What To Do With The Upcoming MARKET CRASH Real Estate | JULY 2022 Market Update feat. Jamil Damji

Right you’re still not getting anything you’re still not doing anything right so there’s gonna be people who are going to sit on their ass and do shit. And there’s gonna be people that are gonna get out there and they’re gonna take action and like actually care about, this it, those people are going to always win. Why? Because they’re taking action.

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Justin: What’s up everybody. Welcome back to the Science of Flipping Podcast. I am Justin Colby and today I got one of my pals one of the best to do it. Mr. Jamil Damji. From Quigley’s here. Good to see you bro.
Jamil: What’s up?
Justin: Listen, I’m back in Arizona and not cold.
Jamil: How do you like it?
Justin: I’ll be honest. I’m gonna be honest with you.
Jamil: Yeah
Justin: For 12 years I lived here.
Jamil: Yeah.
Justin: I never complained about the summer. I didn’t really it was hot. We get it. Never really complained. Whatever. I moved to Miami.
Jamil: Yep.
Justin: Different climate. Warm.
Jamil: Yeah.
Justin: Humid.
Jamil: Yeah. Ball sweat.
Justin: Yes, a lot, a lot. But then I come back. And I literally think I just landed on hell. And it’s funny, because I’ve never complained about the heat in Arizona.
Jamil: Yeah.
Justin: And I traveled back here this week. And I landed Thursday, and it was 115 degrees. And I said, Oh, no, this is awful.
Jamil: Yeah. So last night wife and I were sitting out in my backyard. And we were like, there was a cool breeze. And she’s like, Oh, it’s really nice. And I’m like, isn’t it? And I looked at the temperature. And it was 103.
Justin: Yeah.
Jamil: And so you’re 100% Get acclimatized to it, you got to stay here in order for it not to feel like hell. But you leaving to Miami coming back. I think that was your big mistake. We go to LA a lot, because we have a house out there as well. So traveling back and forth. We see the temperature difference.
Justin: Yeah,
Jamil: Just drastically
Justin: Crazy
Jamil: You know, right in our face, because we’ll go and it’ll be 70 degrees at the water. And then you come here and it’s 150. And you’re like what’s happening? But you know, Phoenix is still such a beautiful town that like.
Justin: There only two places I live in Miami or Scottsdale.
Jamil: So even though it’s hot, hot as balls, it’s just like, got the opportunity. The people here there’s something in the water that makes everybody good at real estate.
Justin: Everybody,
Jamil: right? Yes. sir.
Justin: We’ll talk about real estate dude, because I came in, I literally hit you up first. And I said, Dude, we need to do some content. Because
Jamil: Yeah, man.
Justin: The markets changing real time.
Jamil: Big time.
Justin: Like real time. This is a thing.
Jamil: Has actually happened so fast. It was like, one weekend. It was hot, hot, hot, like, multiple offers. And then the next week, I think like Easter might have been when it changed.
Justin: That would be a good so our guy Chris Simon and I had little bet little steak dinner at city hall that yeah, he hits me up. He was like, How much do you want to bet by July 1? There’ll be over 10,000 listings in Phoenix. I said, bro, what is it? And now he’s like, 2800. Like, this is back in May? Yeah. June, July. And like, I don’t know, that seems a little aggressive. I see it going up. But he shoots me a text message right now. And he’s like, 13,000 active listings. Yeah. And right.
Jamil: You go to dinner.
Justin: Yeah. So there we go some money
Jamil: When you take Chris to City Hall. I mean, he’s what nine feet tall?.
Justin: Yeah. Something like that.
Jamil: He gets to tomahawks. But what he does is he orders to and then eats a quarter of one and then just leaves. That’s it? Yeah. Well, because he’s big. Yeah. He’s like, hey, there you go. I’m going to order for two. I’m going to eat a quarter and then you’re going to pay for both.
Justin: He’s on his fitness grinder.
Jamil: He’s actually amazing. Dude, he honestly I love Chris so much. And every time I see him, it looks healthier. Yeah, he’s always making himself happier. He’s, he’s engaged. His fiancee is gorgeous. His daughter just got married Jack is crushing it out here. I mean, you know, I think he’s literally living the life right now. Everyone’s Yeah, man. His kids are all happy and healthy and doing well. And he’s made tons of money. So he gets to hang out with a gorgeous woman on in the water in Florida watching anime and we love Buddy. Yeah, I was like, what else do you want out of life? He’s crushing
Justin: Story about that is every time we come back to Arizona, his fiancee is on the same flight really randomly. That’s cool. Lauderdale and Miami. And so our flights are the same. So that’s cool. misread. So let’s get in. I mean, here’s the one thing I can tell you for certain. Our business model wholesaling is the best business model there is.
Jamil: I believe that I look man, I got involved in wholesale when the market had tanked here in Phoenix. So I started buying property in 2000, late 2009, early 2010 market was was decimated. And I was wholesaling like crazy. You know, and so, I understand that Wholesale is one of those business models that can make money on the up and it can make money on the down. You just have to be very, very good at underwriting. That’s right. It’s everything 100% Like if you I understand how to value property you can, you can always find an opportunity. And it’s not that people don’t need a place to live. So rehabbers are constantly going to be doing projects. They’re just going to be buying deeper right now.
Justin: That’s it. And that’s it. So it’s your ability to buy right? You make your money on the vine, I will tell you, I literally just had a conversation earlier today. I was featured on a podcast and he said, Hey, are you scared? My answer and tactically is absolutely not. Yeah, I will still buy we just talked about you’re buying a 53 unit. I will still buy a flip. I will buy a long term rental. I will buy an Airbnb because the reality is, all of it has to do with how you acquire it has nothing to do about what’s going on with the market. Right now.
Jamil: Absolutely and again, let’s take an honest look at the market. Okay. Because I’m seeing I’ve been I had a great opportunity to get some insight from the VP of data and analytics at bigger pockets who was just interviewing the VP of data and analytics at Redfin. Yeah, who gave some insight that I think really shines a light as to like, what this shift will look like for us. Because 18.6% of home purchases are still being done made by institutional buyers. Okay, so when near 20% of the volume is still being absorbed by entities that are not dependent or sensitive to interest rates. As as much as the average homeowner as us, you start to realize that there we don’t have a natural market cycle. Right now. We’re not changed forever 100% change forever
Justin: And they don’t put them back that that home is off the market forever. She in terms of like Blackstone, if we’re talking to open door and all that that’s different, but the Blackstone’s the colonies, the Amherst, they’re keeping those bad boys and it’s off, you won’t see that home come back on the market.
Jamil: No. The other thing I’ve noticed is that as the residential, you know, your your firemen, your school teacher, your nurse as they pull back, because affordability has gotten hard. Yeah. And because interest rates are high, and they can’t really afford much house. So as they pull out of the market, and sellers start to come back to reality about where the pricing should be. Everyone’s saying, Oh, my God, there’s all these price reductions. Look, if your price was crazy town, and you had to come back to normal town, that’s not a price reduction. Right. Right. And is that normal? That’s normal, because everybody was just out there, literally deciding they were throwing a dart and saying, Well, what should we list for a bajillion dollars? Great. Let’s try that worst case that happens we have to reduce. And so what’s happening right now is you’re getting people reducing back to where the comps are supporting the number, right? Yeah, that comes from supporting the numbers. And so there’s going to be reduction
Justin: Totally, if the column say 315 And you listed for 349 Nine, because you’re just throwing that Dart, that’s what’s happening, and then that’s what’s causing this. Oh my god the market? I don’t know, you should have listed it 315 Right, when you bought the property. And the challenge that I’ve seen a new scene, whether it’s our students or ourselves, because for those that don’t know, Jamil and I both made it through the crash and lost everything Yep. And people that follow you know your story and people follow me follow know my story but the reason why we’ve connected so greatly over the last decade plus is because we literally lost it all Yeah, and it’s because stupid chasing money SELF I don’t know the word but like we were chasing money and going for this like speculation of the deals right?
Jamil: I got murdered on leverage, right? Right like so for my for anybody watching and if you’re wanting to know what I think the key things to stay away from are in a possible correction like Just don’t be over leveraged out there don’t.
Justin: What would you suggest the right amount of leverage? percentage basis let’s let’s call it.
Jamil: So personally, I own my home outright. I nearly on my vehicles outright. I got a very small note. I mean, I can sneeze and pay them off. Yeah. Okay. I have a very low overhead when it comes to how I personally live for sure. And I’m just I just live like that because of the PTSD from the last market cycle right. The other situation that I’m seeing right now is we don’t have the same market conditions as we had that created the last crash last crash was created from fraud and poor lending practices. We don’t have poor lending practices anymore. I just literally am getting financing on this 53 unit right now and it is invasive would be
Justin: just gonna say they’re all the way up
Jamil: Yeah, it’s like it is it’s an it’s incredible just how complicated it is to get leverage.
Justin: Right on this one is cap fund.
Jamil: So no cap fund is just closing it for us so that we can but the term term refi is where it’s gonna get really painful.
Justin: In totally in I just bought a home in October. And kind of like you I would assume, but like it was so invasive going through being an entrepreneur, I ended up issuing bank statement loans because they just said, Alright, how much money do you make really every single month? Because the IRS thinks I’m broke. So, which is great for tax purposes,
Jamil: My IRS? They’re crushing me. I have like $900,000. Yeah, this last year, and tax payments.
Justin: it’s a real time. Well, that’s because you make a lot of money. My Account tells me this all the time. Yeah. If you’re not bitching about taxes, because you’re not making enough money.
Jamil: Right, right. Well, you’re doing a good job of writing stuff off, and I still need to get more tax efficient.
Justin: Yeah, yeah. Part of it and get a loan on your home. Interesting. I mean, listen, by the way, dude, they tell you buy a home, buy a home, it’s a blessing. Yeah, tax write offs. I’m putting a $60,000 roof on my fricking home. Because I’m like, I literally call my account. I was like, Oh, you want me to? But this is a good investment get? Like, yeah, like, but you need to be able to afford the home for sure. So we’re going on tangents, because I’m pretty passionate. And so are you about this. But leverage, if you’re a flipper, what kind of leverage are you looking at right now? What’s the right amount at this point that that keeps you from losing your button?
Jamil: I think if you are buying, right, so if you’re buying wholesale opportunities like we do, which is say you’re getting 30% from like, 70, you’re buying at 70 cents on the dollar. Yep. Okay. So what ends? What’s the worst that can happen? You renovate it? And you sell it with a breakeven? Yeah. Right. So like, it’d be very hard to the market would have to tank 30% In order for you to get to get crushed on that deal, right? And so when is that going to happen? Not. So it’s not the way I look at it is if you’re buying correctly, then you shouldn’t have to worry about how much leverage you have. But But like, for me, 20% down makes me feel real comfortable. Because I know, I’m insulated. They’re like, I’m not gonna have to walk away from this loan, I’m not gonna have to walk away from this house. I only do non recourse loans anyways, just in case like things go to, because I, the last time I was in recourse, and they took everything for us, right. So I’m doing asset based lending only. So hard money loans are private money loans. So they’re non recourse, meaning that they can’t come and take my house if things go wrong. I am putting 20% Down on all of my projects. I mean, beyond that, there’s not much more that I can do to insulate myself,
Justin: you’re still being protected.
Jamil: Yeah. And I’m and I’m underwriting, underwriting every one of my deals and making sure that I’m not overpaying. I’m not buying on speculation. There’s good fundamentals in the purchase that I’m making. Beyond that, that’s the best that I can do to be careful.
Justin: Yeah. And the key here is people like when I got asked this morning, am I scared? And I’m like, Absolutely not. And I’m gonna continue buying because in these times, and I think we’ll go through the season, right? I’m not, by the way, I’m not an economist, I have not studied this my whole life, I just have some common sense as a business owner being in real estate 15 years. I think the market corrects roughly 20% Over time, not next month, not even the month after, but I think we’re gonna go through a six month season that I kind of feel like 20 percents about the right number. And here’s why I say that. markets like this Phoenix, roughly a 40%. Appreciation last two years, year over year 20%. That’s insanity. Yeah, normal markets three to 5% appreciation in a totally normal market. Right. So for there to be 20% year over year here in Phoenix. I’m like, okay, it makes sense in some markets like this, that there is going to be a 20% correction, because that’s actually getting a lot closer to being a normal market. But that’s not a pop of a bubble. It’s because this has been almost falsely created over craziness. Well, right.
Jamil: What the economist or the data analytics person that Redfin had noted, which I thought was really interesting. Is what caused the appreciation. And what caused the appreciation was America migrating. That’s it.
Justin: Right, right, leaving San Francisco coming to Phoenix
Jamil: Leaving San Francisco leaving leaving New York leaving Chicago leaving LA. So all of these people left these high priced markets and they came with so much money. So for them. It really, I mean, the migration and it happened in such a dramatic fashion. And it happened so fast, because of the pandemic, that you got this massive spike. Right. And so I don’t know if that was an overheating, because what ended up happening was they just came in, they plopped down cash. Yep. And so the only thing that could cause the prices to even correct 20% Which again, it could happen.

Justin: It could I don’t know, it’s not just to be clear, that’s not me being fear, based at all.

Jamil: Yeah, that’s just saying 40% appreciation was nuts. Yeah. So even if we lost half of that, that will awesome. It would still be great. But like that, again, look, the fact that people were paying 50,60 $100,000 over list for properties. And there was no appraisal fundamental there that showed that the value actually was real. I mean, that happened because of the just volume of people that migrated and we’re coming. That’s right now. This is the question Will the migration end?
Justin: So, if you’re really asking my opinion, which I think you are, I actually don’t think so. And the reason why is because I believe COVID really set a new precedents for the world, like the world, not just US. Yep. And I believe people are gonna want to live where they’re gonna want to live, and they’re gonna be able to work. I think it was. Is it? Facebook, one of the, you know, whether it’s Facebook or Amazon, or even Tesla, they’re like begging their employees to come in the office at this point. Yeah. Because people are like, well, I don’t have to anymore, right? The world has changed legitimately changed to the point where I moved my happy ass to Miami and didn’t feel bad about it or feels like my company would go under because the entire world, my entire team is virtual. Right? We’re sitting in your office right now. And it’s beautiful. And you have a great team. But the reality is, anyone could be in real estate in any market. We just talked about privy a little while ago. Yep. I have students working privy in states they’ve never even been in.

Jamil: Yeah, right.  I mean, it’s a fantastic tool.

Justin: I don’t think it’s going to I think it’s going to continue, I think Phoenix is going to be a great market. I think Vegas is going to be a great market, Miami, these markets that can be sprawling and have the appeal that like a Scottsdale and Phoenix does, I just don’t think it slows down as much as people are. I am not fear based in this, you know,
Jsmil: I’m 100% behind you with that. I also believe that we have a relative low cost of living in these markets that have this crazy appreciation. You know, like, coming from California. And because I’m, I live in LA as well as Phoenix. For me, I I’m really sensitive to the price differential between the two cities, you know, I go to LA and I fill up gas at over $7 A gallon I come home and I’m at like high force. Yeah, you know, I go to the grocery store over there. It’s 400 or $500. They go to the grocery store over here. It’s two or $300. Right? Everything is just more expensive in Los Angeles, right? So when you look at it that look at it that way, the people that are leaving California, that people that are leaving those high priced markets where everything is more expensive, even though they spent a little bit more money on the house, they’re spending a lot less money on everything else that they’re doing. And a lot of them are having the same job that they had when they were living in the high priced markets. So they got an income that allowed them to live in LA, but now they’re living in Phoenix, right where a plum is 80 cents, not $1 50%. So I still believe that you’ve got really strong fundamentals when it comes to these markets where we had this crazy appreciation. I don’t necessarily feel like we’re going to have less people moving here. I don’t think we’re going to have less demand for housing. I think that the buyers are going to be a little bit more competitive. And they’re going to require the sellers to do more work in the homes. I mean, I saw some very shoddy remodels get absorbed. Yeah. And, you know, being somebody that really pays attention to design and style, especially for fix and flips, and seeing how our competitors were getting away with like substandard work and substandard materials. Like I think that’ll end. Yeah, I think that of course, we’re going to start seeing some relaxation and pricing when it comes to lumber and material. But it’s still like the Great Depression out there. If you go to the Home Depot. Oh, I mean, it’s like you know, one day you go outside and you get chocolate and other day you go outside and you get coffee, like that’s what it was like in the 30s Yeah, today, you might go to Home Depot, and they might have drywall and you might go back the next day and they got nothing done. There might have been like, right now we’re gonna have a concrete shortage.

Justin: Oh, dude, this is wild, but lumber is going down. So everyone’s super excited at lumber pricings finally caught, right, we have now you can go your concrete, there’s always going to be something going on? Do you have any feeling about whether price point plays into this? And why ask? Because I’m looking at buying right at the street buying a home for about a million, putting roughly 100 into it and selling for roughly one four, and that’s me being conservative underwriting it correctly. Maybe it gets listed at one three, you know, seven, five, and then you know, do you think price point relative to what’s happening? Right interest rates and all that you think that’s a big thing?

Jamil: I mean, I think the luxury space always is a little bit less sensitive to an interest rate hike, because look at that price. People put down more money. and they have higher paying incomes. So you know if they’re if their mortgage payment is $1,000 more a month, it’s not going to make a big deal. It just I mean, I hate saying this but like it really just depends on like where you are in life. Like you know, people in a higher income bracket when things like this happened with inflation. They just figured out how to make more money. You know, and like nothing has really relaxed when it comes to how expensive stuff is out there right now. It’s everything is a lot of money, but nothing. I still can’t get a table at a restaurant.
Justin: No kidding.
Jamil: I mean legit, I can’t get a table at a restaurant. I can’t get in. I can’t get a seat in a movie. Everything is sold out. Yeah, everything is booked. They’re still spent. People are still out there doing stuff so it’s so bad. Why aren’t you guys just staying home. I
Justin: People are addicted to the fear. They love it the world’s gonna crashes. And that’s where it’s just like, you don’t even have to educate yourself, like just be around the people who aren’t addicted to fear, right? Like your amount of abundance and my amount of abundance needs to be way further out in this space because this is an incredible time to be in real estate. Not a scary time.

Jamil: It’s always an incredible, incredible time to be in real estate, real estate, interest rates, inflation, recession, and all the other key words that news is trying to shove down everyone’s throat. It’s real. I don’t I’m not blind and deaf to what is actually happening. Gas really is in Miami is almost $6 a gallon, right? I’m not blind to that. When I fill up mine randomly. I’m like, Oh, this is a lot. Okay. But there’s still incredible opportunities in real estate. Right.

Jamil: And we did $1.4 million in assignments last month.
Justin: But it’s a recession. But there’s interest rates going up. Oh, wait, no, there’s no, but you just go do?
Jamil:  Yeah. So what did that how did we sell wholesale deals? I’ll tell you how we bought them deeper?
Justin: And you have a buyer that you know, that will buy it? Yeah, understanding. I mean, we didn’t go too much into technical real estate, which is fine. But like, I think people right now is they watch this on YouTube or iTunes or wherever this is going to be. They need to understand it’s not time to be fearful. No, like, it really just isn’t. You’re talking about buying a 53 unit. I’m looking at buying 20 rentals in North Carolina like I’m more in than I am the other way. Yeah, right. Like I probably been more conservative over the last two years, when flipping and things because I’ve always kind of felt there’s always this thing you and I’ve been through it where there’s like if that music turns off, and you have 19 rental or you know, rehab running, that gets scary.

Jamil: As long as you can debt service, what you’ve taken on his obligations, and you’re fine. You know, like make sure that if you’re buying, I think, you know, in times like this multifamily always does well, why because multifamily is not as sensitive to the comparables because it’s all cap rate driven and rents have spiked, and rents aren’t coming down, no, going higher. They’re going higher. Right. And so you think about that. So where will we have opportunities in real estate right now multifamily is absolutely true, for sure. Because cap rates and a lot of buildings haven’t increased their rents yet. So there’s still a lot of opportunity there for value to be at

Justin: 100%.

Jamil: So I still believe that, you know, you can get in do a lot of transacting in the multifamily sector. I think that there’s a lot of transacting still in single family. I think there’s a lot of opportunity in the lower luxury price points. I’m talking like $2 million, and under Yeah, I think the ultra luxury market will absolutely find some some softening there just because people in that real high income or that those high net worth individuals, they may be waiting a little bit longer to deploy capital because they’ve got so much money that they’re not really rushing towards doing this or that. So there could be a softening there. I think in the lowest lowest price points, there’s still just no inventory there. And because interest rates have spiked is where they went, housing start stopped. Yeah. And so look, we have an inventory problem.

Justin: It’s so real l

Jamil: And we’ve got people locked into their homes because they can’t go anywhere.
Justin: We’ll end all the people that bought at 2.85 interest rates and all the people that refi they’re not they’re not going anywhere. No, they can’t because what are they gonna buy? I mean, it’s crazy, dude, it’s this is such a great time to be in real estate and in by the way, for all of you aren’t following Jamil, you need to be following Jamil him, his whole coaching program, his business of KeyGlee, like one of the greats to be in the space. I don’t say that about everybody.

Jamil: Thank you.

Justin: You are that guy like and so I just appreciate you spending some time with me while we’re here,
Jamil: Man. It’s fun. You know, I always think it’s important that people that have their finger on the pulse of what’s going on in the market speak. I think there’s a lot of fear out there. I think there’s a lot of people who don’t have really they’re not in the arena. Yeah, they’re not really playing the game. And so they’ve got opinions. And I think that unless you’re financially invested, and unless you’ve got something to risk, I really don’t want to hear your opinion.

Justin: Agreed.

Jamil: You know, I also think that for people that had been desiring to learn and understand real estate, look, if a correction does happen, okay, and say we do end up losing 20 or 30% in the market. So that’s called a dip. Right? So you know, what ends up happening at the end of a dip, action, activity? And so cool, if you’re saying the market is gonna crash and what are you doing right now is the time for you to learn the fundamentals of underwriting right now’s the opportunity for you to understand how to reposition and add value to property right now is the opportunity for you to learn the instruments that we use to buy and sell contracts. Right now is the opportunity for you to learn the creative finance models of subject to and seller finance right now is an opportunity for you to learn multifamily investing, I mean, guys, there’s always going to be a reason not to take action and learn stuff. Right? How many people as a coach, did I hear people say, oh, you know what, I’m going to wait for the market to crash. All right? Well, where are you? Hey, what are you doing guy that was waiting for the market to crash. Where are you? Right? You’re still not getting anything, you’re still not doing anything right? So there’s gonna be people who are going to sit on their ass and do shit. And there’s going to be people that are gonna get out there and they’re going to take action and like actually care about those people are going to always win. Why? Because they’re taking action. One more thing. If you look at real estate prices from the time we’ve been tracking 1930s or 40s, or whatever, and you look at today, guess what real estate has always done this. Once you’ve had moments where it did this, but ultimately it is always up into the right. So don’t time the market. Have time in the market.
Justin: That’s it. Boom. We’re gonna leave it at that dog.