Do you know how many real-estate haters
are out there right now telling you that it is such a dumb time to be investing
in the market? My name is Kris Krohn and last year, I bought hundreds of
properties just about every single day of the year. And I want to know, last year
2019, did the properties perform at the level that we thought they would? Did it
drop? Did it exceed? Well today, I’m actually going to bring you that full
report with my director of acquisitions, Tyler Bennett. He’s here and the house.
Tyler, how we’re doing, brother? -Good, Kris. How are you? -Good to see you. Have a seat. Listen, guys. So.. Today, if you’ve been to
any of my live events, you’ve probably had a chance to interface with Tyler, his
amazing team. He runs a group of 200 experts around America in the leading
markets essentially helping investors get their hands on the sealer best
investments that exist. And so today, I want to get that Tyler Bennett report. I
want to know 2019 in review. Was it a success? Was it good? Was it bad? Where did
we win? Where did we lose? In specific to the markets and then really the economy
as a whole. -Our main focus is understanding the market, the economy and
then how Real Estate’s responding to it. And then going to identifying the niche
opportunities where it’s going to be very, very best. Let’s talk a little bit
about 2019 in review. So, first and foremost, people have jobs. People are
working and there’s more job openings right now than there are adult humans to
fill in, Kris. Which is not very common. -You’re saying that… We actually have a
demand for more jobs than we actually have humans to do them.
So, is this like negative unemployment? Like, what do you… -No, it means… I mean
unemployment rates are still very, very low. So, there’s always going to be
unemployment because people just don’t work because (I don’t know) they’re lazy? Hard to say what
it is, I guess. -Yeah. -But unemployment rates are very, very strong. And projected
job openings are continuing. So, we’re really good as far as that goes,
companies are making money and they’re sitting on cash. -Yes. -More so than they
ever have before. A lot of people are wondering, “What’s
going to happen in the market? Is it going to burst?” And not only companies
but households have a higher net worth than they’ve ever had in the past.
Equity in houses and cash in banks, investments… You know, portfolios
performed well. Our real estate which we’ll talk about in a minute performed
exceeded expectations. -Yeah. -But there’s a lot of capital, there’s a lot of cash out
there. -And it’s amazing because so much of the market is not determine by what
is but the perception, right? So, it’s about confidence. Right now, there’s a lot
of confidence in the market. There’s a lot of money in the market. And that
actually ironically makes people a little bit skittish. -Yeah. -Because they’re
like, “Man, can it stay this good?” -Even though the recession was seems like
forever ago now, many people remember that. The perception of the energy of how
good everything was and then it crashed so hard. So, people are moving forward
with hesitation right now. But interest rates continue to be low. -Yeah.
-So, it’s stimulating. Companies are borrowing capital and continuing to grow,
grow, grow, grow. So, we have a lot of these (I call them) tailwind that are kind
of propelling us into 2020. It’s a lot of good news.
-Yeah. And I see that right here as you’ve kind of put that up here on the screen.
And I know my partners. I’m making this video for everyone all over the world.
But my partners, they want to know how did we do in our real estate last year.
Right? I mean, we’ve been buying a lot of homes. We’re going to buy even more homes
this coming year. And at the end of the day, one of the things that I love about
this particular approach that we’re talking about is you don’t look at the
deal. You have to look at the economy. You have to look at it as a whole. And then
you go down to the markets that make sense and then you finally find the
neighborhoods and the deals where you’re going to have the highest growth. Now,
we’re going to talk about some of those markets and we’re going to get specific. But
obviously with all these tailwinds, what about these headwinds? -We’ve got trade
tensions. Right? We have the whole US China in the headlines. We have election
year. What’s going to happen, depending on what happens there, that
will have an impact on the market. -100%. -We have… I call them itchy trigger fingers.
This is kind of that, “Do I just take my gains off the table and park money?” -Yeah.
-And that’s happening a lot right now because the markets up and people have
had gains. We have the whole… I mean, geopolitical tensions, terrorism. We have
the Chinese economy. European zombie banks. You know what zombie banks? -Dude, it’s so crazy what’s happening right now. -Yeah. -This wild right now. -Yeah. Literally banks have negative net worth
and they’re just relying upon the government infusion to stay alive. -Yeah.
-So, I mean it’s definitely complicated and yet the economy is better than it’s
been in 12 years. And so, where do we really go from here? You know, it’s
interesting. The stock market has to take its negative turn on average every 8
years. And that hasn’t happened yet. You know, some people would say we’re behind
because there’s a history of like how often this happens. And is the stock
market –the real estate market going to really match each other? And yet at the
same time, real estate evaluations continue
need to go higher and higher and higher. And honestly, if you’re buying expensive
real estate, real estate over the median or in the big cities, you’re probably
setting yourself up for when the trend is turned to take the biggest bath. And
yet, there are markets that people should still be buying it, yeah.
-First and foremost, Kris, its cash flow. -Yeah. -Real estate provides cash flow and
up down and flat markets. -Yeah. The market doesn’t provide that, right? The markets
either up it’s flat or it’s down and your balances are reflected
from that. Well, we get to benefit from the cash flow regardless of what the
markets doing. So, real estate is up. The markets been up. Everything has been up but
we get cash flow along the way which is one of the biggest advantages to real
estate. But should we be buying? Yes. Rates are historically low. -Money is cheap. -Money is cheap, leverage is very very powerful right now. And we’ve been
able to still find markets where we can benefit from cash flow even though the
growth is outpacing historical rates. -So, I remember when 2008 hit and I knew the
market had shifted in late October because all the sudden, the bank said, “Hey,
instead of giving you a 6% interest rate, it’s going to be 18.” And I’m like, “Banks
don’t just triple rates.” That Bank a month later was out of business.
Literally, they were trying to pivot and they were trying to find a way to
actually survive what was coming. And all I know is that anyone that had locked in
really low interest rates on solid investments were having the time of
their life where like we were in 2009, ’10 and 11 and 12. Those 5 years were like
the best years. Everyone thought that it was the worst time to be in real estate.
But dude, when you’re buying practically brand new homes for like a third of what
they built them for, like you couldn’t help but make money hand-over-fist. I
mean, it was wild. And those times are going to be coming soon.
The secret is buying homes under the median. I mean, at least for me. Like, right
now, where do you see the biggest correction… When it happens a million
dollar home will be a half a million dollar home. a half a million dollar
although be a $300,000 home. But a $200,000 home might drop to 160. -Yeah. And
in our price range, our average purchase price $140,000. So, how much drop and we really get experience in that price
range? Well, if we experience anything like the Great Recession of
of 2008 is going to be minimal. It’s actually diving to take a look at some of our
markets. Because dude, these are some of the houses that we’re buying right now.
-And Kris, let me add to that you talked about price drop in value.
-Yeah. -But rents… Our clients, our personal portfolios, our clients
portfolios; we did not reduce rents once during the last recession. -But they did
keeping… -And our vacancies improve because we had more customers. There’s
more demand for our type of product that entry level single-family house. -And I have to
say that that’s actually happening right now. Over the next decade, Millennials and
Gen Z, they don’t want what our generation wanted. They don’t define the
American dream as having a home with the white picket fence. They value mobility
and freedom. So, we’re going to go from 70% of American real estate
being owned by homeowners to that number dropping closer to 50%. It is a
cataclysmic shift and it opens up this sector of single-family for becoming way
more popular. I think we’re going to see more hedge funds getting involved. We’re
going to see bigger money. They’re going to come and try to compete in that space.
It’s hard to get organized the way that we are on the thousands of homes that
we’re doing. But it’s going to be more popular because it’s going to be more of
a dream rental market versus an American Dream ownership market. -Absolutely,
100%. Yeah, I agree. -So, Tyler let’s jump in. I mean, I’ve got
Memphis which is obviously our hot cash flow market. It’s not known for its
appreciation. It’s definitely a solid grower. This is a home where we’re
killing it on cash flow, right? I mean, 1960, definitely an older home. 1,400
square feet, 3 bedroom, 2 baths. But completely gutted, completely rehabbed.
Definitely on the right side of the railroad tracks. -Yep. -And this home for $125,000 dollars only cost 33 grand to get in.
This is what we’re talking about, friends. I’m going to zoom in on this. Cash-on-cash
ROI at 8.98. So, basically 9%. You bring in the
principal reduction, you’re sitting at 13 and a half. But with depreciation, this isn’t a growth market. We’re freaking still hitting 27%. I mean, any time over 25%, buy! Like buy, buy, buy. Like, if it
went through a vetting process, it’s 25%, I’m going to buy that
thing. How did we do overall in this market compared to what we thought we would do?
-Yeah. So, one thing that we do is we go in and constantly analyze the portfolio
that we’re buying. And we look back and say, “Okay, these houses that we bought
in 2018 or the first part of 2019, what are the values today?”
-Yeah. And what do they look like? And we averaged about, in our portfolio, about 6% appreciation in Memphis. It’s just phenomenal when you couple
that with the cash flow that we’re getting. -Yes. -And the ROIs that we’re
getting. So, we’re able to get that 10 to 15 percent cash on cash plus principal
reduction target. Plus we have this upside of 6% appreciation. -And
now, we’ve been in this market for the last 5 years. And we’ve been
predicting year one, 6%. year 2, 4%. Then 3% after.
Have we actually been actually performing compared to our numbers as a
whole? -On average, we outperform it. Yeah, we over
performed. We want to be conservative in what we projects. It’s always fun to make
the phone call of “Hey, you’ve got good news.” -And by the way, this market… So, you
buy in this price range 125,000. When the market tanks,
guess what? This thing still cash flows. Just like 2008, our cash flows hold
steady and that there’s a greater demand. It’s easier. Their vacancies that are
going down. It’s like, all you can do is win, win, win in this one right here.
Let’s talk about this other one. This is Florida. This is obviously our superhot
growth market. This house is actually brand new under construction, right? At
1:59 in Ocala, in the Orlando area not too far from the Disney Land
parks, there’s a number of reasons why we’re in this market. But a 1,282 square-foot home, brand new three-bedroom, two-bath. Dude, tell
me the story on this house and tell me about this market. -This particular house
is benefiting from this huge influx that’s coming into Florida of 55 plus.
All these baby boomers that are retiring. Their portfolios are looking good right
now. They’re converting 401Ks to IRAs. They’re starting to take income. They’re highly
attracted to Florida. There’s no state income taxes. Their money goes further.
The weather’s awesome. So, they’re coming in and dwarfs. -Yeah. -And they consume. They
don’t they’re not coming there to work. They’re coming there to retire and have
the lifestyle that it offers there. So, they’re creating jobs, this is one of the
communities is benefiting from all those types of jobs. -Now, we
traditionally say that we anticipate Florida in this market to grow an 8% the first year
and then we’re going to expect him to see a drop in that. How to Florida actually
perform in 2019. -So, 9% is what we saw on the growth in our portfolio. -So, we
outpaced, like the growth was fantastic. -Yeah. -But I’m seeing the cash-on-cash.
Remember, our cash on cash is on average, were they’re increasing? -Yeah. We’re going
to more of the right markets where we’re getting that like that extra
benefit and we’re killing it there right now. -Which means, rents are keeping pace
but it also means there’s a lot of underlying factors –affordability,
obviously good unemployment rates and all those different things. But the the
housing still works. And it’s affordable for the citizens in Central Florida
which makes it super attractive. -Yeah. Guys, bottom line: 2019 was an amazing
year. 2018, our report last year, we beat our performance then. 2017, the year
before, our performance beated then. In 2016, like we are 4 years in a row
slaying it. And at the end of the day, part of it is because we’re being
conservative and we’re still producing these ROIs. This next year, we’re
going to be purchasing probably double the number of single-family homes than we
actually purchased this year. I’ll tell you guys personally that even when the
market does take its drop, you should be nervous if you’ve been buying homes. You
know in that 3, 4, 5, 6 hundred thousand dollar price range. We so
what happened in 2008. We’re buying the kind of real estate that you can be
proud to hold, that you want to hold, that it will be in high demand that people
want to have that will keep cash flowing and keep delivering that super sexy tax
benefit. As you look back on 2019 and all of the crazy amount of real estate
activity, any final thoughts for my partner’s out there or those that
are curious about our strategy on our last billion dollars worth of real
estate and how it’s going. -First and foremost,
buy, buy, buy. -Right. -Now is the time. -Yeah, yeah. It is still an incredible environment to buy
real estate in. The homes are over performing. The way that we underwrite
them, the way that we project. And that doesn’t mean we get more aggressive in
the way that we’re doing things. We’re going to keep doing things the way that
we’re doing them even though outside information tells us we could be more
aggressive. And it’s a great environment to buy in. And so, we’re
sign it for 2020. -Tyler, man, thank you so much for being here. -Yeah, you bet.
-Dude, this guy freaking runs the team. Helps me absolutely crush at the real
estate. And this is our latest publication. And what it does is actually
tells the story of exactly how we’re producing 25 to 30 percent annual ROIs. You can get a free copy of this book. It discloses the strategy,
everything that we’re doing. Copy it, rip it off, steal it. Literally go crush it in
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We’ll see you tomorrow.