Hey everyone Me: Kevin here I Have a massive warning for Real Estate Investors And this piece is inspired by a Bloomberg opinion editorial founded on Bloomberg.com and I have to say I Gotta add commentary on this look. You might know already that not only am I a real estate agent, real estate broker I have got a huge history in real estate investing. Buying wedge deals, selling flips, selling wedge deals. you name it.

wedge deals are basically buying Market a real estate substantially below market value because they're fixer-uppers and the market has mispriced them. So it's basically real estate. Arbitrage Where you look at a property, that's say, underpriced by two hundred thousand dollars. but that's because the market thinks maybe it needs 200 000 of work.

but you could get it done for 50k and still have a quality and safe property, right? That's a wedge deal. You got 150k wedge in that example I just gave you. It's incredible. So they're really, really amazing opportunities in my opinion, to explode your net worth in real estate, even if you're just a homeowner.

because you could buy a home that is a form of wedge deal, rent that out in the future, and buy a new home, right? That's called bank hacking. Anyway, Real Estate Investing absolutely love it. If you want to learn more about real estate investing, obviously subscribe to the channel. We're going to be releasing so many real estate videos here, it's gonna be ridiculous.

Uh, in a good way because I'm traveling the country to explore real estate. uh, with my startup Househack Househack.com And of course. uh, you could Shadow me for a day via the link down below join me on my jet as we go explore real estate. But this Bloomberg opinion piece was shocking because Reese they suggested that the following recent data suggests the rental part of the housing market is setting up for a hard Landing one like we've never seen before.

Now that's fascinating because when we look back to 2009 and sort of that recession of 201 Uh, and and really in housing, we saw the recession kind of start. Prices started falling in about 2006. everybody thought it was just sort of a soft correction and then things really fell off the cliff in 2008. Nine Real Estate Market kind of had a double bottom.

You kind of started bottoming out and at about the end of 2009, double bottomed in 2011. Well, what was crazy during that time that was different was in 2008 2009, the industry really focused on single-family dwellings rather than building apartments. So we kind of had an understupply of Apartments Back in that housing boom and because of a lot of foreclosures, a lot of homeowners moved from owning real estate into renting real estate. especially since in 2010, you had like the Dodd-Frank laws and stuff the ability to repay rules it made lent that made lending so much harder.

You had basically more people renting and fewer people able to buy. Because it was harder to qualify, less people were able to qualify. also because their credit had been hit due to Prior foreclosures. So in other words, in the 2008 recession, you actually had a huge boost of available renters, which in which basically helps prop up rents in 2008 and 2009.

And this was specifically the kind of recession that led to the groundwork that in my opinion, really helped individuals like a Grant Cardone get started in multi-family real estate. Now don't get me wrong, this video isn't a bag on Grant Cardone or multi-family Syndicate investing. It's simply to say I would really caution against multi-family investing. Well, really.

I would caution against any real estate investing at this point until we sort of bottom out. which we're not sure where that bottom is going to be. Is it going to be at the end of 2003? Uh 23? Is it going to be at the Uh the the beginning of 2000 2024? We're not entirely sure, but we do believe that Multi-family is going to take many more years to bottom than single-family real estate because of this kind of data. So think about that for a moment if the Federal Reserve U-turns and cuts rates and all of a sudden start seeing people slowly start entering that buying cycle again, which takes time.

People are very nervous about double dips. Okay, it's exactly what we had in 2009 to 2011, so you can't blame them. But if it takes time for the real estate market to recover, it is entirely possible that if let's say the housing market bottoms out Q4 2023, it's possible to multi-family Market Thanks to all the new Supply coming online right now, we're at the highest level of multi-family building in the last 50 years. In fact, if you look at a report by Morgan Stanley I'll try to pull it up actually really quick, it'd be very convenient.

There's a report by Morgan Stanley that shows us single-family housing starts are actually negative, right? This is single family right Here, single family housing starts are negative, but then you look at multi-family starts and where are they? Oh up 20 percent. And so it's indicative that we're going to see a big flood of multi-family inventory, probably closer to where the real estate cycle bottoms for single families. That could then exacerbate the bottom for multi-family real estate. So my opinion, if we have a single family bottom, let's say Q4 2023, we might not actually see a bottoman multi-family for another one to two years after that.

And in my opinion, the best time to invest in multi-family isn't until we actually have that data. I'm not going to crystal ball and say oh, it's definitely going to be there I'm just trying to give you a heads up. If you're thinking about investing in multi-family real estate, probably pause right now. Take a little bit of a breather.

Think oh man, multi-family housing starts up a lot more than single family. The entire real estate market is coming down. The entire rental market is slowing down across the board. In the United States Yes, I Know all real estate is local, but when you actually start looking at the numbers, all the local numbers are not looking that great, right? And this is where I Actually think you have an interesting opportunity to potentially position yourself into pricing power stocks.

let those hopefully run over the next year, then move into single family real estate, then wait another year or two and get into multi-family Just the thesis, but watch for those sorts of movements. So in other words, in the 2008 recession, you actually had a huge boost of available renters, which in which basically helps prop up rents in 2008 and 2009. During that recession when home values fell anywhere between 35 to 45 percent, multi-family only fell like 45 to 50 percent, right? That was 2008 2009. But today, we actually might be getting hit with a harder rental crash than back then.

That's because today, even though mortgage rates are higher, you actually have a lot of Millennials who are now able to qualify for homes because they're getting paid more and they have less debt than they did in 2008 and 2009, at least as a percentage of their income. And this is starting to show up in the data. see in three and well, about three months ago we started to See the first signs of weak apartment demand. and according to this Bloomberg piece, it's gotten worse since then.

Apartment list is suggesting that rents fell every single month in the fourth quarter at a larger Pace than we've historically seen. In fact, rents fell an average of 0.9 percent per month in the fourth quarter. The last time we saw rents fall was between 2017 and 2019. We had half that kind of fall.

So we're double a bad rent decline it compared to a prior Market a rent decline. Uh, we're double that. And when you annualize this rate, you're looking at rents potentially coming down 10.8 percent. Now that's just for the end of 2022..

what happens when the trend of rents coming down then accelerates and continues? Well, then you potentially see another 10 in 2023 coming up. So you have to be careful. Look for example, at what JP Morgan is seeing in terms of rental inflation right now. look here at Shelter Inflation you Zillow Yardy Co-star Loop Net All of them are seeing the month of a month or quarter over quarter annualized rent for rental inflation going negative and that is a trend that once it begins, can accelerate and get worse.

This is really bad for multi-family Real Estate Investors or anyone speculating on short-term rentals. But what we have today is concerning new lease demand in the second half of 2022 is negative and apartment vacancy rates currently sitting at 5.9 percent in December are the highest that we've seen since April of 2021. and they're Rising about 2.2 percent monthly. So even though the numbers might not be the biggest historically yet, the trend isn't looking good for rents now.

This is really interesting because at the same time we've talked about this in a prior video: apartments are booming in new construction. More apartments are under construction now than have been under construction in the last 50 years, leading to a lot more apartment housing coming and Supply coming in the next few years. So now we have to combine all of this we've got bad: Trends in the rental market, especially for apartments, a lot more Supply coming for apartments, less household formation coming for apartments, all contributing to less apartment rental demand and signs that rents are already declining at an over 10 percent annualized rate, with most of that damage going to Apartments This creates as Bloomberg suggests two potential scenarios: one a Goldilocks scenario where maybe things just don't end up that bad. Home prices and apartment prices come down a little bit so investors get hit a little bit and tenants get a discount to their rents and we get a nice quick recovery as rates come down.

Maybe. But there's also a dangerous risk that if you are a real estate investor, we've all got to pay attention to it. I Want to talk about that specifically? From an investment point of view, the risk is capital dries up. You start getting multi-family developers that that face this over Supply that start going bankrupt.

Valuations compress for these. Then other companies complete those development projects at discounts so you get value compression and prices fall more than rent's fall. So big red flags for apartment buildings. Not so many red flags for single family homes.

But how do you analyze this as an investor like this is a lot of information that we've got here. How do we put this? The pieces of the puzzle together here: as an investor, Well, my opinion: a it's a concerning Trend because I think the first thing this is me personally I Think the first thing that's going to happen is I Think we're going to go through a short-term vacation rental market bubble. I Think they're going to be a lot of short-term vacation rental owners who have to transition to long-term renting because they can can't sell their vacation rental because prices have already come down 10 to 15 percent in many markets so they don't want to sell at a loss and they're getting less demand for their vacation rentals. So what's happening? People are moving to long-term rentals.

They're now increasing the supply of long-term rentals, which means we expect to see those rents full as the data shows we are expecting or already seeing. I Think that Trend continues as the vacation Rental Market Bubble Pops That exacerbates the pain we see in rents come down just as home values also come down. That means if you are an investor now in real estate I Think it is critically important to not base your numbers on that is your long-term investment numbers on what we think the market is today, but rather where the market could fall to going forward. In other words, lower your expectations for returns or be patient to let the damage hit the markets first and then buy.

So in other words, I Think now we're in the kind of Market where it makes sense to wait to buy rather than to buy and then wait. There's a famous saying don't wait to buy real estate, Buy Real estate and wait that works phenomenally in a market that's not being destroyed by a the Federal Reserve and B a massive shift in where renters are going away from Apartments to single family. But even that move to single family is starting to get hit with its rents coming down. So you have to be patient and let those market dynamics play out.

And those those market dynamics may not play out until in my opinion, three massive catalysts occur. Number one, the Federal Reserve has to U-turn which isn't just like pausing on rate hikes, but actually starts cutting rates. Then we have to see 10-year treasury yields actually reflect that change. That is the expectation that rates should come down, that should push mortgage rates down.

mortgage rates rates down. Then you've actually got to see inventory. Trends Change Inventory Trends I Expect are going to be such that we will see over this next three to six month period. Inventory Bubble Up More housing inventory.

Especially as we get to the Spring. A lot of sellers think oh yeah, Spring's going to be the time to sell. We get a little bit of an oversaturation, less buyers price comes down Even more. We got to see inventory start actually plummeting, not increasing, but plummeting so fed you turn 10, your treasure yields down Market Inventory plummeting and you need a shift of sentiment.

which unfortunately, sentiment hasn't even gotten its worst yet. Why? Because when we get the year-over-year negative revisions for rents and prices come. March April May Oh boy, mainstream media is going to have a field day bagging on real estate and I actually think that is a big risk factor for Real Estate still to come. So I am urging caution Now if you want to diversify into real estate I Do Cons: recommend you consider checking out the zero to millionaire real estate investing program down below.

Do-it-yourself Property Management Course, if you're a real estate agent, there's a real estate course for you or consider investing into House. Hack. If you're an accredited investor, you could do that by going to Househack.com Video is not a solicitation, the solicitation is the private placement memorandum there. And of course, if you're non-accredited investor, hang tight.

We've got the non-accredited round coming up soon. And remember, with Househack, we're not going to buy until those inflection points have occurred. That is the plan. Thank you so much for watching and we'll see you in the next one.

Goodbye.