Affordable Housing Solutions Just Ask Us (HA 62)
Steve: Steve and Jill here.
Steve: Welcome to The House Academy Show, real estate investment talk. I’m Steven Jack Butala.
Jill: And I’m Jill DeWit, broadcasting from sunny Southern California.
Steve: Today, Jill and I talk about affordable housing solutions. Just ask us.
Jill: Really? Are we doing that now?
Steve: Doing what? Affordable housing?
Steve: Or just ask us?
Jill: We live in the opposite of affordable housing.
Steve: I didn’t think about that. Yeah, that’s probably true. I got in a huge debate on a recent vacation with a family member, my sister, actually about affordable housing. And now, I believe we have, and it’s not a unique solution to us, or I don’t think we’re any smarter than anybody else, but I do think we’ve identified the problem.
Jill: Which is his sister.
Steve: And the solution’s been around forever.
Jill: Just kidding.
Steve: Which is what?
Jill: Which is your sister.
Jill: You’ve identified the problem. No, just kidding.
Steve: My sister’s the greatest. And she’s got a very valid point of view and so does everybody actually.
Jill: Are you going to tell us your point of view? I am curious.
Steve: Am I going to tell you my point of view on this show?
Jill: Your sister’s.
Steve: Of course.
Jill: Her’s. Okay, good.
Steve: Of course.
Jill: I would love to hear it.
Steve: Yeah. Before we get into it, let’s take a question posted by one of our members on the houseacademy.com online community. It’s free.
Jill: Brian asks, “Hello, I’d like to hear if anyone has used or trusted the Redfin estimate to help figure out a property sales price? I went back on two counties where I’ve completed deals and I’ve noticed that the Redfin estimate is pretty consistently 10% higher than my other sales. When you use the map view and scroll in closely, a gray box appears with the estimate. I’m assuming that this is their version of the Zillow Zestimate. I use the standard Land Academy, House Academy method of pricing a county. But in the counties where there’s a good variability in sales price and/or lack of recent comps, I thought maybe this would be another way to get an accurate retail price that I can use to calculate a wholesale price for a given property. I definitely value other nearby and recent comps more than this estimate. However, if the comps are sparse and far apart, then I’m curious if these estimates are the next best thing? Thanks, Brian.”
Steve: What Brian’s asking is, I look at all these comparison values regardless of whether it’s Redfin, Trulia, Zillow, LandWatch, Land and Farm, and he’s talking about, on one hand, land here, and I’m going to bring in houses because this is The House Academy Show. And what he’s saying is, darn it, the stuff that I sold my properties for, everything else looks like it went for 10% higher. Well, Brian, you did everything right.
Jill: Exactly. Congratulations. That’s probably why it sold fast. And that’s what they were looking at, also.
Steve: We have a, and this is a huge grandiose, big picture compliment from me to our members. We have people in our group who have personalities from a data standpoint and from a, I don’t want to use the word OCD but, really analytical, let’s just say, personality x80 over mine. That’s probably very unhealthy for a person like that to walk through the planet. But it’s extremely healthy to be in our group and succeed. I’m not picking on you, Brian. There’s people like, well, it should be-
Jill: Don’t name names.
Steve: I’m not-
Jill: Oh, I thought you were going to name-
Steve: No, I’m not going to name names.
Jill: There’s people like-
Steve: John, and Sally, and no. There are people that sit and look there and say, “Everything needs to be perfect. The numbers need to line up.” Now, this is not what this is. If you’re selling property at 10% lower than everything else that’s around there, you’re doing great. I’ll say this about houses. It’s a lot closer to all those estimates and all those numbers than land.
Jill: You know what’s funny about this? I never go back and look. I don’t really care. By the way, if you really track these numbers, they change all the time. By the time I sent my mailer out, and by the time it comes back, for houses, I sent out a house mailer, we did all our numbers, we did our smart pricing, I have that number, then by the time the offer comes back and they agree to it, maybe it’s been 30 days, by the way, by the time they got my letter, thought about it, stared at it on their kitchen counter, signed it and sent it back to me or scanned it in and emailed it to me, that number has changed. And I don’t get too hung up on it.
Steve: I never go back. I never return to scene of crime ever, honestly, on this stuff.
Jill: I’m only looking at really, right now, to make sure do I want to buy it? Does this make sense to me still today?
Steve: I’m done, entirely done, with the whole real estate deal when we buy it, mentally. That’s it.
Jill: But that’s what I mean. Even on the buy side, I’m just saying, by the time I send the offer out and it comes back, those numbers have changed. Don’t hurt your head, Brian. Because you’ll go nuts if you try to sit and monitor and track it.
Steve: And I’m curious if these estimates are the next big thing.
Jill: That’s the thing. If there’s not a lot of comps, are the estimates the next best thing? I take them with a grain of salt. And we all know that’s where we start. That’s where we start our smart [inaudible 00:05:23] pricing based off of. It is a good gauge.
Steve: I mean I personally choose uncomped counties for land and uncomped zip codes for houses, not so much for houses, all the time. I mean I love uncomped areas. I love it. You know what it makes me naturally do and, then, makes Jill naturally sign off on it? We don’t have any really super good data in this really sparse big untouched county. What do you say we offer 10% of what we actually think we should offer which is 20% of what we think we can sell it and see if anybody wants to sell it? And offers come pouring back.
Jill: That’s for land. This is houses. Houses is so easy.
Steve: Houses is 10x easier.
Jill: This is houses.
Steve: Because these algorithms that Brian’s talking about here, they tell you what to do.
Jill: And so what? At the end of the day, this is a house show. Brian, you went back and you’re like, maybe I could have gotten 10% more of it. Forget it. Move on. It’ll work out.
Steve: Today’s topic, affordable housing solutions. Why don’t you just ask us? This is why you’re listening. All the big cities in this country, specifically the ones that are west or any popular area that people are moving to not moving out of, are having affordability housing, in some cases, crises. My sister’s from northern Michigan in Traverse City which has long been a retirement/vacation destination for Chicago and Detroit. Which have been and still are largely populated urban working areas. We got to talking on vacation. And she said, “You know there’s just no affordable housing.” I hear that. That sentence makes my back teeth go, “What?”
Jill: I remember this. She was talking about the restaurants. There are restaurants that are actually closing, because they can’t get the workers. And the workers, and it’s the waiters, and the dishwashers, and the servers, and some of the lower paying jobs. And these guys can’t afford to live there. And the commute is killing them. The restaurants are finding themselves closing.
Steve: And I’m sure that’s all true. And it’s actually unfortunate. Because when you have people who want to work… I mean I’m a huge believer of, hey, if you want to work and you’re going to show up, let’s figure it out together. That was like yesterday’s show. That’s our common ground. Okay? Now, common ground is, you want to work, I want you to work, we need you, let’s solve this together. My question is, then, I said to my sister, on a large scale this is happening in Los Angeles county x100, Jill’s going to get into that in a second, my response to her was, “That’s great. How many trailer parks do you guys have in Traverse City?” “Trailer parks? Oh my God, we would never let a trailer park in here.”
Steve: That is the definition of affordable housing. Mobile homes have been around for as long as I can remember. Since way before our time and probably almost everybody listening to this. What do you say I’m a developer, I go in, I request a special fast track approval from the mobile home park that I want to build. Because there’s so much demand for affordable housings. Let’s do that together. Oh, wait, you don’t like mobile homes or you don’t like that word? That’s cool. How about we do one that’s called modular which is the same damn thing as mobile homes? They’re just constructed a little bit differently. Oh, you don’t like modular housing? That’s got a stigma? How about we do tiny houses? Everybody loves tiny houses.
Steve: And Traverse City’s got nothing but land everywhere on the outskirts, especially. The affordable housing problem, surprise, surprise, is caused by legislation. And legislators, specifically in the civil planning, civil engineering county level, they’re not making decisions based on money or actually solving a problem. They’re making decisions on personal self satisfaction about the fact that they’re changing laws to better the world when all they’re doing is adding laws. Which makes it harder to do everything.
Jill: I remember that. I remember reading an article about that. How many laws are added every day is staggering. What’s funny is, whenever we add a law, we never take one away. Those other old laws still stick there. We should add one, take two away kind of thing. But we don’t.
Steve: Here’s another-
Jill: Go ahead.
Steve: Here’s another part of the problem. Technology is changing everything on a daily basis, and in my opinion and I think Jill’s, for the better. Jill’s got a very new car. And I sit in the car. It’s like a spaceship. It’s got all this technology. And even my car that’s about four years older doesn’t have that type of technology. But you don’t see that changing in houses the way that you should even though it’s there. Why? Because legislators say, solar panels? Nope. You have to connect up to the grid. Water supply? Well, we could have our own water plant in our garage, all of us, and make it a pretty simple solution. Nope. We get taxes from that. You have to connect to the water.
Steve: Sanitation? You don’t have to have a septic anymore. There’s like 22 different types of waste disposal that’s way better for the environment. And so there’s all these great tech solutions to these. And people are all saying this. The younger generation, who really need the affordable housing, are all saying, we don’t need to live in a big house. We want to live in this tiny house. It’s cool. There’s all kinds of shows on TV about it. The affordable housing solution? The problem is caused by legislation. The solution is ridiculously available overnight.
Jill: I agree. I was going to say something funny. I’m going to throw it in now. Because you jumped in so fast. I didn’t get a chance. You add a law, take away two. It’s like your fat clothes.
Steve: How does that work with fat clothes?
Jill: You get new clothes, get rid of the old ones. And you should never see them again. Move on. And I mean goodbye to bigger clothes. Hopefully, you’re losing weight and you buy smaller clothes. And you get rid of your fat clothes. You don’t want to have them hanging out there. You don’t want to ever have that fallback plan. Get rid of them.
Steve: Oh, really?
Steve: Do people do that?
Steve: Keep your fat clothes just in case you get fat?
Jill: Yes. You should not do that. When you lose weight, get rid of the other sizes and then you’re stuck with this size. And, mentally, it keeps you here. I don’t know how that ties into this but I thought it was a law thing.
Steve: I don’t know what guys do that’s like that.
Jill: Oh, I’m sure guys do that. You know what the guys do? I’ll tell you what guys do. Guys go from an extra large to large. You know what they do? Then, they still wear their extra large. Because it looks like they lost weight. People go, “Wow. You’ve lost weight.” “No, just wearing this old shirt.” Maybe they did lose weight. Or sometimes, guys will buy bigger shirts. That’s it, too. “Did you lose weight?” “Nope. Bought bigger shirts.” I’ve heard guys do that.
Steve: Most guys are not intelligent enough to apply any of this to anything. If a man gets a new tool, let’s say a hammer, there’s no chance they’re going to throw away that old hammer.
Jill: There you go.
Steve: They’re going to just keep it. Because you might need it.
Jill: Oh my gosh. Well, that’s like these laws and these rules. You might need it. You might have to go back there. It’s stupid. What does it do? All it does is make us trying to get a permit… That’s why permits probably take so long. Why do permits take two weeks? Because they’ve got to go back for 80 years of rules and make sure this one works with that one and doesn’t negate this law and negate that. It’s nutty. And you’re right. We need to cut the crap and catch up to 2020. People need housing. And just because you don’t want to live next to that kind of establishment. Come on. That’s not cool. And that’s not fair.
Jill: I was thinking about what’s happening right now. I was reading an article, just this week, yesterday morning, about it’s an area in LA, downtown LA. And I thought it was LA Live. I’m like, “What’s LA Live?” It might be LA live. I’m not sure. But it’s an area, in the article, they gave the streets on the bordering of this area. And they are approving like madmen these 40, 50, 60, 70 story buildings. They’re like, this will be the tallest building. And then, this will be the tallest building. And some of them, they’re breaking ground right now in 2020. And I was reading one’s going to be done in 2023. I’m like, wow, I want to see this. I’m actually thinking to myself I kind of want to drive this area now and watch this unfold. I don’t know if that’s the best solution. What do you think?
Steve: If you’re from the east coast or from the Midwest, specifically the rust belt, and you are driving down the freeway and you see a 70 story building where there’s affordable housing, we have a name for that. It’s called the projects. And it’s failed. And it has failed every single time that anyone has ever tried to do it. It’s a gross disruption of natural supply and demand. Talk to anybody who lives in the projects. They all hate it. People get murdered there. It’s all terrible. When you say 70 story building in some designated zone of Los Angeles, all I hear is fail.
Steve: You know why they’re popular? I’ll tell you why they’re popular. Because people who make these rules are large institutional commercial developers who have a huge vested financial interest in building the biggest structure they possibly can. Letting it take five to eight years. Because they make money. Developers, huge scale developers like that, and contractors, and legislators, by the way, make hoards of money on a big 70 unit project. Who makes a lot of money on a outskirts of town subdivided tiny house development with a bunch of solar panels? You know who wins? The person who lives there and potentially the people like us who cut through the crap, I’m using Jill’s words, to do something that’s right for the planet and right for the people and right for the investor. And those are the building blocks of all the stuff that we do and all these companies that we have.
Jill: It’s amazing.
Steve: That’s so see-through, it’s silly. Follow the money.
Jill: People aren’t paying attention, I guess. It’s shocking what they’re doing with parking, new things. A, parking’s already a problem. Now, it’s going to get worse. And then, B, so many of them, they’re getting by with not having the normal allotted, required parking spaces, now. Because they’re within X amount of distance of public transportation. They don’t even have to provide it.
Steve: That’s a classic example of, hey, you get a huge break if you build a building close to a train stop. Which is what that means. That’s ridiculous. Los Angeles itself has massive, I don’t need to tell anybody this, massive traffic and saturation problems and huge water issues. Building a 70 story building in downtown is going to magnify that x10. But it doesn’t matter. Because there’s a bunch of fees involved.
Jill: Right. I know.
Steve: This just turned into a rant.
Jill: I know. Here we go again.
Steve: This defies common sense. But they’ll get built. And the people who live there will hate it. Can you imagine raising kids in a 70 story building?
Jill: I’ve looked at that. It’s kind of funny you say that. When, years ago, my brother, we were young, my brother before married and kids and everything, he lived at a studio apartment in Chicago. And I remember looking around at some of the neighbors around there, too. And I’m like, “How do you raise kids here?” I thought that was very interesting. They can never just go in the backyard and play. And certainly there’s no such thing as a doggy door.
Steve: I think you could do it. You can do anything.
Jill: But the windows don’t even open.
Steve: I know.
Jill: It’s weird. It’s really weird. Okay?
Steve: Don’t get me started.
Steve: Because I’m from Detroit. And I’m aware of all this stuff.
Jill: What is the solution? Can we wrap it with this?
Steve: Yeah. That’s just code for Jill saying, “Can we please make this positive before we end it?”
Jill: Give me something great.
Steve: The positive is to grossly loosen up the concept and the stigma of tiny houses, mobile homes, and maybe even RVs. This stuff has been around. And it’s just got this terrible stigma. And I don’t even know why. And every legislator that I’ve ever talked to says, “Well, yeah, mobile homes? Okay, let’s say I can get past the fact that it’s a mobile home which we don’t like. I don’t understand why but we don’t. There’s not the infrastructure for it. We can’t.” Yes, there is. There’s water and all that stuff that can be… Almost mid 21st century we’re coming into here. Technical solutions for all these problems. And it’s simple and environmentally healthy. That’s the solution.
Jill: Thank you. The House Academy Show. Let me do this again. Happy you could join us today. Every Tuesdays and Thursday, we are right here on The House Academy Show. Monday, Wednesday, Friday, you can catch us next door on The Land Academy Show.
Steve: Tomorrow, on the episode on The Land Academy Show is called Why Offers to Owners is Hitting Record Highs. You are not alone in your real estate ambition.
Jill: These are kind of deep shows.
Steve: Are they?
Steve: Oh, you know what it is? I’m making it deep.
Steve: I guess we could have said, “Affordable housing? Sure. Allow mobile homes.”
Jill: And then, talked about fun stuff.
Steve: Like fat clothes.
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Steve: We are Steve and Jill. Information-
Jill: And inspiration.
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