Learn about Real Estate by one of the premier Real Estate Investors in New Jersey. Each week Joseph J. Zoppi will be talking about investing in real estate including buying and selling houses and apartments. Understand how the economy, the Fed and world events impact real estate and how to adjust to these dynamics.
Templar Real Estate Radio Show for January 25, 2020
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The following program was paid for by Templar Real Estate. The views and opinions expressed on this program are not necessarily those of the staff and management of WMTR. As always it is advisable to consult a professional before making a major decision. It’s time now for the Templar Real Estate Talk Show. Here’s your host for the program; Joseph J. Zoppi.
Hi, this is Joseph J. Zoppi and welcome to Templar Real Estate Radio Show. I’m a real estate investor, consumer advocate, author, and managing partner of Templar Real Estate Enterprises. You can reach us at templarcashforhouses.com or call us at 973-315-7990. We can answer any questions you may have or email us from our website. If you want a topic answered on the air, we will try our best to answer that as well, on the show. My company is a real estate investment firm. We buy houses for cash. We purchase apartment buildings. We do joint ventures with real estate investors. We loan money for rehabs and provide transactional funding, as well. We work with individuals that want to invest with us in single-family houses up to apartment buildings. We do not speculate and we’re very protective of our money and our investors’ money. Speaking speculation, later on, I’ll talk a little bit about speculation and some of the pitfalls of it.
I’m not a real estate agent. I have individuals on staff that are agents that will sell your house through the traditional multiple listing service, but we’re not a brokerage. The show will go over everything that is about real estate and those things that impact real estate. We’ll talk about rehabs, some of our investments, what went well, and those things that did not go as well. Especially, how we learned from it. We will discuss trends in the real estate market. Real estate is the biggest investment most people have and it’s important you know as much as possible about it. Here, I’m providing my opinion. It’s only my opinion. I ask everyone to do the research on everything. You have a CPA and they recommend something, I still recommend doing the research as well as was an attorney. Always double or triple check everything you hear, especially when you’re making financial decisions or any type of decisions.
Last week I spoke about putting cameras in investment properties. I said usually a four unit on up I would recommend. So, there’s certain subtleties with language and certain things based on context. In thinking about what my statement was I wanted to make it very clear that was for investment properties. If you have a two-family you could put obviously a security system in place. It really depends on how much money you’re making and where it’s located. I do recommend, obviously, putting security systems in your primary residence. I wanted to make that clear. Every time you hear something from someone, like I said, you double check and triple check, and make sure what they’re talking about in terms of the context they’re talking about.
That reminds me of a story when I first got married. My ex-wife she used to always tell me, “Joe, you’ve got shower. After you’re done, you’ve got to close the shower curtain.” We never had shower curtains when I lived with my mom. We had the shower stall. It was a new thing for me. I was like okay, that’s fine. Two days later again she’s saying, “Joe, you’ve got to close the shower curtain.” I’m like okay. I’m naïve, I’m not paying attention. I must not have done anything. I must not have done it. Then a third time happened and she said, “You’ve got to close the shower curtain.” I’m like what’s going on. I brought her over to the bathroom. I go here, it’s closed. She said no, it’s open. So, we had this debate on what is closed for a curtain and what is open for a curtain. So, I won though. She had it where it was fully extended so it would drip. I thought that was closed because you couldn’t see through it, it wasn’t open whereas she was saying nom that was not the case. Again, in human language and also written language there’s subtleties and those things where one person thinks something else and another one thinks something else. We were very careful with that in our investments and we do a lot of research. I recommend for anything that you do, you look at those things.
The next thing I want to cover is a topic, which I discussed last week and the week before, and it had to do with the 12 things to look for when you’re engaging with a cash buyer. Case in point, like ourselves. I had gone, over the last two weeks, you had to look at how long the business has been in existence. I highly recommend they be part of the BBB; Better Business Bureau. In addition, I said about assigning contracts. That’s where you sign a contract and then the individual could have another person fulfil those obligations. Again, we don’t do it and we discourage it, but if you’re going into it with your eyes wide open, that is fine. It’s just that when you’re engaging with someone you feel comfortable with then and someone else has to pay the money, you might not be comfortable with them. You might have done your due diligence for the one person but then you’ve got to do for the other person or you don’t do it. The other thing that I talked about is when you’re presented with a contract where you need to sign immediately. Again, you shouldn’t have to sign anything immediately. You should bring it to your attorney so they can review it. Those are the things I spoke about previously.
Now, in this segment I’m going to talk about proof of funds. Sometimes it’s POF they call it. So, if a person’s purchasing with cash you would think they have cash. So, as a result of that, we will show proof of funds. We highly recommend that you request it. It’s not out of the ordinary. If someone says it is, then I would be looking for someone else. You could use a bank statement. I think that’s the best thing to use from our feeling, but you can have a third-party letter. The unfortunate thing about a third-party letter is that it’s not a guarantee. It’s not a promise. It’s a promise, but it’s not a guarantee. We’ve all had promises broken so an organization company might promise that they’re going to invest x amount of dollars in a house, but that’s not a guarantee. Now, we also use lines of credit, private investors, but each of those things we have fully documented to ensure that the person that’s selling the property feels very comfortable.
Unfortunately, sometimes with individuals selling their property and they’re under a tight timeframe, they’ll capitulate and not ask some of these questions because they’re so desperate. So, that’s something that is understandable, but sometimes it just exasperates a bad situation and makes it a lot worse. The other thing that I’d like to talk about is their place of business. If an individual or a company is going to purchase your home, they should have a place of business. It could be their home, which is fine or a commercial building, but you should be able to know where their office is. A lot of times investors you don’t know where their office is, so that’s something to be very cognizant of and be weary of that’s not the case. You’re going to be receiving a lot of money, hopefully, from the purchase of the house and you would hope that they’re a legitimate organization. If you follow these rules it’s going to be a lot better and you can feel a lot more comfortable in that you’ll have a successful transaction.
The next thing I’m going to talk about is real estate agents and app that’s used for real estate agents. There’s probably a lot of real estate agents out there. One of the things that has occurred over the last x amount of years is that there’s a safety concern for agents. They’ve been robbed, raped, and even killed. It is a serious situation. You’re showing a house or going to meet an individual to show a house and you don’t know who that person is, so a lot of things could happen as a result of that. There’s an app that’s out there that we just—we’re looking into right now and we’re going to keep you updated on it. It’s called Forewarn; F-O-R-E-W-A-R-N. It’s an app and what it does is when someone calls in they’re going to leave their number or you’re going to take their number. You put the number into the app whether it’s on your android phone, your apple phone, or on your laptop or desktop, you put their phone number in and it’ll do an instant background check. It’ll check for bankruptcies. It’ll check for mortgage liens. It’ll check for criminal history. It is 80% successful in terms of pulling information from an individual. Before you go to show a house you can check it out. I think it’s really, really important.
Back in 2014, in Arkansas, there was a real estate broker. She was kidnapped and murdered by a couple that targeted her for being rich. So, it is real and present danger with that. There are certain agents that do protect themselves in certain ways. From the statistics nationwide there’s a survey and 16% pack a pistol, 19% carry pepper spray, and 5% have Tasers. That’s about 40%. So, 40% of the agents are packing somehow but again, in certain areas, those things are restricted, especially in New York City and certain cities like that. With this app it really is proactive instead of reactive. That’s the thing, with all these things is more a result of so if something happens you don’t have to pull out the gun or the pepper spray whereas an app like this will be proactive and you know where you could reduce the likelihood of a potential problem. Thank you very much for this segment. I’ll be talking to you shortly.
Joseph J. Zoppi:
Hi, this is Joseph J. Zoppi. Welcome back to Templar Real Estate Radio Show. Right now I’d like to cover a couple of additional things about some events we’re going to be having in the near future. One of them has to do with investing in real estate passively. There’s two types of real estate investing. You can do passive or active. Active is something that we do. We will roll up our sleeves, we’ll do a rehab if it’s an apartment building, we’ll do all the research. We’ll look over the numbers. We’ll engage. We’ll fix up the building and then obviously receive the rents. That’s what an active real estate investor would do. Now, on the passive side, it’s more of where you invest in something and then you get a rate of return. So, we do both of those things whether it’s active or passive. Usually, when you’re investing in an apartment building there’s that passive side, so we sit back afterwards and we collect the rents. That’s the passive side, but the active side is getting into it, rolling up our sleeves, and looking at the deals, searching for them, and eventually fixing and selling them.
We’re going to have an event on passively investing in real estate and we’re going to have an individual that’s going to talk about self-directed IRAs. I’m going to bring him on next week. It’s probably going to be next week, to talk about self-directed IRAs and how you can invest in either real estate or other types of securities or other investments. It’s provided a lot of flexibility to investors so you’re not just tied to your 401K and what different types of instruments that, that particular company will support whether it’s mutual funds, stocks, so on and so forth. The self-directed approach is you’re more in control of your money you can do a lot more things with it. There’s certain restrictions, but the restrictions are relatively small considering the flexibility you’ll have. The gentleman I’m going to bring on will explain all those types of things, the dos and don’ts. Then, we’re going to have a follow up after next week’s talk at a hotel. It’ll probably be in the Parsippany area in the February-March timeframe. We’re still trying to finalize that. You can come by, you can listen, and you can learn some more about different investment approaches.
We’re going to also have another event for active real estate agents and how they could increase what they’re making. It’s going to be a lunch and learn, probably. It’ll probably be about an hour, hour-and-a-half, and it’s exclusively for real estate agents. Again, it’ll be in the Parsippany area and it’ll be in the same time frame; February-March timeframe. We’re excited to host that event. It should be very interesting. Agents have to do a lot of work. Their pay is okay, but they’re always getting charged fees for certain death fees, certain things that the brokerage will charge. Certain ones are more liberal and they won’t charge as much or charge at all, but this event should open their eyes to another approach and something that might make them considerably more money.
The next thing I’d like to talk about is some of the things with the economy and I said before, about speculation. So, we don’t speculate. One most recent example is with Amazon. A few years ago Amazon said they were going to open up a second headquarters. They provided a list of a number of cities throughout the country where they were interested in. They sent out a request for proposal to come back in terms of how they could support Amazon based on highway access so on and so forth. They were going to bring on about 25 to 40,000 individuals. It was a very big deal. A lot of people were always wondering where’s it going to be, where’s it going to be. One of those locations was New York City area. A second one was Newark area. Like I said, I don’t speculate, but I was always wondering whether it was going to come to Newark. It’s like okay, what happens if it does? What should we do? That was always going on in my head, but obviously I was very prudent with that and I didn’t jump on the bandwagon.
Amazon put out the final award to two places. One was New York City, the Long Island area and the other one was in Virginia; Arlington, Virginia. After they announced it, there was a lot of purchasing of real estate so on and so forth. Again, it was somewhat speculative because everybody assumed the deal was done. After the politicians got involved and started demanding additional things form Amazon, they complained about the tax benefits, the tax reduction that were going to get so on and so forth, and Amazon decided to pull the plug on it. They left. So, that kind of put a little bit of—popped the bubble a little bit in the New York area whereas on the other side with Arlington, Virginia, what happened was the median home prices in the Arlington area increased by 33%. Listings were down 50% so basically when the listings were down 50% because things were turning over very quickly because days on market were less than 28 days on market, there was a buying frenzy there whereas New York had initially experienced a surge but as a result of that, it’s decreased now. Home prices are down 15% in the area. Again, if you’re speculating you can see what happens when things aren’t truly finalized. I think some people in the New York area are going to get hurt because of that. Right now, prices aren’t appreciating that much and you take a 15% hit, that’s considerable.
Next thing I’m going to talk about is the migration to different states. There was a couple of articles out about the shifting of individuals moving from different states and they looked at it from a political perspective, but I’m going to look at it from both political a little bit, but really from a real estate perspective. So, California’s highly regulated and as a result of that, there’s a lot of people leaving California and they’re moving to other states that are more flexible as well as their economy is a lot stronger. One of them is Arizona. The second one is Texas. Texas has really gained a lot of individuals. I think last year California lost 86,000 individuals that moved out of California. Another state that’s losing a lot is New York. What’s happening is, people out of New York some are going to Jersey, which surprised me a little bit. It didn’t surprise me a lot, but they said it was a fairly sizeable increase. That’s what surprised me, I guess, because they’re still working. The other ones are going to Florida. Most of the New Yorkers are going down to Florida. Like I said, the California side, a lot of them are going to Arizona and Texas.
This article stated that in 2024 there’ll be ab increase in the electoral votes for some of these states like Texas, Florida, even Pennsylvania. It might change the dynamics of who gets in office based on this. There was a question about if more democrats are moving over to Texas, which is a red state, will that effect it. Now the question is afterwards, they’re saying maybe they’ll assimilate more towards the way Texans think and it will stay a red state. It’s something that we’d have to see. It’s pretty interesting to think about it but with those individuals moving out at record paces, both New York and California, what’s that going to do to real estate prices. Again, there’s areas where California has topped out and then with individuals moving out of the state, that’s going to put additional pressure on house prices. So, that’s something that I think as the years progress, it’s going to be very interesting where this goes. It’s going to be very interesting,
The next thing I’d like to talk about is inflation and the deficit. I talked previously and I said a little bit about the deficit and my concern for the deficit. Again, different things like this are going to impact interest rates. Obviously, again, it’s going to impact real estate. One of the things that I think the Trump Administration has not been successful at and no one has in terms of curbing our deficit, back in 2009 deficit went over a trillion dollars. That was up to, I think, 2012 and then it came back down below a trillion. Now, it’s inching back up to the trillion dollar mark. It’s going to continue to go up. That’s the issue. There’s some politics involved here. Unfortunately, neither side wants to take the necessary measures to control spending because it’s going to impact their contingency, their people, and they don’t want that. In the end, it’s really going to hurt everybody involved. Alan Greenspan, which is a former Federal Reserve Chairman, he warned of the surging out of control budget deficits, which was going to ultimately cause inflation. There’s certain individuals that say it’s going to really push really high. I don’t know if that’s the case, no one knows really, but that is a major concern of mine, as well.
When we’re doing investments we’re always looking at those types of things and how it’s going to impact our investments, where it’s going to be, what we’re in the middle of. If we have a recession how is that going to affect us? If we’re in the middle of x amount of rehabs and a recession hits how quickly can we get out of those rehabs? How quickly can we turn it over and sell it? What’s the impact going to be? That is always a concern of ours. We look at these numbers and where the economy is going, where the market is going, a lot. In 2019 the budget year, the government ran at a deficit of $984 billion. That’s the most in the last seven years. So, it’s going to go above a trillion in the next year or two. That is, like I said, a very big concern of mine.
Japan right now, it’s been for a long time, has been in the 200% of debt to GDP. Ours right now is about 105%. We have to pay back that debt. You could say that Japan’s handling it okay at 200%, they’re the third largest economy, they’re doing okay so it should be okay for us, but our debt is owned by a lot of individuals outside the country whereas Japan’s, the majority, 90%, is owed by the Japanese people themselves. There’s a difference from a cultural perspective and the government pushes on the individuals to buy the debt whereas we sell our debt and countries like China and throughout the world, purchases our debt. That’s something that’s definitely different. They’re saying that potentially it could really affect us considerably. That’s, like I said, a big concern of ours. Not everyone is talking about that. They talk about it here and there, but the spending continues. There’s no end in sight. That’s a very unfortunate thing.
I’d like to close out this session. I’d like to thank you very much for listening to us today. If you have any questions at all you could always call us or you can send us an email. Just go on our website and fill out the form, and if you’re ever interested in selling your house, selling your apartment building, if you’re interested in joint venturing with us, please give us a call. Okay? Thank you very much.
The preceding program was paid for by Templar Real Estate. The views and opinions expressed are not necessarily those of the staff and management of WMTR. As always, it is advisable to consult a professional before making a major decision.
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