What is your marketplace experience? How much cash does it require to do a deal? These are some of the key questions in an investor survey that Jason Bible is conducting. In this episode, Jason takes a breather and talk about his favorite cars. He also tackles the importance of doing an investor survey for single-family real estate investors, sharing what he believes will be the results.
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Investor Survey, Cars, And Technology
Let me share with you guys what we did. Rob and I have a really good problem. There are things in life that are frustrating and you’ve had challenges in. When you look at them from a third party’s perspective, they’re actually good problems to have. The problem we have is, we are running out of office space. Our office in the heights is packed to the gills. Our office in the high atop the Quest Trust building off of Park Row is completely packed. On Tuesdays, it’s absolutely insane. There are bodies everywhere. People hanging out in the lobby, working on their laptops. When people are in the studio at our Park Row office, it’s bananas at that point. The air conditioner can’t even keep up with all the people in there. We also have our office near Champions.
We came close to executing a contract on an office flex warehouse space. Unfortunately, we will not be going through that deal for a number of reasons. As we’re looking for office space, I’m chatting with one of my commercial broker friends, and he goes, “Why don’t I get a couple of places and then we can look at them and you guys can decide what you want to do?” We were touring an office building on a Monday. A nice high-rise building for us to purchase and my favorite part was Rob looks at the team there and says, “We need to get up to the roof.” They’re like, “Really? You want to get on the roof?” I’m like, “Yes. This is like a single-family house. It’s just a lot bigger. I want to look at the roof, the HVAC, the life safety and fire protection systems, a couple of bathrooms that have been remodeled, and the elevators.” They’re like, “Okay.”
We got up on the roof and the view was spectacular. If you go to my personal Facebook page, there is a panoramic photo from the rooftop, and it’s just excellent. The whole time I’m up there, we’re looking around and we know that the property needs a roof. While I’m up there, I didn’t tell Rob this, but this is what I was thinking, “We need some a rooftop bar up here. We’ve got to figure out how we can build something up here. An open-air, open deck thing for the office staff. Maybe it opens up at 4:00 and they serve until about 7:00. $5 Margaritas and $3 beers.”
I’m like, “We’ve got to do something up here because the view is spectacular.” We’re working on some other things. I’m working on some modeling for the 94-house package that we’re working on and defining what those tranches are that we’re going to close. Somebody asked me, “Jason, what’s a tranche?” It’s a package of assets. We’ll take the package and we’ll close in clumps if you will. Tranche sounds cooler because it’s finance. When you’re in finance, a lot of it is French-sounding words. Instead of saying clump, group, or cluster of assets, you say tranche. It sounds so much better. It sounds like you’re so much more sophisticated. We’re doing that.
The money raising day was a lot of fun. We’re over at Quest Trust. They are a sponsor of the show. You are going to see Quest Trust here and Anne Marie is going to be back which is a lot of fun. Anne Marie and I work together. I call her the voice of Quest Trust. She’ll be doing interviews, commercials and all that stuff here. Quest is on board with us again, which is great. I’m speaking at a ton of their events throughout. Hopefully, I get to see you guys in Dallas, Austin, San Antonio, and another market yet to be named. We’re working on that outside the state of Texas. You will get to see us live if you are a Quest Trust client.
In any case, we went over to Quest Trust, had a couple of meetings that zipped over to our office at the heights. I was working on a handful of things, sending out emails, doing the normal stuff I do. Previously, Brian and I were hanging out at the office, and then it came to about 3:30 to 4:00. Late lunch, it’s probably 2:00 at this point and he was like, “You want to grab a beverage somewhere?” I was like, “That sounds like a great idea.” We zipped over to Buffalo Bayou, and while we were sitting there chatting, he said, “A friend of mine is running that Porsche dealership right there at 45 North,” actually it’s on the southbound side just outside the loop. He said, “Let me call him and see if we can stop by the dealership tomorrow.” I said, “Great.” He calls him up and said, “Why don’t you guys come by the shop here at 4:00 to 4:30 in the afternoon?” We said, “It’s fine. We’ve got another event at 6:00 so let’s stop by.”
I love this dealership. When you’re heading southbound on 45, it’s going to be to your right. When you drive by a dealership that has a lot of Porsches, I call it the bag of Skittles. Usually they have all the 911s out front and they’re all these wild colors. Yellows, oranges, bright greens and there’s that Miami blue that’s kind of turquoise. It looks like a big bag of Skittles. They bought a McLaren and they have Lambo there too. It’s all these wildly colored cars. We stop in and chat with the manager there who Brian has known for years. We went and got to test drive some cars. While we were there, out of the blue, he said, “Do you guys have one of those new Porsche Taycans?” That’s their electric car. He said, “As a matter of fact, we have the only one in the city,” which I was pretty shocked at.
I was like, “There’s only going to be 2 or 3 of these things in the state right now.” It’s an all-electric vehicle. We said, “Do you mind if we take it for a spin?” They said, “Go for it.” I jumped in the car, and I will tell you, I’ve not driven a Tesla yet, although I’ve ridden them before, but this Porsche Taycan is an absolute animal. If you’re a car person, if you follow The Smoking Tire, or any of the other guys on YouTube, Matt Farrah, drove this thing. He said, it’s as fast as McLaren 720, which is an incredibly fast car.
This thing was a hoot to drive. If you are on my personal Facebook page, you guys can watch that video. I believe the example we drove was $185,000. They’re not cheap, but they are a blast to drive. We did that and then went to a networking event that evening. It was a great event. One of the things that’s been fun for me is, typically the only events I go to are the ones I’m speaking at. We do that for a couple of reasons, but I’ve been going to a handful of events that I’m not speaking at to gauge the temperature of the real estate market. That event was interesting. From my best of my knowledge, I do not believe there’s been a survey conducted of single-family real estate investors in the entire country. To the best of my knowledge, my investor survey is the only one that’s ever been done. We’ve got a couple of hundred responses already.
Somebody asked me, “Jason, what do you think of the new Corvette?” I think it’s going to be fantastic. The real Corvette to get is going to be the Z06. That thing is going to be the mid-engine track prepped. Z06 is going to be an animal and the ZR1 is going to be a supercar killer. It’s going to be absurd. Here’s the little problem. From an engineering standpoint, when you take an internal combustion engine and take it from the front of the car to putting it behind the passenger’s, which is mid-engine, you begin to run into cooling issues. Because you don’t have this wall of air running into, over, and under the car. Chevrolet has had some significant problems with cooling on this supercharged ZR1 and Z06 models in the front-engine Corvette.
In fact, with the outgoing model, the last version of the Z06, I want to say they added ten radiators. It was something ridiculous. They had to add all this cooling in. I’m not talking about driving around Houston traffic. I’m talking about taking these things to the track and really running them. When it’s 106 degrees out here and you’re running on Texas Motor Speedway, the cooling system can’t keep up with all that force induction and everything else that’s going on these Corvettes. It will be interesting to see how they handle that with a pushrod V8 that goes behind the passenger. We will see how that whole thing develops, but it is going to be an absolute animal of a car.Technologies are born from challenges in the marketplace. Click To Tweet
That being said, the Tesla Roadster, if and when they build it, Elon says they’re going to build it. It’s just not something that’s a high priority for them. That car is $200,000, and it is the fastest production car ever built for $200,000. It will smoke, not even a little bit, and embarrass a Bugatti Chiron, which is a $3 million car. When you get into that level of performance, they call those hypercars. We’re seeing a monumental shift in technology, to go from an internal combustion engine to all-electric. These are all-electric cars, don’t get me wrong, there are some issues with the batteries, range, and getting them charged, but like with any new technology, the early adopters are the ones that are going to finance all of the future development. The rumor on the street is that the next battery that comes out of Tesla is going to be a little bit better for the environment. It’s also going to last a lot longer. They’re talking a million miles for a battery. The third thing they are discussing is a range increase in the amount of 25% to 50%. The Model S is going to get 500 plus miles to a charge. It’s incredible.
What I find fascinating is when I read all these automotive journalists, they’ll say things like, “They don’t charge as fast.” “It takes too long to charge.” “You don’t get as much range.” “If everybody had an electric car, the power grid can’t handle it.” All of that is true today, but it’s not true ten years from now. I’ll give you a classic example. If you read science journalism from the ‘70s, and I know everybody does this. You’re like, “Let’s read old science from 40 to 50 years ago.” One of the biggest concerns was the overpopulation of the planet. Not because we didn’t have the space, but because we couldn’t make the food.
If you want to go on a little tangent here, if you’re trying to duck work from your boss, and you’re sitting there in a cubicle, or maybe you’re sitting in the car in traffic, Google up crop yields for the last 50 years per acre. What you will find is back in the ‘70s, we had all of this discussion around, “The Earth is growing, the population is exploding, how are we going to feed people?” What has happened since then? Technology has been implemented such that our crop yield per acre has increased substantially. That’s what happens. A lot of people miss that. They’re static in their thinking. They’re like, “You don’t understand, Jason. The electric cars are only going to get 300 miles a charge. It’s going to take this many hours to charge. If there are these many people charging, it’s going to have this much draw on the power grid.” I’m like, “The technology is not available for massive consumer consumption. The technology is not there yet. However, it will be in the years to come.” I can guarantee you, it’s going to be. They are putting the best engineers on it.
Here’s what is a telling sign for me. How many young engineers out of college want to work for a company like Tesla? They aren’t going to Google. They’re all going to SpaceX. They’re all going to Tesla. The Boring Company is still pretty small. Also, Neuralink. They’re going to all these things, different firms that Elon is running or companies that are supporting that mission because it’s fun, it’s new and innovative. You’re going to get, at least from the young crowd, the best and brightest minds. They are going to these places. If you think what happened on the internet for the previous years was revolutionary, wait to see what the car industry looks like in the next years. I drove that Porsche Taycan. It is incredible. The world is going to change very quickly moving forward.
Rob, and I, actually invested in a tech firm. One of the things that we’re seeing, it’s on the horizon, and it’s probably the following years is 3D printing for construction, like residential construction. When that happens, it’s going to turn the single-family house market on its head. I can envision a future in which you and your spouse are sitting in the house going, “I never really liked this house for this reason or that reason.” You’ll move all of your furniture and belongings out. A company will come by, demolish the house, the materials will be recycled. Inside of a week, you will 3D print your new home. That technology will happen in our lifetime. You’ll get a brand-new house on the same lot. It will happen. There’s no reason why it shouldn’t.
The only thing we’re dealing with is the when. The technology will happen and it absolutely will be in our lifetime. Part of that is going to occur because of Elon and company. I don’t mean just Elon Musk, but Bezos, and the British guy that runs Virgin. All those guys are pushing for space. They’re going to have a place to live when they get up there. The Boring Company will be boring these things underground on Mars, but all of the stuff on Mars will have to be built there. The 3D printing technology will come to fruition in the consumer market when we have this space travel commercial market that starts being built. These technologies have to be developed somewhere and they have to be developed here. That’s why the cyber truck is so ugly because it’s actually a Mars rover. It’s what it is. It’s going to be the next Mars rover. He’s testing it here. That’s all he’s doing.
Problems are not solved until the problem becomes big enough that it needs a solution. That’s what you’re seeing in the electric car space. There’s a reason GM is building an all-electric Hummer. If you guys saw that Super Bowl ad, it’s an all-electric Hummer. These technologies are coming to the forefront in response to what Elon is doing, which is in response to the consumer market. I’ll leave it at that, but at the end of the day, that’s exactly what happens. Technologies are born from challenges in the marketplace and some of those challenges are challenges that people don’t even see. I’ll give you a great example. A phone that plays music. Before smartphones, you had your iPod, and then you had this goofy flip phone or one of those what they call them candy bar phones back in the day, the little Nokia phones.
Some guy named Steve was like, “If we took our iPod and this phone, smush them together and made him one device that also would do the internet and everything else, it’d probably be a success.” In fact, when the first iPhones came out, they were terrible phones. They were great at everything else, except being a phone and they were horrendously expensive. The same people that were all over Apple would say, “This is a terrible phone. Why would anybody do this? This phone is awful.”
Now, that phone has developed into literally people’s lives. It is their life. All their apps are there, all their friends are there. They’re texting and calling, although most of the time it was texting and that sort of thing. You’re doing emails, using it to listen to music. I use my phone all day every day. I’m sure everybody else does too. That is the pace at which technology rapidly gains implementation as challenges are solved. That’s what you’re going to see in the electric car market. “Jason, not everybody can have an electric car.” I’m like, “I know that.” I drove $185,000 one and that’s not even the top of the line model. The Turbo S with a couple of options is $200,000. The median home price in Houston is $250,000. That car costs more than 40% of the houses that people live in. It’s ridiculous.
Wait until there’s a Honda Civic that’s all-electric for $27,000. That is absolutely going to happen. You’ve got to remember, Porsche is owned by Volkswagen, which is the largest car company in the world. They put these products out there for their high-end clients, their high-end customers, which Porsche obviously is at. I don’t think there’s a 911 that’s under $100,000. If you’re driving a brand-new Porsche, they start at $100,000. If I remember last time, I looked at this, the average new car purchase was around $30,000. Your basic 911 is three and a half times more expensive than your average new car purchase.
That’s how these products start. They start high end and expensive. It’s the early adopters that finance all the technology. You’re going to begin to see that. That Hummer that GM is going to build wouldn’t surprise you if it’s $80,000 to $90,000. It’s expensive. Give it another couple of years, you’ll be buying Corollas and Honda Civics for under $30,000 that you plug in that get 400 miles to a charge. That technology is coming, and it will trickle down to the masses.
I don’t know how this is going to work, because I think this is where Tesla is absolutely crushing people. It’s on the self-driving technology piece. That self-driving thing is cool. In any case, I go to a lot of real estate events like I’m sure a lot of you guys do. When I talk to people about what it is they’re doing in real estate and the deals they’re seeing out there on the “street,” about 90% of the time somebody would say, “I’m doing this deal and these are the numbers behind the deal.” I’m like, “I don’t know if that’s good. Do you have it under contract?” “Yes, I got it under contract. We walked it and the rehab is $80,000. I think I can do it for $40,000.” I’m like, “I don’t think you can do it for $40,000, but maybe you could do it for $60,000.”
I started looking at a lot of the self-reported numbers that people were allegedly closing deals or looking for deals. That was the precursor of this whole thing. “Jason, I’m looking for a deal that’s XYZ.” I’d say, “I don’t think that deal exists anymore.” “I closed one recently.” I’d say, “How recent was that?” “Let me look at my phone.” They’ll pull up their phone. I’ll say, “Search the address and see when you close it.” They go, “I guess the last deal I bought was two and a half years ago.” I’m like, “That’s like an eon ago in real estate.”
One of the fascinating things I’ll do is I’ll network with all the investors I know that are buying property. I’ll say, “Are you flipping it? Are you doing buy and hold? What is it that you’re doing?” They’ll tell me and I’m like, “How much you out of pocket? What percent?” We’ll have all those discussions about what kind of cash you need to bring to do the deal. I saw this great quote from Grant Cardone. Uncle G drops a couple of nuggets every now and then. Uncle G says, “If you’re going to be an investor, you’ve got to invest time and money.” I totally agree with that. Real Estate is not free. If it’s free, it’s not investing. You’ve got to invest time and money and he’s right. You’ve got to have some cash, time, and money.You make money by paying less taxes, but all you're really doing is deferring those into the future. Click To Tweet
When I talk to real estate investors, they’re like, “Jason, I’m looking for the no money out-of-pocket deal.” I’m like, “That deal doesn’t really exist. It does for a couple of us, but there’s not enough out there in the marketplace for you to buy them.” I did a free seminar one time. I was sick as a dog. I didn’t make it through the whole Q&A and I want to do the event again. There are two events I want to do. One is How to Lose Money in Real Estate, and the second one is the event I did, How to Buy Free Real Estate. Can you buy free real estate? Absolutely. Can you do real estate with no money out-of-pocket? Yes, but there are only three ways to do it and it’s not easy.
How to do it is simple but it’s not easy. It is excruciatingly difficult for a brand-new investor. You’ve got a couple of houses under your belt. You know what you’re looking for, you know what you’re doing. Can you do it? Absolutely. We had a full house at the Quest Trust training room, and I talked about how to buy free real estate. I’m not going to give you some sales pitch. There’s a $997 class and there’s this $25,000 education package, I’m not going to go there. I gave everybody on that seminar on how to do it. It’s like, “This is how to do it. It’s no more difficult than this.”
However, it’s simple, but it’s not easy. You can do real estate with no money. It’s got to be somebody’s money. It just might not be yours, but you’ve got to have money and you’ve got to have time. “Jason, I don’t have money and I don’t have time.” The real estate is not for you. You’re starting a business here whether it’s one single-family rental property or a 200-unit apartment building. The reality is, you’ve got to have some time and some money. If you don’t have either one of those things, there’s not much I can do for you. However, if you guys are interested in joining our mastermind, Rob is hosting an event at our property in the heights. If you’re interested in going to that, send me an email at Jason@MrTxRE.com.
Let’s talk about this investor survey. I started to chat with a lot of people in the marketplace, and I’m sitting there one day and I’m like, “I would love to know the answer to three simple questions to gauge, A, what people are looking for, but B, what is their experience in the marketplace?” What’s going on in the marketplace. There are three things that any investor is looking for. You can distill down all of the real estate education to three simple things. It’s no more difficult than this. I know we put on seminars, we have these retreats, “Here’s this new book you’ve got to read on XYZ in real estate. Here is a new financing product and a new wallboard. Here’s a new sink. Jason is using these types of water heaters,” and I’m like, “At the end of the day, this comes down to three things. How much cash does it require to do a deal? How much equity do you get at the time of purchase, and what is your cash-on-cash return?”
Everything else is secondary, but those are the three things you’ve got to ask yourself when you do a deal. Truth be told, where you make your most money in real estate is appreciation. No ifs, and, or buts about it. Cashflow is not making you rich. The math bears that out. It’s the appreciation of these assets. As they increase in value, that’s where you derive your real wealth from. You don’t believe me? Do the math on it. I’ve got a $150,000 house and this is not uncommon. This is very common in Texas. You have a $150,000 house. It’s appreciating 10% a year. That means it’s appreciating $15,000 a year. You will not make $15,000 a year in cashflow. You’ll make $4,000.
There are some tax benefits to owning real estate. It’s called depreciation, but depreciation is a loan from the government. You have to pay that depreciation back when you sell the property. I never look at depreciation as, “Do you quote ‘make money?’” Sure, you make money by paying less taxes, but all you’re doing is deferring those into the future. Do your tenants pay down your mortgage? Absolutely, but if you’re on a 30-year amortization, the first 7, 8 years, you’re not paying that much down anyway. You don’t start paying the principal down until about year seven.
When you start to look at, “Where do I make my money in real estate?” It’s the appreciation. Even though we’re talking about these three questions, these are the three questions I want answered when I go into a deal. How much cash do I need to bring? What’s my cash-on-cash return, and how much equity am I getting? We’re doing deals that have low cash-on-cash return but have massive equity. Conversely, we’ve also done deals where there’s no equity, but massive cashflow. There is a bit of a balance there. One doesn’t necessarily mean it’s better than the other. However, one strategy may be better for you because of your goals versus the other.
I was chatting with a couple of young men, late 20s, early 30s, trying to figure out real estate, wholesaling, and do some other things. Every time I talk to these guys, I will tell you, the smartest wholesaler in the room is the one that says, “Jason, I don’t want to wholesale anymore.” What is real estate wholesaling? It’s a real estate professional that puts a property under contract and sells it to another real estate professional. They’re pushing paper and selling contracts. They don’t ever actually own any real estate. That’s why I don’t call them real estate investors. They’re pushing paper from one side of the desk to the other. They’re making what’s called an assignment fee. I had a guy tell me that.
This is at the end of the night so I can already tell a couple of guys were 4 or 5 IPAs deep at this point. With that droopy look in their eyes and said, “Jason, I can’t do this wholesaling thing anymore. It’s awful.” I’m like, “I know. It’s the worst thing in real estate.” Wholesaling is awful. He looks at me and goes, “Wholesaling is really hard.” I’m like, “I know, I own that company. It’s the hardest thing to do in real estate. It’s not the easiest.” Everybody says, “The easiest thing to do in real estate is real estate wholesaling.” No. Being the lender is the easiest thing in the world. If you do your due diligence on the borrower, on the asset, and you’re lending money in real estate, it’s hard to lose.
Although I’d add this, there’s an even better person in the marketplace and they’re even having an easier time. That is people who invest in our fund. They look at a couple of deals, they go, “It sounds like you guys know what you’re doing. Here are a couple hundred thousand dollars.” They are 9% preferred return and we give them 10% equity. That’s an easy street. Sign a couple of pieces of paper, wire the money in, and we put the money to work. That’s pretty easy, but real estate wholesaling is a job. I was chatting with a friend of mine, he’s a banker here in town. He’s like, “Wholesalers and flippers are just trading one job for another.” I said, “That is exactly what’s going on. That’s not a bad thing, but don’t run around town telling everybody you’re an investor and this is easy. This stuff is simple, but it’s not easy.
When I go back and I have these conversations with real estate investors, wholesalers, and those handful of other people, the common denominator is, how much cash do I have to bring to the table? What’s my cash-on-cash return and how much equity do I get at the time of purchase? We put together a survey that I’ve sent out to a handful of people. We’ve got a couple of hundred responses already. I don’t want to tell you the results because I want you to take the survey. It’s three questions. It takes less than a minute. On average, it takes 44 seconds to fill out.
This survey asks three questions. What’s the maximum cash out of pocket that is acceptable to you on a deal? What is the minimum cash-on-cash return at the time of purchase? What’s the minimum amount of equity at the time of purchase? I look at the results and it’s striking. I did not expect the data to be displayed in this fashion. It’s very interesting. When we hit about 1,000 on the survey, I’m then going to share it publicly. I was chatting with Alex at Jet Lending, once we get about 1,000 results, I’m going to take 10, 15 minutes or so at one of the Jet Lending events to share with you the results. I’ll share it with you here on the show as well. It’s a fascinating survey and it gives me a good read on what’s going on in the marketplace.