you have COVID, like you were saying, I mean, it’s just a horrible storm. That I mean, you can you can want as much as you want, but it’s just not always going to be there. I wanted to touch on one thing you mentioned in a recent podcast that I think not enough people are taking into consideration and that was y’all were talking about inflation. And you mentioned 99% Sure, it was you, you mentioned that sometimes inflation expectations create the inflation. And I think in this case that it is happening to some extent, because if you look at some of the commodity prices, not all of them, but some of them have been decently stable for a little while, or in case of like lumber, it’s plummeted. But people still talk about how Oh, the cost of lumber is going up and up and up. And it’s like, well, yeah, it’s more expensive than it was three years ago, but it’s way cheaper than it was six months ago. But I do think the inflation expectations have led to continue that. So can you touch on that, that thought process? You’re going through a little bit?

Dave 23:08

Yeah, absolutely. That with inflation, you know, it’s defined as too much money chasing too few goods. And COVID has created this perfect storm where we have way more money than we used to and way fewer goods. So both variables there have moved in a direction that would support high inflation. It’s like a perfect storm for inflation. That said, you know, I do think that the supply chain part of things will start to come scat working out. But I think what the Fed is so worried about and what a lot of people are worried about is inflation becomes entrenched in people’s mind, it becomes entrenched in their decision making. And that can lead to more inflation. And it’s hard to quantify this, but a lot of economists have studied this and put out papers and data about this, but the expectation of inflation does positively correlate with inflation. And that is because when people for example, are going for a job, they demand higher wages as they should during an inflationary environment. But then a job you know, a the employer is thinking, oh, man, we’re gonna have to pay with all this inflation next year, we’re gonna have to raise salaries really high. So now we’re going to price our products more to anticipate the inflation that’s coming next year, then that impacts the consumer and they’re like, Oh my God, these companies are raising prices. So now when I have a new job, I better ask for an even higher price and it creates this cycle of inflation that is really detrimental to the the the integrity of our currency, which is super important to the economy and can really spiral out of control, which is why we’re seeing the Fed take such a aggressive stance And against inflation now, and why interest rates have been going up so quickly?

Zach 25:06

Yeah, that’s a lot of really good information. Dave, I love what you talked about with just going back to the Great Recession in 2008. So many people want to just, it’s almost like they’re nervous and probably to Adams point have PTSD if they lived through that, or were hurt by that financially. Because it’s almost like sometimes we see this mindset where that’s that’s what people assume is we’re waiting for is something like that, just because it was so impactful as the you know, that’s what what the next crash is going to be like, we all know that that was a very unique type of scenario that we’re likely never to experience again, and not a typical type of market correction. So I guess I’d like to hear just a little bit more about your, your opinion on on that. And then a follow up question completely off topic would be you’re in Europe, where you’re buying in the US. Tell us about that. What do you buy? And where are you buying? And why.

Dave 25:55

Sure. to your first question about the 2007 recession, I’ve done some research into this because people continuously ask me, and seem to assume that if prices go down, it’s going to be similar to what happened in 2007. And just to put some numbers behind what happened, housing prices in 2007, dropped nearly about 30%. At their at their worst point. And it took about four years for the market to start growing. And in many housing markets, it took 8789 years for prices to recover, which is the worst thing ever seen. Right? My far the worst that we’ve ever seen as far back as IFC data, if something happened, more pre Civil War, I’m not really sure about that. But as far back as we have different housing market. Yeah, exactly. So that’s what I’ve seen. And just for historical context, I looked at a few things since 1971. Because just if you’re not familiar 1971, monetary policy in the United States changed very significantly. So looking at things prior to that, not exactly comparing apples to apples. But if you look at what happened in the housing market since 1971, the times where the housing market has gone down, on average, the peak of from peak to trough the most it’s gone down is about 8%. And it usually lasts, you know, maybe four to six quarters a year, maybe two years. So that is I think, in my mind a more normal correction, somewhere between five and 8%, from peak to trough, in in value decline, and then lasts somewhere between a year and maybe three years between before we reach new highs again. And if you talk about that type of correction, I think that’s normal. I think that will happen several more times in my investing career. And that is to be expected. And that’s okay. So I think what happened in 2007, I don’t know if we have time to really get into that was very unique. What happened was very largely based on very loose credit and mortgage and lending practices that no longer exist. people right now are in some of the best position they’ve ever been into, to service their debt. And so we’re seeing very different market fundamentals, which of course, does not mean it’s not possible. It’s just It means it’s less likely. And if there is a crash of that magnitude is not going to be because of subprime lending, or or very loose credit. That’s just not what would drive it. Of course, we don’t necessarily know what would drive it until after it happens. But the things we know about what that drove the last one or not really president in today’s economy?

Adam 28:40

Yeah, one of the things that you mentioned earlier was the construction starts. And obviously we’ve seen since the Great Recession, you know, the massive gap, you know, of homes being built to household formations. I mean, it’s anywhere in the five to 7 million range, depending on what numbers you’re looking at. And then obviously the start of COVID. I mean, our annualized starts dropped to something like 800 900,000 900,000 units for a couple of months, and now it’s gone back up a little bit. What rate of home building Do you think we really need to be seen to kind of create the inventory levels that will make the market better? I mean, I know back in the Great Recession just before and I think we were a little over 2 million and people were saying well, that’s too much while we’re building like it’s the 1970s right now. So what number are you kind of hoping to see if we’re looking to fill the inventory gap that we have?

Dave 29:36

This is not an area of my expertise. So I’ll just caveat this and say I don’t like giving out like a whole number because I think particularly when it comes to construction, it is very local, like you will see areas that are overbuilding right now, and there are areas that are under a building right now. And so I’m pretty hesitant to give like a nationalized number for what we should expect but I do think Right now we’re seeing maybe too much. If we continue this for five years, you know, is like, is it too much? If it’s for another year? No, I don’t think so. But I think it’s extremely localized, which is why I recommend people look at that data on fret or elsewhere, because it really matters. Like, if there’s a ton of building in an area that’s losing population, maybe any construction is too much like or if you’re in the fastest growing city in the United States, and permits take years to get like some places in the in the northwest, maybe you need a lot more construction, it really is localized.

Zach 30:38
Adams asking me to write, you know, economic policy for the US government.

Adam 30:43
Well outside the scope. So So then where where are they under building drastically that you’ve

seen then? How about that,

Dave 30:50

um, I can’t say off the top of my head, but there’s actually a really cool website and AR puts out where they compare building starts to population growth and job growth. You can Google that. But I think there’s places historically in the southeast, that have been a lot, but construction is really picking up there. So I’m not sure how long that will last. And then there are like pockets in the Midwest as well that are seeing that.

Zach 31:17

That’s a lot of what we do is Midwest and of course, southeast, I mean, southeast and, and we’ve seen that trend to Dave, I’m sure you can attest over just I mean, in COVID, I think expedited this, but just a lot of people moving to Sunbelt, and maybe a little bit more tax and politically conservative type of areas during COVID. I mean, Florida, Texas, that were heavily invested in those both those markets, and it just seems like construction just can’t keep up, at least for right now, obviously supply a supply chain and other issues, you know, are having an impact on that. One thing that you always put out, I believe on an annual or semiannual basis is just kind of a like state of the market or market trends. I mean, let’s talk about where are the hot places to invest in 2022? What are you seeing in terms of like some of these markets? I think you do like the top 10 or 20? Maybe just if you can enlighten us on that, please?

Dave 32:11

Yeah, it’s all depends on your strategy. And if you’re looking for cash flow or appreciation, historically, there has been a trade off between markets that appreciate a lot and markets that have a lot of cash flow. There certainly are hybrid markets that tend to be in the middle for both like there’s very rarely a great cash flow market that also has great appreciation that just doesn’t really exist, and a historical context, the last two years we’ve seen above average and abnormal appreciation. So that trend has not really continued over the last two years. But I do expect with rising interest rates that we will return to a market dynamics that are much more consistent with how it worked in the past. So appreciation markets I think are always driven by economic growth. You look at places like Austin, Texas are very obvious Denver, Seattle, some of the fastest growing economic sent epicenters of the country right? There are really good I think there are a lot of places in Florida like Tampa is one I’ve been a fan of just on paper I don’t invest there just to be clear, but I think on paper is a really good market for appreciation Miami as well you see a lot of the finance world from New York moving there so a lot of wealth is moving to Miami is already very wealthy. So I think those are our strong appreciation areas if that’s what you’re looking for, but pretty hard to find cash flow in any of those places to be perfectly candid unless you’re finding off market deals or doing value add you know, finding places that need significant upgrades and doing that cash flow to me the best areas the Midwest, you know, if you look at a lot of the markets in the Midwest, you know, you can name a lot of a Madison Milwaukee, Chicago, Indianapolis, Detroit, Lansing, yeah, Kansas. Yeah, like all these places in the middle, offer the best cash flow. There are pockets outside of that. The Southeast still offers cash flow in many places, but northeast West Coast very difficult to find cash flow. Traditionally speaking.

Zach 34:30

I love that. Let’s just get back a little bit to your investing. I think as we tie up here I just any advice you have for someone that’s looking to get started investing at a distance? I mean, you’re you’re across the world, you’re in Europe, you know, investing still in the United States. How are you doing that and continually doing that successfully. David, what advice would you share for someone that also wants to invest not local to where they’re at?

Dave 34:56

Yeah, I continue to invest primarily really through syndications at this point, which is passive investing, which is not available to everyone I understand. So that’s something I do, because I live far away. And I think it’s it’s nice to just have a company that I can I can talk to, I think turnkey is a great option where you are buying pre vetted houses. I personally, I think, for me, I take comfort in data analysis. To me, that’s like, what makes me feel confident about my investing. And so I just look for good markets that I feel have long term growth potential, and then try and find good partners. I mean, it’s really not all that complicated, it’s pretty pretty much comes down to that is find a good market, find a good partner, and then expect that you’re going to invest for the long term, don’t expect quick returns, don’t expect to get rich, quick, expect to build wealth over time. That’s how real estate works. And if you have good expectations, you’re you’re likely to succeed.

Adam 36:04

Now, one of the things you mentioned is, you know, home prices, probably not going up nearly as quick rent prices. However, you know, we’re still seeing a lot of pressure there. Obviously, the last one to two years, we’ve seen significantly higher than normal rent increases, as home prices, slow down rents are still trying to catch up. Do you see a longer tail on how much longer rents can go up faster than national average? Or do you think they’re going to slow down? Kind of like home pricing? Or what do you see there?

Dave 36:35

No, I actually think by the end of the year, we’ll see a situation where rent growth on it like a year over year basis is probably higher than home price growth. That is because I think a lot of people, landlords are catching up from Rent over the last couple of years, I didn’t I was very fortunate, I didn’t have anyone who couldn’t pay rent, but I just chose not to raise rent during the pandemic, I just thought it was in everyone’s best interest to just keep it at the same. That said, you know, I just raised rent for the first time on on any of my properties, because working from home, I pay the utilities on this property, for example, it’s literally doubled, my taxes have almost doubled and the insurance has almost doubled in that time. And so there to maintain your your profit and your business, you do need to raise rents, I don’t think we’re seeing people who are gonna like be aggressively raising rents. But I think, you know, there are people who are in two or three year leases and people like myself, who just chose not to, to raise rents during the pandemic that are going to keep just start raising rents a little bit right now. And that’s going to be reflected in the overall numbers. But I think from a like a macro economic standpoint, even though there is inflation, wage growth is not keeping up with inflation right now. And that doesn’t support long term rent growth in my mind. I mean, it will I don’t think it’s gonna go down just for the record, I just think like these rates of like, crazy, crazy rent growth, for both, like our societal benefit, and just economically it needs to go down and I think it will.

Adam 38:21

All right. Well, excellent. Well, Dave, thank you so much for joining us, as I mentioned before, VP of data and analytics for bigger pockets hosts of the podcast the on the market. I didn’t see if that one has a specific website and now you can find more information where I’m on bigger pockets, but are there any other websites or things you want to promote before we wrap it up?

Dave 38:40

Oh, no, yeah, you can just Google on the market. It’s on Spotify Apple, we have our own YouTube channel as well. And if you ever want to interact with me, you can do that on Instagram, I am at the data deli and that is where I’m most active.

Adam 38:55

The data deli really appreciate you joining us here today. Check us out at rent to retirement.com you can see everything that we have to offer you can see all of our previous episodes as well. Really appreciate you listening to the show would also appreciate a review on whatever podcast platform you use. If you give a listen to on the market, make sure you give them a review as well. If you have any questions reach out podcasts at rent to retirement.com That’s podcast at rent to retirement.com and we’ll see you on the next episode.

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