The Jon Sanchez Show
7/23 - Real Estate market update with Cory Edge and Dwight Millard
- Nice to meet you, or maybe we've met before. I'm the COVID-19 virus. I use disguises to fool your immune system. My buddy, the flu virus, and I make thousands of people sick every year, but updated vaccines make it a lot harder. - Don't make it easy for these viruses. Stay up to date on your COVID-19 and flu vaccinations this fall, sponsored by Champions for Vaccine Education Equity and progress, cveep.org. - Good afternoon, Joe. Welcome to the John Sanchez Show, my new top 780 care wage. Sailing in for John tonight, he's again under the weather and we'll be back this week with you, but filling in on Dwight Millard of Guild Mortgage and my co-host and cohort and crime, Corey Edge of Edulty. Corey, how you doing this beautiful Tuesday evening? - I'm doing well, sir. How are you doing? - Doing fantastic. I know both of us, I think, talk to John. He was not doing well at bronchitis, he believed, so keep him in your prayers and thoughts. It's a tough one to get through, but in the eyes of fighters, so he'll be back, I think, Thursday night tomorrow, I think is the president's speech. So he will be back with us. And in the meantime, you and I've got the fort, we're gonna hold it down and, you know, Corey, I'm gonna run through the numbers on the market, as John always does, I'm by no means an expert in it, but I don't know if you looked at some of the earnings and things like that, but certainly put in your, what you saw or what you heard, but the Dow Jones, it was kind of a boring day, which sometimes we like boring, especially when we got to do the show, right, Corey? So the Dow Jones was down 57 points, a 0.14% to 40,358. The NASDAQ was down 10 points, 0.06% to 17,997. And this B500 also down 8 points, 0.16% to 55, 55. The commodities goal, Corey was up at 2409 and outs. Oil was down under the $77 per barrel, but I did see after hours, it's like 77.39. So, and they had a little relief there. And then the 10-year treasury was up two basis points to 4.26, I think last week, we were talking about 4.17. So we're getting some movement around the treasury market, but I only thought the headlines that Tesla had a rough day, anything you want to add to the market itself, it looked like it was just, it's kind of in shock, I think, of the whole event that have happened over the course of the last week or so. Anything that you took away from the market today? - No, I think just kind of a boring mundane day. There's a lot of earnings coming up. The big tech company earnings are coming up to start it today. You've got CPI coming out Friday. So the market will usually kind of gravitate, levitate, whatever you want to call it through all that stuff to see how it comes out. I did not see, I believe, Google and Tesla reported after hours, I did not see what the reports were, but I did notice the futures were down not too bad, half a percent, 3/4 of a percent, somewhere in there. So the reporting must not have been super great, but nothing too horrendous. So we'll probably just levitate in these areas for the next few days as we get through all this. - And I think as maybe companies hit, miss, exceed their earnings or whatever. I mean, this is a nice little spot to stay in right now until I guess things start to clarify. I mean, we talk so often that the market does not like it, just despises confusion and uncertainty. And boy, I mean, you've got confusion all over the place, right? Yeah, I was meeting it, meeting Trump. And awhile ago, you've got, looks like Kamala Harris now is, you know, I mean, there's just so much confusion going on. And the market just is, I think, trying to sift through the news of the day and the movements of the day. You know, so it's an interesting time. And you know, I want to, you know, I haven't talked or anything about Friday, you know, when you had the little glitch between Microsoft and CrowdStrike with that tech outage. I got caught in the middle of trying to get, you know, trying to fly out and had to reschedule. But, you know, on Friday, how dependent we are on this stuff, Corey, Friday, our full operations were down for a few hours. We had no funding, no drawing docs. You couldn't run automated underwriting. So, I mean, you know, it makes you realize how dependent we are as a society on the different degrees of dependencies on this. And, you know, I noticed that Delta still struggling on the airline industry with, you know, that. So, I mean, you know, I hate to say it, but I, you know, we've got such a, we operate in such a technological world and we're so dependent on it. I can't even imagine that we don't see more of this more often. I'm surprised that we don't, you know, but I don't know if you saw it had any effect by it, but it was kind of crazy. - I didn't have any personal effect, but it is interesting. And especially if you look at how it was affected with CrowdStrike, you know, send out kind of an update. It only went to the Microsoft system, caused some kind of glitch, you know, I don't want to pretend like I know exactly what happened. But you really had those two components and the chaos it created around the world instantaneously to me was the amazing part, not only here in the US, but China, India. I mean, every major country that is using the systems had some issues somewhere. And the scary part is that was only one little minute, you know, kind of source code or whatever you want to call it. And so I listened to some people talking about it, the hackers and the people that, you know, dig into those things to try to cause chaos. They see now, or maybe they already knew, that they only have to break into one system or two systems and they can create some pretty severe chaos across the country and across the world, really. - Well, the irony to it was mortgage and real estate executives were meeting in Dallas at a summit, AI summit, when it happened, you know? So it's like, well, they got to experience firsthand, you know, what AI can and cannot do. And, you know, so, I mean, this is the paradigm shift. This is, you know, they're saying this AI is the next revolution to the internet and the computer. You know what I'm saying? It's the smartphone and things like that. So it'll be interesting as we travel through this. And, you know, but yeah, we experienced that firsthand at our company. And so I know a lot of other companies experienced it, but that is, that's the nature of the beast now. And so, but you know, you get, you start to wonder that, you know, when do you get the rates and all of that? So it just cascades, it's a cascading effect. But let me cover that real quick too. With the tenure treasury, it was up to basis points. The 30-year average six straight accordion mortgage news daily, Corey was finished at 6.87%. Again, I like to always emphasize that's your top borrower with plenty of money down. So, but, you know, again, we're clearly inside the seven. And, you know, we're going to get in some real estate news. But, you know, that is helping, I think, a little bit of the activity. But I sent you an article. I don't know if you got it before the show about housing inventory. And I want to cover that as well. But part of the news that came out today, Corey was June existing home sales, fell 5% from May. And I don't know, which actually produced a median existing home price was up, 426,900, which is 4% higher than a year ago. Are we shifting? Do you think with these numbers, are we shifting towards a buyer's market or a balanced market, you think, as you start to see existing home fall and inventory rise, do you think this is healthy? I certainly think it's healthy. We'll see if it does a full shift to a buyer's market. So remember, we're probably, I didn't look at it on a national level, but let's say locally, we're right around two months, month and a half worth of inventory. So if the national market usually has a little bit more than that, let's call it two and a half, maybe three months, worth of inventory and a balanced market is six months worth of inventory. So I do think there's something going on. You are seeing the inventory increase. It hasn't affected the pricing yet, but to me, that's the next kind of shoe to drop because if lack of inventory is what's kept the price up, then added inventory should stabilize or bring that price down. I caught a good interview today on CNBC with one of the real estate executives and yeah, you're seeing inventory increases as high as 80, 90% in some markets. So, you know, these little cycles, these little things that the market gets in, they do not last forever. Sometimes it feels like it, but they never do. So don't put all your eggs in one basket as far as what a new market is. They always kind of revert back to the main and go back to the way they were. - Well, you know, it was just a couple of weeks ago, we talked about the different stages of, you know, recession or buying and selling real estate, I guess it was, you know, and we go through these cycles and, you know, we had a dear friend other years ago that said he believes we're operating seven year cycles. And I think we've kind of broke through that seven year cycle on the up and things like that. But, you know, I think it's those things, those windows and opportunities you look for, especially being in real estate as an investor and, you know, or looking to buy your first home, it's, you know, you just try to find these little, these little windows that you can capitalize on. And, you know, kind of, I guess in plan up, but kind of leads into our segment for tonight. We're going to talk about maximizing the return of real estate portfolio involves a combination of strategic planning, market analysis and effective management. So those are the, we're going to review eight key strategies to help optimize your real estate portfolio. And, Corey, I think, you know, over the several years, you've talked on this over this, and it's just a healthy reminder to keep it fresh in people's mind of how to optimize that, you know. And you, I think over the years, you've offered your, you know, your services and your time to help people, you know, achieve that dream of multiple investment properties and things like that. And, well, this'll be just another way to cover it tonight. You know, and some good advice there to be aware of. But, when we come back, I've got a couple of things. I want to touch on that housing inventory up almost 40% over last year. Got some other headlines I want to cover, Corey, and then we'll get into our topic. But, we'd appreciate you being with us tonight. Let's get our first check of the Right Now Traffic Center with Kristin Snow. Hi, Kristin. Welcome back to the John Sanchez Show on Newstalk 780, KOH, filling in for John tonight. I'm Dwight Mallard of Guild Mortgage, Corey Edge of Ed Drill T. If you're just now joining us, it was kind of a quiet day on the market. The Dow Jones was down 57 points to 40,358, NASDAQ down 10 points, 17,997, and the S&P 500 down eight points to 55.55. With that, the treasury market was up two basis points to 4.26, and the average fixed rate mortgage on a 30-year conventional 6.875, a court in mortgage used daily. Corey, as we were leaving, we were talking about the June existing home sales that came out, which fell 5% from May, and the existing home prices are still up, but I hadn't an article that I sent you that came out of housing wire. I just want to read a little bit of it real quick and just kind of get your take on it if we're kind of into a new, let's say, season. But it says housing inventory up almost 40% over last year. However, home prices are still rising, but not like 2020 or 2021. Low inventory, as you have stated, plagued the housing market since the pandemic, plummeting to all-time lows in March of 2022 when we only had 240,000 single-family homes available for sale in the entire country, Corey. Today, that number is 668,383. Well, this is still apart from average. It's a huge plus that we are no longer in a savagely, unhealthy, low inventory market in parts of the country. So do you see, I mean, do you see a shift mentally or even actually going on with, you know, a little bit more properties coming? I know we're in a difficult market in Northern Nevada, but, you know, usually as things move, so eventually, well, Northern Nevada. - Correct, yeah, and vice versa. And so, yeah, like I think on our last report, we were 2.2 months worth of supply. And if you remember, just a few months ago, that was down to half a month of supply. So you're definitely getting the inventory. I think, you know, a couple of things that may or may not be going on. The first one is, as I've always said, I still believe that the peak of the market is usually 4th of July, and so we'll, in my opinion, kind of starting that slow descent into December. It happens every year. Nothing to be worried about. It's just kind of a normal market time, but we are seeing more inventory now than we did in previous times. So, you know, I've always thought, as we go through this, you can only tell people they have half a million dollars in equity before they're gonna wanna get their hands on it and move on. And I do see some sellers that are feeling like, okay, price is good now. I'll go ahead and move. I'm seeing and getting some sellers that bought at the 2008 recession lows that are now starting to liquidate that inventory 'cause they have some massive, massive gains. So they're gonna move into something, I don't wanna say more stable, but something that they don't have to rely on the market stuff. So, you're seeing some inventory come from places that we haven't seen in the last two years and even 10, 12, 13 years. And we'll see. And I was listening again to one of the economists today and talking about, it seems completely backwards, but his take on it was, which, if you think about it as what's happening, when you get to higher rates, you're getting higher prices, because home prices, because you have lack of inventory, and you're getting lower rates, you may get lower prices because you're going to have people not tied to those golden handcuffs and put their house on the market and that may lead to lower prices. And you're gonna have some sellers that struggle with that, not because they don't have an equity question, but because mentally, they're so used to logging into Zillow every morning and telling themselves how rich they are that it's gonna take them a while to believe that the house has worked anything less than whatever the high point was. - Well, and the fact of the matter is, there's over $2 trillion in equity, right? I mean, there's a massive amount of equity sitting in the marketplace. And at some point in time, people will want to cash into that. And we talked about that the last time you and I were, I was just gonna say, when you bring that up, there was a gentleman on one of the shows today that was talking about a Silicon Valley startup that is tying a credit card to your equity, not a home equity loan, it's not a second. I don't even know if he explained that it was a mortgage, it was kind of a weird product. But essentially, this would be a card, tie to your equity, you could go out and buy a McDonald's Happy Meal if you feel like it, run your card and they take it out of your equity. I'm sure there's some more mechanics to it that I didn't quite sell all the way through, but there are companies out there and people out there that are trying to get their hands on your home equity and they are going to entice you to spend it any way you can, so just be aware of it. - Well, these are topics and ideas we're probably gonna be covering over the next, the next several weeks, months, whatever it takes. But before we go to break, I wanna talk about it. So when we were together last time, there was a 100% probability of a September rate cut of a quarter point. Now it's down to 97, so we've lost 3% from that. I'm still very, very strong that that's gonna happen. As you mentioned, we've got PCE, Core PCE, which is a real big number of people like to watch coming out Friday. So along with busy week of earnings and the new home sales come out tomorrow, they expect 640,000 versus 619 prior. So Fannie Mae came out and said, "Hey, we predict two rate cuts still this year." So there's just lots of activity going on and the markets gotta absorb it. So these are just the things that we try to navigate through on this show, giving people the ideas. So it's helpful to stay on top of all this if you're making key real estate decisions. But when we come back, we're gonna talk about maximizing real estate portfolio and maximizing your returns. So let's turn it over right now to Kristen Snow for a check of the latest news traffic and whether in the right now, or in the KOH, new stream, hi, Kristen. (indistinct chatter) Welcome back to the John Sanchez Show on Newstock 780, KOH. Wonderful evening and lackluster market today. Dow Jones down 57, it has down 10 and the S&P down eight. Corey, I just wanted to bring up, looks like in the future market, little bit of activity that Dow futures are down 85, S&P futures down 22 and the NASDAQ futures down 112. So a little bit of movement based upon maybe some after hour earnings or reports. So it'll be an interesting day tomorrow and you get all the coverage right here on Newstock 780, KOH. So Corey, a couple of things before we get into our topping and great eight points you've put together that I wanna cover as quickly as best as we can. But we talked about new home sales coming out tomorrow, expecting 640,000 versus 619 prior. More did your applications to purchase new homes sell 16% in June. So I've got to believe that new home sales tomorrow may be off, especially if it goes coincides with the applications, but that may be a delay in that report as well. And then the last thing Corey, I was just kind of trying to prepare for the show. And I can't believe this doesn't get any traction at all. Nobody talks about it. National debt is 34.957 trillion. We'll probably by the time we hang up, we might be at 35 trillion 103,702 per US citizen. The last time and the only time the debt was ever paid off was January of 1835. So anyhow, a little statistics there, but I find it very hard to believe this just doesn't get any attention at all. - No, no, they just keep saying, no, it doesn't not get attention. It just keeps going up and they keep spending. And we'll see, at one point, we'll have to pay the paper, but you and I might not be around when that day comes. But our kids will. - Yeah, yeah, it's just an interesting tidbit. And I always see it. I get a saying, it talks about the debt clock and all that. So I thought I would just enlighten everybody where we're at. We'll clearly be at 35 trillion before no, not too long. And it just keeps, we've got to figure that out. But anyhow, tonight, at least what we're gonna figure out, Corey, is we're gonna maximize return of real estate portfolio, involves combination of strategic planning, market analysis and effective management. So let's jump into some of these key strategies. Number one, I'm gonna go through them. You, I'm gonna let you just talk about them. Number one is diversification. Well, I'm gonna talk about that. - Yeah, and they're strategies and they're just kind of things to think of. And you can do diversification, if you can think of different states, different markets, different things to kind of diversify it. If you're highly centralized in one place that is relying on one kind of, you know, job. So let's say you're in a place that's all manufacturing and the manufacturing plant shuts down while now you're gonna have a lot of vacancy. So sometimes you wanna diversify into different areas, just to be safe, no different than how John diversifies the portfolio is for his clients, just in case something happens. But you can also look at diversification into other things. When you buy a fourplex, for instance, you're diversifying, or let's say you have enough investment capital to buy a one house or a fourplex. Well, if you buy the fourplex, you're diversifying into four different tenants. So if one moves out, you're only 25% vacant versus if you're in a single family house and one tenant moves out, you're 100% vacant. So diversification can be, you know, very small. It's just like the example I gave her very large, as far as owning things across, you know, the country or different parts of the state. It can also be different types of a real estate. If you wanna down one commercial or do a land or, you know, all those different things. But the point of it is, if something happens to one sector of the real estate market and you're diversified, it won't bring your whole portfolio down. - Well, and I know that you're a big proponent of diversification. So yeah, that's a great way to kind of look at it. 'Cause like you said, do not put your eggs on one basket and just be mindful of that. Let's go on to the next one, market analysis. - And this is just, you know, it's helping a friend of mine with us over the weekend and they're looking at a, you know, could be a three plex all the way up to a five plex, just a piece of property. So what we do, same thing I did for him is what I do for myself as you're gonna dig into the market, trying to figure out the value of it is, what are things trading for it? What's the cap rate on similar properties that have actually closed escrow in the last, call it six, eight, 12 months, to see what the market is paying for properties like these. And these are all things now with Zillow red said and all these different sites you can get sales. A loop net is a good one for commercial properties. Anybody with an internet connection on a computer can dig in and do this kind of analysis. And again, just to try to figure out what things are trading for, what the value of things are based on the market. You don't always want to look at what is slower sales. And maybe you look at what has sold 'cause that tells you what people are willing to pay. And it also helps you with rents and expenses and just different things to educate yourself on what is happening before you jump into the market. - Well, and you've always been, again, another proponent of do your due diligence and what your way your head and what you're doing. So the great advice there. Number three, Corey, and again, I know we're kind of covering these pretty quick, but I think they're all important ideas. But number three, property management. You have harped on this and harped on this. So property management, let's cover that one. - There's nothing wrong if you're new to the game or if you're just small-time one or two houses, there's absolutely nothing wrong with managing the properties yourself. I would say when you get over, there's no magic number. Could be one property, could be five, could be 10. But at some point, when you feel that you don't have enough time to fully commit to that property to make sure it's taken care of, you want to hire a professional property management company to take care of those things. Tenant screening is a huge one. You can save yourself a lot of headaches by properly screening tenants. If you ever get in a situation where you need to do evictions and understand what the laws are and all this stuff, that's what these professional property managers are trained and licensed to do is to help you get through those processes and they can be incredibly expensive and frustrating if you don't understand what you're doing. I've always been a bit proponent of they're going to hire a property manager, hire a company that only does property management. Nothing against realtors that have both licenses, but I've found in my experience sometimes it's hard to be a full-time realtor and a full-time property management because they're both full-time careers if you do them properly. So you don't want to be somebody side-gig, if you will, especially when it comes to tenants, in my opinion. - And Corey, I always believe, especially if you're out of the area, but even in the area, having a property manager, just on an average or a range, what are you paying for the service of getting that quality tenant in the background? All that, what typically does a investor need to plan on? - It's usually about 10% of the gross rents. That's what it's been kind of historically, but I'll tell you, there's more companies coming into the market that are forcing that right down. There's better technology coming into the market that's forcing that right down. So it wouldn't surprise me to hear people pay 6%, 8% of the gross rents to take care of basically everything. You're just going to see it share culturally in your mailbox every month and then get a year in statement in general to your accountant. And you're absolutely right. If you do not live in the town that your rental is in, hire a professional property manager or at bare minimum, have a friend or someone you trust to go buy that property at least once a quarter, not once a month, because a lot of horror stories I hear are people that haven't seen the rental for two years and are managing it themselves. And when they show up it's a, the tenant was paying rent the whole time, but the house is basically destroyed. - Well, that follows along the first point, diversification. If you start diversifying your portfolio out of the area, that is one I would factor in as an expense, right, as a necessity. It's a, to me, it's a, you know, that's a must, you know. So number four, financial leverage. How about that? - And you're the expert on it. Like the beauty of real estate is very easy to leverage for, you know, maybe 25% down, probably a little bit lower. If you can owner occupy one of the four units, if you're only looking at four plexus, for instance, but the leverage is easy to get. It's relatively cheap. Obviously not as cheap as it was a few years ago. And it allows you to grow your real estate business much faster than if you had to put 50% down or 100% down pay cash for things. And if you start, you know, hammering away on the fancy calculators and you figure out your cash on cash returns and all these different, you know, cool return options. I guess you can say they are. You can see that you can return some pretty good percentages on the little amount of cash you have to put into these properties. - Well, and, you know, one of the things I talked about is over leveraging and it made me kind of laugh. Remember in the '08, '07, '08, 125%, you know, loan the values on those HELOCs or those seconds, remember? So, you know, those days are long gone, but, you know, that was a clear abuse of over leveraging and interest rates we talked about this all the time. You know, keep a very close eye on what your rate is and take advantage in dips in rates and if we get into another season of lower rates and you bought, recently bought an investment property, always, always brief finance out. I mean, it's just, it makes sense. And those are things that we try to initiate here on this show when we see those type of interest rates falling and it's been very difficult for the investor right now, you know, especially that they have to use, you know, financing to buy. But the other thing too is you always talk about, you know, using one property, the equity to buy others. And so, there's all sorts of tools and ways to, you know, leverage your properties in a very responsible, constructive way to move on and grow that portfolio. So that is a big one. And anybody that has questions, feel free to call out to Coria or myself and talk about that. But there, to your point, there's lots of ways to do it. So, well, we've covered the first four. We've got four more to go on the final segment, but let's do our final check of the right now traffic with Kristen Snow. Welcome back to the John Sanchez Show on new SAC 7-8-K-O-H. Still have been under the weather, John Sanchez, on Dwight Mallard, who built mortgage and Coria Edge of Edge Realty. We've covered the first four points out of eight Coria on effective strategies, you know, to, you know, I guess maximize your return on your portfolio, real estate portfolio, diversification, market analysis, property management, financial leverage, where we ended off. Coria, before we get into the fifth one, anybody that's looking to get some information from you, what is your phone number, please? 673-6700. And anybody looking for me, it's 240-2022. Okay, Coria, fifth point, value add opportunities. Yeah, and you can look at this in a bunch of different ways. If you're just kind of in the single family house market or small unit market, you can look at renovations. And to me, when I look at renovations, I'm looking for renovations that are going to either A, help me increase my rental. So if I got to redo a kitchen or redo a bath or something that will help me increase my monthly rent or the addition of a bedroom or a bath or something like that, you don't want to, you know, if you're charging or starting number $1200 a month, you don't want to do a complete renovation and then charge $12.25 a month. That doesn't make any financial sense. So it's something you can look at. If you're in the commercial world, then you see this all the time. If you're a gate warehouse owner and the market's pushing towards lots or you can start converting warehouses to lots or you're seeing it in offices now that are putting repurposed into housing or different things. So to remember real estate is a, it's the building, but it's also the ground. Sometimes the building that is on the ground is not the best use for that ground. So you can look at making some money by taking away the current improvement and replacing it with a different improvement. - Well, we've seen that in locations in Reno with casino, so it's all casinos, you know, and turning those into condos and things like that. So yeah, perfect. Yeah, let's keep going on tax efficiency. Talk about the few tax benefits. - Well, and one of the beauties of real estate, the tax deductions, the depreciation, the credits and centers, I don't want to get into all the individuals 'cause I don't want to pretend like I'm an expert on it, but I would say, if you own investment properties and you're still doing your own taxes, I would highly, highly recommend that you hire a CPA or some kind of accountant to walk you through that process and do the taxes for you. It's interesting to me that when you get into my world, in real estate, people don't want to hire property managers or accountants even though it'll save the money, but they'll still pay for a lawyer or somebody else. - Yeah, it's important. - So, and the final two, active portfolio management, regular review, just kind of know what you've got and then risk management, talking about insurance and contingent planning, legal compliance, those type of things. Corey, your final words for people looking to buy investment or improve their portfolio. - Run it like a business, look at it like a business. Use the professionals to get you through all the hard stuff that you don't know about and run it like it would a business. - Yup, great advice. We appreciate you being with the John Sanchez Show on Newstalk 780KOH. Good night and God bless. [BLANK_AUDIO]