Borrowing Money 101, with Dan Leanna | Think Realty Radio

Borrowing Money 101, with Dan Leanna

Dan Leanna, with Recovco Mortgage Management LLC., is on the show to discuss lending and buying correctly. Dan gives great advice for first-time borrowers, such as understanding your market, and he touches on some big mistakes borrowers make, like overpaying for a property.

Learn more about Dan and Recovco Mortgage Management LLC., and call 866-824-2552 or visit RecovcoDirect.com.

The Power Play:

Greg and Abhi sit down and discuss the growth and opportunity for investment in Grand Rapids, MI. They are looking at high yields, for lower prices.

Read Full Transcript

Abhi Golhar: Think Realty Nation, it's your host, Abhi Golhar. I'm really excited to have this hour of radio today. You know, it's not every day when you get to pick the brains of a lender that actually makes sense, that actually understands the market and I have one such lender on the phone with me today. His name is Dan LeAnna from Recovco Mortgage Management. I'm really excited to connect with him and get the show started. Dan, you with me?

Dan LeAnna: I'm here, yes, thanks for having me back on again.

Abhi Golhar: Absolutely. A pleasure. Looking forward to having the conversation. Tell us a little bit about Recovco and what you do.

Dan LeAnna: Sure. I've been in the industry about 25 years. Moved out from the Midwest about 25 years ago to California. During my career, I've spent time on both the lending side as well as the loss mitigation, asset management side of the business. So strong understanding of both the origination and the sale and resale of properties. Here today representing Recovco Mortgage. We're a nationwide direct lender. We focus primarily on residential lending, with offices in East Meadow, New York, Irving, Texas and then our retail platform here in Orange County, California.

Abhi Golhar: Awesome, and I know over the last many years that you've been in business in this specific space, you have a lot of experience on the NPL side, and I know that's helped you in many ways help to build Recovco and its client base and just reach out to investors. Help me understand how that's helped you and what, I suppose the initial question is what is an NPL? Help me understand that process and then help me understand why that's helped you so far.

Dan LeAnna: Sure, so an NPL is a non-performing loan, which basically the borrower is delinquent and then as a note holder, you have a couple options. You can either get that loan to re-perform or you exit in terms of a short sale or a cash for keys, take control of the property and then resell the property. So one thing that's really helped me on the lending side, from the NPL days, it's just given me a different perspective and understanding of risk and risk assessment, when loans actually default.

Dan LeAnna: You know, to know and see not only how it impacts the homeowners, which is does both financially and emotionally, but to the lender, to the note-holder, it really impacts them from a cost of due diligence and foreclosure and you know, carry costs, property taxes, insurance, they have to pay all that, so it's definitely given me a different perspective when it comes to evaluating business opportunities and loan scenarios.

Dan LeAnna: On the flip side, what it did was it really opened my eyes to the many opportunities that are there for real estate investors to take advantage of these situations. In a lot of cases, the lenders who are holding these delinquent notes, or if their bank-owned, they don't want to keep them on their line, so that's where we saw a lot of real estate investors get back into the game, or get into the game and buy these at discounted rates and then either hold or fix and flip.

Abhi Golhar: So as a result of seeing how loans can be structured, say, correctly and incorrectly, and also being on the NPL side, I'm sure you've developed an understanding of characteristics and traits that successful real estate investors need to have. For those of us listening, and if you're a business owner, you're thinking about dabbling into real estate, or the same thing if you're an entrepreneur or healthcare professional or whomever, what do I need to exhibit as a real estate investor? Maybe the single most important trait or characteristic that I need to exhibit as a real estate investor to be successful?

Dan LeAnna: I think it's the ability to buy correctly, and see an opportunity and doing the proper due diligence up front and when you see that opportunity and it fits your business model, you gotta jump on it. You gotta jump on it quickly. And if it's not, if it doesn't fit your business model, you gotta be patient enough and move on to the next one. I think in addition to that, how it correlates to the lending side, is you really have to be in line with the right lending partner, so when that opportunity does come up, that you can take advantage of it, and I think that's where we excel is 'cause we understand that concept.

Abhi Golhar: So when I am looking at say, working with the lender, or say, working with Recovco in this case, what do I need to look for in a lender? What are some things, maybe the top three things that I need to be paying attention to?

Dan LeAnna: I think it's important to find a lender who is in line with your business model. So example, we do a lot of real estate investment property programs for investors who are really just looking for a quick exit and quick access to funds. So you have to find a business partner who understands that concept and candidly, specializes in it. It's very rare to find a traditional lender who A) grasps that concept or B) offers the product lines to match up with your business model. So I think that's the most important is find the right partner, find the right lender with the right products and then just stay in touch with that lender throughout your business ventures to keep them informed of what's coming down the pipeline.

Abhi Golhar: Yeah, I would say I agree with you. I think if I'm looking at doing my first deal, or even scaling my business, I definitely need to be looking for a lender that gets me, that can advise me and that has the investing experience themselves and then has the ability to grow with me as well, depending on what my aspirations are. It's really, really important.

Abhi Golhar: In terms of, say, streamlining the process for applying. When I submit my application to Recovco, or when I submit my application, what do I need to do so that it's easy for you to say, "Hey, you know what? Abhi knows what he's doing, he has experience. Or this is his first deal, but he's showing the right things." What do I need to do to streamline that financing process?

Dan LeAnna: I think what helps is doing the due diligence up front and really understanding if you're buying it as a rental property, as a long-term play, to really understand what the rents are in that area, so you don't get hurt that way. So that's whether that's a first time buyer or whether that's a serial buyer, a buyer who has multiple properties with us, or in their portfolio. What really helps for the serial investors, which we have a ton of them in our pipeline, is sharing their tape with us. Not everybody's comfortable doing that, but it really essentially expedites the process for both sides. So I'd say at least on a daily basis, we'll receive a tape from one of our past clients or current clients and they may have 10 different properties on that tape. They'll have the expected rents, they'll have the current monthly applications, they'll have the expected value of the property and if there's a current balance against the property right now, so we know how much equity that we can pull for them on each particular property. From there, we can come back with the entire tape and say, "Of these 15 properties, John, there's 10 of them that make sense to pull cash out at this time. There may be two that you can refinance at this time, because you have an extremely high interest rate, and there might be three that you're in a pretty good situation right now and I would pass on those and just keep the current rate that you have right now." So I think the more data that you have to present to us, it helps us, allows us to do our job just as quickly as well.

Abhi Golhar: Got it. We've gotta go to break in maybe about 15 seconds or so. But what I wanted to ask you is what's the best way that our listeners can get in touch? IF they have any questions about say the lending landscape and what y'all do?

Dan LeAnna: Sure, best phone number is 866-824-2552. Again, 866-824-2552, or check us out at www.recovcodirect.com.

Abhi Golhar: Awesome. When we come back, Think Realty Nation, I want to ask Dan a little bit about advice for first time borrowers and some of the mistakes that borrowers are making currently. Those are two hot tickets things you want to hear and then we're going to jump right into the lending landscape and what's going on as guidelines continue to open up for lenders across the country and some of Dan's thoughts on 100% lending programs that are out there. So don't go anywhere, we're coming right back .

Abhi Golhar: Think Realty Nation, we're back. It's Abhi, and I know you missed me during the break. I missed me, too. I mean, I missed you as well, and I missed me and I missed you and I missed me. Look at that. All right, we are back. My guest today is Dan LeAnna from Recovco Direct talking a little bit about working with and assessing lenders in the first segment. Now I wanted to kind of shift gears a little bit and head to the lending landscape. But before we do, Dan, I wanted to ask you these super awesome two questions. For those investors that are new, right, they don't have a whole lot of background in say flipping or buying and holding real estate. What advice do you have, across your many 20+ years of experience in this specific world? What advice do you have for them on succeeding as a real estate investor?

Dan LeAnna: Sure. I think the biggest thing is, it kind of ties into a previous question in terms of good traits of a real estate investor, and that is knowing how and when to buy. But prior to that, you have to do your homework. You have to do your due diligence, and again, that's understanding what the rents will be in that area, it's understanding the appreciation in that particular market. But also it really comes into buying the right property that matches your profile and your business model. One piece of advice I always give to new clients, or new investors buying, is to start small. People think that every average investment property has to be in the $2-300 price range and we see them on both sides. We see a lot of properties at $100,000, $125,000 that can be extremely profitable. A more recent trend is we see individuals buying properties for a million, two million, three million and renting them out on a short-term rental for Airbnb. So you see different sides. So as a new investor, if it's myself, I'm starting small and really trying to invest in a local area that I'm comfortable with, so that I can do my homework before I decide to purchase.

Abhi Golhar: And I'm assuming you see successes, you also see failures of investors on a very regular basis. Hopefully not ones that you're lending to, obviously, but for those stories that you hear, what are some mistakes that borrowers are making that they shouldn't be making at all?

Dan LeAnna: I think they just overpay. They overpay and it's one thing to want to diversify your portfolio and grow your portfolio, but growth is not always a positive thing. Growth on your bottom line is, on your net revenue, but just because you have 10 additional properties added to your portfolio, that does not make you successful, per se. In fact, it can actually hurt you if your not doing your diligence up front. So I think in most of those cases, you're overpaying and/or a potential of a mismanagement of the property or just missing on either the buy or the sale of it.

Abhi Golhar: So let's say that I've picked up a couple properties, maybe two or three or four, in the Midwest somewhere, and now I'm looking at growing my portfolio. I'm making the smart decisions, I'm really sculpting my portfolio well. I'm looking at the area, I'm looking at the demographics, I'm looking at population, I'm looking at job growth, all this stuff. Crime, school districts, everything. Now I'm thinking, "Well jeez, I want another five properties that I've identified and I currently have say five or six or seven in my portfolio." And I go to a lender and the lender says, "You have too many properties." Why are lenders capping the number of loans that they're giving out right now?

Dan LeAnna: That's a common issue, or a common challenge, I should say, with traditional lenders and I think the main reason is just the risk and the exposure. If you have one investor who has 10 to 15 properties, if he or she runs into some financial challenges, and hypothetically, files for bankruptcy or defaults on properties, that can turn pretty ugly pretty quick and they're a little bit more time consuming if you try to go the traditional route as well. In other words, if you were to try to finance multiple properties, or if you have multiple properties and you go the traditional route in terms of Fannie, Freddie, VA or FHA, you have to disclose all of those properties on your application, on your 1003, you have to gather all the statements, the deck pages, so it's time consuming for the lender. Then also, in most cases, at least on our side, most of our clients that have multiple properties want to hold title in an LLC and that's also very uncommon on the traditional side. So those are reasons why lenders cap it and try to stay away from that. For us, on our side, we love it. That's what we do all day. That's what we specialize in. I'd say 30 to 40% of our portfolio right now is loans with serial investors who have multiple loans with us and we step back and we evaluate each asset separately. If it works financially, step by step and asset by asset, then we view each one separately. I think the highest that we've ever closed concurrently for the same investor has been 34 properties. So we love it. The more the better for us.

Abhi Golhar: I'm with you. I think that goes right back to the scalability, right? You need to find the lender that has the wherewithal and that understands what your goals are. Traditional lenders generally won't do that. It's too high of a risk for them and you know, they can also be super slow. If you go to your big bank, big box lender out there, it's going to take them 45 to 60 days sometimes to close and even then, it's going to be a hassle. You don't need that. As we know, speed execution in a real estate deal is everything.

Dan LeAnna: Right.

Abhi Golhar: What do you think is going on with this uncertain rates and the environment that's creating for real estate investors? Should we start freaking out or what?

Dan LeAnna: No, I don't think so. I think it's a reason to step back and evaluate and reevaluate your business model, but at the end, if your returns are still greater than the cost of the capital, then keep attacking. It's working. If it doesn't, then that's when you gotta step back and you gotta restructure what you're doing.

Dan LeAnna: We're seeing a lot of our short-term investors, meaning the fix and flip, or they hold for two to three to four years and then either sell or refinance, they're really taking advantage of the ARM programs, whether that's a 5-1 ARM or a 7-1 ARM, and they tie that into an interest-only option payment, so they're objective is just to minimize their monthly obligation on a property and use the extra capital to go reinvest in another two or three properties. So for the more, I don't want to say conservative, but more of the long-term players who they're objective is to ride it out for 30 years on this particular property, those are the individuals that we see going for the 30 year fix. But just because you see that the rates are ticking up, I don't think that that necessarily means that your margins are going to automatically be compressed. We see several pockets in the country, including out here in Orange County California right now where as the interest rates tick up, the rents continue to tick up as well. So reason being, or part of the reason is those prospects, those potential homeowners who are looking to buy properties as a primary home, they start running into affordability issues as the interest rates tick up, so rather than going to buy today, they're going to continue to rent and obviously, supply and demand, all that does is it drives up the rents for those investors, so just because the rates increase, it doesn't necessarily mean that your margins compress. You have to be conscious of it, but there's still a lot of revenue being made on rental properties.

Abhi Golhar: So we have to go to break in about 30 seconds or so. I want to talk about some of the lending options that you offer, which will really tie into some of the strategies, whether you're a flip investor or if you're a buy and hold investor, you still need the right program, so I do want to talk about that after we come back from the break and then of course, you know what we should do, we should talk a little bit about looking forward. Where lending has been and where lending is today, so what the changes have been since you've been in the industry and are there any events that we should be worried about, any say, black swan events that we should be worried about coming down the pipe that will drastically change the way we have a perspective on investing real estate. So we'll talk about that when we come back. Think Realty Nation, we gotta go to break, check it out. Recovcodirect.com, or call them, 866-824-2552.

Abhi Golhar: Got questions for me? Thinkrealtyradio.com's where I live. Don't go anywhere, coming right back.

Think Realty Radio is back with host and real estate investment pro Abhi Golhar.

Abhi Golhar: Think Realty Nation, we are back. My guest today is Dan LeAnna from recovcodirect.com. Go check him out and before the break, we were talking a little bit about the lending options that Recovco offers its borrowers and I wanted Dan to take maybe a quick second or two to talk a little bit about those programs.

Dan LeAnna: Sure. Really we have two segments of the market that we appeal to. One is our bank statement programs which are specifically designed for self-employed borrowers. To qualify, we simply look at the monthly deposits that are going into the individual's bank account, take a percentage of those deposits, and then use that dollar amount to qualify them. For those programs, Abhi, we don't look at tax returns, W2s, pay stubs. Real minimal documentation. It's really just based on the cash flow that's generated by the business, documented via the bank statements. So that's one segment. Then our primary bucket are the business purpose loans and again, those are designed for our real estate investors who are looking for a quick exit. Our top program is our debt service coverage program at 100%. What that means is rather than compare the total consumer debt versus the total consumer income, which is how traditional loans are qualified, we're just looking at and comparing the housing expenses for the subject versus the incoming stream for the subject. If the net rents are greater than the expected monthly application, then we qualify. So for those programs, we go up to 80% LTV, FICO scores as well as 620. If for whatever reason the borrower does not qualify for that program, meaning the rents are a little bit too high, we offer a no ratio program that goes up to 75%, FICO as low as a 640.

Abhi Golhar: Gotcha. Those are pretty fair, those are pretty fair. I mean, jeez. Recovcodirect.com, totally makes sense. Are you seeing any troubling news? Any troubling events, also known as black swan events, right, that could potentially derail the housing market and derail opportunities for real estate investors?

Dan LeAnna: I think on the lending side, as for the real estate investors too, an increase in interest rate environment is always something to be conscious of. We have to look at that, and then also does that impact the availability of funds, as we progress into the second half. And when I step back and look at it, I think on the traditional side, there is an impact on funds available in terms of Fannie, FHA and VA, simply goes back to the affordability issue.

Dan LeAnna: The private money, the private lender, such as us, we're thriving right now. We don't see it that way. We continue to get more and more aggressive on our guideline and we're growing. We've grown 120% month over month for eight consecutive months, so we don't see that slowing down. I think where opportunities may come up for real estate investors to buy is if and when the market starts to correct itself and home start to default at some point. That's where you really see ... I know that's why I'm sitting on the sidelines ready for that next cycle. To really buy at a discounted price, that's the next event.

Abhi Golhar: Gotcha. Now I'm assuming availability of funds for Recovco, you're not going to have a major issue with that for the remainder of 2018, or is that something that y'all are concerned about?

Dan LeAnna: No. Not at all. Like I said, for traditional programs, I think there's some concern there, but on the private side, and it kind of duck tails into our guidelines, we continue to get more and more aggressive on our guidelines. In fact, Abhi, last time we chatted, which was about two months ago ... example on the bank statement program, we were capped at 90%. Today we're at 95%. On our FICO, our minimum FICO for some of our programs was a 580. Today it's 540. Our reserve requirement was minimal. Today you can actually use the proceed from your cash out transactions to cover the reserve requirement, so we continue to grow in scale and provide those funds. But again, I think it's because of who our segment is. It's self-employed borrowers that have been underserved and it's real estate investors who really, we just qualify off of credit equity and their reserve requirements. So we don't see it impacting us in terms of these availability of funds for what we do.

Abhi Golhar: Yeah, and it also goes back to buying smart, right? If you're not buying smart and you're making that initial mistake, then you're kind of crap out of luck. And that can turn into a whole slew of issues which I'm sure we cam talk about on a totally new show.

Dan LeAnna: Sounds good.

Abhi Golhar: What are some of the indicators that you look at to kind of determine the future of where we're headed? Essentially put together and assemble a crystal ball.

Dan LeAnna: I think it's well, you know, on our side, on the lending side, we continue to assess our portfolio in terms of how it's performing, and I think I go there because of the non-performing side of me, we have to be conscious of our loans still performing and so far they're performing at extremely high levels, so that's usually the first indicator. As soon as you have one bucket, and typically that bucket is the more aggressive bucket, as soon as that starts to default, or non-perform, then you get a little bit more conservative and then that's how the cycle turns, but between that and the appreciation of homes or the depreciation of homes, and that's really still kind of, and depending on the pocket of the country and the state, some areas, as you probably know, are still appreciating and some of them are starting to get a little bit more stagnant. So you gotta be conscious of those things. A) As a lender, is your portfolio as a whole, or even segments, still performing and then as a buyer, what's the forecast for the property values, decreasing or increasing?

Abhi Golhar: Got it. That makes sense to me. What are some of your favorite markets right now and then we'll get to your entire Green Bay/Detroit football prediction, because I'm not a big fan of these numbers, man. Anyway. We'll leave the best for last here.

Dan LeAnna: Speaking of having a whole other show, we could have a whole segment just for that, my friend.

Abhi Golhar: I know.

Dan LeAnna: Back to your question, though, we've seen especially on the no-ratio real estate investor program, we've seen a large increase of demand, especially on higher valued assets, A) in the Los Angeles area and B) in Hawaii. What a lot of our investors are doing on the higher end is they're purchasing million dollar properties and then leveraging them short-term as Airbnbs. So that's where we leverage our no-ratio program because we don't even validate what the rents are, we just go off of an LTV cap. So those two pockets. Florida's always good for our foreign buyers and foreign investors, but we lend nationwide, so we really haven't seen a decrease. If anything, we continue to see an increase. But probably the three most highest demands right now for our products are California, Florida and then we're starting to see that in Hawaii as well.

Abhi Golhar: Gotcha. I'm a huge fan of the Midwest. I'm also a huge fan of the Southeast and I'm really like the single family rental game right now in those parts of the country. Prices are still good, I'm not overpaying and I'm not bidding up more than $75-80,000 for something that will rent anywhere between $1,200 and $1,300 a month, which I think is great.

Dan LeAnna: That's great.

Abhi Golhar: So just for me taking a look at those numbers, makes sense. Let's take a look at some more relevant numbers. Green Bay and Detroit. I mean, seriously.

Dan LeAnna: You don't the prediction?

Abhi Golhar: I mean, you know-

Dan LeAnna: I'm giving you the benefit of the doubt. I was thinking 30 to 3, but that's kind of an insult to the host. So I went with 31 to 17, Green Bay.

Abhi Golhar: I appreciate it. And that's all the time that we have for you today. Stick around, Think Realty Nation, we have the Power Play with Greg Rand coming up. Dan, thanks so much for jumping on the air with me.

Dan LeAnna: You're welcome, thank you.

Abhi Golhar: Think Realty Nation, check him out at recovcodirect.com. Also, give his team a call, give him a call at 866-824-2552. I gotta go to break, but when we come back, you don't want to miss this session of the Power Play. It's going to be super cool. Stick around.

Abhi Golhar: Slam dunk, grand slam, victory lap. Get ready for the inside scoop into real estate investing industry. You're tuned into The Power Play with me, Abhi Golhar, and my buddy Greg Rand. Think Realty Nation, it's Abhi. We're back and you're listening to The Power Play with me, Greg Rand and oh you know, a microphone. So today we have a cool, cool little city in my home state of Michigan that we'll be talking about, right Greg?

Greg Rand: Thanks Abhi, as always, awesome to be here. I have a really interesting pick for you today. Grand Rapids, Michigan. This has come up three times recently with strategy profiles on ownamerica.com and questions that we've gotten. A strategy profile, when you open an account on our website, which is a market place in a research facility for single family real estate investors, is we ask you to tell us a little bit about your plan and most people do, and what you get is an indication of where people are thinking about investing as they're doing their research, and Grand Rapids has been coming up. It came up three times in the last few days and that always is a signal to me that the universe is inquiring and conspiring in a certain direction. So I happen to like Grand Rapids. Back when I was a New Yorker, I'm a recovering New Yorker, I'm a southern now, I know you can tell from my accent. We did a gig on the Fox Business Network. I was a regular there and we had a segment called Where to Invest Now and it was on in 2012. I lost that gig when I left New York and it was worth it 'cause I live in the south now and it's good for me. But it's a cool look back because Grand Rapids jumped out at me back then for reasons having to do with it being misunderstood and having fundamentals that people were missing, all right? Grand Rapids, on the western side Michigan. Michigan is a phenomenal state and too often ... You know, Detroit has gotten a bad rap. We've talked about Detroit, and maybe it deserved it, it was a pretty precipitous decline that it went through. We've talked about it here, that's it really on the recovery now, and it's got a really, really bright future, but back in 2012, that had not yet happened, and Grand Rapids being in Michigan, people think Michigan, they think Detroit and they were kind of writing it off. But Grand Rapids is really more suburb or in the sphere of Chicago, 'cause it's on the lake on the western side of the state. Look at a map, you'll see what I mean. But there were fundamentals that I felt were really powerful and I talked about them on Fox and I want to play you that clip right now because if someone doesn't brag about my predictions being right, who else is going to do it? You know, if not me? So check this out.

Abhi: You like Grand Rapids, Michigan.

Greg Rand: Right, I do, yeah.

Speaker 7: But this isn't Detroit, this is western Michigan, right?

Greg Rand: Well, that's part of the reason. When you hear Michigan, you think Detroit, and unfortunately, when you hear Detroit, you think broken down factories and graffiti. This the western part of the state. They're not really dependent on manufacturing in the first place. Grand Rapids is the leading city in Michigan for private sector jobs, okay? Privately held company job growth. Unemployment's down to 6.9% and it also is a state, you wouldn't believe, more coastline in Michigan than California and Florida. So quality of life is good, home prices are way down to 2000 levels right now, which means you can buy a house, rent it out for profit and then as western Michigan appreciates again over the next 10 years, you ride that up and see good return. All right, so now what happened since 2012 in Grand Rapids? Well, the median price in Grand Rapids, at the trough, back in 2012, was $112,000 and change. All right, if you look at the chart at ownamerica.com that shows the 20 year price appreciation, you see it take off from that point, and it's had a six year run where the median price has gone from 112 to 164. Okay? Now, that's a very, very big jump. You look at the chart and what you see is that it was gliding along from 1996 to about 2006 at a nice gradual upward trajectory, which is what it's supposed to do, then it took a little bit of a hit in 2006, '07, '08, '09, '10, '11, and then in '12 it was sitting down there at the bottom, and don't forget, back in '12, there was a lot of people who were like, "Oh the housing market is over. A housing meltdown. Generational meltdown free fall." Right? Nonsense. I wrote my book, Crash Boom, back in 2010 to remind people of what happens in the housing market after any kind of a crash. That was really the only crash we've had in the last 80 years where home prices went down, but they really were a correction. It was very predictable that the market would come back and some markets would come back more strongly than others and Grand Rapids was one of them. So Grand Rapids was a great call in 2012. So the question is, is it a great call now? This is the kind of research you can do that can give you a feel for what's happening in the market to let you know that hey, should I invest there? One of the things I'll tell you about Grand Rapids is that the yields are high because the prices aren't high, all right? Yields being the profit you make based upon your rent, compared to your value, essentially of what you paid. And you can get 7-8% plus, in current yield, in Grand Rapids, Michigan, meaning you're plunking a hundred grand down to buy a house, and you're making $8,000 a year in profit, just on the rent profit. Right? It's unbelievable. 8% yield. Now, what are you going to get in terms of appreciation? The appreciation average has been only 2.7%, which is less than the 3.5% average, but it's been catching up. It's been a lot steeper than that the last five years, so anybody who listened to me five years ago really won. The question is, what's going to happen now? Has the ride ended? I want to read you ... I did a search. This is a fun search to do about any market that you think you might be interested in anywhere in the country. Search Google with this term: Announces blank expansion. So, 'announces Grand Rapids expansion.' Or if I was interested in searching, you know, Albuquerque, New Mexico. 'Announces Albuquerque expansion.' What's that's going to do is pick up any stories that have been written about any company, any hospital, any university that has announced an expansion in that market. So 'announces Grand Rapids expansion.' Here are the results today on announces. Let me just read you the headlines:
"$2.7 million dollar expansion adds 115 jobs in Grand Rapids tech company."
"GR Manufacturer, Grand Rapids manufacturer, to dad 39 jobs in $9 million expansion."
"The Right Place finalizes aerospace expansion in Grand Rapids."
"Grand Rapids tech company announces expansion." That's the same one as the first one, I think.
"Switch plans major expansion in Grand Rapids campus."
"4.3 million expansion, 50 new jobs by Michigan tag maker."

Not exactly Tesla, right, a tag maker. Love that.

"Helix Steel proudly announces the expansion of manufacturing." All right.
"Doctor Brad Bankston announces a practice move and expansion in Grand Rapids."

It goes all the way down the page. Now, what I said on Fox, which is still true, is that Grand Rapids was leading the state and was ranking very high in the country on small business expansion. So they were never really dependent on a big company coming in and opening a factory and putting a billion or so in, like ... I could give you examples, but I'm short on time. When you have small businesses expanding, 50 jobs, 30 jobs, 100 jobs, a $2 million, $10 million, $15 million expansion, what you've got is real resilience in the economy in that market, okay? And you've got a lot of people, for their own reasons, making decisions to expand their business, to locate their business, like the doctor, or to expand their business in that market. Individuals putting their own money at risk, putting their own skin in the game, to expand a market. They're doing it in unison. All the announcements I just read to you were all 2018 or late 2017. So when the question is, "Well, if I miss the ride?" Right? "Did I miss the ride? The last six years in Grand Rapids was awesome and is it over?" Well, no, because we've only gotten back to the long-term trend line in terms of price appreciation. So might it level off a little bit? It might, but what you're seeing is the fundamentals of entrepreneurs making a decision to invest their capital, to expand their business and to hire people and doing it in large numbers like this is probably my favorite harbinger of really, really positive things to come, because there are reasons for all of that. They like it there, the quality of life is great. The cost of living is reasonable. They've apparently gotten over the freezing winters and they're okay with it. Population trends. People trends. Why do they go there? Are they going to stay? Is that going to continue and are they going to invest in the market? If they are, then we think you should also.

Abhi Golhar: I'm a huge, huge, huge fan of Grand Rapids. I completely agree about the freezing winters too. It is freezing cold in Michigan, but I'll tell you something, you cannot sleep on the Midwestern cities. Grand Rapids, the medical mile, what they're doing over there is amazing, and it's still one of the cities that you can buy real estate. It's not going to cost you $500,000 as an entry point and you can still hit a pretty awesome yield.

That being said, Think Realty Nation, that is the show for today. That ends The Power Play and you got questions for us. I get it. I'd have questions for us too. Get in touch, go to thinkrealtyradio.com, you'll see a form on your right side, input your question and Greg and I will answer it the next time. See you later.


Leave a Reply