Mike: Good morning!

David: Hey there.

Mike: How you doing, Dave?

David: Good, man.

Mike: Good deal, man. This is the Discount Property Investor podcast. If this is your first time listening, thank you for joining us. Your host, Mike Slane, joined with co-host--.

David: David Dodge.

Mike: Which one is the host and which is the co-host? Are we both just co-hosts?

David: We are hosting together, yeah.

Mike: I'm not trying to jump in front of you.

David: Not at all. One thing I do want to mention to all the listeners is that we have a new website. DPIPodcast.com.

Mike: It's awesome. We are really excited. The old one was okay, but hopefully this one is a little more functional.

David: Much more functional.

Mike: We had some issues with the search function, going back, people always mention, check out the first couple of episodes, and they were hard to find. So hopefully you can go back and search, and find things easier.

David: They are all there, we transcribed everything if you would like to read it as well.

Mike: Got a cool toolkit too.

David: Cool toolkit too.

Mike: We know how to speak on a podcast, right? Check that out, a lot of links in there that are really good for newer investors if you are looking for where to find for somewhere to pull your lists. We have links in there. Most of them are going to save you money, give you a discount. We will get a little something from the company as well if we can send you there. It's in your best interests because 90% of them you are getting a discount for clicking on the links, or using our promo code or whatever. So check those out guys, hopefully it helps you guys. Like Dave said, our new website, and again we are pretty excited about it, we thinks it looks pretty good. Check it out. Today we want to talk a little bit about-- we don't want to talk about it, we just feel we are getting pulled into this kicking and screaming, the fear that is in the market place, and we are going to keep it a little bit broader and not necessarily focus on the current pandemic and all that. Just fear in the market place and how that effects you, and how that effects your business as a wholesaler. What's happening right now, people are loosing their minds about the Corona virus. I get it--.

David: This is the 20th of March, just want to make this clear.

Mike: It's not super timely, we want to back it out and talk about fear in the market place, a little bit more broadly if we can. The current pandemic, it has everyone-- a lot of us are sheltered in place, and we are seeing some of our private lenders back off on lending. They just want to make sure things are calm and cool in a couple of weeks or couple of months or whatever it is, so they know that banks are still going to refi. A lot of times what we're doing is buying these properties, fixing them up then refinancing them, part of our BRRRR strategy. What else do we do with our properties though? We buy them, then we fix them up, then we resell them. Guess what? If the banking system goes a little haywire, the end buyers can't get their financing either. It is a legitimate concern, and I definitely understand why there is some fear in the market place. I was just hopeful, or more hopeful that real estate investors would be more even keel about about it. It does seem like a lot of us are, we are just kind of prepared. How do I fine tune my business? That's a lot of talk that I'm seeing in some of our mastermind groups and other groups, and discussion boards that we are part of--.

David: It's just such a crazy time, man. This has never happened in our life time or really even our parent's life time.

Mike: I was just watching something-- Netflix, Pandemic, have you watched that? I started it and kind of lost interest, but now with the current craze it's like, I am going to go back and try and re-watch some of that. So I watched a little bit this morning, it's like, oh yeah very interesting. What they were saying though, Dave, is-- if hasn't happened in our life time, our parents, or even a lot of our grandparents. 1918 was the last big flu that was an issue, and there was a little statistic that it killed more people than WW1 and WW2 combined.

David: Oh my goodness. That is nuts.

Mike: That was prior to airline travel. So this was just like with boats and stuff.

David: Spread without the airlines, wow.

Mike: I can't remember what the population was, but the population was only like three million, sorry three or four billion I think at the time, something like that. The number of people has doubled to eight or nine billion on the planet. Now we just have rapid rapid travel. There are people from China to New York, New York to-- all in the same day. It's crazy, interesting and easy to get swept up in that fear and oh my gosh! Yes, this is not a happy time or subject, but a lot of people are going to get sick, and a lot of people are probably going to pass away. It is a little scary and I get it, but we don't need to lose our minds about it, guys. Can we do the social distancing? We do-- just take it easy, if you can stay home, stay home.

David: It is a little strange though going places right now. People are like awkward as hell. They don't want to be close to each other. I get in the elevator and I'm like, what floor? I will hit them all. Come on guys--.

Mike: I think we're going to get it. I think most people are going to be exposed to it. Again, I am hopeful that 50% of those are just asymptomatic. You get it and no big deal.

David: That's the case in China, right?

Mike: I have no idea.

David: I think that's the case where most people are not symptomatic.

Mike: Dave and I, again we follow it with a little bit more curiosity, oh what's going on? That's interesting, more so than what's the details? Again, don't get your news from us.

David: Definitely not.

Mike: -- on the whole Corona virus thing, that is not our intent here. Again, it is very interesting. You said people are losing their minds, yesterday I went to grab milk for Penny, the daughter, she still drinks a little bit of milk here and there. So went to grab some milk, I was in the check out line, check out lines are crazy. There are people wearing masks in Walmart, but that's not the best example. There are so many people wearing masks just walking around, wearing gloves. What is going on?

David: People have lost their damn minds.

Mike: Yeah it's insane. I guess the lady--.

David: We are all scared of something that we can't see.

Mike: I am just going to blast my way-- same--.

David: Can't see these things and-- oh man-.

Mike: What I can see, what we can see, Dave.

David: Just mind boggling to me.

Mike: Is what panic does to the market.

David: That's the thing.

Mike: The stock market, we all saw that plunge and it is down about 30% from--.

David: It was up to 29 and now it's at 20.

Mike: Let's call it down 30% for rough estimate.

David: In two weeks.

Mike: It's insane. There are tons of people lost a lot of money, scary.

David: Tons of money. Crazy.

Mike: What is scary though is panic breeds more panic. I am more fearful of the long term consequences to our economy which was just bumping and churning. We were doing--.

David: Trump had this country great again. He made America great.

Mike: He did, four weeks ago we were all on top of the world, so this is-- it's very, it's an interesting time to be alive. The panic is what breeds other panic, which is-- I hope other real estate investors are more even keel about it. I think a lot of them are. But it is just one of those things, so what can we do now as wholesalers that is always our kind of go to, to think about the wholesaling perspective. So the wholesaler, we go into most transactions and we don't have a ton of risk, right? Because we are buying a property, we are putting it under contract, with the intent to close on it and resell it to someone else, or assign that contract, that is always our intent, to try and provide liquidity to the market.

David: Sure.

Mike: The market needs that liquidity more than ever right now. What I just mentioned was that some of our-- even our private lenders who have done hundreds of transactions are saying, I understand that, but if banks shut down--.

David: This cash is gold, right.

Mike: I lend this cash out to you, I might not get it back quickly if at all. So again, there is definitely--.

David: And that's understandable. If I'm lending I'm thinking the same thing right now. Another thing, I had a couple of wholesalers reach out to me over the last few days asking if A, I was still buying, B, if I would be interested in their deals. I said, yes and yes. However, the convenience that we trade for the discount has a higher value in a state of panic, because there are more people that are now all of a sudden willing to sell their properties at a discount, because of the risk.

Mike: I think a lot of the sellers haven't realized yet, okay they were offered 50k for their property that is distressed and maybe worth 100k, six weeks ago, and now it is not just them that wants to sell, it's everybody who has that distressed property says, oh crap I kind of want that cash today.

David: People are getting laid off.

Mike: Exactly. So a lot of people want that cash, they want they liquidity which we provid, but guess what? Our offer just went down 50%.

David: 30-40%.

Mike: Stock market went down 30%, why would I still be paying what I was going to pay six weeks ago?

David: That's a great indicator. It's not linked exactly, but it is linked based on the fear in the market place, and that's what matters.

Mike: That's again what I think is a really good talking point for people. Man, now I would really love to pay more for your property. I understand I offered you 50'000 two months ago when we last spoke, but unfortunately things have changed and I wish I could get you that 50k now, but my end buyers, again there is a lot of uncertainty, I am going-- I am just going to follow the stock market, going to have to take 30% off my offer today.

David: Right. I made two offers yesterday where I said, hey-- last week my offer would  have been X, but today it's Y, this was yesterday, hopefully in three or four weeks I can get back to X. If you need to sell terribly bad, here is the new offer. It was 30-40% less than the offer would have been a week and a half, two weeks ago. But I explained the transparency there, here's why. The lender-- we essentially have a kink in our supply chain.

Mike: We do.

David: Which is the funding aspect of it. Yeah, it's effecting everybody. It is definitely a crazy time.

Mike: I think we were very fortunate. Over the past few months, we were kind of taking advantage--.

David: Of the high market.

Mike: Of the high market, sell off a couple of rentals. We put ourselves in a position where we were a little bit more liquid which was nice. Again, that is a good position to be in, and it is a good time to dive back into your business, dive back into your personal finances even, and figure out where you are spending extra money that you could cut, trim some of that. In addition to, make sure you go out to the restaurants, we have to keep the restaurants open.

David: They all shut down last night though. By the time this publishes it, it shouldn't be the case.

Mike: And take out. You can order--.

David: Support them, absolutely. We are going to go get some good dinner, tonight, man. Just pick it up.

Mike: Just picking it up, bringing it home and re-heating it when you get home.

David: We were laying in bed last night and I asked my wife I said, hey sweetie, got any plans for the weekend? She goes, nope just locked inside with you. Nobody has any plans right now.

Mike: Nothing to do.

David: Everyone is locked down. It was kind of like a rhetorical question. But it was just so funny because we were both laughing. She's like, nope calander is cleared. I have absolutely nothing on my plate for the next three weeks, maybe a month. Oh man.

Mike: It's difficult to remain even keel. We want to try and tie this back into the wholesaling and the business a little bit more. As much as you can, I think it is a time to continue making offers, again, your rice has to be adjusted, it's not even based on today's comps, it is based on the fact that people cannot buy. This is going to be a pretty long term thing in the real estate markets.

David: It's going to be months before it normalizes. Definitely not weeks.

Mike: We are going to see some lasting effects to this, Dave.

David: There will be for sure.

Mike: People losing their jobs. Again--.

David: The unemployment numbers-- the applications are spiking and crashing servers nationwide, in every county, city-- but there is definitely going to be some lasting effects. What's crazy is that the government just all of a sudden starts throwing around trillion dollar numbers like-- I get that inflation is kind of exponential, it gets big, it gets bigger faster, I get that but--.

Mike: Mind blowing numbers.

David: Man, I'm 35 years old, you're about my age, when I was a kid, hearing billions was kind of like crazy, right? Now they are throwing around hundreds of billions all the time. It's always a billion this, a billion that, right? Now-- correct me if I'm wrong, Mike, but this is the first time I have noticed trillion dollar number getting thrown around.

Mike: Again, I don't think I pay attention very closely but you're right--.

David: It's going to be more and more now that we've seen that.

Mike: Yeah, what's next?

David: In twenty years it's going to be like, there was a ten trillion dollar package, man! That's going to be the norm. Money grows. It's kind of nuts.

Mike: It's insane.

David: Yeah anyway, fear in the market place and what to do about it. We are still making offers, guys. We have just adjusted those offers. We have also not just adjusted the price, we have also adjusted the terms. That's even more important in my opinion. The value of the real estate market hasn't taken a dive necessarily. It is just kind of come to a halt. Not much is moving. So there are still transactions happening.

Mike: A lot of stuff that is in the pipeline I feel like is going to get closed out. But I feel like there isn't going to a be a ton of new business on the books over the next month or two.

David: But here's where I'm going with this, the values, those are are putting values on properties-- it's kind of unknown.

Mike: I'd hate to be an appraiser right now.

David: That's what I'm saying, it's like, well you know-- the value that you put on something has a lot to do with the ability for people to get loans, and close on those loans. If the banks are not lending, is something still worth a half a million dollars if it was whenever they would have easily have a hundred people that could qualify? Just goes to show that there is a lot of uncertainty out of there, it's just kind of strange. What we're doing and this is my point, what we're doing is we are extending out expectation period or even our closing dates by maybe even three months to try and pad in some of that uncertainty. If the market does reflect a 10-15% decrease, fine, that's okay. We will reflect that in our new offer price.

Mike: I think it's very important because I know you, I know your business and the way we operate is that we are very transparent with people. Any of these things that we are putting in there, we are going to mention to the seller and just say, because of this our offer is lower and we need a little bit of a safety net as well, so we are going to have to have this inspection period. We are very candid--.

David: I am so transparent that I sometimes upset people. Like yesterday on the phone, you heard me I think, you were sitting in there, I was talking to a guy, I think we offered like 150 on his property, he is like, there have been some properties that have sold in the last one or two years for 225. I go, well that was in the last one or two years, I am offering today. He goes, well, that doesn't make any sense. I go, have you seen the news? Have you been watching what's happening for the last--. Do you have $150'000 cash ready to deploy into a property? I wasn't being rude, that wasn't my intention, but sometimes you have to be blunt. After I said that he's like, yeah I have seen the news. That offer doesn't sound so bad after all.

Mike: Turns out you probably should sell it right now if you need that liquidity.

David: Life will go on, business will continue, it may-- there may be-- 2020 maybe not be the best year, especially with this kind of rocky start, but people have to have housing, and they have to have a roof over their head. We are in a business that regardless of what happens, people need shelter from weather, from temperature, from bugs, animals, period. This business is not going away. Will the properties of values fluctuate? Yes. Will the time frames in which they can close fluctuate? Yes. Will there be maybe a short term or even a long term capital issue? Sure. But people are going to have to have housing. So this business is pretty secure in my opinion. Also you can't just print more land. There is going to be that guy that says, look at Dubai, they make islands. Yeah and they spent trillions of dollars doing it, right? You can't just make more land. It is so incredibly finite. Whereas stocks and bonds, and especially cash can just be created, copied and pasted. You can't do that with land. So no matter how crazy things get, that is still an asset that is finite. Even gold can be dug up and more can be added into the supply, not with land.

Mike: Yeah, especially in desirable areas around-- like good schools, in good school districts, around metropolitan areas, so around big cities where people want to live.

David: Absolutely.

Mike: It's very-- there is only so much. So it's very good. The other thing-- what was I thinking about? You had hit on-- the fear in the market and the prices. So the neat thing about real estate in my opinion, again, we are more of a tailing indicator, at least here in the Midwest. We are very slow to respond significantly in big price fluctuations. So we are going to have big swings in prices, right? But because we are in the Midwest, we are a big slower to react to that. We had talked about the stuff that is currently in the pipeline for when most mortgage companies are probably going to close, there is a pretty good chance they are going to keep funding that, I believe there is a little pressure from Uncle Sam for banks to keep lending. So that's a good thing. Most of that stuff is going to close out. What it might mean-- this is my guess is that come this Spring and Summer and-- the foreseeable future are housing starts. So new housing starts are going to slow, and that--.

David: What? Like the new construction?

Mike: New construction.

David: Okay.

Mike: So new housing starts. I think that industry will be hit harder than what we're doing, which is buying and selling existing properties.

David: Exactly, I'm not trying to be pessimistic or negative, I don't even know the term.

Mike: No, you have to be realistic about it.

David: Let's be realistic; if we lose 2% of the population, 1% of the population, I mean I am talking small numbers here, right? That frees up a ton of houses too. So there are going to be a lot of empty places. It's going to drop the price down a little bit, maybe not a ton. It's going to be more appealing to buy-- than build something.

Mike: Let's think this through, especially in--.

David: Some people are going to build no matter what. That's never going to end.

Mike: I don't get that desire as much as a lot of people.

David: I get it, but some people are going to want to build no matter what. That's not going to stop, but I totally agree with you. When you have an inventory supply that is high, and the demand is obviously going to be lower if you have a way high supply due to the nature of economics.

Mike: Supply and demand.

David: There you go. You're gonna have a little bit of an issue.

Mike: Let's think that through, Dave. Currently it seems like the outbreak is effecting-- or the mortality rate is higher in the elderly, right?

David: Yeah I have heard several stats, I don't even want to drop them.

Mike: They're going to change all the time.

David: Call it this way; from what I've seen, the super majority, let's use that term, because it doesn't even give a percent, is effecting the super majority, over 80. Majority of 60, super majority over 80.

Mike: Right, and that is often people in nursing homes. So the construction of the retirement communities--.

David: The retirement community might get crushed big time.

Mike: Exactly what I'm thinking. I mean there is-- they are all over.

David: They are everywhere.

Mike: I feel like when I look at a new apartment going up, or a five storey-- nine times out of ten, it ends up being an assisted senior living, or group senior living type thing.

David: Which is crazy that we have the population hump over the baby boomers. The baby boomers are not in their 80's yet though.

Mike: I don't think so.

David: I don't know, it's something to think about.

Mike: If that retirement age group is hit the hardest, which is kind of what's happening. What's that going to do? Again, I think it's going to free up space in those areas, again, like you said, supply and demand.

David: I took that class in college, that was ten years ago.

Mike: I don't remember any of it. There is going to be a decrease quantity demand, I don't know if it shifts the curve or whatever. Long story short, I suspect that is going to be hit harder, we are not going to be seeing as many of those popping up.

David: The single family--.

Mike: Exactly, if this truly does effect them more. If it is a little bit younger on that curve--.

David: But the 80 plus, most of those people are not in their homes at this point.

Mike: You still have people that-- even if they are 70 or 75 plus and they are in their home, they are still in their home, you are going to see that property be passed on. That either means it is going to go to the younger generation, I think nine times out of ten what are those people doing? They are selling that property. So it is going to create an increase in properties-- supply of single family homes. So again, that is going to indirectly effect or long term it is going to effect new housing builds. That's where I think this has the bigger impact on your business, which I would be more nervous about.

David: That's a good point.

Mike: Luckily we haven't got any new construction, Dave, as a company, we have done a little bit of everything else. But we-- you know, haven't done that so--. Knock on wood.

David: It's a good thing we are not in it at this current time, because it is going to slow things down quite a bit.

Mike: Exactly.

David: Either way, guys, handle fear in the market place. This is temporary, it is unforeseen, we will get through it. Try not to panic, I'm not. Again, I look at it like this; people have to have a place to live. If they have trouble paying rent for a period of time, and we have trouble paying mortgages for a period of time, we're not alone. Everyone is having this same problem. At the end of the day, that's one thing people can not not have. Basic essential needs; food, water, shelter. I am not providing the food or the water thank God. But, I can provide the shelter. At the end of the day it is going to be something that is always needed no matter what.

Mike: That's awesome, yeah.

David: We're not going anywhere.

Mike: Real quick, what do we think-- before we wrap up here on this one. What do you think--.

David: Did you ever think we would be talking about food water and shelter?

Mike: Dude, I am stockpiling, we have to hoard this stuff.

David: I'm not.

Mike: I'm kidding.

David: I know it's liquid, but still though, these are crazy times.

Mike: Well, the only concern I would have is if-- shipping gets shut down. Then we really do have an issue with our supply chain. That is what gets scary. I have seen a few articles on-- I think one State closed down all the rest stops, so it's like-- okay truckers probably need the rest stops open, there are not huge numbers of people there. Why are you--.

David: Yeah, that's for the truckers. Mostly more than anything else I would think.

Mike: I think so too. I don't know anyone who does road trips and stops at the rest stops. We do it maybe once in a while on a long road trip.

David: I think most truckers are men--.

Mike: Keep the truck stops open, keep the trucks moving. What's-- let's wrap up with a couple of thoughts on what opportunities does this create for a new investor, a wholesaler to come up with? Not a simple answer. One thing I think again is the opportunity to go out there and find more motivated sellers. More people are motivated today--.

David: And will become more motivated quickly--.

Mike: To sell their property than there were 2-6 weeks ago.

David: Correct.

Mike: Again, there are more motivated sellers, which means you should be able to find better deals. There are still big investors, still cash investors that need to buy properties, or want to buy properties. So there is plenty of opportunity for a new investor to go out there and find themselves a motivated seller. That's what I've got. Dave, you got any other thoughts on it besides that one?

David: I totally agree, man. There are going to be a lot of opportunities here. Mike and I are both not trying to profit off of loss and disease, but this is what it is, and this is the real estate business, and opportunity will arise, and we are going to prepare ourselves to-- take advantage of that. We are always creating win wins too, that's another thing. We are not out here trying to just properties from people. We are providing a service that is liquidity. That is going to be needed more and more. The value of that service will increase with this pandemic.

Mike: Exactly, market goes up, market goes down. Real estate investors are typically the ones that are still going to be making money either way, the successful ones. Our goal is to be one of those. Your goal should be as well, guys. Thank you so much for listening, talk to you again.

David: Signing off.