David Meyer (03:13):

And so I kept doing it pretty slowly in the beginning, because I didn’t have a lot of money with which to invest. At the same time, I was sort of building a career in software and in data analytics and in 2015 I was like, “Man, I really love real estate investing, really love software,” and looked for a job. I just Googled real estate software and found BiggerPockets. I had never used the website before. And luckily it was about a mile away from my house, the place I was house hacking at the time, and got a job and have been working there ever since.

David Meyer (03:48):

I still have a small portfolio in Denver, but in 2020, I moved to Europe. And so now I primarily invest passively in syndications and don’t buy a lot of individual properties. I actually haven’t bought any individual properties since I’ve moved to Europe, but given what’s going on in the market, I am starting to look again right now.

Robert Leonard (04:11):

No investing in properties in Europe?

David Meyer (04:14):

No, I looked in Amsterdam where I live and it’s just very expensive and it’s just difficult to do as an expat. There are places in Europe where it is a little bit more attractive like Portugal, for example, and Belgium I think are attractive, but honestly, man, I just didn’t want to learn the laws of every individual country. There’s just so much. You have to translate everything to English. It’s really hard. I know and like the US housing market and figured I’ll just stick with what I know.

Robert Leonard (04:47):

Are you country-hopping or are you staying in mostly one place?

David Meyer (04:51):

No, we live in the Netherlands and stay there. My fiance was working for a company in Denver that got bought by booking.com and they are a Dutch company. And so they transferred her over there. BiggerPockets was kind enough to let me move with that sort of our home base. Luckily we do get to travel a lot, but Amsterdam is our home now.

Robert Leonard (05:14):

So that first property you bought in Denver back 2010. If you think about what that’s worth today, it’s probably gone up significantly in value. I mean even just properties in the last couple years in Denver have gone up a lot. So I’m curious, you don’t still own that property to this day. You didn’t hold it for that long, did you?

David Meyer (05:30):

No, I sold it in 2018. I had bought out some partners along the way there and sold it in 2018 for just about triple what I bought it for. Anyone who invests in Denver now will be shocked and a little jealous to know we bought a fourplex for just about 450 grand in a very good neighborhood in Denver. Now those are trading in the 1.2, 1.5 million range. But now I have 1031 exchanged that into some other properties, originally into other single families, into one short-term rental. And then I sold one of those and actually just did a Denver statutory trust, if you’re familiar with those. Anyone listening, it’s basically a way to invest in passive syndications with 1031 money. It’s a unique sort of investment vehicle, but that really it did so well. It really launched my investing career and gave me a lot of capital with which to explore different investing strategies and opportunities.

Robert Leonard (06:33):

Are you doing most of your passive multifamily syndication investing through others that have done it with BiggerPockets, maybe Brandon Turner or somebody along those lines?

David Meyer (06:45):

It’s not Brandon. I do talk to Brandon, but I haven’t invested with him yet, but it is pretty well-known people for the most part. I have done one or two smaller ones that are more regional, I would say, but mostly for experienced operators. And for me, it’s syndications are obviously you do need to do your due diligence. And for me, the experience of the operator is probably the most important one. I’m not typically investing with people who are relatively new to it, although I know there are probably new people who are very good at it already.

Robert Leonard (07:20):

Pretty recently, back in the middle of July, you published an article on BiggerPockets that you titled: The housing market correction has begun. Coming from someone who studies data as much as you, which I’m excited to have that conversation because a lot of people will go on podcast, social media and they’ll kind of spew their predictions and what they think is going to happen, but they don’t necessarily… If you drill into it, they don’t really have any data or reason other than just like a gut feeling. Somebody who actually studies the data behind what’s going on. I’m interested to chat about that. Given that you study it so much, we’d be probably pretty wise to listen to you. What are you seeing in the data that’s making you confident that the market has started to correct? And when you say correction, how do you define that?

David Meyer (08:02):

I should start all of this by saying I also don’t know what will happen, but I do think I have an at least informed opinion here. I believe that when you look over the last 15 years, basically since the great recession, there was a lot of factors and economic variables that were contributing to rapid price appreciation in the United States. And of course over the last two years, we’ve seen it really just sort of turbocharge, but it was going up at a pretty good clip even before then. And that’s because money has been relatively cheap. Inventory has been relatively low, so there’s just not a lot of stuff to buy. And demographics are really strong. There’s just a lot of millennials who are reaching their peak family formation years and that’s who primarily buys houses and that’s who enters the housing market. You see all of those things, and two of them in the housing market are still there.

David Meyer (08:56):

Millennials still want to buy homes. That’s probably not really going to change very dramatically. Whether they can afford to is a different question, but they want to. And inventory, although it’s going up a lot, is still relatively low in a historical context, which puts upward pressure on housing prices.

David Meyer (09:15):

The thing that’s really changed is affordability. Interest rates have been going up and with prices going up as much as they are, we’re at a point where affordability for houses is at a near 40-year low. And so that’s just going to reduce demand. The way I see it is that we no longer have… For the last two years, every macroeconomic factor was pointing in one direction, which was housing prices were going up. Now one major factor has reversed, but there’s still a lot of support for the housing market in a lot of the fundamentals. I think what’s happening is with this declining affordability, we are seeing a lot of demand get sucked out of the market and that’s going to slow down the market very considerably. But there’s really in my mind, not much of a risk that we are going to see the market at least on a national scale decline more than let’s say 10%. That’s a rough estimate.

David Meyer (10:13):

I think when you say what’s a crash, what’s a bubble? I think the best example is in the stock market they say, if it goes down 20% off their peak, that’s a bear market. I don’t think there’s any risk of that happening in the housing… I shouldn’t say any risk, but there’s a very, very low risk of that happening in the housing market. And instead I believe because of these factors, we’re going to see housing come off its peak. I do think it’s going to decline on a national scale, but it’s going to be very regional. And some markets are going to see continued growth, I believe, and some are going to see declines that might approach or even slightly exceed 10%.

Robert Leonard (10:49):

I’ve heard a lot of articles and studies say that millennials not only can’t afford homes, but they don’t want to buy homes anymore. So I’m curious what data points, what kind of research have you done that is showing that millennials actually want to buy homes?

David Meyer (11:03):

I look at a bunch of different variables. I think the NAR, they put out some buyer and seller profiles every year, which is pretty interesting. I don’t know it off the top of my head, but I think a lot of the idea that millennials don’t want homes is that millennials haven’t been able to afford homes. And so when you do look at home ownership rates for millennials, it has traditionally been lower than their generational peers. So if you looked at Gen X or baby boomers at this point in their life, they would own more. But I don’t know and I haven’t seen really anything that says it’s like millennials are like, “I don’t want to buy a home.” It’s that a lot of us… I don’t know how old you are, Robert, but for my peers who graduated college in the late 2000-ish, it was a really terrible job market. It was a tough time to start saving money, and I think a lot of millennials generationally were behind financially and that explains more of the lag in home ownership. But we’re seeing now in terms of family formation data, it’s really catching up and people, when they start a family, they want to buy a home. And so the demand has been really led by millennials for the last couple of years if you look at most of the data sets that track this kind of stuff.

Robert Leonard (12:20):

When you’re doing your data analysis, why don’t you put much weight on price drops?

David Meyer (12:25):

I think it’s important. It’s a major indicator, but I think ultimately at the end of the day, it’s really about what home prices sell for, not what the seller is asking for. And a price drop is really a reflection of whether or not the seller is in tune with the market. And at a time when the market is in transition, like it is right now, sellers are going to be optimistic and think, “Oh man, three months ago, I could have gotten this.” And maybe someone will buy it and so they’ll put out that number, but the market has turned and people aren’t just going to pay anything that you put on, anything you list it for at this point.

David Meyer (13:05):

I think we’re seeing that in the price drop numbers, that sellers are being a little bit overambitious. And that does reflect that the market is cooling, but at the end of the day, to me, what really matters is that housing prices year over year are still up. And that shows that there’s not like a crash happening right now, despite there being some lead indicators that show that the market is softening.

Robert Leonard (13:31):

Yeah. This made so much sense when I read this or heard you say this. It made so much sense to me because for me, I actually just sold one of my rental properties and my agent said, “If you want to sell it really, really fast, sell it at 100. If you want to sell it for fully what I think it’s worth, sell it for like 110. But if you really want to push it, I think we might be able to get 120.” In this case, we were like, “Okay, let’s just list it for 120. See if we get anything. And if we don’t, we’ll just drop it down to what it’s probably really worth at 110.” And we listed it at 120 and we got an offer and it sold, but if we hadn’t, we would’ve just dropped it to 110. And like you said, that wouldn’t have been an indication of really what the market is doing or saying. It’s not that the market’s declining. It’s just that we were aggressive on our pricing and we just had to drop it to really more in line with what is really worth.

David Meyer (14:23):

Totally. And I think people got used to… I talk to, on my podcast, a lot of people who flip a lot of houses, for example. They’ve just been gotten used to being able to just throw any number up there and people have been willing to pay for it for the last couple years. And it seems like that is changing. I don’t flip houses. This is just from what I hear from my friends. They say that they can’t just throw up any number, but they’re still hitting their margins that they would expect in a normal year. It’s not like they’re selling at a loss all of a sudden. The margins are still good. The profit is still out there. It’s just not the carnival it’s been for them for the last two years anymore.

Robert Leonard (15:00):

Talk to us a bit about how inventory shortages could get even worse as interest rates rise and homeowners feel locked into their current property?

David Meyer (15:10):

I think this is going to be one of the most interesting things to watch in terms of real estate data over the next few years, because inventory has been trending down for decades. And inventory just for anyone listening is basically the number of properties available for sale at any given time. So usually it’s the last day of the month. That has been trending down and basic supply and demand indicates that if inventory is low, then that’s going to put upward pressure on housing prices. And there is this theory that even though it’s super low right now, it might get worse because interest rates have been so low that people aren’t going to sell. And if you were a homeowner and you locked in a 3% interest rate for 30 years, it’s not necessarily very attractive to sell that home, move to another property that’s probably significantly more expensive at a higher interest rate. Basically to trade up right now is incredibly expensive for people who have bought over the last two or three years.

David Meyer (16:12):

And so there is this theory that people won’t list their properties. I think there’s some weight to it. I don’t think it’s going to be as dramatic as some people believe because ultimately for most home buyers, selling and buying a house is more of an emotional decision. It’s more of a circumstantial decision and less of an economic decision. But for some people who don’t need to sell, they won’t. And for investors, I think, they’re less likely to sell if there’s less attractive options out there. And just anecdotally, there is some information recently that’s showing this might be true. Like over the last couple of weeks, the number of new listings… So the amount of people who listed their properties for sale for the first time has started to decline again. And so this is, I think there’s a real chance that inventory doesn’t really rebound to pre-pandemic levels in the near future, at least on a national level. I think it’s too early to make that call, but it’s going to be a very interesting thing to watch in terms of the dynamics of the housing market.

Robert Leonard (17:15):

I fit into this exactly. This is literally happening to me and not so much from the selling side, but still for the rental market. Is that my plan was… I live in a house hack and I’m using an FHA. So my plan was after I lived here for a year, was refinance into conventional if I could, and then use an FHA again to buy my next house hack. But now with interest rates doing what they’re doing, if I were to just lose my rate and go to current market rates and nothing else changed, my monthly payment on this house hack would go up like 900 to $1,000 a month. My interest rate’s 2.25% on a 30-year fix.

David Meyer (17:49):

Awesome.

Robert Leonard (17:50):

When I went to the title company to close, she said it was the lowest interest rate she’s ever seen. And so-

David Meyer (17:54):

I’ve never heard that.

Robert Leonard (17:55):

Yeah, it’s awesome. And I didn’t buy it down, no points, nothing. That was just at least the actual rate. So now my property’s not going to go on the market for rent. So that’s like you said, it’s not on the selling side, so it’s not necessarily inventory of sales, but it’s inventory of rental markets. So that’s an impact as well. And now I’m not a buyer to buy another property because kind of stuck a little bit in this one. So I’m trying to figure that out. So when was reading this and heard you talk about this, it was definitely something that anecdotally I feel is true, for sure.

David Meyer (18:24):

I think it’s going to be really interesting to see what happens. We study a lot of data, but so much of it is psychological to see people… Even if it’s not a rational decision, they see that interest rate and they don’t want to pay more. And sometimes it is irrational decision, sometimes it’s more emotional, but this is one of the most important things. Actually, I was just writing another article that really, to me, inventory levels are the X factor in the housing market over the next few years. We know of what’s happening with a lot of the other trends, but whether or not inventory gets back to pre-pandemic levels will make a big impact on what happens with housing prices.

Robert Leonard (19:07):

I recently wrote a book called The Everything Guide to House Hacking, which people can pick up at everythinghousehacking.com. House hacking is pretty near and dear to my heart. Personally, I’m house hacking right now. So I want to talk about this article that you wrote, that is: The 98 Best Markets for House Hacking. When I saw it, I was pretty intrigued and now I want to test you. What are every single one of those 98 best market… No, I’m just kidding.

David Meyer (19:34):

Well, actually, I should have titled this something different because it was really, I just looked at the tendered biggest markets and measured how good they were at house hacking. And then I put a bad title on it.

Robert Leonard (19:45):

Well, hey, it gets people to click. It’s more interesting maybe than a hundred. Before we get into what makes for a good house hacking market, give us a quick overview of how you define house hacking.

David Meyer (19:58):

I think house hacking is basically just an owner occupied real estate investment. And you can traditionally do that in two ways. You can either buy a small multi-family, live in one unit and rent out the rest, or you could buy a single family home and rent by the room. So find roommates. And I’ll just say, I also love house hacking. I did it for several years. I think it’s a no brainer way to get into real estate investing. And that’s honestly why I wrote this article, is that with declining affordability in the housing market, you see a lot of headlines about like, “Should I rent or should I buy?” And that’s a good question.

Robert Leonard (20:39):

But there’s always option three.

David Meyer (20:41):

Exactly. I was just like there’s a third option. And house hacking, it’s almost always the best option. That’s why I wrote this article because I was kind of like, it’s this false dichotomy to say you could do one or the other. There is a really good middle ground that is a very safe investment and really beneficial to almost anyone’s financial position.

Robert Leonard (21:04):

I don’t know. Do you know who [inaudible 00:21:05] is?

David Meyer (21:05):

Yeah. Yeah.

Robert Leonard (21:08):

I love a lot of what he says, I hate a lot of what he says. I’m like he’s a perfect example of you could love some of the things some people do and not for everything. And so he talks a lot, a lot, a lot on Twitter, in social media in general about this rent versus buy debate. And almost every time I see it, I comment there’s a third option, house hacking. Every single time. And he hasn’t gotten back to me yet, but if he ever does, I hope he sees it at least.

David Meyer (21:33):

What’s his position on rent versus buy?

Robert Leonard (21:36):

His position is that it almost always makes sense to rent for most people. And he’s a renter. He says that a lot of his wealthy friends rent. He says he has nothing against buying a house. Like, “If you want to buy a house, that’s fine. I’m not going to tell you you shouldn’t, but just realize that from a financial perspective, it’s not an investment. It’s not the best optimal financial choice for most people; it’s an emotional one. And it’s you need a backyard, you need bedrooms and space and these types of things for your family and you’re doing it from that perspective. You’re not doing it from a financial perspective.” And I think in many cases he’s right, and in some cases he’s wrong. But the point is that for me, and like you said, is that I think he forgets that there’s a third option.

David Meyer (22:19):

Definitely. And I think that’s generally true. I listened to this other podcast recently and the guest was saying, I forget his name, that buying a home is sort, it’s not a bad financial decision. It’s just like you said, it’s not the optimal financial position. And I think that confuses people too, who want to buy a home and they’re like, “Oh, I’m going to lose money.” It’s not like you’re necessarily losing money. It’s like if you took the money and invested it into a different type of asset, you might make more money. But if you want a home and you want to buy one and that’s important to you, it’s not like you’re throwing money away in most cases. Sometimes you are, but in most cases it’s sort of like a forced savings account. It’s just not going to make you as much as investing in rental properties or putting it in the stock market or something like that.

Robert Leonard (23:08):

The problem with the rent buy debate that I see… And the math does a lot of times work out to be in the rent’s favor, but like you said, it’s dependent on you investing that money in something else. And I think that is a huge flaw in that kind of debate because if you adjust that number at all, of what people take from… that they would’ve put for down payment on buying something and instead investing that and renting instead, I just don’t think most people will do that. That’s the thing. I think if you adjust that down a little bit, renting doesn’t necessarily always become better. So I think you’re making… Not you specifically, but people that are making that argument for renting are making a big assumption about people’s psychology. And I just don’t think that’s always true.

David Meyer (23:48):

I totally agree. On this article, there’s a calculator you can actually download for free attached to it that basically lets you see house hack, rent, traditional home purchase. And to do this calculation properly, you need to input a rate of return like you’re talking about. It’s like, what is the rate of return that you would generate if you took the money from a down payment, for example, and put it in the stock market? And at first I was like, “Oh, I’ll set the default at eight or 9%,” because that’s like the standard S&P index fund number that you hear. And I was like, “No way. There’s no way that people have the discipline. I don’t have that discipline to put every dollar that I don’t invest into the stock market and invest in optimal returns.”

David Meyer (24:37):

And so I put it at three or 4%, because that seemed like more realistic. But for some people that number might be zero. If they’re not going to take that money and invest it, then that totally changes the math very dramatically, and probably means that you should buy a house because it’s that forced savings account that will get you to invest at least a little bit. It’s not going to make you the same nine, 10%, but it’ll at least improve your financial position over time.

Robert Leonard (25:07):

We are definitely completely aligned in the same boat on that one. Getting back to the markets for house hacking, what data were you looking at to determine if a market was one of the best for house hacking? Are you looking at rental rates versus property values so you can get that price to value or price to rent ratio kind of in line with maybe more affordability? What are you looking at there?

David Meyer (25:29):

Pretty much. Because there’s so many variables in house hacking, I had to make a lot of assumptions and that’s why I made the calculator by the way. So if you want to change my assumptions, you can just go do that. But basically I did exactly what you said. I looked at the median rent and the median purchase price for just a regular house. So it’s for any residential property, which could be anything from one unit to four units. And I also made some assumptions like what your rent would be. If you were renting, would be the median. And that if you bought a duplex that your income as a house hacker would be equal to the median rent too. So there’s just a lot of assumptions there.

David Meyer (26:11):

But I think my goal is if you hold those assumptions true, they might not be the best assumptions, but as long as you hold them true across all of the markets, then it shows you directionally which markets are better and which markets are worse for house hacking. I’m sure there’s nuance there, but I think that’s a pretty good way to at least get a sense of the trends here. And I think that was pretty accurate. You could see the trends pretty clearly about which markets are better for house hacking and which ones are probably better to renting.

Robert Leonard (26:43):

Give us some examples. What were some of the most notable cities from your research, both good and bad? What were some of the best cities and what were some of the worst?

David Meyer (26:54):

Generally speaking, more affordable markets are better for house hacking. I don’t think that’s super surprising, but just to give a shout out to one that I was surprised by. Is usually you see big cities aren’t as good for investment, like huge cities like San Francisco or New York, but Chicago was one of our biggest, best cities for house hacking. And it’s because prices in terms of purchase prices haven’t gone up there all that much over the last couple years compared to the rest of the country but rent has. It’s a pretty good place. Philadelphia is also really popular. Milwaukee and even Miami was one that I was kind of surprised by just because I think rent is so high in Miami. And Miami’s one of those markets where it’s really polarized. There’s like ultra, ultra luxury, but a lot of Miami-Dade County, there is more affordable areas that still have high rent. So that’s a good option.

David Meyer (27:49):

On the other hand, the markets that aren’t great are the ones that you’ve probably heard are in a bubble like Boise, Reno, Austin, are all some of the ones where it’s just the price of housing has gotten so crazy there. Even with house hacking, it might not make sense because it’s just the prices are so out of whack with the rest of the economy in those local markets.

Robert Leonard (28:17):

Outside of just the house hacking strategy and just thinking about real estate in general, whether it be rental properties, maybe even flipping or multifamily syndications, what is your data showing for the best general real estate markets or the best for longterm rentals?

David Meyer (28:31):

I think it depends. Personally, I look for markets that have appreciation upside and a decent cash flow. Some people just want pure cash flow. And if you’re looking at that… I actually just, I think it’s coming out today or tomorrow, wrote an article about the best places to find cash flow. But generally speaking, on the East Coast, I did the top 10 markets and not a single one of them was west of the Mississippi, which was kind of interesting. You see, the Midwest upstate New York is really popular and the Sun Belt for cash flowing markets.

David Meyer (29:06):

And then appreciation markets, I think it’s really hard to tell that right now. For years, I really was interested in picking those, but things have gotten so crazy in some of these markets it’s really hard to predict. But I still think generally speaking, Texas, Florida, Tennessee, Sun Belt, Southeast are going to be really popular. So those are kind of the markets I think are the best. I’ve invested in Texas recently, in Virginia, in Alabama. I have a guy, a friend on my show who’s all about Northwest Arkansas. So I think these markets are still affordable. People are moving there. There’s strong migration there. That bodes well for the 5, 10, 20-year timeline.

Robert Leonard (29:46):

Back in early July, you did an episode on your podcast called get rich in the recession. And there was a subsequent log article titled: What to invest in during a recession. So how should investors be preparing for a recession and how can we benefit from the recession?

David Meyer (30:02):

I think people generally are rightfully fearful about a recession, but in typical years in a recession, it is not super impactful on housing. And I’ll say that this is probably… I don’t know if you’d call this a typical recession because it’s really GDP is going down because of inflation, not because people aren’t spending their money. I think that housing prices, like I said, are probably going to go down a bit but not dramatically, but I don’t really see rent going down. And that actually means that cash flow prospects across the country will probably get better because as you were saying before, a good way to estimate cash flow is the rent to price ratio. And that means if rent continues to stay strong and maybe even goes up over the next few years even in a recession, and housing prices go down, that improves cash flow prospect.

David Meyer (30:57):

I believe that means that buying opportunities are going to be better over the next couple months. And it’s true that interest rates are higher, but from everything I hear from my friends who are really active in buying single families and multifamilies, there’s just way better opportunity to negotiate right now with sellers. And I think that that’s the best thing for people to keep in mind. Is like, yes, it’s a recession and that creates fear, but that creates fear among people who are selling their property too and they might be willing to negotiate with you and you might be able to find better properties.

David Meyer (31:33):

That being said, personally, I don’t flip houses, but I would be wary about flipping houses in this type of market because I think there is a good chance that… Flipping houses is great if you’re in a consistent bull market and we are not in a consistent bull market. I think there’s a lot of market and timing risk with flipping right now. And there’s an enormous amount of labor and material risk. Just people it’s hard to find products to work with. I would stay away from that. And also, this is just a personal note. I think the short-term rental market is… I don’t want to say it’s going to crash. I don’t think that’s what’s going to happen. I think it’s really interesting time for the short-term rental market because when a recession comes, people travel less and we’ve seen just this massive influx of short-term rentals over the last couple years. And so we’re seeing conditions where there is continually increasing supply and potentially decreasing demand. And so I think there is probably going to be a drawback in prices that is stronger in vacation rental hotspots.

David Meyer (32:38):

Personally, I wouldn’t be… You can look at it two ways. You could either say you’re going to stay away from that, or for me, I own a short-term rental. I’m interested in buying more. I think those markets might have a discount in the next couple of months. It might present a good opportunity. That’s how I’m looking at the next couple of months, at least.

Robert Leonard (32:58):

Yeah. I think the short-term rental debate is really interesting. I hear people come on the podcast and they say they’re short-term rental investors, obviously. They’re a little bit biased, but they don’t think that there’s any concern for short-term rentals. And then others don’t necessarily feel the same way, maybe such as yourself. I don’t necessarily see it that way. I’m not personally a huge fan of the short-term rental investing strategy as a whole. I just don’t personally staying in Airbnbs all that much myself. It just doesn’t make a lot of sense for me to invest in it if I don’t really love it myself. So I’m really interested to see there’s a lot of money that’s going into Airbnb and short-term rentals, which I think is interesting. There’s funds that are multi-hundred millions, if not billions of dollars that are going into the short-term rental space. So that’s really interesting. Like you said, it’s going to be a really interesting time for short-term rentals and I’m excited to watch it play out, especially with no dog in the fight really.

David Meyer (33:48):

I have won and I honestly bought it mostly so that I could use it sometimes. And I was just like, “Oh, if the cash flow is great, as long as I break even, I’ll be pretty happy.” And it’s actually worked out great at cash flows and has appreciated a lot. But I think there’s two risks, I’ll just say. One is, there’s a lot of competition. And I think if you’re going to be in the short-term rental game, you need to go to the higher end. If your property doesn’t stand out and is not a fantastic place to stay, you’re going to be in trouble because there’s a lot of just garbage coming on and there’s just going to be oversaturation. But I also think like you see in Dallas recently, they just banned short-term rentals. And I think there’s going to be a wave of legislation over the next few years that is going to be really tough on the short-term rental industry. I think that’s the even bigger risk than the supply and demand dynamics.

Robert Leonard (34:40):

I mean, we saw in Atlanta… I don’t remember all these exact specifics, but it was something along the lines of you’d only own one of them or maybe two of them in the area and they just came down hard on it. And then I know a good friend of mine lives in Virginia Beach. In Virginia Beach, they had some issues there. And then somewhere I had some family down in North Carolina, South Carolina area. They had some issues there as well. And then actually I heard some stuff going on in Joshua Tree as well. So some people that got hurt there as well. I mean, the legislation piece outside of just the economics is an issue as well for sure.

David Meyer (35:12):

I bought mine specifically in an unincorporated town because I just did want to deal with it. But a lot of people also just invest only where there are already strong regulation because then you kind of know what’s coming. If you can make those numbers work in one of those markets, that would make me feel a little bit more comfortable because it also limits your competition if you can get into them.

Robert Leonard (35:32):

Yeah. That would be my exact approach as well. Is if you’re going into a city or state that already has pretty well-defined short-term rental laws, the chance of them changing abruptly, I think is significantly lower than if there’s no laws or very little laws or regulation already. But outside of just real estate, given all the data analysis and research you’ve done, what other assets are you investing in? What do you think might do well during a recession? And how is that changing right now, given the current environment that we’re in?

David Meyer (36:00):

I still invest in a very boring way in the stock market. I just dollar cost average into index funds basically. And I would say that about 25% of my portfolio overall is in the stock market and the rest is in real estate. I buy crypto a little bit just for fun, but a very, very little bit amount. But the thing I’m actually getting… I haven’t pulled the trigger yet, but I’m interested in is within real estate, people talk about diversification across asset classes and I’m a pretty firm believer in that. But I also think in real estate, I try to diversify because now that I mostly invest passively, you can diversify across markets, which is really nice in different regions of the country. You can diversify between… I only invest in residential currently, but you can, if you want to, get into office or industrial or storage.

David Meyer (36:56):

But also, I’m looking into getting into note investing. I don’t know if you do this at all, but the returns look really good, especially as interest rates go up. It seems like a really good way to hedge against inflation. And they’re really experienced operators. I’m not going to start going and underwriting loans myself, but I think that there are… It’s a way I’m interested in hedging my own real estate portfolio and staying in real estate kind of, but is just another way to diversify across the spectrum of different ways to invest in real estate.

Robert Leonard (37:32):

I don’t personally do any note investing. Not because it’s bad or good or anything like that, it’s just not something I’ve gotten into yet. But we did have the author from BiggerPockets who wrote the book on note investing on the show. It was a while ago now, but if anybody’s interested in learning a little bit more about note investing, you could check out that episode. It’s actually an interesting-

David Meyer (37:50):

Yeah. Dave Van Horn.

Robert Leonard (37:51):

Dave Van Horn. Yeah. It interesting-

David Meyer (37:53):

Super knowledgeable guy. He knows a lot.

Robert Leonard (37:55):

Yeah, it was great. It’s this interesting. I heard this ladder of real estate investing where becoming a note investor is kind of or the lender, you’re essentially a lender in that sense. Is that’s the end goal for being an investor. That’s the optimal place to go. And as you go up towards that, it becomes… You’re getting kind of more and more… Flipping is the lowest kind of run on the ladder. And then you go up to rental properties is a little bit more passive. Then you go up to passive syndications that’s a little bit more passive. And then you get into note investing and it’s purely passive. You’re just really just trading notes at that point. A lot of people will say becoming the bank or note investing is the echelon of being a real estate investor.

David Meyer (38:34):

That’s interesting. I haven’t heard it put that way, but it makes sense. The flipping is a lot of hustle. It’s a lot of effort and I guess over time you just want to do less.

Robert Leonard (38:47):

Well, I hear a lot about it from the creative financing standpoint of seller financing. People are like, “I’ve owned and operated this for a while. Now I want to be the bank. I don’t want to do anything and I’m still going to get my money coming in every month.” It’s completely passive. It’s that kind of note… And then a lot of them what they’ll do is if they need a payday from seller financing, is they’ll go sell their note that they have with the seller financing to a note investor and now they got bought out. And so that’s just the way that I’ve heard it explained, especially with creative financing.

David Meyer (39:16):

That’s a good idea. I’m just starting to look into it, but that type of investing to me is sort of immune to economic cycles. Of course, notes become more risky in a recession, but if you have an experienced operator who knows how to rehabilitate loans or knows how to deal with that, I think that you can generate strong returns year round. And personally, if you look at getting back to the data like foreclosure data right now, I don’t think there’s a risk of a foreclosure crisis even in this recession. So I don’t see a lot of risk in note investing right now.

Robert Leonard (39:56):

Yeah. There was a lot of talk about when the moratoriums were ending, that there was going to be a massive flow of evictions. I mean, I don’t follow the data as closely as you do, but I haven’t personally seen that kind of happening or I haven’t seen any new stories or anything like that.

David Meyer (40:10):

No, it’s just not going to happen. I mean, if something else changes, of course there could be a wave of foreclosures, but foreclosures keep dropping. It’s like the data is overwhelming that there is not really a risk of a foreclosure crisis at least related to COVID-19. Sure, if there’s a huge job lost recession in the next six to 12 months, that could change. But based on the moratoriums, something like 90% of people who exited the forbearance program did so in good standing.

David Meyer (40:42):

I had a guy named Rick Sharga on our show recently who works for Adam Data and is the foreclosure guy. And he was saying that a lot of the foreclosures that are coming online right now are ones that were from pre-pandemic. They were in bad standing. They sort of caught a break with the pandemic and got to go in forbearance. And now they’re just sort of back to where they were pre-pandemic and that’s the majority of foreclosure. So again, it’s not because of COVID, it’s just the normal cycle that was happening in 2019 resuming.

Robert Leonard (41:14):

Yeah. You got to look at correlation versus causation there.

David Meyer (41:17):

Exactly.

Robert Leonard (41:19):

Well, David, as we wrap up the show, I want to give you a chance to tell the audience where they can go to connect with you, find more about your data, research, blog post, even your podcast. Tell us where is the best place to connect with you?

David Meyer (41:32):

I host a podcast called On the Market. We have a bunch of experienced real estate investors and we talk a lot about data and economic trends and basically try to keep people up to date on the housing market rates, trends that could be good opportunities for investors. So you could definitely check that on Apple, Spotify, YouTube. Also, I work for BiggerPockets full time, and my job is largely to do housing market analysis. So if you go to BiggerPockets, you can read a lot of articles and studies I do for free. We also give away a lot of data for free if you want to check that out. And if you want to interact with me personally, the best place to do that is on Instagram, where I’m @thedatadeli.

Robert Leonard (42:14):

I’ll put a link to all your different resources, social media, blog posts, podcasts, everything in the show notes for anybody that’s interested in connecting with you, David, or checking them out. Thanks so much for joining me.

David Meyer (42:24):

Thank you. It was a pleasure.

Robert Leonard (42:27):

All right guys, that’s all I had for this week’s episode of real estate investing. I’ll see you again, next week.

Outro (42:32):

Thank you for listening to TIP. Make sure to subscribe to We Study Billionaires by The Investor’s Podcast Network. Every Wednesday, we teach you about Bitcoin; and every Saturday, we study billionaires and the financial markets. To access our show notes, transcripts, or courses, go to theinvestorspodcast.com. This show is for entertainment purposes only. Before making any decision, consult a professional. This show is copyrighted by The Investor’s Podcast Network. Written permission must be granted before syndication or rebroadcasting.