Transitioning Markets And Opportunities For Future Investments

FO 18 | Markets In Transition

 

In this time and age, we see a considerable flight from the cities to the suburbs and rural areas, where we start to see an increase in values in the suburbs and a decrease in values in the urban areas. What states will gain residents, and which states will lose residents? On the economic side, the Payroll Protection Plan has temporarily kept us afloat, but without another stimulus, this won’t last much longer. Companies will be declaring bankruptcies in droves starting late summer or early fall. Join Paul Lizell in this episode as he dives into markets in transition – from real estate to stock market and cryptos.

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Transitioning Markets And Opportunities For Future Investments

Welcome to the new age of virtual investing where we look at the latest and greatest ways to innovate, automate, and ultimately accelerate your investments so that you can live the virtual real estate lifestyle of your choice.

This episode, we’re going to be going over markets in the transition from real estate to stock markets cryptos. We’re going to go over all of those. The first thing to note here is we have a flight from the cities to the country. Coronavirus started that. I have a property up in the Pocono Mountains. It’s an Airbnb property that was in huge demand because it’s close to New York City. It’s about 1 hour and 20 minutes from New York City. Everybody was looking to get out of New York City in March, April and May. Luckily, fortunately for me is you’ve read another episode here. I was able to rent that and able to run it for over a month because in Pennsylvania and this particular community, it’s in an HOA community that has all amenities, but there were too many people coming in from New York and North Jersey. They were trying to cut down the Coronavirus risks to the residents, which you understand. They said, “No short-term rentals.” Short-term rentals were 30 days or less. I rent it to people for over 30 days. I had the first tenant from New York come in for 45 days, had another one come in. Also, they came in for 45 days and then things started being lifted because different parts of Pennsylvania especially up in the Pocono area weren’t as hugely affected.

Areas were going to yellow, which you can then run short-term again and then to green, where we are now, even in Southeastern PA where you could do most things. You still do need a mask, but you can do most things at this point. The market’s in transition up there. You’re going to have an influx of people from North Jersey and New York looking to buy in the Pocono area. Maybe move permanently. If not there, to others. You’re going to see a transition to people going to North Carolina because there are a lot of job opportunities in North Carolina. Maybe people to Texas, Florida, people who were thinking there were of retirement age or close to it that we’re planning on moving to Florida. For those of you don’t know that, it’s big in Northeast, Pennsylvania, New Jersey, New York, Connecticut, and Massachusetts. A lot of people move down to Florida and retire down in Florida. This sped things up for people like that. That Florida market should continue to be hot. Even though it’s a hotspot for Coronavirus at least in Miami area, and maybe a couple of other spots in there, highly densely-populated areas. Overall, that’s going to be a desirable location for people to go to. You may have people moving to Arizona as well because some people like the drier climate, and Arizona is the drier climate, where Miami is more hot and humid. New Mexico may be a place where people like to go, even though it is hot.

Pick your tenants better because it's going to be tough with a lot of people unemployed. Click To Tweet

You can go to the mountains where it is cooler. It’s not as bad for dry though. For people that don’t like dry arid environments, they won’t like that. You will see people moving to these areas, especially in Smoky Mountains too whether it’s Tennessee, where the Carolinas are great areas to be. They’re not as brutally hot. Nowhere near as bad as Florida, Arizona, Texas, New Mexico or anywhere in the Southeast in there. These would be markets you’re going to start to see gain some traction. Another reason people are fleeing too is because of the protests. If you happen to be in one of the hotspots for the protests, mostly big cities here whether it’s Philadelphia, St. Louis, Baltimore, New York, any of the major cities where mostly a lot of people don’t want to deal with these protesters and protesting. It’s a big income means for them so they’re going to be moving to different areas. That’s going to push people out as well. It’s going to hurt these areas especially we already had a big outflow from North Jersey and New York because they’re overtaxed. People are overtaxed and overregulated and people can’t take it so they’re moving. Finally, they’re moving to other locations. The hope is they don’t move to these other locations with the same idiots that run these locations and then had the same thing happen here.

History repeats itself when you don’t think and you don’t vote properly. You put dopes in there, you’re going to get bad politicians, you’re going to have bad decision-making and if you’re jacking people’s taxes up all the time, you’re not going to have a good area. You’re not going to have a desirable location. Why Texas is popular? Think about it, it’s your income tax state. Regulations are much more friendly down there. It’s a desirable place for businesses to be. California, it’s not desirable. I don’t know why there are many companies out there. Silicon Valley, maybe they’ll move especially that it’s made people working remotely. Texas, Florida, maybe Tennessee, and Nevada, these states, Utah, you’re going to see these states gain a lot from all this especially with the writing and everything that’s going on. Next, I want to get into where I see us in the economy. Where we are now, you have the payroll protection plan keeping companies afloat and keeping people employed. Even though every week, it seems 1.5 million people are unemployed. We’re 42, 44, 45, and I lost track of how many people are unemployed. It’s a catastrophic number of people that are unemployed and people have stopped looking for jobs. This is going to continue.

As soon as the PPP runs out, you’re going to see, and this is my personal opinion because I thought this might last until the end of August or early September, then you’ll start seeing a wave upon wave of bankruptcies, huge. Starting in the commercial and retail side and the retail sector, like Macy’s, JCPenney, Sears, these companies maybe don’t stay in business or file for bankruptcy protection. A lot of other companies are going to file a suit and especially restaurants. These restaurants are not going to be able to. If you’re a quarter capacity, you’re not going to be able to make money even with takeout services and things going on. They’re going to have to figure out something different here. Takeout services ended up for the near future, maybe 2021 or 2022. As long as Coronavirus is around, it’s going to be the way to go. You’re going to see more little small spaces maybe being taken up by restaurants and a lot more takeout service being offered or outside seating. Anywhere you are in a country, outside seating can only be used certain times a year. Florida, you can use it all-year-round, but up here in the northeast, people don’t want to be outside eating in the snow. In late August, early fall, early September here is where you start seeing wave after wave of bankruptcy and you’ll see the stock market start pumping further and further down getting ravished. It typically does, most of the stock market crash happened in the fall.

FO 18 | Markets In Transition

Markets In Transition: As soon as the PPP runs out, you’re going to see wave upon wave of bankruptcies.

 

We did have one in the spring here from Coronavirus. It did ramp up again. They’re putting so much money into buying corporate bonds to the treasury to buying stocks. They’re keeping the market afloat with spit and glue at this point. It’s not real. There are people who are paying a price if they wait too long. I don’t see it lasting too much longer. I was reading a couple of articles here. A lot of people expect this to happen in July. Hopefully, we get a little bit longer if we get into the fall. The longer, the better so people have more time to prepare and shift their portfolio. Get more to cash, get as much into cash potentially as you can if you feel like any bit uneasy. Not to give financial advice, but that person, what I’m doing is we’re moving from stocks into cash, even real estate into cash. I’m selling off some of my properties here, some of the rentals I have, and keeping certain ones I want. There are locations you’ll bring an amount of cashflow or mostly, like I tell everybody that I have no money into because I was able to pull out, cash-out, refinance, and have little or no money into it. I’ll keep those sums in cashflow. I look to continue to buy some more of those if I come across them. Otherwise, I’m liquidating as much as I can to try and get a good cash position for the crash.

Where is our new economy going to lead to? There will be different new jobs that come about or we’re going to have a wave of unemployment and continued unemployment. It looks like they’re going to keep paying unemployment at the end of the year here and to December. We’re going to have new innovations that come out, new job opportunities that come about from those innovations. A lot of them will be working from home. Think about it from a real estate perspective. If you have properties that are in areas where there’s a commercial zone or industrial zone, where you could do multipurpose, they’re going to be valuable properties. You’re going to be able to rent to somebody who maybe wants to rent small office space from you, wants to have a small storefront, or run a little business shop out of that particular property. That’s something important to keep and to look for so when the opportunities come up on those, those are something you might want to jump on. Residential is still going to be good. You’re going to have to pick your tenants better because it’s going to be tough with a lot of people unemployed. Lots of people are unemployed and you’re trying to find properties and unemployment runs out. How are you going to get your rent? That is the real question. Who knows, whether it be another stimulus?

Odds are there is going to be more stimulus. You’ll probably see another one in a fall as the markets are tanking, you’re going to see much bigger stimulus stuff, keep printing and devaluing the dollar, devaluing the currency. You see gold and silver go up along with cryptocurrencies. Cryptocurrencies will go up along with that. From there, I did not know about the stimulus done. It was in May. There was a US dollar cryptocurrency made. They called it digital currency, but it’s a cryptocurrency rebased off blockchain technology. They’re preparing if the dollar collapses, that might be the new dollar and they could be a new reserve that we go by. We’ll see, we don’t know how it’s going to go, but that’s where I see the market transitioning to and some of the opportunities that will be out there. Next, let’s dive into where I see the opportunities here in real estate. What parts of the country? What states? Why? Indiana and Ohio, I’ve always liked these markets. I’ve been investing in them for years. They’re still good, low taxes, low cost of living. Rents and people are solid. It’s good at all around the area. If you’re looking to invest, whether you’re doing buy and holds there, which is the best or fix and flips. That is marks would be great.

People will move where the cost of living is cheaper and it's more business-friendly. Click To Tweet

North, South Carolina would be next. I see the potential for more people retiring and moving to those states. You already see Charlotte’s been growing more than any city since the 1980s from that time period on and now. Aside from Dallas, they’ve been growing and growing. What low-cost state, income tax, and cost of living. It’s nice living too right there. The weather’s not as bad there. It’s a little more desirable. You’ve got states like Texas, they’re low-cost, business and landlord-friendly, which is great. Alabama, Mississippi, to an extent, Louisiana is good. Tennessee is good, but Tennessee has been hit by the hedge funds where they’ve been overpriced. Especially in Memphis, Nashville, these areas have become fairly overpriced. It used to be great cashflow markets, more so Memphis and Nashville. Now, that number’s getting pushed up again, lock them in there. I know Idaho is one that’s growing, that state is growing. Washington, low taxes, just don’t be in Seattle. Nevada is great for taxes, for protections. It’s landlord-friendly. South Dakota is one, but again South Dakota like the environment is not that great. You don’t have a lot of people living there. I don’t see it as a huge growth area, but it’s going to become potentially a little bit more of a growth area. People will move where the cost of living is lower and it’s cheaper and it’s more business-friendly.

Georgia has always been good, the weather’s good. Not too highly taxed, easy to cashflow properties in different areas. Atlanta has become pricey. It used to be a great cashflow city. It’s a little bit overpriced now like Jacksonville. Florida too has become overpriced. The hedge funds all bought in there. High buyers, Zillow, all those hedge funds out there are buying in those markets. Those are the ones I see. Maybe Alaska becomes a little bit more desirable as far as expensive. You’ve got to fly or take a boat. Maybe not quite as desirable to others, but I still think you’re going to see Texas be your probably number one desirable area. The Carolinas, Indiana high would be up on the radar for people with low cost of living. Georgia, Alabama, New Mexico, Nevada, look for those areas for future growth here, if you’re looking to hold for a few years or many years, they’d be good spots to buy-in. You’ll see appreciation there are markets knock on wood. For those of you that are looking to buy and hold, this is something that I constantly deal with and it’s not buy and sell some of my rentals. When you’re buying in particular areas like for me here in Pennsylvania where I buy a bit, there’s a water company called Aqua PA.

There’s Aqua in Ohio and different states as well of this company. They are incredibly overpriced. What I pay at my house with North Wales Water Authority with a family of six is per quarter less than what I pay per month for say a 2 or 3-bedroom with a couple of people living in that house as a rental. They pay more per month than I paid per quarter with three times the number of people living there. Utility costs are an important cost when you’re looking at rentals and you’re looking to cashflow properties. You’ve got utility costs, which I see are huge and I’d be careful with water. If you see well in septic, that’s more desirable unless the septic is bad but you’re going to have much lower costs there. They’re going to help keep your costs down. If you’re in an HOA, it’s going to increase your costs. However, it does increase your rent potentially too like these places that have Airbnbs where everyone is out of Airbnbs, they have pools, they have facilities that people like. You get a little bit more in rent, which may offset the HOA a little bit. Real estate taxes are huge. It’s hard if not impossible to cashflow properties in New Jersey, New York with the super high taxes, Connecticut, Rhode Island, and Massachusetts, all these super high-tech states. It is hard to cashflow properties there because the government takes so much out of you from there. Plus, you’re getting your state income tax too and your tax is a much higher rate there.

FO 18 | Markets In Transition

Markets In Transition: When you’re looking at markets, don’t forget to look at the taxes.

 

These are important things to look at when you are holding rentals. In Pennsylvania, it’s not bad. I believe our state income tax is 3.8, which is not too horrible. There were some local taxes in there. That’s another thing to look for. We pay 1% per year. Local taxes are new to start at 90%. These politicians can’t get enough to fund all their stuff. They hit you with different new taxes here and there and that is one of them. These are important things when you’re looking at cashflow rentals. Remember, when you’re looking at markets, when you’re using the track as I do and it rates school, the community, crime, all that stuff, don’t forget to look at the taxes. Scroll down and look at the taxes there. You can find out what the utilities, who the utility companies are there too. When you’re buying a place, see if you can find out what the average utility cost is per month for those that are rentals or for somebody selling you that lives there. Ask them if you can get copies of that. That’s important. Those are hidden costs that eat away your cashflow. Let’s say you’re renting a property that you picked up for $60,000 here and getting $1,200 a month, which sounds great. Except if you’re paying $4,500 a year in taxes, and let’s say your insurance is high too, another $1,000. You’re $5,500 there. You’re in an HOA community, which charges $200 a month. Before you know it, that cashflow is gone and maybe you’re break-even or losing money.

You’ve got to look at those factors. Those factors are vital. Another thing I wanted to touch on for those of you who are doing virtual wholesaling as we do, we focus on different areas at different times of the year and not exclusively. Let’s say North Dakota, South Dakota, Montana, Wyoming, Colorado, New Hampshire, and Vermont, which we don’t buy up in those areas anymore. Let’s say you’re looking at buying properties in these areas where you get a lot of snow like Erie, Pennsylvania, these places get dumped on with snow. If you’re trying to wholesale a property, sometimes you have to wait 2 or 3 weeks before people can even get to the property because of the snow. If it keeps snowing on top of snow and snow, it’s hard for people to get there. It’s a good time to buy in those areas, get them renovated and rented or flipped before you get into that market. Think about it too if you’re doing a flip, if you’re going to resell it. It comes that time of year where it’s snowing again and carrying around of that same issue when people can show and see the property and then you’re sitting on it longer, your holding costs go up. Timing of when you’re doing your fix and flips, buy and holds, or wholesaling deals is vital. It’s important to know that. I start to ignore those states or not ignore, but I look past them and I look at other states and come September, October timeframe is when I start or beginning of October.

I’ll focus more on the southern states because the only thing I have to worry about there is mowing the yard and not have to worry about snow removal or haze or any bad weather there. You do have to worry about hurricanes in the Coast, Florida, South Texas, Alabama, Mississippi, Louisiana, all of those areas. I know this mark is in the Carolinas, but generally not in the northeast and not at all in Midwest or in the west. Something to think about too, from that perspective, when you’re looking to pick up properties and what different parts of the country. It’s something that I never remember to tell you, people, the audience here. It’s important to know and I always remember how September comes. I’m transitioning and I’m looking at the southeast, southwest, central, and all those things. It’s something important to keep in mind. The last thing I want to go over here and this is for those of you who are watching on YouTube. This is my brand-new podcast studio. I finished building here. I worked on this during the Coronavirus time. We had a two-tier deck that we’ve been wanting to replace it for a while, which it didn’t work. It was 12×20 in the one section, and then it dropped down a little bit of 6 inches into another 12×20. What did I decide? What have I convinced my wife here? What did I need to do? The kids were driving me crazy too in the office and trying to record a podcast without noise I built this right off of our deck on one-tier.

We built this on this deck and the other side of the deck, we extended, made larger and isolate outside bar and seating area, all those things here. We’ll have the chairs where I’m going to have on occasion. I’m going to bring in some guests to do a podcast here, local investors. I’ll bring some local guys who have some expertise may be in different things that might be good to go over and we’ll do some interviews potentially right in-house. Readers, you’re not seeing what I’m talking about, but check it out on YouTube. You’ll see, I’m going to have all kinds of stuff. I’m going to have a whiteboard that I’ll be using and utilizing for the YouTube channel and hopefully get you some more good information here. If you have any interest in learning more about virtual wholesaling or anything real estate-related, please reach out to us at the channel. It’s www.TheVirtualInvestor.co and I’m looking forward to getting out a bunch of more shows here. We’re going to have some good guests booked up here soon. Thanks.

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