Table of Contents
Podcast Transcription
Dave Dubeau [00:00:09] Everyone, welcome back to this episode of the Property Profits Real Estate Podcast. Today we’ve got two, not one, but two special guests, Kimi Wen and Bill Gooding, who are zooming in. They are multifamily syndicators. They’ve been in the business for a long time. And today we’re going to take a look at the big R. What is our stand for recession?
Kimmie Nguyen [00:00:33] I asked.
Dave Dubeau [00:00:36] This is something that’s in on top of a lot of people’s minds. We hear it all the time in the news and everybody is freaked out or a lot of people are freaked out about this. So we want to try and unwrap it a little bit and see where the opportunities may lie, especially when it comes to multifamily investing during a recession. So, Bill and Jimmy, welcome to the show.
Bill Guting [00:00:59] Happy to be here, man.
Kimmie Nguyen [00:01:01] Hi there.
Bill Guting [00:01:02] I didn’t know we were going to talk about recession, but we’re excited about it.
Dave Dubeau [00:01:09] Well, nothing like walking the high wire without a rope, without a debt. Look at the big, long thing either. So anyhow, you guys, walk me through a little bit about your thoughts. Are we going into a recession? And if so, what can we do about it? And where are the big plays? Where are the big benefits of being in a recession when it comes to real estate investing?
Bill Guting [00:01:35] Well, when you want to take a crack at that committee or you want to get going.
Kimmie Nguyen [00:01:38] Well, you know, I think a lot of sentiment, investor sentiment are we are in a recession. But according to the U.S. data, we’re not quite there yet.
Dave Dubeau [00:01:47] But we’re heading down that path. Is that what they’re foreseeing? Are you not to say no.
Kimmie Nguyen [00:01:53] But, you know, when more people believe we are than we are, I guess. Yeah.
Dave Dubeau [00:01:58] And I think a lot of people are starting to believe that.
Bill Guting [00:02:01] Yeah, I think I think you can actually make a case for both sides. You know, so we try to look at both perspectives. You can make a strong case for housing will crash this year, but you could also make just as strong a case for housing won’t crash. So it just leads to more confusion. So we’re not here to profess that we have any answers, but we do have an opinion.
Dave Dubeau [00:02:23] Yeah, yeah, we.
Bill Guting [00:02:25] We. That’s all it is. Well, it’s a disclaimer.
Dave Dubeau [00:02:28] It reminds me, Bill. It reminds me of the beginning of the pandemic. You know, I’m up here in Canada, and the pandemic shut us down, or we shut ourselves down because of the pandemic. And there was a lot of fear around what was going to happen with the economy then. And I did an online webinar and I believe I had 18 real estate experts on the call. It was like the COVID plan or something like COVID 19 plan, whatever it was. And out of those 18 people, 17 predicted that the real estate was going to crash. Really? For all the panel. Oh, yeah, 17 out of 18. Now, I’d like to say I was a smart guy that didn’t predict that. But no, I was in with everybody. Hey, no, nobody’s working. Nobody’s everything’s shutting down. You know who’s going to buy houses, all this kind of stuff. And the exact opposite happened. It almost kind of I don’t know if it’s a similar situation, but sometimes it’s so hard to have that crystal ball. So anyway, what’s your opinion? What do you think?
Bill Guting [00:03:34] Okay, so on the side of house, I did jot down some notes why housing will crash. I mean, there are some compelling reasons. Inventory is growing. Interest rates are gyrating upwards mainly. Right. That I think has put a stop to the market. But what Kimmi said earlier, they’re the one big thing that sticks out for me that I think is a strong case for why housing has downward momentum. The whole home buyer sentiment, I think it was I think it was the Fannie Mae study. 79% of respondents say it’s a bad time to buy a home right now, 79%, even though we’re not officially in recession. I mean, if you got that type of negative sentiment, it almost becomes a self-fulfilling prophecy eventually. Right. So I’m concerned about that number. Then you look at increase in price reductions, real estate companies, starting layoffs. Those are strong, compelling reasons. Right. But then you look at the other side and men are, you know, at the core, economics is all about supply and demand. Okay. And when you look at supply and demand, you still are with all this recession talk, you’re still look at it, housing inventory at record lows. Yeah, I think I think just as short as a few months ago, it was what was it? Can it be two months, two months’ worth of supply?
Kimmie Nguyen [00:04:47] Well, it once upon a time was like one month.
Bill Guting [00:04:50] Exactly.
Dave Dubeau [00:04:51] So where should it be normally if there is any such thing as normal, where three opinions differ?
Bill Guting [00:04:59] I mean, in a normal neutral market, you’re looking at six, six months, 6 to 9 months. And then you look at what Fannie Mae did, another study on housing supply. In 2018, we had a short they pegged that we had a shortage of 2.5 million units. Two years later, in the thick of COVID, that increases to 3.8 million. And I think it’s even higher than that now. So we’re way out of balance in terms of entry level housing. Okay. So when you look at just barebones supply and demand, it’s like how do how the heck does housing crash? You know, foreclosure starts at historical lows. So, I mean, those are, to me, just as compelling a reason on why housing won’t crash. Okay. But there are some. Excellent.
Dave Dubeau [00:05:43] Okay.
Bill Guting [00:05:43] What are the are some X factors? Well, can you think of any X factors, Kevin?
Kimmie Nguyen [00:05:48] Well, you know well, you know, we have this Ukraine Russia war, which is already happening. We have the tension between the United States and China with Taiwan. Yeah, I think that’s the.
Dave Dubeau [00:06:01] Tension between the Republicans and the Democrats.
Bill Guting [00:06:05] Yeah, we don’t even need to look abroad. We have all that going on. Well, we are tracking that pretty closely. That seems to be like a potential black swan event because, man, if you think we’re having supply chain disruption now, upward pressure on interest rates now and inflation now, my goodness, man, China is our number three trading partner and they’re like over 100 trading partners, like their largest trading partners around the world. So that is has potential for massive disruption. Okay. That’s one that’s an X factor that I call it X Factor, because it’s something none of us control. Okay. Another X Factor is what if he’s threatening? I don’t know if you’ll follow through, but I’m talking about the Fed chief, Jerome Powell. Mm hmm. What if he becomes Paul Volcker reincarnated? I don’t know if you guys remember Paul Volcker. Okay? But he was the Fed chief in the early, late seventies, early eighties, cigar chomping chief of the Federal Reserve, who jacked up to fight inflation. He jacked up. Which do you I don’t know if you guys remember what mortgage rates were.
Dave Dubeau [00:07:08] Yeah.
Bill Guting [00:07:09] 18, 20%.
Dave Dubeau [00:07:10] Yeah, I remember that. My mom had a bunch of them at that time.
Bill Guting [00:07:13] They got. Think about that, man. It’s like we’re moaning now about five, six, 7%. But can you imagine double digits, 15 to 20, maybe even higher. Okay. It’s I mean, it’s stunted. So if some of those things happen, okay, all bets are off.
Dave Dubeau [00:07:32] Wow. That’s another fantastic idea. Hold onto that thought for a sec. Will be right back. Now, are you a real estate investor who’s run out of cash or credit to grow your portfolio? Are you looking to grow your portfolio using other people’s money and raising capital? Well, I want to show you how to raise six figures or more in six weeks or less at my upcoming Investor Attraction workshop. You can get your ticket and find out all about it at Investor Attraction Workshop dot com. We’re going to spend a full day taking a deep dove into this roadmap that I’ve used to raise millions from ideas and I’ve helped other people, just like you, cumulatively raise hundreds and hundreds of millions of dollars for their deals as well. So again, you can check that out at Investor Attraction Workshop dot COM. And as a loyal listener to the podcast, you’ll get 50% off your ticket when you use the Discount Code podcast. That’s right. Discount Code podcast at Investor Attraction Workshop. Com. See you at the next workshop. Okay. So where’s the play? If we do go into a recession, what are your thoughts about opportunities in the single family home space as well as, let’s say, multifamily? Because I know you guys are syndicators.
Bill Guting [00:08:41] Yeah.
Kimmie Nguyen [00:08:42] I would say you need to get your sack ready because everything is on sale.
Bill Guting [00:08:46] Yes, that’s our message.
Dave Dubeau [00:08:48] I get the big sack of money ready to go? Yeah.
Kimmie Nguyen [00:08:52] Yeah. How about get to your truck and back it up? It ready to go get em?
Bill Guting [00:08:58] Yeah, yeah. That’s our best. Our message is not to be Debbie Downers. I mean, because the way we see recession is like, you know, what’s funny to us is like when people hear recession, when we talk recession, potential depression, people get fearful. But what we try to do is get people to reframe. When you see recession or even depression, don’t see recession, see opportunity, see clearance, sale, everything is everyone. Everywhere else, everyone runs to a sale. But when it comes to when real estate is on sale, we tend to run away from it. Yeah, it’s a weird, weird phenomenon to me.
Dave Dubeau [00:09:35] Well, I mean, it’s the difference between the professional investor and the pastime investor. Right past time investor buys on emotion. Everybody’s getting in the market, things are bubbling along. They buy at the peak, they freak out, they sell it. The low real estate doesn’t work. They lost their shirt, blah, blah, blah, right. Versus the professionals. As you guys are pointing out, look at this as a massive potential opportunity. Now, where do you see opportunities with multifamily?
Bill Guting [00:10:06] Well, let me I’ll give you an example. You started off talking about, you know, gathering 18 investors. Right. And everyone had a negative spin. They thought there was going to be a crash. Well, we were buying.
Dave Dubeau [00:10:17] What they were looking at as an opportunity, but. Okay. Yeah, got.
Bill Guting [00:10:21] It. Yeah. And I think, I mean, so a couple opportunities came up like in the thick, right when the pandemic hit, we bought a 300 plus unit apartment complex and we were able to buy that $2 million below the previous contracted price. Okay. And then later on, a few months later, here’s another. I think recessions bring this type of opportunity as well. Okay. We haven’t seen it in the last decade plus, but seller financing. Okay. So if you remember the flash crash of 2020 when everyone got fearful, okay. Financing dried up for about three months. Okay. And we were like a week or two away from closing on a $7 million deal. The financing basically went was on us. Okay, but, but the seller was more fearful than it than anybody else. So he was willing. He was motivated. He was willing to work with us. And so guess what? We put together a master lease option.
Dave Dubeau [00:11:17] Haha.
Bill Guting [00:11:18] Closed the deal. So sell our financing lease options. Master lease options become available not just in multifamily but all among all asset classes. So I think those are some of the types of opportunities that become more prevalent and available in a downturn. Okay.
Dave Dubeau [00:11:34] Creative, creative deals. Exactly right. Because the banks are puckering up and, you know, sellers still need to sell, so they have to do it creatively.
Bill Guting [00:11:42] And I think that’s also you know, I think Kimmi would agree with this, right? The whole ability to raise capital, aggregate capital is probably one of the most valuable skills that you can develop right now.
Dave Dubeau [00:11:54] Well, then let’s talk about that just for a second, you guys. So again, if the general public is freaking out and talking about recession and thinking that they need to hoard their cash and save, save, save and all that kind of stuff. How do you enlighten people about the opportunities in real estate for investing in a time like this when so many people are nervous?
Bill Guting [00:12:19] I think you can tell stories, right? It’s like, what would you say?
Kimmie Nguyen [00:12:25] What the truth is, it is harder to raise money when we’re in a downturn. Because just like you said, every. Buddy is freaked out. Everybody wants to hoard the cash. But the reality is you educate, you shoot a lot of stories about you know, we know a lot of people who made millions in the financial crisis when you know the right timing to go in, like I think one of our business partners in the financial crisis, he actually came out with what is a $50 million, 500 units. So really, we just share a lot of stories and share, you know, even for me personally, in the pandemic time and up in the financial crisis, I bought something for 125. Now, if you look at it is almost $400,000. It went up three times more.
Dave Dubeau [00:13:13] Right. And you might have overpaid a little bit at that time.
Bill Guting [00:13:16] Yes.
Dave Dubeau [00:13:17] Yes, right.
Kimmie Nguyen [00:13:18] Yes. Because there was a lot of competition at the time. Yeah. However, but if you look at past board, if you never made the purchase, you never have double your money or hold it long. Yeah, you hold it long term. So anyway, so I would I share a lot of stories. I go in and just show what the value was, what I five years later, what the value would have been if you actually start applying. And then, you know, a lot of people when that opportunity comes by, they said I should have good, I would say.
Dave Dubeau [00:13:48] Good or.
Kimmie Nguyen [00:13:49] Whatever. Yeah, but then here you are. Here is an example. You don’t have to say you should have got a word. It’s here.
Dave Dubeau [00:13:54] Exactly. Yeah, that’s a great that’s great. That’s a great example. And then also, you know, you can point to multifamily as being one of the best recession resistant asset classes out there, because when times are booming, you got a whole influx of new people coming into the area who need somewhere to live. That’s affordable. Then you’ve got it when times suck. Unfortunately, people are losing their homes. They’re downsizing. They still need somewhere to live that’s affordable. And guess what you got? Right. So that’s one of the beautiful things about multifamily. Yeah, yeah, yeah.
Bill Guting [00:14:29] So basically, bottom line, we tell a lot of stories and many and educate, I think I think you do a lot of that as well. Just educate, give people a comparison. This is what you could have. I mean, they don’t even have to be your properties. You can you can give people references on any property.
Dave Dubeau [00:14:44] Right.
Bill Guting [00:14:45] It’s like so educate and get people to realize that this is what the smart money does during downturns.
Dave Dubeau [00:14:51] Right. They don’t wait to buy real estate. They buy real estate and wait, which is such a great thing to point out to people. And especially with long term strategies, it’s a more of a challenge if you’re doing a flip or something like that, but if you’re doing long term buying old with virtually anything. Yeah, that makes a lot of sense.
Bill Guting [00:15:09] And if you’ve got some favorable stats that you can show. So we’re big into education, as I know you are too. Dave So like because we’re multifamily guys, we’re a little bit biased, but one of the things that we really display and like to, to educate our folks on is how multifamily has performed over the last. Actually, you can look, you can go back as far as you want, but one number that sticks out for us is the serious delinquency rate for multifamily. Right. So during the Great Recession, it spiked a little bit for single family. Okay. Up to close to 10%, which led to the highest number of foreclosures in our history. And at the same time, at the height of the Great Recession, the serious delinquency rate for commercial multifamily, less than 1%.
Dave Dubeau [00:15:54] Yeah.
Bill Guting [00:15:55] That sounds pretty recession resistant to me.
Dave Dubeau [00:15:57] It does. Yeah. You guys, this a lot of fun. We can chat for a long time, but this is a short podcast. There you go. So if people want to find out more about you and Jimi, where should they go?
Bill Guting [00:16:08] You know, we have a podcast as well, so I guess that might be the best way. Give me some more info. Give me is spelled gimme some more dot info.
Dave Dubeau [00:16:19] Perfect. We’ll put that in the show notes as well so they can check out your podcast. What’s your podcast primarily about.
Bill Guting [00:16:26] Talking to stars and rising stars of the real estate investing game like you, Dave.
Dave Dubeau [00:16:35] All right, you guys, it’s been a lot of fun. Thank you for sharing your opinions, your insight, your experience. I appreciate it very much. And so do the listeners.
Bill Guting [00:16:44] Awesome.
Dave Dubeau [00:16:45] All right. Take care. Talk to you on the next episode. Well, hey there. Thanks for tuning in to the Property Profits podcast. If you like this episode, that’s great. Please go ahead and. Subscribe on iTunes. Give us a good review. That’d be awesome. I appreciate that. And if you’re looking to attract investors and raise capital for your deals, so we invite you to get a complimentary copy of my newest book right back there. Is The Money Partner Formula. You get a PDF version and investor attraction book dot COM. Again Investor Attraction book dot COM. Take care.