#1314 Michael Zuber | The Fed Broke The Housing Market

Michael Zuber is a W-2 employee who retired at the age of 45 through real estate, and created a brand called "One Rental at a Time." In this conversation, we talk about the single family rental market, how Micheal built a life of financial security, thousands of hours of content on the internet teaching others, current market conditions, and more. ======================= Introducing Espresso - the world’s most interactive portable display. They have a portable screen that is incredibly light, comes with a nice stand, and the user interface is very easy. Anyone who listens to this podcast can go to ⁠⁠⁠⁠us.espres.so/pomp⁠⁠⁠⁠. They have a brand new offer waiting for you. ======================= Get Better Crypto Data: Do you want faster, easier crypto data? Sign up for Velo Data, a new product that we have been working on to solve this problem: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠velowaitlist.com⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ======================= Pomp writes a daily letter to over 265,000+ investors about business, technology, and finance. He breaks down complex topics into easy-to-understand language while sharing opinions on various aspects of each industry. You can subscribe at https://pomp.substack.com/ ======================= View 10k+ open startup jobs: ⁠⁠⁠https://dreamstartupjob.com/⁠⁠⁠ Enroll in my Crypto Academy: https://www.thecryptoacademy.io/

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:02Anthony Pompliano?

  What's up everyone? This is Anthony Pompliano. Many of you know me as Pomp. You're listening to the Pomp Podcast, which is my effort to find the most interesting people in the world and sit with them for hours while I ask questions in an effort to learn. So it would mean the world to me if you would subscribe to the show on your favorite audio platform, watch episodes on YouTube, and tell your friends and family about the podcast. My goal is to help millions learn from the world's most interesting people. So let's get into today's episode. Today's episode is with Michael Zuber. He's a W2 employee who retired at the age of 45 through real estate, and he created a brand called One Rental at a Time. In this conversation, we talk about the single-family rental market, how exactly he, as a W2 employee, was able to build a life of financial security

• 0:47Anthony Pompliano?

  and ultimately achieve financial independence. Michael has created thousands of hours of content on the internet. He has taught hundreds of people how to do this, and he is living proof that One Rental at a Time can get you there. This was a fascinating conversation by not only someone who's got a ton of interest and knowledge, but someone who has done it before. And I really enjoyed learning from Michael, and I think you guys will learn a ton from him. So here is my conversation with Michael Zubor.

• 1:13Speaker 01

  Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only.

• 1:37Anthony Pompliano?

  Today's episode is brought to you by Espresso, the maker of the world's thinnest portable display. Now, listen up. If you're like me, you feel like you are at a command center when you sit down at your desk. I've got a gazillion tabs open and different windows for different activities. There's my web browser, my text messages. I have Slack open, and I've got a Notes app. I normally work on a desktop, and it can be very, very productive. But everything falls apart the second I leave my desk. If I'm traveling, if I go to a coffee shop to do some work, or just want to work from the kitchen table, my laptop doesn't have enough screen space. I lose my command center, and my pro- Productivity falls off a cliff. It's a major problem, but this is where Espresso comes in. They have a portable screen that is so beautiful that you think Steve Jobs came back from the dead to create it.

• 2:20Anthony Pompliano?

  The thing is incredibly light. It comes with a nice stand and the user interface is so easy that I figured it out. How to do it in less than three minutes? If you listen to this podcast, you know that's not an easy feat. So the Espresso team and I, we became friends. I got to know them because I really like the product. And those screens, they now want to offer them to any fan of the podcast. So we struck a little deal. Here's how it works. Anyone who listens to this podcast can go to us dot E S P R E S dot S O. Or that's too confusing. Just go click the link in the description. If you go to Espresso's website, they've got a brand new offer there sitting for you. You get a little discount and you'll get a beautiful screen.

• 3:01Anthony Pompliano?

  Trust me, I use mine every day. You'll love the Espresso screen and I think it'll make you more productive. Go check them out today by clicking on the link in the description.

• 3:10Anthony Pompliano?

  Before we get into this episode, I also want to tell you about a brand new product called Velo. Velo is faster, easier crypto data. Everyone in the industry is always looking for, what's the price? What's going on on the exchanges? Where are assets flowing or not flowing? How is things like open interest and derivatives actually playing out in the market? Well, that's where Velo comes in. It's faster and easier crypto data. You can go to velowaitlist.com today. Myself and a couple of friends, we invested in the business. We're advising the founder and we think it's pretty cool. This one is something that keeps me informed on a daily basis. So you should check them out at velowaitlist.com. That's V E L O waitlist.com.

• 3:53Anthony Pompliano?

  All right, guys. Bang, bang. I've got Michael here with me. Mike, I thought a great place to start this conversation. You were a W2 employee. You retire at the age of 45. You use real estate to do it. As you think about the real estate market today, can people still do what you did? Is it possible to continue to invest in real estate even though monetary policy is crazy? Fiscal policy, interest rates, all this complexities happening in the world? Is it still possible to pull this off?

• 4:19Speaker 03

  It's absolutely still possible. Now, if I were to start today, would I build the portfolio the same way I did? Absolutely not, right? You have to take some of this in context of where you are. But you can absolutely have a better financial future by buying real estate, you know, all the fiscal monetary policy, all of that stuff goes back to something that I've believed since I got my economics degree, and that is inflation is a feature, not a bug. So if you happen to have an asset that has 30-year fixed rate debt, that is also income-producing, that will go up with inflation, but the debt stays nominal, right? So it's kind of fades

• 5:02Speaker 03

  away, and somebody else is paying you that, paying that off, and the rent goes up, it's hard to beat all of that. So I think more and more people need to appreciate that inflation is a feature and not a bug. I think a lot of people miss that, in my opinion.

• 5:18Anthony Pompliano?

  Let's talk about your story, right? So you're a W2 employee, and you built this real estate portfolio. What did you do? Like, how did you get started? And what were some of the initial properties that you purchased and kind of came to this conclusion?

• 5:29Speaker 03

  Yeah, so I think my journey, I think it's important for a lot of W2 employees. My journey starts at 30. So first off, I wasted a decade of falling out, right? The money I made, the money I spent, right? I didn't have, you know, very much left over. But if my story happens to relate to another recession, even pre-rate recession, it was the dot-com bust. I was one of those guys who turned seven grand into almost 200 grand by essentially gambling in day trading, right? I was investing the right way in the beginning, but by the end, I was just YOLO-ing and, you know, just doing stupid things, and it eventually caught me, right? I think there's a lot of people that probably had a similar experience

• 6:13Speaker 03

  in crypto with the altcoins and all of that stuff, right? You made a lot of money, money disappeared. So at 30 years old, I like to say I lost 160 grand, because I had my, my highest balance was 200,000 bucks, and ultimately, when I finally went to cash, I had 40 grand left. I'm going to a bookstore and I find what is Rich Dad Poor Dad. It's a book a lot of Gen X kind of fall into and that book opened up my world. I'm 30 years old. I have multiple degrees. One of them is an MBA. I'm an accountant out of school, so I'm comfortable with numbers. And I don't even know, I don't know anything about real estate, real estate investing. Kim and Robert talk about these little condo, one in Hawaii, one in Oregon. I'm like, that's a

• 6:57Speaker 03

  thing? You know, let's go, let's go figure that out because again, I, I came to the conclusion that the stock market is the largest regulated casino in the world. I don't live in New York. I don't have a, you know, a pedigree of the degrees and the relationships. So I had to find something else. And real estate is physical. You can see it. You can touch it. You can add value. It goes through its own cycles. So I ultimately buy my first property, 1818 North Drive East, 93703, if people want to look at it on Zillow. And I buy it for 107 grand. It rents for 1100. I don't know any better, Anthony, so I put 20% down. And bingo, bango, we're landlords.

• 7:41Speaker 03

  Unfortunately, unfortunately, the first tenant we put in never paid rent. They ultimately get a divorce, separate, the husband becomes an alcoholic. And because I'm in California, it took me three months to get him out. So my first landlord experience, again, doing everything right, credit check, reference check, income verification, all of that, almost destroys me. Right? We, this asset that we celebrated seemingly three months ago turned into a money pit. We had to drop another 15 grand into it and put another tenant in. So that's my how do you do to becoming a landlord was my first tenant never paying rent. The story gets better from there. Again,

• 8:26Speaker 03

  if you go back on Zillow, 1818 North Drive East, 93703, we ultimately sell it three years later for 263.

• 8:35Speaker 03

  Huge gain, right? Again, this was pre-great recession. We sell it and we do what's called a 1031 exchange. Again, this is something I, it's something that's unique to real estate. You can take your capital gains from asset A and put it in asset B. And oh, by the way, asset B is bigger. And you give the middle finger to the IRS. So, you know, we did that several times. So we had eight houses from 2002 to 2006. We saw the crash coming. I didn't think it would be that bad, but we sold all of our houses, right? So not only did I call my shot, but we executed and we moved all our equity into apartments. So we went from eight units to 80 units. And then

• 9:18Speaker 03

  the world exploded. So, you know, that's kind of the early part of my journey.

• 9:23Anthony Pompliano?

  Now, as you start to build up and you're doing 1031 exchanges, et cetera, at what point did you realize like this is the ticket out of the W2 game? This is the ticket to kind of true financial freedom?

• 9:36Speaker 03

  I wish I had a better answer for you. It wasn't until years later. I, I was so focused. My job, this should be said, I'll say it here. This was absolutely a team sport. My wife ran the books. She ran the operations. My job was to find capital and buy deals. Anthony, I kept my head down until like 2015. And, you know, that's obviously way after the crash. And I remember the phone call because I was in Europe, I think, or maybe Australia. And I'm like, hey, how much money do I have to move to the, to the real estate account? Because we just kept buying, right? We kept buying and buying and buying. And Olivia, which is my wife's name, says, we don't need anything. And I'm like, what do you mean? We don't need anything? She's like, the

• 10:17Speaker 03

  cash flow covers it. So we're 11 or 12 years in, and I never even looked at that account.

• 10:26Speaker 03

  So it wasn't until 12 years later, when you know, my wife wants to retire that I even looked up. So maybe part of the equation is I didn't know any better. I just wanted to find the next deal. I didn't have this, I didn't have a dream of 100 units. Anthony, I got started and only wanted four. And I only wanted four because I knew if I got to 65 and I owned it free and clear, I would have a better retirement. It wasn't until you got in and you started making moves and learning it that you really open your eyes to what's really possible. How fast you can build wealth with real estate. Cause again, it's a leveraged investment. You put 10 or 20% down, but you keep all the upside. And you have somebody else paying for it and you can move equity around when houses are expensive and multifamilies not you move equity around.

• 11:10Speaker 03

  And it really is, the game of monopoly is real. Uh, if you choose to, to pay attention.

• 11:16Anthony Pompliano?

  When you're looking at, uh, these various properties, you mentioned that you would not today build the portfolio the same way that you did. And then you also made a comment that, uh, putting 20% down, uh, was ill-advised. Maybe I'll paraphrase you. Um, and so what would you do if you're starting today? Like, how would you go and do this?

• 11:36Speaker 03

  So I think if I was starting today and I is I would focus on B-class, single-family homes. And you know, that's where my focus would be. And I would put 10 or 20% down wherever the, whatever the lending requirement is. In 2002, when I bought Nora's Drive, it was very easy to get what was called an 80 10 10. 80% first, 10% second, 10% down. Not so much today, right? Today, where we are with lending, you probably have to put 20, if not 25% down. But I now believe, again, as a W2 employee, if you just got one house every two years, one house every three years, you will be on this path to a better financial future.

• 12:17Speaker 03

  I think it's misguided to paint this vision of, hey, let's go get 100 units. I think it's too much, it's too big. It's, it's, you already have a, I'm already spending 10 hours a day working. I have a family and a daughter to raise and I do this and I do that. It's just, it's too much. I think W2 employees would do themselves a service by saying, hey, I just want four. And if you get to four, maybe you go to 10. But I think, I think that's where I would be is I would try to get somewhere between 10 and 20, single-family homes. Bread and butter, all of that. And I would probably 1031 again, if the opportunity came where I could sell an expensive house and, you know, move it to somewhere else. So the game on Monopoly continues for sure.

• 13:02Anthony Pompliano?

  But let's talk about the kind of anatomy of one of these deals. So what is the process for finding it first? Are you literally on Zillow and you're searching for certain criteria? How are you picking which market that you would go into? And then how are you actually looking through that market to find, okay, these are the 10 that I should go and see if they're the ones to pick?

• 13:20Speaker 03

  Oh, I love, I love that. So for me, it starts with market first, right? So when I started my journey, I live in the Silicon Valley. I spent a year looking in the Bay Area because all the books say buy in your backyard. Unfortunately, the Silicon Valley doesn't offer cash flow. So that year was wasted. Ultimately, then we pull out a California map because it was important for me to drive, not fly to my properties. I hate flying, even though I did a million miles, I hated every mile. It's exhausting, it's stressful, it's terrible. So for me, I had to drive. And the first market that made sense, Anthony, was two and a half hours away, Fresno, California. So that was step one. I had to find a market.

• 14:01Speaker 03

  Then when you look at the market, and again, I never lived there. I didn't know anyone, kind of like, probably like lots of people investing in a new market. I spent about three to six months asking people in the market, where should you buy? Where would you go? What would you avoid? Right? So when you start doing that, at least what happened to me is more like, most people talked about this area called the Mayfair District. I gave the address for Norris Drive earlier. It's in the Mayfair, 93703. Okay, so after, after 90 days, I've honed in on 93703. Okay, but still, that's too big, right? I got a full-time job. I don't have access to MLS. It's, it's too hard. So ultimately, I had

• 14:43Speaker 03

  to go three or four bedroom, two bath, single family home, two car garage, single story, be 1,200 to 2,000 square feet. So I had to get a very specific criteria that I now call a buy box. And once I set that criteria that I just gave you, that is all I looked at. A good buy box, Anthony, is permission to focus and permission to ignore. So if it was a two bedroom, didn't see it. If it was a duplex, I didn't see it. By being that focused, something powerful happens. You learn what an average deal looks like.

• 15:23Speaker 03

  In the course of 90 days, the course of six months, I knew that buy box better than any real estate agent, any resident there. So as I'm looking at this buy box, which I looked at only that buy box for three years, I could very quickly, in a matter of seconds, tell you if that was a deal that was terrible, average, or great. So all I did with focus and execution was write great offers on great deals. And I got one or two houses a year by doing that, but it's crazy focus and consistency because you can't learn an entire market. Right? I talk with Lance Lambert from Resi Club all the time. He is housing, housing, housing.

• 16:04Speaker 03

  We're not like, W2 employees don't have that ability to just geek out on data everywhere. Shout out Resi Club. You got to get it. If you don't have that data to that local market, you're missing out. But the answer is I got focused and I was very consistent day in and day out for three plus years.

• 16:21Anthony Pompliano?

  Now, let's say that you've gone through that, you see a deal. Are you looking for a good house at a great price? Or are you looking for a great house at a fair price? And this is kind of the age old question of like the quality versus the price you pay. What are you really optimizing?

• 16:40Speaker 03

  That is a great question. No one to ever ask. In, in real estate, you have two variables that you have to watch. One is the property and one is the lending environment. Because there are times when lending is very restrictive. And there are some times where lending is rather loose. What does that mean in this context? I get, I only buy the best deal. What I mean by that is my buy box produces an average yield, let's call it 6%. I'm only going to do deals that produce 8 or 9%. Now to your question. There are some markets where lending is loose, where I could go buy a dump and borrow the capital to do the repairs and get a higher yield because I have less money in the deal.

• 17:25Speaker 03

  There are some times where the market is so tight, you have to come in with all this extra capital, your own capital, which means, you know, you need a bigger return. So it really depends on the lending environment and the housing market. How are they working hand in hand? I have done some times where you have to buy turnkey. You just have to buy it, no money out. And I bought other times where you can get a 50% discount because nobody has cash and you could refi later. So it's really, it's really depending on lending and housing. Well, tell me what's, what's better value or the other way.

• 18:03Anthony Pompliano?

  Now, let's say that you found that, uh, you know, perfect place. How do you think about constructing an offer? Some people would say, ah, I just offer them 30% less than what they offered, what they listed it for, obviously. Some people would say, no, you actually just want to pay them what they're asking because that's what the market is. Like, how do you think through what, what is this actually worth? And is there some gamesmanship or psychology to the offer?

• 18:25Speaker 03

  There's, oh, it's always gamesmanship, always. And again, this is why you're looking at your market every day, you get to learn what's going on. So for example, in 2020, 2021, I wrote a hundred offers and got nothing. We closed six deals, but they were off market. But the only, the only way to win in 2020 and 2021 was fast, speed, cash. It was tough, it was tough. Today, completely different strategy. I will not look at a deal unless it's on the market for 30 days. Then I write, I write disrespectful offers because again, I don't need every deal. I want one deal a year at this point in my life. So yes, my offers usually are 30% below list price today, not because I think I'll get it.

• 19:12Speaker 03

  But I'm going to find out who the motivated seller is because if you're a motivated seller, you're going to counter. If you are a wish price, don't have to sell, you're going to tell me to F off and not counter. I'm, I'm, my goal with that first offer today is to find motivated sellers. So that's what I'm doing today. Very different than 2020 and 2021.

• 19:34Anthony Pompliano?

  And how much of this is like, uh, you have a template and you're filling it out versus the offers are custom to each home and it takes a lot to put together?

• 19:42Speaker 03

  So I, I'm lucky enough where I work with sets of agents that I've had for years. My offers are very templatized. Uh, again, because we are submitting actual purchase contracts, but basically we're changing price, down payment and inspections. So it's my, you know, the agents I work with can get it done in two minutes or less. They're just changing a few fields. So it's right. I would rather do a very standard offer and then negotiate, right? Real estate investing is one of those things where the real money is made in the negotiation. What's important to you? What's important to me? Um, for example, I, I remember overpaying for a house one time. Why did I do that? Well, the seller wanted 120 for a 100K house. He owned it free and clear. So what did I do?

• 20:27Speaker 03

  I got 30 year loan of a hundred grand at 1% when the prevailing rate was eight. I'm sure he told his buddies that he got this California investor for 120. He doesn't tell him that I, he gave me 30 year money at 1%. Right? So the money's made in the negotiations, but yeah, the, the, the offer itself is just a starting point.

• 20:49Anthony Pompliano?

  And then when you're trying to close the deals, is there a standard timeline, uh, cash offer? Uh, like what are the, some of the things that you've learned over the years to get the deals actually done? I think there's a lot of people who say, hi, I spent a lot of time on, you know, a platform looking for homes, even some people may say I send a lot of offers out, but how do you actually get deals done?

• 21:10Speaker 03

  So let's answer this one in two ways. We'll, we'll give you what I do, but then we'll talk about what most people should do. Most people today should not, not be waiving inspections.

• 21:20Speaker 03

  Waiving inspections if you're not somebody experienced is a recipe to buy somebody else's problem. I think that's highly risky. I don't think people should release EMDs. The market is so hot that there are buyers releasing EMD and the EMD is basically your deposit. It's going hard is what they call that. There are things happening in today's hot real estate market that I think is unhealthy. So don't do those things. That said, I've been through hundreds if not thousands of homes. I have contractors that will go through house with a fine tune comb for me during inspections, you know, during the process. I don't need those things and I will use those to my competitive advantage, but I don't, I don't give those up easily. But if you want to, you know,

• 22:03Speaker 03

  if you want to give me an extra 10% off to close in 15 days, I can do that. But I don't think most people should, if that makes sense.

• 22:12Anthony Pompliano?

  Yeah, that makes a ton of sense. And then when you look at kind of why people are buying these homes, some people I've seen are buying homes because they want to get a long-term tenant with, you know, good credit and somebody's going to be there for years to come. I've seen people who want to put it on Airbnb or, you know, some other type of platform and everything in between. And so how do you think about the property that you're buying and what you've kind of, again, kind of in that buy box where you're saying, all right, my strategy is this and I don't want to waiver from the strategy. How much is short-term versus long-term?

• 22:45Speaker 03

  For me, I'm remarkably consistent and focused and it's always been long-term for me. I didn't want another job, right? Being a, doing short-term, even midterm rentals, definitely more of a job. In fact, the IRS looks at short-term rentals as active income versus passive. So it's an entirely different ballgame. My job, Anthony, was to be the best employee I could. I was a commissioned salesperson. So by being the best typically means you make a bunch of money. So that was where my focus was. I did not need my real estate portfolio to take extra hours away from me because it would only come away from my family time or my gym time or my sleep time. I,

• 23:26Speaker 03

  I didn't have any extra hours to be a short-term rental guy. In fact, when Airbnb blew up in 2020 and 2021, people were making fun of me. Like, oh, you're getting four, five, 600 bucks cash flow. I'm making two grand. And I'm like, you're missing the point.

• 23:45Speaker 03

  I didn't want to become a hotel, right? I didn't want to deal with consumers. I would much rather stick a tenant in and have them live there for a decade than have 10 tenants a month. I mean, having 10 tenants a month would drive me crazy. Couldn't imagine. So that was me.

• 24:02Anthony Pompliano?

  And then how do you manage the properties in terms of, do you have property managers? Are you going out there and you're cutting the grass or fixing problems at 2 o'clock in the afternoon?

• 24:12Speaker 03

  And it's termites in toilets, right? That's, that's the thing that people talk about. No, we've had property management from day one. Again, we chose a market two and a half hours away. My job took me all around the world almost every week. So we've been paying, we paid 10% property management fee that first year. And we just had to do great deals that cash flowed even after 10%. So, you know, we spend maybe four hours a month now on our portfolio. We haven't seen one of our properties in five years. You know, so property management for us was a requirement and, and happy for it now. Now we have a second home in a different state. So, um, yeah, we've had property management from day one.

• 24:54Anthony Pompliano?

  How do you think about the current market in terms of now being a good time or a bad time to, to try to figure this out?

• 25:01Speaker 03

  Real estate investing is always hard. What's hard about it is different. Sometimes it's lending, sometimes it's competition. It's tough today, right? It, it, high prices, high rates. Affordability is, is worst that I've seen it in my 20 years. It's, it's not 1981 crazy, but it ain't great. Inventory, I think the Fed, I think the Fed broke the housing market. I think that's what happened. And what I mean by that is the Fed kept rates too low for too long. They were actively buying mortgages, which brought rates to sub 3%.

• 25:38Speaker 03

  We have so many people now that would normally be on that evolution of selling one and buying ones called the move up buyer that they're frozen in place. So I think the housing market is going to be dysfunctional for four or five years. And not a lot of people have looked at this, but we've done this before from 1978 to 1994. We did less transactions than 1978. Think about that. That's like 14 or 15 years. So we have had higher rates distort housing. So folks, if you're in the housing industry, mortgage, all of that, it's gonna, we're not going back to six million sales because the Fed broke the housing market. The move up buyer is is stuck

• 26:21Speaker 03

  for a while, I think. So it's just tough. If there's not that churn, buyers and sellers, it's tough, but it's worth it. It is certainly worth it. It's, you know, it's hard today, no doubt.

• 26:33Anthony Pompliano?

  And when you see the Fed, you said that the Fed broke the housing market, it seems like they're very worried about inflation. They're trying to get that under control. And monetary policy obviously plays a piece into housing affordability. No doubt. Maybe the bigger, the bigger part is just like, we haven't built enough houses. And it seems like if we just built more houses, maybe that would have a bigger impact than anything that the Fed could do.

• 26:58Speaker 03

  I think it's really funny. If you go back to Jerome Powell in front of the microphone, there's Jerome Powell about 18 or 20 months ago, basically saying, I'm gonna, I'm gonna bring housing down because, you know, nobody can buy anything. He said, he said something like that. And then most recently, in front of the microphone, he's like, oh, I'm the Fed, and my job is stable prices and full employment. I can't impact home prices. Right? The Fed, the Fed can, the only thing the Fed can do in housing is transactions. They can't produce, they don't produce housing, right? That's just what they do. So yeah, we, we, we've underbuilt for more than a decade. Now, there are some areas that are overbuilt. I think

• 27:42Speaker 03

  that's a lot of, you know, you know, the Sun Belt has had a lot of attention and we'll see rent softness. But when you look at the country, the country is underbuilt, no question.

• 27:53Anthony Pompliano?

  And how much of the solution is going to be single family homes versus they're going to just have to build, you know, huge multifamily kind of structures and facilities and everyone is going to kind of move into apartments and that's going to be the only way to solve this problem?

• 28:10Speaker 03

  Well, you can also throw in there the whole office conversion, right? Oh, we're going to, we're going to convert office to apartments, right? That's a big thing people talk about. So I'll answer it two ways. My hope is we haven't killed the American dream. And I think for a lot of people, that means owning a home, right? We've seen homeownership peak out, I think at like 68%. I think today it's 64. I've traveled all over the world and there are countries in Europe where homeownership is less than 50%, less than 40%. I don't want that for the United States. I think that would be a huge failure. So my hope is we find a way to build cheaper homes, whether they're smaller or different stick belt or something. We engineer something. I don't know what it is,

• 28:54Speaker 03

  but that's my hope. But in the short term, it's just easier, easier to house people in, in multifamily. You can put more people in a square footage. There's a whole lot of not in my backyard and NIMBYism, right? I live in, you know, part-time in California. You can't build anything of size there. So yeah, it's, it's, it's tough. So my hope is single family ownership stays where it's at, but it doesn't have to. There, there are countries in Europe where it truly is renter nation. I think renter nation would be an utter failure if we went that direction, in my opinion.

• 29:34Anthony Pompliano?

  Now, maybe a part of this, which intersects between where we're headed and kind of real estate investors is things like Section 8. So if you're buying these kind of dilapidated houses, if you're making, you know, kind of 30% less than asking price offers, et cetera. How do you think about stuff like Section 8? And is that something that makes sense, doesn't make sense, or pros and cons?

• 29:59Speaker 03

  So first and foremost, I was housing insecure growing up. So I'm a huge proponent of Section 8. So all of my units are available for Section 8. I think at any given time, 30 to 35% of my units are rented to Section 8 tenants. I think Section 8 tenants get a bad rap. Because again, you know, I have seniors and veterans and all of that on Section 8 because again, it's income. It's not, you know, it's not, I think a lot of people think it's something else. The other thing you have to remember, I said earlier, I have a property manager. And something I love about Section 8 that some people might hate is their yearly inspections.

• 30:42Speaker 03

  I use every yearly inspection to grade my property manager. I don't want to be a slum. I don't want an unsafe house. I want that if there's something even questionable, haul it out, we'll fix it. So I love the detailed Section 8 inspections. Also, what people don't, may not realize is sometimes in those reports, they call out the tenant. Right? You're not clean. Clean up for yourself. The other thing that people don't realize is Section 8 tenants can lose their vouchers. Right? If they, if they don't pay or they're breaking the rules, they can lose their voucher. So over the course of my 20 years having thousands of tenants,

• 31:24Speaker 03

  predominantly, most of my problems were cash tenants, not Section 8, which I think would surprise a lot of people. But you have to know going in, there's overhead, there's inspections, you know, there's all of that. But I'm a huge proponent of it for sure.

• 31:40Anthony Pompliano?

  Are there other programs or things like that that you're either a proponent of or you've seen work really well?

• 31:47Speaker 03

  Again, as somebody who grew up frankly poor and almost foreclosed on, there are a lot of programs. Typically, most programs are more short term, right? We had a lot of programs pop off during the pandemic, right? To give somebody three, six months, whether they were church or state based. Section 8, to my knowledge, is really the only one that's kind of a long term. Right? Year after year after year. I have some Section 8 tenants that have been in place for 10 years plus. But most of the other programs are very short term gap, you know, gap help. Maybe, you know, like the pandemic is a great example. There were lots of state and city programs.

• 32:27Anthony Pompliano?

  And as we look at real estate, um, there's been a lot of, uh,

• 32:36Anthony Pompliano?

  maybe in 2020, 2021, even in 2022, probably more of this, but supply chain disruptions and various things that impacted construction. And so you mentioned remodeling. Um, you've mentioned things where you may be improving the properties. I know that on your website, you talk a lot about kind of taking things that are kind of from a slumlord to a pride of ownership, uh, rental, et cetera. Um, how does all the construction volatility and supply chain issues impact someone who I think is really, you don't want to be in the construction business. You want to be in the real estate business, right? And so how do you think about that?

• 33:12Speaker 03

  Yeah. The, the thing I would coach someone to do is, is everything I do is really exactly the same. So I have a paint color. I have a flooring color. I have windows that I get out off the shelf at Home Depot. So I've templatized as much as I can, which also allows me to buy supply and have extras on hand. Cause again, you, you could drive by any of my houses and unless it was in great shape when I bought it, they're all the same color. They're all the same two-tone. They have all the same laminate flooring. Um, if we got to repair a window, they all get the same Home Depot window. So if, as long as you templatize what you're doing, right? These rentals for me are income. They're not

• 33:55Speaker 03

  works of art. I'm not trying to make everyone a Mona Lisa. I'm trying to make them safe and repeatable, which gives me scale. Sometimes it allows me to buy in bulk. Cause again, I'm, I'm going to do the same faucet. I'm going to do the same tub surround. I'm going to do the same toilet. And sometimes you can get a deal by buying in volume and, and all of that. So templatize, if you're going to be a landlord long-term, templatize as much as you can is the answer.

• 34:19Anthony Pompliano?

  And how much of, um,

• 34:24Anthony Pompliano?

  That work can be done by any contractor regardless of city versus, oh, I have a certain plan for this region because I have a contractor who does that work. But when I go to a different region or a different city, I need to have somebody else who could do a different template.

• 34:38Speaker 03

  If I could take my model to any city, state in the country and probably 80% of it can be done by a general handyman. Anytime you get into electrical or plumbing, you're going to need a licensed resource from that area. But it's, it's the same work, probably a different price point. Another one would be roofs. You would have to get a licensed roofer for that. But there, a lot of being a landlord is simply paint, flooring, swap swapping out toilets, things of that nature. You're very rarely rewiring a house, very rarely replacing plumbing pipes, you know, the old galvanized steel to PVC or something. People talk about them like it's

• 35:23Speaker 03

  frequent. I think I've rewired four houses in 20 some years. It can happen, but you've got to buy it right and, you know, do those one offs. But the mainly thing about being a good landlord is templatizing and it's all the same stuff. Houses are rectangles and squares with, you know, hopefully a peak roof versus flat roof. That's all they are.

• 35:44Anthony Pompliano?

  And then what about your team? Like, are you doing this all yourself? Do you have specific people on the team that you think are really important to help somebody do this at any degree of scale?

• 35:56Speaker 03

  That is the most important question. You've got to build a team. One of the things that I got wrong in the beginning is I thought the answer lived in Excel. Real estate investing is especially out of the area is a people business. So one of the things I would tell people to do in the beginning is you've got to find people who are in your market that are already being successful. Right. Find other investors. Second, you've got to, to me, I had to find a property manager and unfortunately, I had to fire five to find a good one, right? It's a tough business.

• 36:31Speaker 03

  You can get real estate agents, but I don't sign agreements saying I only go through you. I bring, I go with whoever brings me the deal. You got to have somebody access to money, whether it's a mortgage broker, a hard money, or private lender. You should never stop growing. One of the rules I have is you should try to meet two new people a week, every week. So that's a hundred people a year. That's 200 people in two years. It's a people business and I did not understand that for five years. So always, always, always be connecting, always be growing your network is some advice I have.

• 37:07Anthony Pompliano?

  What are some of the things that, you know, are either mistakes you made or first time mistakes? That if people just hear you say, don't do this, you could save them time, money, or energy?

• 37:17Speaker 03

  Don't bet on appreciation. There are a lot of people out there that, that basically have given up because it's hard to find cash flow and they're saying, just go buy it, bet on appreciation. You're going to get 5% growth and on the other side of this, you'll come out okay. I think that's horrible advice. Second, if you read my story, you'll know that I did a cash out refi on my first property and created an alligator, which means negative cash flow. I don't know about you, Anthony, but I was pissed off. Every time I had to write my mortgage payment, which was more than my rent collection, which meant I was, I had to work three hours a

• 37:58Speaker 03

  week to house that tenant in my property. I hate negative cash flow. Don't do it. Don't over leverage. I also hate the idea that you have to go fast. Again, remember I'm a W2 employee. I'm trying to have a better financial future in a decade. I don't need to replace my income tomorrow. So do it on purpose. Do it with a plan. Keep executing. But yeah, and then the last thing I would tell you is getting wealthy is rather simple.

• 38:28Speaker 03

  Right? It's just a, you know, it's a couple of step process, but it's hard. Getting rich or getting wealthy is hard. There's lots of, lots of poison ivy and stones and you're going to go crawl through glass and you're going to get made fun of, but it's worth it, right? The first five years suck. It's slow. The cash flow is, you know, this much and it doesn't explode till year 10, but it's worth it. And if you're a W2 employee, just keep being good at your job, keep working, let's stack the assets one a year, one every two years, and in 10 years you'll be amazed where you are.

• 39:03Anthony Pompliano?

  And then if somebody was to get into this today, um, should they do it alone? Or should they try to go learn how to do this from someone else, whether it's yourself, or maybe even go work at, you know, I read that Blackstone's buying a lot of single family homes.

• 39:18Speaker 03

  I read that.

• 39:19Anthony Pompliano?

  Yeah, they are. 30,000, 30,000 homes. Yeah. I, you know, I hear about all this. Like, how do you think about that?

• 39:25Speaker 03

  So again, uh, for me, where I sit, we, we, um, we did it ourselves, right? Olivia and I, the team. Again, the, the plan was let's get to four. So our retirement's better at 65. It really depends on where you want to go, right? If you want to be a full-time real estate investor, you want to syndicate deals and all of that, you should probably go learn from somebody that's doing it successfully. I think you can learn today. I mean, the biggest difference between 2024 and 2002, when I started, is access to other experts, right? Back in the day, we actually had to go to get physical books and, you know, writing books take time and it's always out of date and, you know, all of that. Today, we have a lot

• 40:09Speaker 03

  of decent people putting out content that are doing it now, that you can listen to for free. Um, so the biggest advice for me is if, if you know what you want to do, go find somebody else already doing it. It's relatively easy. There's meetups and real estate groups and YouTube channels and all of this. The easiest thing to do is, hey, I want to be a single family landlord in Texas. Go look for them. They're out there. You want to go do, uh, apartment syndication in South Carolina? Go look for that. They're out there. So go find investors that are already doing it, not talking about it, not, I read a book and talk, like actually doing it. Um, they're out there. So that's, that's what I would do today.

• 40:53Anthony Pompliano?

  And what do you think the impact is of these institutional investors? Like, there's a lot of them supposedly coming into the market. And if I talk to Lance, he'll tell me, you know, hey, it's not that big of a deal. They actually aren't buying that much. If I talk to somebody else, they'll be like, oh, my God, you know, the institutions are taking over single-family homes and it's going to be horrible. It's like, what do you think the impact is?

• 41:12Speaker 03

  So I've been lucky enough to be in the game long enough to know exactly when they came in. So in my market of Fresno, California, the big money came in about 2012. And I say that because I was buying at that time. So I'll paint you a vision of my process in early 2012. And then what happened? So in 2012, every Monday, the banks would list their new foreclosures. And what would I do? I would go in and write all my offers at 18% below asking price. Why 18%? Because I learned they say yes at 18 and they say no at 19. Don't know why, but that's what worked. And then one Monday, I go in to do my normal thing and there's nothing there. And I go, oh, that's weird.

• 41:57Speaker 03

  It's been this way for like three years. And then the next Monday, there's nothing. So at this point, I'm like, what's going on? So I reach out to my friends at Tidal and escrow and they're laughing. I'm like, what's going on? He goes, there's some, some wall, some New Yorker just came in, bought our entire book. So they called it a book, right? The entire list was a book. And they laughing because they bought it at list price. So the first thing to realize is there are clearing function. When there's a distortion in the market, they will come in and absorb value. Right? I was buying one or two a month at 18% discounts. They come and buy everything at list price. So they cleared the market.

• 42:42Speaker 03

  They healed the market. Now let's fast forward to today. What are they doing?

• 42:49Speaker 03

  Whether you guys like it or not, they have a buy box. Back in 2011 and 12, it was buy everything they could and they'll figure it out later. Today, they're building new. They have realized that buying old properties suck. It doesn't have cash flow, stuff breaks. So what are they doing today? They're mostly focused on build to rent. So I don't consider them competition. They're basically going out saying, I want to buy, they're basically treating a community like an apartment. So yes, technically they're buying 100 single family homes. But Anthony, those homes were never going to be for sale. They were purpose built for rentals. So in my opinion, in 2024, they are buying more single family homes.

• 43:35Speaker 03

  But they're not competing with, you know, mom and pop. Now, on occasion, they still buy stuff off the MLS or whatnot, but they're not a problem. They own like 1% of the market and over time they're going to buy newer versus older. Oh, being a landlord at scale with old homes spread out is a recipe to lose money because you don't get economies of scale. So they have figured out that owning homes is good, but they want to own newer stuff together. So you're going to watch their business model evolve pretty quickly, in my opinion. So they're not, they're, I don't consider, they're not competition today. They were hell of a competitor in 2012, man. Those deep pockets and writing checks. It was crazy to watch them work.

• 44:18Anthony Pompliano?

  So

• 44:22Anthony Pompliano?

  building to rent is really interesting because what they essentially are doing is they're saying, look, we know we're going to have to renovate properties. We might as well just build them from scratch. But have you seen, um, I think, uh, I think Lance posted it. It was somewhere in San Antonio, these like little miniature 500 square foot homes.

• 44:39Speaker 03

  Tiny homes, right?

• 44:41Anthony Pompliano?

  Yeah, I don't even know if you can call them tiny homes. I mean, that looked kind of crazy.

• 44:44Speaker 03

  Micro homes, micro.

• 44:46Anthony Pompliano?

  Is that the future? Is that where we're going?

• 44:49Speaker 03

  Uh, you know, I, I honestly think that's part of the answer. I do. We've got to get more housing and there's lots of reasons to be a single person to want to live in that. It's going to be a lot cheaper. Energy is going to be cheaper. All these things will be cheaper. I, you know, some of the homes I, I owned were built in the 30s and they're 500 square feet. So we've been here before, right? Homes in the early 9th, 20th century were, they were tiny. We didn't have these mansions until the last 50 years. So I think tiny homes, tiny home communities is part of the answer to our housing problem. Yes, I think that's true.

• 45:32Anthony Pompliano?

  What are you most scared of in the housing market right now?

• 45:35Speaker 03

  Oh, that's a good question. I haven't been asked. What am I most scared of? So the thing that I am most scared of is renter nation. I, it would, I believe owning your, owning a home is a forced savings account and for most people is going to be where most of their wealth is when they retire. It just is. If for some reason we go on to renter nation and I'll call renter nation, anything below 50% homeownership, that's a huge step backwards, in my opinion. I, I, it would be a failure on government. It would be failure on monetary policy. It would be a failure beyond failures if future generations

• 46:20Speaker 03

  just accepted being renters forever. I think that would be, that would take some of the shine off what I feel is the greatest country in the world because homeownership is, is, you know, 64, 65%. That's, that's my greatest fear, renter nation.

• 46:38Anthony Pompliano?

  Where can we send people to find you on the internet or learn more about One Rents All the Time?

• 46:42Speaker 03

  I've done very few things right in my life, but one of them is everything is one rental at a time. Website, Instagram, YouTube, books, everything is one rental at a time. Should be pretty easy, I would hope.

• 46:55Anthony Pompliano?

  All right. Well, Michael, I learned a lot today. I think it's pretty commendable to hear not only your story, but also the work that you're doing, you know, day in and day out to help other people do it. Many people who are successful kind of, you know, get up the ladder and then they turn around, they pull the ladder up so no one else can follow.

• 47:11Speaker 03

  Nope. But I've gotten up the mountain and I'm sitting down and I'm trying to pull up as many people as I can while I enjoy the view. So it's a lot of fun.

• 47:19Anthony Pompliano?

  I love it. Well, I think you're doing a fantastic job and we'll definitely do this again in the future.

• 47:23Speaker 03

  Thank you, buddy. Appreciate it.