What the 1980s Real Estate Cycle Is Telling Us About Today’s Market ⎜Michael Zuber E490

Summary

---

The Rich Somers Report

Episode: What the 1980s Real Estate Cycle Is Telling Us About Today’s Market

Guest: Michael Zuber

Date: April 18, 2026

---

Episode Overview

Host Rich Somers welcomes veteran Central California investor Michael Zuber for a wide-ranging conversation about lessons from past real estate cycles—particularly the 1980s and 2008—and what they reveal about today’s shifting market. Focusing on wealth-building, discipline, the 40/40/40 paradigm, and actionable investment strategy, they share personal stories, hard-won insights, and predictions for the next phase of the real estate cycle.

---

Key Themes & Discussion Points

1. The “40/40/40 Life” and How to Break Free

[01:29–05:40]

• Definition: The “40/40/40 life”—work 40 hours a week, for 40 years, to retire on 40% of your income—was once the dream, now a “nightmare” no longer viable in today’s world.
  • Michael Zuber: “I think it’s been proven to be a horrible strategy...You gotta be a business owner or you gotta find a way to invest in real estate over a decade. Otherwise…the rat race will get you and there’s just, there’s no winning.” (02:13)
• Both hosts came from families that drilled this path, but today, entrepreneurship and real estate investment are the most accessible wealth vehicles outside rare stardom.
• The power of your peer group is crucial: “If you’re around five real estate investors, you’re the sixth.” (05:40)
  • Sometimes you have to “fire your friends” and seek new associations if you want to level up.

---

2. Discipline vs Motivation: The Secret to Real Estate Success

[07:28–10:50]

• “First five years suck.” Real estate is slow to show results: it’s not “get rich quick,” but “get rich for sure.”
• Early phases require daily discipline over fleeting motivation: “If you focus and execute on it daily for a year, you will be in the top 1% of whatever you choose. That is the secret to life.” (10:49, Zuber)
• People often quit after the early struggle; sticking it out is where real breakthroughs occur.
• Zuber applies this to both real estate and personal health, describing a transformation from 34.8% to under 12% body fat in nine months through daily discipline:
  • “Once you get that proof of concept, you just keep coming back.” (10:49)

---

3. Growth Through Challenge—Beyond Money

[13:24–14:30]

• Both Rich and Michael emphasize life satisfaction coming from growth and doing hard things.
  • Zuber: “Even when you ‘won the game,’ you never stop growing…find that thing [to challenge yourself].”
• Zuber’s example: running his first marathon at 52 and now chasing a sub-10% body fat goal at 53.

---

4. Learning From the 2008 Crash: Timing, Risk Assessment, and Cycles

[15:12–20:20]

• Zuber recounts losing 80% of his dot-com-era stock gains, becoming a millionaire via single-family homes, then pivoting based on advice from Bruce Norris about an impending crash.
  • He sold all homes in 2006, moved assets into discounted multifamily, and survived the downturn.
  • Quote: “So we went from eight to 80 units in about nine months.” (17:17, Zuber)
• Importance of paying for mentorship and learning predictive market indicators (e.g., affordability index).
• Illustrative story of 1818 Norris Drive East, where he sold at peak and watched it plummet in value:
  • “I sold it for 263. It retrades at 75.” (19:47, Zuber)
• Key was “sheer execution” and willingness to act “against the grain” when signals shift.

---

5. Why Today’s Housing Market Won’t Crash Like 2008

[21:28–23:37]

• Comparison of market conditions:
  • 2008 was marked by high-risk adjustable-rate mortgages (ARMs), negative amortization, and teaser loans—toxic products that led to mass foreclosures.
  • Today: Households have 30-year fixed debt at low rates; mortgage payments are often much lower than current rents, removing incentive for strategic defaults.
    • “People have 30 year fixed rate debt. Their payment’s 800, there is no reset, and rent’s 1200 or 1400. So that’s why we’re not getting the strategic defaults.” (23:08, Zuber)

---

6. Present-Day Slowdown: Liquidity Squeeze & Buying Opportunities

[23:42–28:29]

• Economic slowdowns visible in areas like discretionary purchases (boats, etc.)!
• Americans have record home equity and cash in money markets but can’t tap it like before due to higher rates.
  • “No one’s been able to refinance their primary residence for three and a half almost four years now.” (24:36, Somers)
• Both hosts agree: when rates dip below ~6%, expect a home equity and transaction boom.
  • “We are sitting on $7.7 trillion in money market accounts. We’re sitting on record equity in homes...The ATM machine is going to open up.” (28:29, Zuber)

---

7. The 1980s Playbook: What the Next Decade Might Look Like

[30:06–31:52]

• Drawing direct parallels with the 1980s:
  • Real estate sales halved from 1978–81; recovery was slow—a “decade, not V-shaped.”
  • “It won’t be till 2031, 2032, until we’re back to 6 million [transactions].” (31:17, Zuber)
• Bottom line: The coming years are a gradual rebuild, not a snapback. Survivors of the current low-volume market will thrive.

---

8. Why the Best Opportunities Are NOW—Especially Late In the Year

[33:05–37:38]

• Both believe late 2025 is a rare window for discount buying; 2026–27 sees renewed buyer competition.
• “70% of our purchases are between Halloween and New Year’s Day” because of less competition and more motivated sellers. (35:59, Zuber)
  • “I want to buy with less competition, more inventory and more motivated sellers. October to January 1st always works.” (36:05, Zuber)
• Rich supports this by recounting a recent hotel deal finished around Thanksgiving at a steep discount.

---

9. Michael Zuber’s Investment Philosophy & Strategy

[37:56–53:20]

• Buy Box: Zuber drills down on market and product (location, property type, size) to become hyper-specialized and spot deals instantly.
  • “I looked at that list or that criteria, I should say, for three years…You know what if something swam in that little area that was a great deal, you knew it.” (39:41, Zuber)
  • Focus on “good or great deals”—for him, 12% yield, not average.
• Track Record: Built a currently 170+ unit portfolio (half single-family, half multifamily) owned outright between himself and his wife, primarily by reinvesting equity and using occasional debt, not outside partners.
  • “We built this entire portfolio with about $40,000 bucks.” (43:46, Zuber)
• Growth Strategy Now: Preparing to repeat his earlier pivot by 1031-exchanging houses into multi-family as syndications and overleveraged operators retrench over next two years.

---

10. Investing in California: Conventional Wisdom vs. Zuber’s Approach

[49:05–51:38]

• He chooses California for two reasons: personal convenience (avoid flying) and regulatory advantages (scarcity from anti-development policy drives values).
  • “If you don’t build anything, that means all the old stuff’s worth more.” (49:54, Zuber)
• Both hosts favor markets with high barriers to entry and tough regulations, especially for hotels and short-term rentals.

---

11. The Power of the 1031 Exchange

[51:52–53:20]

• Allows investors to “avoid pain” and keep growing their portfolio without paying capital gains—plus resets the depreciation clock for further tax shelter.
  • “There’s a lot of people that just do 1031 till they die, right? So they don’t pay the IRS.” (53:20, Zuber)

---

12. Wealth, Freedom, and Living “Every Day is Saturday”

[53:28–55:29]

• Zuber’s ultimate reward: Time freedom and agency, after years of grind as a traveling salesman.
  • “I get to do what I want, when I want, with whom I want. And it’s all because of real estate and 15 years of sacrifice.” (54:29, Zuber)
• Money now facilitates impact and legacy-building, rather than just wealth accumulation.

---

Notable Quotes & Memorable Moments

• Discipline vs. Motivation:

  • “Daily discipline. We got to tell people that’s what it takes. I don’t give a shit what you want to be great at. If you focus and execute on it daily for a year, you will be in the top 1% of whatever you choose.” (10:49–11:02, Zuber)

• Cycles Repeat; New Opportunities Arrive:

  • “It’s going to be a decade. It won’t be till 2031, 2032, until we’re back to 6 million [real estate transactions].” (31:17, Zuber)

• The Value of Being Contrarian:

  • “I want to write disrespectful offers…I want to buy with less competition, more inventory, and more motivated sellers.” (36:05, Zuber)

• Generational Wealth from Long Holds:

  • “The magic of getting wealthy in real estate is you have to do deals that make sense day one that you can hold for a decade.” (51:38, Zuber)

• True Freedom:

  • “Every day is Saturday. I get to do what I want, when I want, with whom I want. And it’s all because of real estate and 15 years of sacrifice.” (54:29, Zuber)

• Strategy Recap:

  • Zuber’s portfolio—over 170 units, built with just $40,000 in seed money, through targeted purchasing, refinancing, rolling equity, and never overextending.

---

Timestamps for Key Segments

• 01:29 – Defining and critiquing the “40/40/40 life”
• 07:28 – Motivation vs. discipline: why five years of “suck” is normal in wealth-building
• 10:49 – Zuber’s health transformation, discipline crossover lesson
• 15:12 – Living (and surviving) through the 2008 crash
• 21:28 – Why today’s market won’t crash: debt structure differences
• 28:29 – Liquidity squeeze, equity, and what will spark the next boom
• 31:14 – What the 1980s cycle teaches about the future recovery
• 35:59 – Why most of Zuber’s deals happen between Halloween and New Year’s
• 39:16 – Finding and sticking to your buy box
• 43:46 – How the Zubers built (and scaled) their portfolio with limited seed capital
• 49:05 – Why invest in California?
• 51:52 – The 1031 exchange explained and championed
• 53:28 – Zuber’s philosophy: “Every day is Saturday.”

---

Closing Thoughts

This episode is a masterclass in cyclical thinking, strategic patience, and the power of disciplined execution for real estate investors. Zuber and Somers blend practical insights, optimism born from experience, and encouragement for new investors to take the long view. Their frank talk challenges prevailing narratives and lays out the case for deliberate, data-driven investing—especially when the crowd is fearful.

---

Connect with Michael Zuber:

• Everything under “One Rental at a Time” (YouTube, Instagram, Twitter, website, book).

---

Final Word (Zuber):
"I believe we die twice. Once when your physical body goes. And then the last time somebody says your name. I'm trying to make the stuff that I put out in the world last 50 years after I'm dead and gone." (55:00)

---

For aspiring and seasoned investors, this episode delivers both high-level perspective and actionable tactics for navigating—and thriving—in the next chapter of real estate.

Transcript

[A]

Daily discipline. We got to tell people that's what it takes. I don't give a shit what you want to be great at. If you focus and execute on it daily for a year, you will be in the top 1% of whatever you choose. And that is the secret to life. But guys like you and I, who are the top 1% in our areas, we have to tell you, you know, the first 30 days suck. The first 90 days, you're not going to believe it, you're not going to see it, but trust me, it's worth it. And it's, it's empowering. And once you get that proof of concept, you just keep coming back.

[B]

Welcome to the Rich Drummers Report where we talk real estate business and wealth building, all while keeping it real. No fluff, no bs. I hope that you enjoy the show. All right, guys, welcome to another episode of the Report. Today I got someone who's been in the game for quite some time and he's been investing in real estate in central California for quite some time. Seen a couple cycles, couple market cycles, the ups, the downs, recessions. I got my man, Michael Zuber. Michael, welcome to the show, brother Rich.

[A]

I appreciate the opportunity. Yeah, it's been, it's been a fun ride, 20 some odd years.

[B]

Yeah, man.

[A]

Seen a lot, done a lot.

[B]

And I like the black on black vibes, man. You got the Air Force ones there, a little purple.

[A]

That's right. Swag I got to wear. Built for my man, dude.

[B]

What a big shout out to built man.

[A]

There you go.

[B]

It's actually sponsoring Tulum retreat next week, man. So excited for it. It's going to be so sick. But dude, what is the 40, 40, 40 life. Break that down.

[A]

Well, there's something that I was told was the goal in life. I was raised, you know, I'm a Gen X. I was raised to believe that you should go to school, get a good job, work 40 hours for 40 years to live on 40%. That was the dream. It doesn't have to be. It's a nightmare.

[B]

Yeah, I was taught the same age, man, from a young age. Go to school, get good grades, go to college, get a job. And I did all those things and it was cool. But very, very hard to win with with that mentality today. I think 40 years ago, 50 years ago, when there were pensions and, you know, there wasn't all the inflation that you see today, you could theoretically win and live a comfortable lifestyle with that. But, but today it's, it's not the best strategy in my opinion.

[A]

Oh, it's. I don't think it's. I think it's been proven to be a horrible strategy. You know, I'm doing a speech at Biggerpockets in the very. Is this is what they told us, the 4040 life. But here are the stats of 65 year olds, right? This is what they're worth, this is what they have. And it's horrible, right? Most people's answer at 65 today is going to be, I have to work another decade. So it's not the 4040 life, it's the 4050 life or the 4060 life. So I would argue that it is, was always a bad strategy. It was something that was marketed by the school systems, you know, the government to get everybody to work and kind of follow along. But if you want to break free from the Matrix, you got to be a business owner or you got to find a way to invest in real estate over a decade and then you can bust free and you can, you own your own time. Otherwise the Matrix, or what I call the rat race will get you and there's just, there's no winning. You just can't win.

[B]

Yeah, it's crazy because they don't teach this in school and I didn't really learn this until, you know, the last few years. But you know, I take the boat out to Catalina, there's 300 other boat owners out there and every single One of those 300 boat owners are either real estate investors or business owners. Those are really the only two vehicles that get there. Unless you're going to be a professional athlete and become LeBron James, a celebrity movie star, famous musician. But that's the point. 001 if you don't win the DNA

[A]

lottery, you know, you're not that lightning in a bottle, Taylor Swift or LeBron or whatever. There is just no other way. Real estate or a business. Right? But all of them are hard, right? Choose your hard. I personally believe again, I think there's, you know, you can either be an born an entrepreneur or born an employee. When I look at someone like you, Rich, I think entrepreneur, right? You were made, you were made to be an entrepreneur way. You think it's just different, right? I was born to be an employee, right? Go follow the rules. Go do this. And you know, that led me down this 4040 path. And it wasn't until I read that freaking purple book, rich dad, Poor dad, that it kind of opened my eyes to like, oh my God.

[B]

Yeah, I read, I read that book too. It shook Me.

[A]

Shook me to my core, sent me out of completely new path. And I'm a guy that has an accounting degree, an econ degree, an mba, and that freaking book sent me on a complete new path at 30. Right. I, I didn't see the, see the matrix until I was 30.

[B]

Why do you think it is that, that most people aren't introduced to entrepreneurship, real estate investing? Because, because I knew nothing about it. And, and looking back, I, I feel like I was born to be an entrepreneur, but I was not introduced to business or real estate until 33 years old. I knew nothing about it.

[A]

I think that word is the key. You were not. Because in our families, it sounds like yours. Like mine. Right. The answer for my mom, who was a stay at home mom, was to go to school, get a good job. She repeated that to me every day as a, as a grade school kid, Michael, now go to school, get a good job so you can climb the corporate ladder, make a lot of money. That was like the saying coming out of the car. And she, it wasn't, it wasn't purposefully bad advice. She just didn't know any different. And what we have now is social media and we have influencers like Alex Hermosi and Dan Martell and some other excellent guests. We now know there's another way, and I think it's extremely valuable.

[B]

Yeah.

[A]

That there's this other way.

[B]

Yeah, absolutely. My mom, you know, my mom is an immigrant. She grew up in Taiwan. My dad grew up in Holland. They both know the value of working hard for your money. And even to this day, my mom is 82 years old and she will tell me when I go home, like, hey, turn off the lights. You know, save the napkin, save the, the paper towels. And yeah, to this day, she still has that scarcity mindset.

[A]

Yeah. I mean, at some age you can't, you don't learn new tricks. We love all of our moms, as I'm sure you do, but it's, it's a signal, Right. That should be a signal to you that there's another way. So I think one of the things that is very true is you become the, the average of the five people you're around. And if you're around five employees, you're the sixth. Right. If you're around five real estate investors, you're the six. You're around five healthy and athletic people, you're the sixth. So again, sometimes we have to seek out new relationships. And unfortunately, that means you've got to fire your friends. And that was a big Deal for me. Right. I was raised to be an employee. I was comfortable with that. But when I saw this other vision, nobody else saw it. So I had to cut off relationships because they weren't healthy for me anymore and I had to go seek new ones. So in the beginning, you're alone, right? Because you don't have anything of value for this new group that you're trying to find. And it takes time. And you, you have, you lack belief. And you know, it's hard, but it's worth it.

[B]

That, that is the hardest part of the transition is, is when you are leaving your old self, your old identity, and you are trying to become your new self and a new version of yourself. Exactly. But to your point, you said you're not of value to that, that next group. Yeah. Yep. But you're trying to become them. And it is a period where I think a lot of people give up. A lot of people throw in the towel, they go back. It's easy to give up when, when things get tough because it's, it's easy when things are brand new and exciting.

[A]

Correct.

[B]

The first two months you do anything new, it's new and exciting. It's the same reason why you go to the gym the first week of January every single year, you're going to see like a bunch of people in there you never seen before because it's New Year, new me, people are trying to work on their fitness, trying to get dialed. And then you go a month later, first week of February, and everyone's gone again because it's not new and exciting anymore. But they haven't stuck around long enough to see the results.

[A]

It's, it's.

[B]

And it's the same thing with real estate investing.

[A]

It's a classic motivation versus discipline, right? Motivation. January 1st, New New Me, new thing, all of that. Get the new gym gear, whatever it is, to make you feel good. And then dopamine hits. But you haven't seen the return from the effort. Yeah, you give up. That's, that's why I think it's so important for guys like you and I to tell people. You know, I say, I have a saying, the first five years suck, especially in real estate, Right. I can't speak the business. That's more your area. But when you, when you understand real estate and you're building wealth, it's never fast. It's not get rich quick, but it is get rich for sure, right? So if you buy, right, long term debt, cash flow, day one, inflation's your friend, but you won't see it until year five. And then the drip starts and then it gets bigger and bigger and bingo bango, you can retire early if you want to. But that's why I keep telling people, like, yeah, you're in the suck because you're in the first five years. I think we have to tell people to expect it so they don't just go, oh, I can't do this after six months. But if we tell them, no, we were there too. We were there too. Everybody else is there. You're not, you're not special, you're not doing something wrong, I think more people will stick around. I think you and I should do that.

[B]

Yeah. And I also think that in a period or a society today to where things are moving quick, technology is evolving. We have AI, and because of cell phones, because of social media, TikTok, Instagram, Facebook, YouTube, podcasts, you know, people are scrolling. Our attention spans are shorter and shorter and shorter. And so I think one of the biggest mistakes that I see a lot of people make is in entrepreneurship and real estate investing is they don't just stick to one thing long enough to get good at it. And although I, yes, the first five years is going to be a lot of ups and downs. And I think, you know, I could argue, you could argue at year six through 10, there's also going to be a lot of ups and downs. And there's, there's issues at year 20. The problems, the problems and the issues and the fires that you got to put out become bigger at every single level.

[A]

Yep.

[B]

You just learn how to cope with them better.

[A]

You build a callus.

[B]

Yep. And, but the thing is, is those first 12 months are very crucial because I think if you can do anything consistently for 12 months with the real strategy and consistently put in consistent effort every single day for 12 months, you will become good enough to actually start to see some success, to start to see some results, and to have that positive feedback loop. But I think most people get into something for two months at a time, three months at a time, realize it's not easy, it's not exciting anymore, and then they go to the next thing, and then three months later, they go to the next thing, and they never allow themselves to get good enough at one thing. And so how does, how does one push past that?

[A]

Well, I think you've got, again, it's all about recognition. I think there's a lot of people that want to try things and they stumble across it and they think after two months it's not working because they don't have people like you and I saying, expect this, this is going to happen to you. Because you and I both know that if they can get through the two months and they stick around, there will be a return. For example, one of the things I did January 1st of this year is I declared I was going to go on a health journey. I went and got a DEXA scan. I was 34.8% body fat. I was 222 pounds. I was as fat as I'd ever been. I was unhealthy as I'd ever been. So I'm taking the discipline from real estate and financial education and I just focus in daily discipline. I walk more, I eat better, I track this, I track that. As of this morning, sitting here, I'm sub 12% body fat.

[B]

Good for you, man.

[A]

Dropped 40 pounds of fat, added 12 pounds of muscle. My entire body changed. I now wear a medium shirt, 34 down to a 30 waist. You know, I'm stronger than I've ever been at 53 because I. Because of what you said. Daily discipline. We got to tell people that's what it takes. I don't give a shit what you want to be great at. If you focus and execute on it daily for a year, you will be in the top 1% of whatever you choose. And that is the secret to life. But guys like you and I, who are the top 1% in our areas, we have to tell you the first, you know, the first 30 days suck. The first 90 days, you're not going to believe it, you're not going to see it, but trust me, it's worth it and it's, it's empowering. And once you get that proof of concept, you just keep coming back.

[B]

Yeah. What year was that when you took the DEXA stand and you were 40 something percent?

[A]

34.8%. It was January 1, 2025. It's now September.

[B]

So this is only nine months ago.

[A]

Correct.

[B]

Damn.

[A]

Yeah, nine.

[B]

Focus Daily you went from 2, 225 to what?

[A]

So I'm right now sitting here at 194.

[B]

Damn.

[A]

But there's a big mix of fat and muscle.

[B]

Damn, that's crazy. Good for you, man. Good for you. And how do, how do you feel?

[A]

Oh, I feel. I feel like I'm 35. Yeah, I'm 53.

[B]

Good for you, man. Good for you. So you, you anti age yourself. Reverse age they call.

[A]

Yeah. And oh, by the way, the built gear makes me feel like I actually work out. So I love this stuff.

[B]

You really Are rocking the bill.

[A]

I am. Yeah. Built shirt, built pants.

[B]

I like it, man. I like it.

[A]

Yeah.

[B]

Yeah. I'm a big fan of the built team. They got. They're at Orange County. They're great. All this stuff is so good. And even their female line is really girl.

[A]

Yeah.

[B]

All the girls on the team rock the female stuff, but. But good folks. And so, anyways, that's good. I always say happiness stems from growth and progress. And so I love making progress at the gym. I love making progress with the business. I love making progress with my relationships, literally everything. And I do feel like it's good to, you know, take your foot off the gas every now and then, enjoy the fruits of your labor. I love going out to eat. I love to go out and have a couple drinks every now and then, but that stuff is not enjoyable. Vacations, going out, enjoying stuff, drinks, going out to eat. It's not enjoyable for me unless I know I'm growing and progressing. And so, you know, August, I enjoyed myself a little bit. I went out is my birthday month, and prior to August this year, I had only drank three times this entire year. And, you know, I went out, enjoyed August about five weeks. And then I got to the point where I'm like, okay, I got to get back to it.

[A]

Yeah.

[B]

Because it's like I'm starting to get the itch again. You know what I mean?

[A]

Yeah, yeah.

[B]

But good for you, man. Good for you.

[A]

Yeah. I want to be. I want to talk about something that I think is really important. So 2023, it was a year that I consider a personal failure because I didn't grow. I didn't do anything hard. Right. Jessely Itzler has this saying that every year you should do something that's memorable. And 2023 was a failure. And by most accounts, you can watch my content. We went on crazy trips. $50,000 trip. This, this, this. The other thing, most people would say, like, you were killing it, but I have nothing that I can anchor 2023 on. So 1-1-24, I said, I'm going to run a marathon. And I'd never done that at that point. I was 52 years old. So signed up immediately for the Vegas marathon. Ran the marathon, got the medal. I will always remember 2024 as the year of the marathon. That led to the goal of, what can I do in 2025? That's hard. My goal for 25 is to be at 9.9% body fat. At 53. I have no idea if it's possible, but I'VE been documenting the process since the beginning because I want to do something hard. You have to grow, right? That's the thing we have to do. Even when you, quote, unquote, won the game, you never stop growing, and you should always challenge yourself. So find that thing.

[B]

Yeah. I would say life gets uncomfortable before the level up, you know, and, you know, uncomfortable is the cost of, you know, the growth that we desire. At the end of the day, nothing good in life comes easy, and nothing worthwhile in life comes easy. And so I love that you're at what percentage now and you want to get to 9.9.

[A]

Just under 12. Like 11. 8.

[B]

Oh, you got that. And when's the target date?

[A]

December 31st. So you got this. I appreciate that.

[B]

That last bit really is just the. The diet.

[A]

Yeah, I think so.

[B]

The kitchen, the cut. But good for you, man. That's actually. That's exciting stuff. I know you're gonna hit it. So what was it like living and surviving through the 2008 crash?

[A]

Oh, that's a fun conversation. So let's. Let's go back to actually 2001, because that's the setup for 08. So I. I'm. I invested in the dot com craziness. So I turned seven grand into 200 grand, almost 200 grand, and then lost 80% because I wasn't investing. I was gambling. But I didn't know it. Right. It was trading options and all of this stuff. And that was a very humbling experience, going from a family who was housing and money insecure to having nearly $200,000 and then lose 80%.

[B]

The Wall street casino.

[A]

Yeah, I was right. So I never. I swore off of it at that point, but again, so I exit that at 4. I have roughly 40 grand, and I find that purple book, and I start real estate investing. So we buy three houses. I put 20 grand down on the first 10, on the second 10, on the third out of money. Then, you know, back in 2001-3, we had some appreciation, cash out, refi. At the end of that, I have eight houses. I go to an event by a gentleman named Bruce Norris. Bruce Norris says California crash is coming. And I'm like, you know, I'm now a millionaire, right, because of eight houses. And, oh, by the way, I still have that scar from losing 80%. So I don't want to. I don't want to have that happen again. Right. So I go to the event. I pay to go to the event. So again, pay. You got to be around the people. You got to get the right mentorship, all of that. And I research what he says and I think he's right. So what did we do to survive? We sold all our houses in 2006 and we 1031 into apartment buildings. And then in my market, Fresno, California, it starts crashing and then ultimately doesn't rebound until 2011. So how we survived is we were out of houses and in multifamily, which is, as it happens, great timing because what was cheap in 06 multifamily, because again, everybody could buy a home. So you were having vacancies, moving specials, all this stuff.

[B]

Yeah.

[A]

So multi family was a discount in housing was extremely overvalued. But we took advantage of it. We chopped, we sold all this, moved all the equity. So we went from eight to 80 houses or 80 units. Eight houses, 80 units in about nine months.

[B]

And what gave you the like, what, what was the driving factor that led you to say, okay, because in 06, the real. Oh, like this, the real estate market was. Was going crazy.

[A]

Absolutely.

[B]

And so when things are like, really heating up, going up, a lot of people are like, hey, I'm going to stay in. This is great. I'm a ride the wave. So what made you realize, hey, like, we're going to sell? What give you the confidence to sell and then go into an asset class that. That maybe wasn't thriving at that time?

[A]

The first thing was the fear of repeating what I'd done when I was 30. The fear of losing 80% of your stack.

[B]

Got it.

[A]

So it was definitely.

[B]

You wanted to take the chips off the table.

[A]

I did. I was well, yeah, I did. I. Well, it was really avoid that pain again. It turned out to be, let's take the chips off the table. But it was what, what the fear was is I didn't want to do that to my family again. Right. I had all this success, lost it all. At least that's how I felt. Got success millionaire for the first time. Didn't want it to happen again. So I went to the event and he. The one word that stuck out to me was this thing called the affordability index. I didn't know what it was, but the affordability index basically says what percent of the area could afford the average home. Right. So it's a math equation. And at the time, Fresno, I think, was sitting at like a 13, which meant only 13% of Fresno can afford the average home. Now, that number by itself means absolutely nothing, but when you look at the historical context of 20 or 30 years, you realize that 13% is the lowest number they've ever had. And I'm like, well this might go lower but the odds are regression in the means coming and I'm going to get out of the way. So it was fear, new education that I paid for and then sheer execution. I could not get out of those eight houses fast enough. And here's the example. You could look at this up on Zillow. 1818. So 1818 Norris Drive East N o r r I s drive east 93703. Look it up on Zillow. I'd buy it for one. Oscar.

[B]

Oscar, look up that address real quick.

[A]

1818 Norris. N o r r I s drive

[B]

East 93703 and get on the mic man, I got you.

[A]

So if you look on Zillow and you scroll down to the sale prices or whatever they call that history. Yeah, I buy it for 107 in what day? I mean you're looking at it now is 2001 ish. 2001, it was 162 000. So I buy it for 107.

[B]

So 107.

[A]

Oh yeah.

[B]

107.

[A]

107.6. Yeah. So I buy it for one hundred and seven. I end up selling it for 263. It retrades at 75.

[B]

Damn. After the OA crash. Yeah.

[A]

The guy I sold it to lost it to foreclosure and it retrade. I tried to buy it but I only wanted to buy it for 60. Somebody paid 75. Now it's worth three something according. Right. So again, if you hold long enough for real estate, it all comes back. But what did I do? I took all that fake equity and threw it into an apartment building that I still own today. Right. And just doubled up. But yeah, that's. It's powerful.

[B]

So you know, when I look back at this, this way crash, you know, I wasn't investing in real estate back then, but to. To know that they were doing income stated loans, state income loans, they were also doing, you know, what was it?

[A]

Ninja.

[B]

Not no income interest only, interest only nagam but negative amortizing loans.

[A]

Those were horrible.

[B]

Where you're making the payment every single month but your principal balance is actually going up.

[A]

It's crazy.

[B]

It's crazy. And then so when the crash happened, it's like, okay, your equity went down significantly but then your loan balance now has gone up significantly. And so people are like, why am I going to hold on to this thing? Yeah. And so everyone just walking away from their properties back Then strategic default it was called. Yeah, you had the short sales. But you know, today we, we've been in this high rate environment and we're not seeing discounts across the board. If you would have told me, hey, we're going to be in a. The rates are going to essentially double for 40 months and most markets around the country are barely going to be impacted. Maybe 10% discount. Some of these markets have actually gone up in value over the last four and a half, three and a half years. I would have thought you were crazy.

[A]

Yeah. It's funny again, I've been studying real estate for 50 years, all the way back to 1970. It's funny, I told people that we were not going to have a price crash, we were going to have a transaction crash. I have receipts. I've been telling people for three years. And again at a national level, I was right. If you're in Austin or you know, some places on the, you know, Miami coast, you've seen some significant draws. But why is that? It's because today and the Great Recession are completely different. Why did it happen in the Great Recession and why is it not happening today? It's a fair question. The answer is the cost of shelter. You pointed it out without knowing you pointed it out. What happened in the Great Recession is everybody. We had 51% of loans originated in 06 were ARMs. Most of them were neg am ninja loans that reset in two years. So in 06, record origination 08 loans reset. But what happened? The cost of shelter went up. So I'm making my mortgage payment. It's 900 bucks. 900 bucks. 900 bucks. And then bam, two years later it goes to 2,700. Right. Cause again, it was artificially 1.9% and then it went to 8.9%. So the payments tripled. And what happened was when it, when

[B]

what year was this?

[A]

So this was 08. This is the start of like strategic defaults and I can't afford it because

[B]

I didn't know the rates jumped like that back then.

[A]

Well, in the arms they did, right?

[B]

Oh, in the arms, right.

[A]

So in the arm, you, you people were approved for the teaser rate at 1.9. It you couldn't do it today. But this is what happened in 06. You were, your loan was approved at 1.9 even though it was resetting to 8.9 or even worse, 9.9.

[B]

But they would tell the borrowers you're going to refi again.

[A]

Exactly. Refi till you die.

[B]

Yeah.

[A]

So. And that's you couldn't write the loan today but that was, was written in 06. So now you get out of it and your payments at 2700 but rents 1200. So you have no incentive to pay this 2700 because you could rent somewhere else for like kind at 12. Why is it not working today? Because Today people have 30 year fixed rate debt. Their payments 800, there is no reset and rents 1200 or 1400. So that's why we're not getting the strategic defaults. That's why inventory is not building. That's, that's.

[B]

Yeah. But I will say know this year we're starting to see a slowdown.

[A]

Sure.

[B]

In travel, we're starting to see a slowdown in you know, additional goods and services that, that people you know can decide to cut out. Even the boat game right now?

[A]

Absolutely.

[B]

I just bought a new boat.

[A]

I saw, it's beautiful.

[B]

Great time to buy a boat right now. Very tough time to sell a boat for sure. My first boat bought it for 490 plus sales tax 527. I sold it for 398. Right. So a little bit of discount there. Had it for a year. The new boat I bought 3.5 in 2021, bought it for 1.3 four years later. Great time to buy a boat. A lot of these boats that were bought right. Coming out of COVID people overbought, they overpaid for them and then now with the slowdown, people are getting rid of their boats. But the slowdown I believe, and I also believe the liquidity is an all time low for most Americans is. Yes, you're right, there's transactions haven't been happening. But, but think about how most Americans re up on liquidity.

[A]

Absolutely.

[B]

It's by refinancing their primary residence that they live in the ATM of the house. Yes. And, and even if you're a high income earner, you make 400 grand, 500 grand a year as a doctor and attorney, you still have expenses. You, your kids probably go to private school, you probably have a couple car expensive car payments, you probably have an expensive mortgage. And so those folks still need to re up on liquidity. And no one's been able to refinance their primary residence for three and a half almost four years now. And so you are seeing a little bit of pressure on the economy today. Now the Fed just came out recently and said they're going to, you know, they're announced they're going to do a

[A]

rate cut, rate cutting cycle.

[B]

Yeah. Signal to probably a couple more Rate cuts between now and the end of the year. So I think, I think the timing is good for that.

[A]

Yeah. And, but make your money when you buy.

[B]

Yes.

[A]

The key. That's what you're talking about. It's a, I think it's, I think it's in much of the country ex the Northeast. It's a buyer's market and it's a buyer's market. All kinds of assets, whether it's a boat, a plane, fancy, like luxury cars. You want to go get a Lamborghini Urus. Great time to be a buyer. Horrible time to be a seller. Right. There's those things all over the place. But again, it's just because Americans are consumers. And you're right, nobody's been able to re up, get that liquidity. We are sitting on $7.7 trillion in money market accounts. We're sitting on record equity in homes. So the question I'm asking myself is this, what does the mortgage rate have to get to for homeowners to tap equity? Because you know it's coming, right? I believe it's sub 6%.

[B]

Sub 6. I would say they would need to go down about 100 basis points to really start to see some. So low five, some movement.

[A]

I think that's a reasonable guess. But it's coming, right? The President of the United States fixated on it. Powell's out in May, right? It's coming. Is it late 26, mid 26?

[B]

Hey, guys, if you're looking to get into real estate investing, but you're like, hey, I don't have the time, but you want to participate in the passive income, the tax benefits and the wealth building my company, Summers Capital Partners, with limited partners, people like yourself, and we go out and buy boutique hotels. We have a fund where we currently own five hotels and we currently have a waitlist for investors to participate with us. If you want to learn more to see if this is a fit for you, you can go to summerscapital.com invest to inquire and get on our waitlist and be notified next time we have an opportunity. Again, summers capital.com invest. Now back to the show. Let's talk about that. So, you know, as far as the rates go, I foresee probably, I think a lot of people are penciling two more rate cuts between now and the end of the year. Probably going to be 25 and another 25. So we're going to see 75 basis points worth of cuts between now and December 31st. Likely. Right. How many rate cuts do we see in 20, 26. Well, what does that look like?

[A]

If you believe the Fed, we'll give you. I look at this stuff every day. Right. So the Fed is the Fed in their dot plot only penciled in one cut in 26 and one 20 in one in 27. I think that's complete crap. But that's what the Fed says the market. Right. You know what's called, you can look at the Fed watch tool. They penciled in two more cuts this year and three cuts in 26. So somewhere between as of today, five more cuts and three cuts is, is what the smart money saying, Fed versus market.

[B]

Okay. So we're looking at, you know, about 100 basis points. Yeah. And I think that's probably a good median, I believe to where we're going to see some more activity transactions. More deals will start to pencil on the commercial real estate side which will, you know, have more buyers, you know, playing ball and more sellers willing to sell. And then I think on the residential side, I think you'll see some more activity as well. More, more first time homebuyers ready to jump in. You'll start to see some homeowners be willing to refi. But let's also not forget, I mean equity hasn't really increased much in the last three and a half years for these homeowners. So they might not have a ton of equity to tap into unless they just haven't refied in quite some time. And they're like, all right, you know what, liquidity's low. Let's, let's refi.

[A]

I think you're gonna be, I think you're gonna be shocked. Again, these are all aggregate numbers, but we have never had at an aggregate more equity in homes ever. So yes, if you bought in 23, you probably don't have a lot of equity. But again, we have 40% of homes owned free and clear. That's a lot of equity. Right. We have 40% of, you know, the remaining, you know, that have mortgage rates below 4%. I mean there's, I think there's a lot of, I think there's a, the ATM machine is going to open up. And that's what I keep telling all these doomers who think the economy is going off a cliff. I'm like, let me just ask you a question. We got all this money sitting in, in money markets account 7.7 trillion. We've got somewhere in the orders of $28 trillion in home equity. And last time I checked, consumer behavior hasn't changed. Right. We can all pull back For a little while, about six months. And then we just say, we got it. We got to live our life. Right. We're not being impacted by this or that. We've got to do our thing. Now. Our thing might be vacations or eating out or a new car or we're going to move. Right. You have a. You have a kid, you have a second kid, Right. The first kid's out of a bassinet. It's into a bed. You need more space. People are going to start moving. And if rates come down again, somewhere between 6 and 5, that'll start going. And again, I'm not saying we're going back to six million transactions, currently at four, but we'll go back to four and a half million. And that's going to feel like. If you're in the industry, that's going to feel like a buffet because you guys have been starving for four years. Right. So, again, I think people are going to be shocked at how much money in liquidity is. Gets into the system in 26. I think people are going to be shocked.

[B]

And do you believe 27 will be a big rebound year?

[A]

Well, default rebound of what?

[B]

Tick up in transactions and asset appreciation.

[A]

So I think what we're going to see for the rest of the decade is very similar to what we saw in the 80s. And again, I've studied history back to the 70s. So if you guys don't know what happened from 1978 to 1981, we saw real estate transactions crash 50%. They were 4 million in 78 and they were 2 million in 81. 50%. What did we just go through? We went from a total collection of nearly 7 million to 4 million. So not quite 50%, but that. Why? Because affordability sucks. Affordability was never worse than 1981. Today's the second worst. Right. Again, 81 was worse, but people are like, it's worse today. It's not.

[B]

In 81, I know that the San Diego median home price was like, less than $100,000.

[A]

I'm sure it was.

[B]

Which is crazy. Yeah.

[A]

And mortgage rates were 18%. That was the key. Right, Right. But so your question was, what's going to happen? So again, if you go from 4 million to 2 million. 78. 81 guess how long it took Rich to go back to 4 million transactions.

[B]

Mm. I'm going to. I'm going to say four and a half years.

[A]

No, 1996. Fifteen years. It was just a slow build every year. So that's what I think is coming back. We are not Going to have a V shaped recovery in transactions. It's because everybody's life is different. Right? You can wait a little longer. You want to wait a little longer? It'll be, it'll be a decade. It won't be till 2031, 2032, until we're back to 6 million. But we've lost half the real estate agents. We lost 60% of the brokers. So the people that are still in the business, they're going to crush because they stayed in, they survived. They're going to, they're like right now there's a refi boom going on. Not cash out refi, but rate and turn. Because all these people did stupid 21 rate buy downs and they got lucky. Right. Their rates were jumping back to 8% but now they got lucky. So you see, refis were up 70% year on year last week. They're going to be up probably 90% when they report tomorrow. So again we're seeing a refi boom already. Rate and term rates continue to drift lower till January. Then you get cash out refi. Then the question is, are consumers smart? Do they pay off debt? Do they invest, do they, do they raise dry powder or do they do what consumers do and just splurge? We're gonna see.

[B]

Yeah, you're right. I, I do feel like a lot of the real estate agents, loan officers that were one foot in, one foot out, it was their part time hustle or maybe it's full time, but they just weren't good at it. They've, they've washed out of the industry of course. But on the flip side, the ones that are good at it, the top 10%, it's always the 80, 20 rule, right. It's like 20 of the agents, 20 loan offices control 80% of the business. And those individuals have, have really, you know, doubled their book of the business. This during the season of, you know, high interest rates and so they'd be primed to set up. I also think it's a great time for new agents and new loan officers to get into the industry. Couldn't agree and learn it right now.

[A]

Yes.

[B]

Because as things heat up over the next 12 months, 18 months, there's not a ton of competition for them. So I think it's a great opportunity and I'm, I'm curious to see what happens. I also believe that on the investment side we're talking commercial real estate. The rates coming down is, is, is going to be, it's going to bode well. But I've been saying this all along like I said this in early 2025, I really saw 2025 as an opportunity to, to go in and pick up deals at a discount. Assuming you can do three, three things. Buy at a good location, buy below market value and have a clear path to force appreciation and add value. If you can do those three things and you have a long term time horizon, I always said 2025 is going to be one of those years where there's no buyer demand and you're going to, you're going to start to see some sellers that are willing to concede some discounts. And we've seen that thus far this year. We've been playing a little bit of offense. And you know, I think for the folks that are sitting on the sidelines and they have some powder ready to go to work and they have a long term time horizon, I really believe these next four months between now and the end of the year is going to be that, that window to where you know you can strike. Because come 26, come 27, I think there's going to be a lot more buyers that are willing to play ball.

[A]

Man, you are, you are so in front of this. Most people don't get it, right. I've been doing this a long time. So there's a couple of things you said there that I want to go back to. First. First, at the beginning of that, being a new agent, new broker. You're absolutely right. Do you want to be a new agent today or a new agent in 21? Now if you say 21, I get it. It was easy. You put a sign in the yard, you got checks, but you didn't learn anything, right? And then you bust out because you're broke. If you learn today, it's hard. And good news, if you start today, it will probably never be this hard again for 20 years. So you're going to learn at the hardest time and your reward for the return of your effort is going to be exponential next year. So you're dead on. Most people don't get it. Most people would tell me, I want to start in 21. No, you're idiot, you're a lazy, you're going to go bankrupt. Start today. So that was genius. The second thing is, if you look at our portfolio, which we've built over the years almost two decades, 70% of our purchases are between Halloween and New Year's Day. Why? Because retail buyers lose their mind, they leave the market and I'm a cheap son of a gun. So I want to make my money when I Buy. I want to write disrespectful offers. I want to write seller carries, I want to get concessions, I want to get repairs. I want, I want everything. So I want to, I want to buy with less competition, more inventory, and more motivated sellers. October to January 1st always works. You add on top of that, the buyer's market we're in today because of everybody's high rates and the economy and all this other nonsense. I am salivating for the opportunities that are.

[B]

Say this out again. 70% of transactions happen to win between Halloween.

[A]

For me, this is our portfolio studied over your portfolio. My portfolio?

[B]

Yeah.

[A]

70% of the deals we have closed were put pending between Halloween and January 1st.

[B]

Yeah. I mean, it's crazy. I think about the, the best, one of the best hotel deals we bought and this was a new construction deal up in Lake Chelan, Washington, developed in 21. And it came to us in November at 23 from our bridge lender. They had just repossessed the deal from the developer and they said, rich, we got to get this off our books by the end of the year. This is right before Thanksgiving.

[A]

Yeah.

[B]

And they said, we think you guys would be the perfect buyer. We can sell or finance it to you guys. 0% seller financing for the first six months with a two year term. And we can give you like a pretty big discount, I guess about a 35, 38% discount versus what the property had previously been appraised for two years prior.

[A]

Nice work.

[B]

And, and that was right at the end of the year. But you're right, that time of year a lot of people take their foot off the gas. The holidays are happening, people are traveling, their kids are out of school. And, and people aren't playing offense. And so you're, you're saying the sellers are willing to concede more because the buyers are not.

[A]

The buyers aren't there. Again, I want to play with. There's less competition. Right. I'm willing to play in any market. Right. So I was still active in 21, in 22. But you had to be fast with cash, right? I can do that. I can write that check. But I would much rather play today. No competition. Time to look at properties, time to get repairs done. It's just a different, different time. But yeah, I, I'm, I want to play with no competition. And, and most people don't. Most people are like, they look at the market today and they're like, and that's the same crap I saw in 2010 11. Like, like, I bought a house, I bought a house at 75 grand and then it's 60 grand and then at 40 grand and people like, what are you doing? I'm like, I don't know where the hell the bottom is, but this stuff's below replacement costs. I mean, yeah, I lost some money, but really. Right. I added assets and I'll stack for decades.

[B]

Yeah. So what is your, your personal real estate investment strategy?

[A]

I want. So what I want to do is always get a good or great return. What does that mean? So I have a buy box, and that's a set of criteria that produces an active list. So, like Fresno, California, where this whole thing started. I, I never lived there. I never lived in Fresno, didn't know anybody. It was just a cash flow market. So Fresno at the time was about 600,000 people. It was too big for me because I lived three hours away. So what I had to do is I had to find an area to invest in. So what did I do? I went to Fresno and I talked to 30 people. Where would you invest? Where would you invest? And out of that, most people said what was called the Mayfair district, 93703. So, okay, great, I'm going to, I'm going to zone in on that. And then I said, that's still too big. What do I want? I only know houses. So I'm going to buy houses. Not duplexes, not quads, not apartments, not mobile homes, not land houses. Then that was too big. And again, I'm, I'm a tech worker, I'm a software guy. So I don't have mailers and postcards and all this stuff. So I buy three or four bedrooms, between 1500 and 2000 square feet. So that criteria at the time, rich produced about 30 active listings. So I looked at that list or that criteria, I should say, for three years. So that means I ignored 99.9% of the market. But you know what if something swam in that little area that was a great deal.

[B]

You knew it. Yeah.

[A]

Better than anybody else.

[B]

Yeah. I always say, the more clear you can get with your search criteria, you know, market selection and then your buy box. Like if you have the ability to buy up to a $2 million deal, why are we going to waste time looking at 5 and $6 million deals? If you're a hotel investor, of course, you're just wasting everyone's time. The broker's time, your time. And so the more clear you can get on your search criteria.

[A]

Yes.

[B]

The better you're going to know whether a deal is a good deal or Not a good deal. And the quicker you be able to

[A]

act, it's, it's everything. And again, so what did I do at the time? So I had this criteria. I listed out everything that came across over the span of three or four months. I knew what the average yield is. Let's say the average yield in 2001 was 8%. And what is that? Down payment, closing cost, repairs. The denominator, the numerator is expected yearly cash flow. Do the math, produces a percentage so it comes out average 8. I don't know about you Rich, but I don't do average. I only want to do good or great deal. So a good deal might be 10. A great deal would be 12% cash on cash. I call it yield. So that's all I did. I, I searched for 12% yields and that usually means writing below list finding a three bedroom that you can convert to a four bedroom to, to increase rent. Right. Finding value add opportunities. And that's all I did is I did great deals. From 2001 to 2006 we had eight houses. Then I went to that event, sold them and had 80 units in apartments.

[B]

So that was your strategy then. What is your strategy today? And give us, give us real quick a snapshot, give us a snapshot of what you currently own today in the real estate space. What's your portfolio like?

[A]

Yeah, so I think it's really clear or really important because again there's a lot of people that quote big numbers but they own like 1% because they're in a syndication. Right?

[B]

Right.

[A]

Everything I'm about to talk about is owned by two people, my wife and I. Now they may be hidden under LLCs and all that other stuff, but we've never taken outside capital.

[B]

It's always been our thatch does the same thing. And, and I think that's, you know, even more impressive when it's with just your money, just your equity, no investors, no partners. And yeah, I think that's a beautiful thing.

[A]

So anyways, so we have about 170 units in the Central Valley.

[B]

Right.

[A]

So from they're all in different cities, but the Central Valley of California, it's about half and half residential. Again resi being 4 and below and 5 and above being commercial. So it's about 50, 50 split properties. And if you look at just singles, about 35 to 40 singles. Right. Just single family homes. And what's beauty about this is I think I'm going to get a chance, Rich, to do exactly what I did last time when I went from eight houses to 80 units. Because I think there's a lot of busted syndications in my market. And I know this for sure because I had an apartment building that I sold in a bad part of town for a 5.8 cap. And they should, they've never traded below a 9 cap. It did go down to a 4 cap, so I sold early. But that thing that sold it, A4 is already listed and it's going, it's, it's gonna, it's gonna retrade at 12. So again, I think there's a lot of busted syndications over the next 18 months. And what I'm gonna do is just sit back and go sell a house. 1031 new apartment. Sell a house, 1031. So we might go to 300, 350 units over the next 24 months by exiting houses again, because all I own is entry level stuff. I'll exit those to FHA buyers after I fix them up, and I'll 1031 to apartments. Again, I did it before. I do it again.

[B]

Yeah, we, myself and to my partners that I used to work air traffic control with when I first got in the game, we, we partnered. But anyways, one of the first deals I bought was in Indianapolis. 32 unit multifamily deal. We sold this in 2021, right before the rates went up. End of 21.

[A]

Oh, good timing.

[B]

And I remember the buyer, he syndicated the deal. 32 units, submarket, 60s product. It was a rougher property and he paid a 3.7 cap. And on that, this is when the market was crazy.

[A]

Yeah. Yeah, good timing.

[B]

And so that's exact same example. And, and I, I, I know I, I wish that guy all the best, but I'm like, there's no way that that guy's cranking right now. No way.

[A]

There's no way. Yeah, he'll be lucky to keep it.

[B]

Yeah, yeah, but, and then that was when I was like, damn, I saw the writing on the wall, the multifamily stuff. I was like getting crazy. And then that's when I made the pivot in the boutique hotel game. But so I like what your move is here. I'm curious. With this portfolio, there's a massive portfolio, especially just you and your wife. How did you guys acquire the equity to, to acquire all these properties?

[A]

So it's really, it's a slow game and then it goes fast. So again, it's really funny. We built this entire portfolio with about 40,000 bucks. Okay, so again, the first three, 20,000. Down, 10 down, 10 down. Out of money.

[B]

Damn.

[A]

The money was gone.

[B]

Okay.

[A]

The next five were all equity extraction because again, if you look at Norris Drive, like we talked about earlier, I bought at 107, we refi to 160. We took out 40, we bought two more. So we just played this shell game. Then obviously we're sitting at 80. It's really funny that that same 40 grand got us 80 units, if you really want to look at it, because it was just the equity that moved.

[B]

So refi and roll.

[A]

Refi and roll.

[B]

Then we 1031.

[A]

31. Yeah, yeah. Refined roll. Then 1031, trade it up. Then the crash happens. And the other thing we did really well is I was writing for bigger pockets at the time is document what we were doing, right? So we were buying houses that were destroyed and fixing them up. And you just tell your story enough times and money attracts is probably what you're doing with your boutique hotels, right? Tell everybody what you're doing, show them, become the expert. And then money shows up. So we raised millions of dollars during the crash. Again, none of our own capital. We just blew it out. We paid 12% interest at the time, and then when rates went down, we refi everybody out.

[B]

So, yeah, so you raise capital, but just as debt, you didn't bring in any equity debt. Got it.

[A]

Debt.

[B]

Got it, got it, got it. Okay. And then you use that to scale. Yeah, got it.

[A]

So the whole portfolio, I think, I think I added it up one time. We only ever had about 100 grand of our own capital in a portfolio that's, I don't know, $30 million or something. It's just wild. It's. And again, two decades. Let's not pretend like this happened overnight, right? Inflation's a feature, not a bug. And we just rode that wave and we made some great timing, right? Selling houses at peak value, going into depressed. Great timing, as it turns out, buying during the dip, great timing. Raising private capital, great timing. But if you pay attention in the game, these seem to come around.

[B]

So what's your buy box today for multifamily? What's your, what's your strategy there?

[A]

So what I'm looking for, really is. What I'm looking for is what you got the phone call. I'm. I'm networking with community banks, which I did before. I got a 10 unit building, nothing down. All I had to do is put 50k in their bank as escrow. So I'm networking with local credit unions and bank in Central Valley because that's where I think I'm going To get my deals is from busted deals. When I get that phone call, hey, Michael, you got to bail me out. And it happened last time and I'm sure it'll happen again.

[B]

Okay. And then as far as like size heavy Renault, are you guys comfortable with a big renovation that's needed?

[A]

Yeah, absolutely.

[B]

You are?

[A]

Yeah, I mean, we like that 10 unit building. I never had a bank president call me before, but he got my number and called me because I own the building next door. And he goes, have you seen my building? I'm like, yeah, it's a piece of, it's all boarded up, all this stuff. He goes, I want to sell it to you. I'm like, oh, really? So anyways, long story short, he sells it to me for nothing down, you know, gives me a 3% mortgage rate. This is like 2011 or 12. And all I had to do is put 50k in the bank. Those deals are coming, right? And we'll take it on. So our buy box today is below 50 units. Again, it's just Olivia and I, we don't, we don't want to take outside capital. We don't need capital. We've won the game. So now we're just playing for fun. So we're not. Our gas isn't like to the floor like it was before. There's growth mode and chill mode. I'm definitely in chill mode, but I'm only. I got all the skills. So if you throw me a layup, I'm going to, I'm going to take it. And yeah, so 50 units below in my market because again, I don't. You know, it's, it's really funny. We talk about 170 units. Olivia and I combined spend about two hours a month on our portfolio because we, we've had property managers since day one, but we have, we've had the same team for a decade now. We have the same point of contact. We get daily reports. Everything has been systematized. So it just runs. So I have no problem adding 30, 40, 50 units to that team. And if I could do it without any money because I just equity swap, I'll do that all day.

[B]

Yeah. What, what's the rule in California as far as multifamily to where X amount of. You have x amount 13 and above. 13 units a unit. On site manager. Damn, that's crazy.

[A]

Yeah, because I think it got changed to 16. I stand correct.

[B]

Because a lot of most markets, especially like Midwest, east coast, you don't justify on site staff until you're. You're about 8, 500 units.

[A]

Yeah, I have several 18 units or one of the units is eaten up by on site.

[B]

So because of that is it, does it not make as much sense when you're in that 13 to 20 unit range? Because the economies to scale versus the, the expense ratio they're having, I mean on site staff, you're looking at what, an extra 60k minimum. Yeah.

[A]

I mean all in costs. Yeah.

[B]

Like minimum, right?

[A]

Yeah, minimum.

[B]

Right.

[A]

So again you just work that into the number. Right. The seller has to know that. And again the stuff I'm gonna typically like.

[B]

You let them live in one of the units.

[A]

Yes. Yeah, I think every unit I have over 16 I have an on site live in. On site.

[B]

Yeah, yeah. Interesting.

[A]

It just goes into the numbers. It's just, you just take it out of the, out of the rent and throw the cap rate on it.

[B]

So it's 13 units and that's, that's anywhere in California. 16 anywhere in California.

[A]

I believe it's anywhere in California. Certainly anywhere in the Central Valley. It's where I have my units. I think it's California wide.

[B]

Interesting.

[A]

The audience.

[B]

It almost makes the value of like a, a 12, 14 unit building more.

[A]

Absolutely.

[B]

Yeah.

[A]

Yeah.

[B]

Interesting. How come California? I know a lot of people are terrified of investing in California. Personally, we invest pretty much primarily only in California. But why California for you guys?

[A]

So I think there's two reasons. There's what started and what we're at now. So in the beginning I was a traveling sales guy who hates to fly. I'm a million mile flyer. Right. But I hate to fly. I'm a nervous flyer. All the bumps, I just hate it. So why California? The answer is I was not going to build a real estate portfolio where I had to get on a plane. So the answer was I had to be able to drive there. That's the honest truth. So Fresno's three hours away from where I live in Mountain View. That's why Fresno. No plane rides. But hindsight, I actually like California because our government is so anti new units. So if you don't build anything that means all the old stuff's worth more. And I've just let inflation be my friend. So I actually like the fact that California is so anti building. It means all my units are worth more each and every year. It's a, it's a funny game.

[B]

Yeah. The barrier at entry is, is obviously very big here. And I think it's funny because I think for me a lot of, when I hear a lot of people like you know, poo pooing California. A lot of folks that never invested in California before, they just hit the headlines.

[A]

You guys keep believing that. Stop, go away, don't come to my market. It's terrible.

[B]

Yeah, yeah, absolutely. You know, for us, we've, we've been able to take a lot of advantage of it because, you know, for us, we will only go into markets with tight Airbnb regs. I don't want to go own boutique hotels in markets where there's 6,000, 7,000 short term rentals. Right. And so we actually will only invest in markets with tight Airbnb regs. And so in California, you know, with the bureaucracy, the red tape here, there's very tight Airbnb regs. We saw what happened in San Francisco, we saw what happened in la. You know, here in San Diego, they slashed the airbnb supply from 16,000 short term rentals to just 5,500 a couple years back. But see, all that regulation bodes well for of course, hell owners. Right. And so we're taking advantage of it. And then also I, you know, for me, I think my progression has shifted as a real estate investor. Where when I first started the game, I was buying stuff in Midwest, Indianapolis, Cincinnati. We own some multifamily stuff still today out in Greensboro, North Carolina. You know, higher cap rate markets back then, but now I've really shifted my progression to where I really only want to buy in high growth markets, to where, you know, every 12 to 14 years the real estate will essentially double like clockwork with you without having to do much. Right. And so that's kind of how my, my, my progression has shifted. I feel like early on I really wanted the cash flow, but I realized like true wealth and real estate investing is really through appreciation. You know, that talks about this all the time.

[A]

Yeah. The magic of getting wealthy in real estate is you have to do deals that make sense day one that you can hold for a decade. And if you can hold for a decade, the chances of getting wealthy are very good.

[B]

Yeah, absolutely. Talk real quick on the 10:31 exchange because I think a lot of folks don't trade up. And there's a big benefit of trading up. I've done one 1031 exchange in, in my, my short real estate investing career. And it was actually that Indianapolis place and it, and it, it panned out really well. And I, I know a lot of folks that do trade up. You know, every five to seven years they do that two, three times and they've built a massive portfolio with the sense, the same set of equity. So talk about the benefits of the 1031.

[A]

Well, the 1031 exchange especially is the way we did it. It allows you to avoid pain because again, you gotta remember when we did it, we thought there was gonna be a crash. So we scooped equity that we would have lost. Right. Sold a property at 263 that sells for 75. I didn't lose any of that equity. So again, if you are in a market that you think is going to have some pain, one way to get out of it to scoop the equity via 1031. So that's step one. Step two is you get to give the middle finger to the irs. Right. This is a non taxable event. You get to take all the equity and given that it's a like kind exchange. And yes, there are some parameters like you got to identify in 45 days and close in six months. Again, work with a professional. But again it just allows you to go bigger. You get to reset the depreciation clock. A lot of people depreciate aggressively and then there's nothing left. You want to re reset that on a bigger asset. It's just a way, you know, there's a lot of people that just do 1031 till they die. Right. So they don't pay the IRS. So it is absolutely a strategy to legally avoid taxes.

[B]

Yeah, absolutely. Talk about, you mentioned something. You say every day is Saturday. What does that mean to you?

[A]

Yeah, so that's actually a very meaningful saying of mine. People ask you how's it going? And I always say every day is Saturday. But where that statement comes from is because I, I lived in the suck for 15 years. I already talked about it. I was a sales guy, right. And I had either national or worldwide responsibility. What does that mean? Well, that means every Sunday I was on an airplane because I had to be at some office or some client Monday. So the only day I had to enjoy with my family was a Saturday. Because I would always be home Friday. Sometimes late, but I would be home Friday. I'd have all Saturday with my family. And then usually by noon or 1 o' clock I'm on an airplane Sunday. So I never had a weekend for 15 years. Now every day is Saturday. And I get to do what I want, when I want, with whom I want. And it's all because of real estate and 15 years of sacrifice. So it's a very, it's a, it's something I hope everybody gets to enjoy. And I truly mean it. I, you know, I Got to come out and see you today, because every day is Saturday.

[B]

Yeah. So, yeah, it's a. It's a powerful thing, man. And, you know, I think it's not, at least for me, I. I've realized I always want to be building something because I, you know, I would say happiness comes from growth and progress, but to have the option to work or not work on most days is quite nice.

[A]

Yeah. And again, it's a peace of mind, no doubt. But it also allows you to take on a lot more new challenges when you don't have that rat race or that wheel that you're trying to feed every month. And you really can chase impact. And I think that's what we're doing is we're chasing impact now, not money. Money comes, no doubt, but when you can really focus on being a good human being, leaving the world a better place than you are now. I personally feel since my first video on YouTube, I'm trying to create something that outlives me by 50 years. I believe we die twice. Once when your physical body goes. And then the last time somebody says your name. I'm trying to make the stuff that I put out in the world last 50 years after I'm dead and gone. I think that would be quite the accomplishment.

[B]

I love it, man. Michael, I appreciate you coming on, my man. I encourage all the listeners to go check out your show, run rental at a time. Where can the folks get in touch with you? They want to learn more, listen to your show, all that good stuff.

[A]

I've done very few things right in life, but one thing I did is everything is one rental at a time. YouTube, Instagram, Twitter, website. Everything's one rental at a time. Go get the book.

[B]

I love it. There it is. He's Michael Zuber. Always looking fresh. Black on black with the purple air force ones. I'm Rich Somers. Listeners, thanks for tuning in. We'll see you guys in the next one. Peace.