In this episode, Mike discusses the looming housing and financial crisis heading our way in the near future. Mike explains to us why it mightn’t be the best time to invest in real estate but why you should consider purchasing a business, particularly in the HVAC sector. Is cash king, or is it trash?
“Long term cash is trash, cash right now is king”
0:00 – Intro
1:07 – A lot of people have made a lot of money off real estate
3:59 – The writing on the wall is not looking too good, but there is a lot of opportunities
6:12 – A lot of damage is being done to people; suicide hotline calls went up by 600% and there’s a real estate crisis coming
6:59 – Mike announces he’s going to launch a real estate and mindset 101 course
7:41 – Now is not the time jump into real estate investing
9:23 – Mike is considering selling and becoming a renter
10:32 – People are not spending money like they used to, at this may mean inflation won’t happen
12:49 – The PPE isn’t additional money, that money would have been spent anyway
15:57 – Ken McElroy believes the crash will happen in 2021
19:13 – Joe Biden’s plans to cut tax benefits and incentives for real estate investors is going to create challenges
20:57 – Will there be investment opportunities?
23:25 – Long term cash is trash, cash right now is king
30:04 – 10,000 baby boomers are retiring every day, and the pensions aren’t there in this financial crisis
36:49 – This is a crisis for businesses
37:16 – Mike is looking for HVAC and plumbing services to purchase and gives the details if you’re interested
Ken McElroy | https://www.youtube.com/watch?v=hF1H1qfW15Y
Four Peaks | Fourpeakspartners.com
Sell Your HVAC | Sellyourhvac.com
INTRO [00:00:00] Are you looking for freedom? Freedom from the daily grind and hustle or just finding a way to live the life you always wanted? Then join us on the Investing for Freedom podcast, our host, my guy. We’ll help you discover new ways to find freedom. With tips, insights and interviews, you’ll learn the exact systems he’s used to travel the world and live his best life. True success and happiness are all about freedom. And here’s your roadmap on how to find freedom on your own terms. Welcome to the Investing for Freedom podcast. Here’s your host, Mike Iola.
MIKE AYALA [00:00:32] Thank you for joining me on the Investing for Freedom podcast. Today, I’m coming to you from Breckenridge, Colorado. I’m up here with a group of guys that I talk about often. It’s an organization called Go Bundes. And, you know, if you’re an accredited investor and you’re a guy, unfortunately go abundances for men only, but actually not unfortunately, because that’s what makes it powerful. But anyway, if you’re a man and you’re an accredited investor and you’re interested in just hanging out with an amazing group of guys and just expanding your network and, you know, tapping into some amazing relationships, I’d highly recommend that you check it out, go abundance dot com. But anyway, yes. So I’m up here at Breckenridge and I wanted to talk to you today. It’s gonna be a little bit different. I debated whether to do this on the Monday episode or. The Thursday episode, because, you know, she’s going to be me. I don’t have a guest today. But the reality is it’s probably maybe a little bit longer than, you know, what we’re used to on Mondays. And I didn’t really want to disrupt the flow. So. Well, here goes. You know, I’ve been talking about this quite a bit lately. I really believe in a lot of smart people that I know, like and trust kind of are thinking the same thing. 2008 was a real estate crisis. But, you know, it was it. It stemmed in real estate. It stemmed in banking. It was a financial crisis. And the opportunity, you know, after 2008 was really in real estate. And that doesn’t mean that there wasn’t, you know, opportunity in business in other sectors. But 2008 was a real estate crisis and it gave real estate investors a lot of opportunity and in possibly the greatest window for real estate investing that we’ll ever see. And I’ve had a lot of conversations this week, you know, just about the state of real estate and and where we’re at. A lot of the guys in go abundance are in real estate. And, you know, one way or another, you know, some of the guys are in tech, but it’s associated with real estate. And by the way, they own a bunch of rentals. You know, some of the guys have staffing companies and big benefits of providing companies. But by the way, they’re there in real estate. They own a ton of real estate investments. You know, there’s that old saying that the majority of people who are wealthy, they and they they made a lot of their money in real estate. And I’ve also heard it said that a lot of people that are wealthy most likely made their money in some sort of business and then they held it in real estate, too. And, you know, I think that rings true. But there’s been a lot of people since 2008 that have made a lot of money in the business of real estate and not to go down too far down this rabbit hole. But, you know, I was in it a mastermind with the real estate guys, Robert Helms and Russell Gray, and we would meet once a quarter. And I had this epiphany when one of the meetings, I think we were in Miami and we’re sitting around a table on another 15 or 20 of us. And I had this epiphany as I was looking down. And, you know, all a lot of these guys that were in this mastermind, they had started out as passive investors. But then, you know, as we progressed, we naturally move into a larger investment business. And so there’s really, you know, there’s a lot of different kinds of real estate investing, but. You you switch typically from a passive real estate investor where, you know, maybe you own some rentals and you outsource the property management, et cetera. A lot of times the natural next natural progression is moving into a real estate business of some sort, which is obviously what we did. You know, I had 45 single families. We had three commercial buildings. We had five mobile home parks that. You know, we were operating and owned. So when we made the transition, though, and we started I teamed up with Andrew Lanois and we started Park Place communities. We shifted from Kara and I having a passive real estate portfolio to us operating a business. I mean, we built out a construction company. We built out a property management company, you know, started an investment firm for Peake’s and, you know, hired a bunch of employees. And and we were operating a business. It was no longer a passive real estate play. It was operating a business. And that’s going to lead me into kind of the Segway of what I really want to talk to you about today. If 2008 was a real estate crisis that gave us a lot of opportunity in real estate and then, you know, like I said, there’s a lot of us that actually own and operate real estate businesses around that real estate. So if 2008 was a real estate crisis, I really believe and again, a lot of the smart people that I get to listen to and get to be mentored by, I’m so fortunate believe this as well. I believe that the 2020 pandemic and the financial crisis that we are going to experience, I don’t think that I think we’re still on. You know, we haven’t reached the hangover phase yet, if you will, were worse. It’s still late at night and we’re still drinking, if you will. Maybe that’s a horrible metaphor. But the reality is, I don’t even and I’m not I’m not here to be a doomsday. I think there’s gonna be a ton of opportunity. But if you just look at the writing on the wall, I shared a story the other day on my Instagram page at the Mike Iola, I think it was in Forbes. You know, I think it’s 32 percent of people in July of mortgages missed some form of their payment. Thirty two percent. I don’t know, even the unemployment rate. Yeah, there’s a lot of people that are going back to work, but there is a lot of people that are still unemployed. And I don’t think that we’re really hearing about this. And again, I’m not here to be a doomsday here. Stick with me. I’m going to tell you where I think the opportunities are. And I got to tell you also what we’re doing and and how you could help me and possibly even make some capital. I when you look at unemployment and again, I don’t really see a lot of people talking about this because we’re talking about, you know, elections and we’re talking about the corona virus and we’re talking about. Just I think we’re distracted right now. And I don’t whether that’s designed, whether that’s intentional, I don’t know. But if you look backwards, you know, I’ve watched this my entire adult life and you’ll probably agree with us any time there’s something major going on. It seems like, you know, we’re distracted by something else, something completely different. You know, the things that we were thinking about and hearing on the news and everything six months ago, I mean, a lot of stuff just disappeared. And so even right now, you know, we’re we’re we’re all talking about Corona virus and, you know, how we’re shut down in this now. But here’s the reality. Even I live in Arizona. And so, you know, we we open back up. You know, some people would say a little bit early because, you know, then our cases spiked and everything else. Listen, I’m not saying corona virus isn’t a real thing, but the reality is, you know, we’re doing a lot of damage to lives. I heard the other day that the the phone calls at the suicide hotlines have gone up 600 percent. 32 percent of people in July in some way, shape or form missed a portion of their mortgage payment. We have a real estate crisis coming that nobody’s really wanting to discuss or talk about. I talked to so many people everyday, and I appreciate you guys reaching out to me that are, you know, asking about real estate. How do I get into real estate investing? You know, is it a good time to buy real estate? So first and foremost, I’m going to launch a a real estate and mindset one to one course here in the next month or so. And the first one, the first time we do this, it’ll it’ll be probably a group of 10, 10 people. And I’ll announce the details shortly. But I’m not in any way saying that. I don’t think you can find deals right now. But, you know, I had one of my mentors that used to say in order to get a deal done, you had to look at 100 real estate deals in order to really analyze 10, in order to put three under contract, in order to really negotiate and close on one. And I would argue right now, you know, those ratios are probably much, much higher. I’m not. Again, I’m not saying you can’t find real estate deals right now, but I don’t really believe that right now is the time for, you know, anybody to really be jumping. Into real estate investing. Now, there is some exceptions. You know, I know an individual who’s a real estate agent. Do you know they have got a couple of deals under their belt? And they get first look at a lot of properties, right? Sometimes even off market property. So I’m not saying that you can’t find deals. And I did say I don’t think it’s a time for anyone to be jumping in. Let me retract that. It’s probably not. That it’s not a good time for anyone to be jumping in, but you’re going to have a pretty hard time right now finding real estate deals.[00:08:47] And I’m surprised, you know, every day I’m talking to real estate investors who are still super bullish, closing deals, et cetera. And I think we’re if we’re not at the top of the market, we’re really, really close. I mean, we’re in that we’re in that scary red line zone. You know, just opening up the door a little bit on our personal lives. I mean, I’ve never really thought about my house as an asset, but I don’t really pay attention either to it as a liability. It just is. I’ve always been more concerned. Karen, I have always been more concerned with, you know, the environment that we live in and having a safe place for our children and a and a happy place, you know, a place where they’re comfortable, a place where they can bring their friends and, you know, be be loud and hang out. And I mean, we’ve literally designed our last house around that. We put the basement in so that the kids could just go down there and, you know, be as loud as they wanted. I’ve never thought of my house as an asset, but again, I’ve never really thought of it as a liability either. But I have you know, Karen, I recently have just been looking at the amount of crazy equity that we have in her house because of appreciation. I’m were considering selling were considering being renters there, and there’s several reasons for that, which this is the real meat of what I’m going to get into today. It’s a really good time to be, you know, holding pulling cash right now. And it’s interesting because we have a panel coming up here at Breckenridge is trash. Cash is king. And, you know, a bunch of guys from Go Abundance are going to be debating whether cash strapped for cash is king. And there’s one of the founders of Go Bunyan’s. His name’s Pat. Hi. He asked me the other day, said, Michael, do you think it’s cash trash or is cash king? And I said, you know, I’m not trying to shirk the conversation or dodge it. But but the reality is, I believe that cash is trash. When when we’re printing money the way we are right now and I’m having a lot of amazing conversations that are expanding my brain, you know, automatically everybody says, well, you know, we’re going to have major inflation and I’m not going to get into super deep inflation deflation conversation. But one of the guys that I look up to the most, I think he’s really brilliant. I’ve never met him, but I learned a ton from him. His name’s Jim Records, and he’s talking about how he can’t he doesn’t believe that we can have major inflation right now because there’s no velocity of money. And believe it or not, people are not spending money like they were. So, you know, when the government steps in and they give a stimulus checks and, you know, they give businesses PDP and, you know, everybody’s thinking, oh, well, the you know, the government stepped in and they’re giving us all this money and everybody is just spending it. Well, the reality is it’s not we’re not spending to the level that we were before. And I’m a pretty simple guy. And so just think about it this way. Whether in your backyard, your city, your community, your state, whether you know, whatever phase of reopening or closing or whatever because of Covais you’re in, I I sidetracked a little bit here. But what I was saying, you know, Arizona, we we opened up a little early, some would say. So, you know, we started going back out. We’re go into the restaurant. And even during that time, the restaurants were not you know, there was the regulations where they can be more than 50 percent occupied. But most of the restaurants that you went into were 10 percent occupied. Twenty five percent occupied. And half of them weren’t even open there. There’s a staggering statistic about the amount of businesses that have closed their doors. I think it’s something in the range of like 19 million restaurants, something like that, of closed their doors forever. They’re not coming back. That’s a lot of jobs. I mean, if you just take 19 million or whatever the number, it doesn’t even really matter what the number is. I’m just trying to get you thinking about what’s coming and what’s happening. If you take the amount of businesses that have personally are completely to permanently, not personally, permanently shut down. And you think about those jobs, those jobs aren’t coming back. And tip, typically when something tragic happens, I mean, people rally and we figure it out, we’re humans and I believe we’re going to do that here, too. But the reality is it’s not going back to normal and we’re not spending. Here is my point. We’re not spending. The money at the velocity we were before, there’s certain sectors, I get it, that are doing very well. And there’s certain demographics and groups of people that are doing okay. And doing well. But our heads in the sand. I mean, there’s a lot of stuff here that’s not being talked about. We’re not going back anytime soon to the level of spending that it was before. So Jim Rickards point is, in order to have true inflation, yes, you have to inflate the money supply. As Peter Schiff would say, but also that money has to be being spent. And so when you look at the BPP and you look at the stimulus that everybody’s getting, that’s not additional money that’s getting put into the system. And I think this is what a lot of us don’t get and understand. That’s not additional capital. That’s it’s not like it’s not like the economy is at a all time high and everything’s well. And then all of a sudden the government said, okay, I’m going to create an additional, you know, trillions of dollars on top of that for you guys to have and spend. So it’s not like we’re spending all this money and then additional money got pumped in. What happened is people weren’t making money. Businesses were shut down. So we weren’t creating revenue. People didn’t got laid off. And and and so they’re not getting paid. And so then they’re getting unemployment, which he had. There been a lot of people are making a little bit more on unemployment than they were before, potentially. And so maybe you could poke a hole in that argument. But the reality is we’re not. It isn’t like the economy’s doing great, that we’re pumping a bunch of money and on top of that, that people are spending. We’re just making up the difference of what wasn’t being made. We’re making up the gap. The Fed and the Treasury and the government is make it. We’re just making up the gap for for what was being spent before. And and here’s the problem. Even though we’re trying to create that money and make up the gap, people are not spending at the level they were before. Just look at your own life. And I would venture to say that the majority of us are spending less today. Than we were before. [00:14:53] And I would venture to say that, you know, the majority of people are having some sort of financial concern and constraint in saving money. And there’s a statistic that shows the American savings right now is at a level that it hasn’t been for a long time. And it’s not like we have all of a sudden a big, huge number of, you know, money or dollar amount in our bank accounts and savings, most of us. But but the average American has a negative net worth, right? They don’t they their their bank accounts are actually paycheck to paycheck week to week. And they’re negative in some way, shape or form. [00:15:27] And so that being said, the savings rate being higher than it’s ever been, that means that Americans are not spending as much money. Just look around you. You don’t need to be, you know, a statistician with Goldman Sachs to figure out that our economy is not the amount. This is the amount of money that was going into the economy before is not there. I heard that. I think it’s October one when, you know, some of the PDP money in the stimulus money and some of the big stuff ends in and they may extend it. Who knows? I heard that the some of you know, the airline industry is like planning on laying off another 75000 people. I literally I I’d like I said, I’m up here in Breckenridge and flying out of Phenix. Man, the airports are dead. And you know the planes. Yeah. You know, every other seat has to be unoccupied. But honestly, like half the seats. That could be occupied or not occupied. We’re not spending money. There is entire industries that are just collapsed and Sony pulled us together. You know, where’s the opportunities? First off, let me just point to Ken McElroy. He’s got a YouTube channel. And he put up a a video a few weeks ago, which will put in the show notes. And he believes that the crash is going to happen in 2021. And by the way, I mean real estate crash specifically. And I buy into that. I’m not gonna spend a lot of time, you know, really talking about this, because you could just go listen to his YouTube. He said it. Way better than than I think I could, but. But I agree with him. And so here here’s that. Here’s the challenge that we’ll talk about with real estate real quick. The reason why real estate prices haven’t dropped and asset prices are are not. Dropping. Really? I mean, they’re they’re increasing interest rates are at an all time low. People are refinancing left and right. People who were living in apartments. People who were renting and considering buying are seeing this as an opportunity to get into homes, there’s maybe a little bit of extra cash because again, they’re not spending as much and maybe they got some money from the government. And so now is the best time probably for them to have a down payment. But interest rates are at an all time low. Supply is at an all time low because we had disruption because of the pandemic. You know, developments weren’t moving forward for a couple months. We literally lost a couple months of production. And I know a lot of areas. The construction guys kept working, but still it was slowed down. Deals were put on hold. You know, developers are moving forward, a lot of them with with their land developments and everything else. But there was a period of time where supply was constrained. And that’s not just in real estate. I mean, that that could be set for for a lot of industries. But supply is at an all time low. And then you see to that, you know, certain markets are doing better than others. Phenix, for instance, you know, like I said, my wife and I are talking about selling our home. We got a crazy amount of appreciation and equity in it. Phenix, this has been, I think, the highest appreciation year ever. Well, maybe not ever, but Phenix is definitely number one in the U.S. and it and and we appreciated nine percent year over year. I think it was from May to me, May of twenty nineteen to me. Twenty twenty. We appreciated nine percent. So, you know, if you’ve got a million dollar home, which I’m just using that for years, math scores again, I’m, I’m, I’m not that really a calculator for me. So you have a million our house. That means your house appreciated by 90 grand in one year. That’s just insanity. So interest rates are at an all time low, supplies at an all time low. You know, we’re still on this economic stimulus high, which I don’t know that we even call it stimulus at this point because it’s not really stimulating anything. It’s just making up a gap. Our heads are in the sand, guys. There’s there’s some challenges coming and a lot of people are not going to go back to work. There’s gonna be major, major unemployment. The political scene, which I’m not going to get too into that right now. But, you know, we’re facing some serious and I’m not I’m not a hardcore Republican and I’m definitely not a Democrat. I would say that I’m more conservative and I’m probably more libertarian in my a lot of my thoughts and beliefs. So I’m not saying, you know, that Donald Trump is our savior or anything else as investors or business owners or or anything like that. But what I am saying is, you know, the writing on the wall that I see the way that I see Joe Biden talking, eliminating, you know, a lot of the tax benefits and the incentives for real estate investors to be real estate investors, that’s going to create some challenges because there is such a sentiment out there right now, you know, with people that are, you know, basically think that capitalism is evil and, you know, people that are making good money are evil and landlords are evil. And, you know, we don’t have to parent. Well, here’s the reality like that just is not that that can’t work. If you increase my taxes, let’s just say I have one single family property that, you know, I rent to you for a thousand dollars and you increase my taxes by 20 percent or 30 percent. Guess what? Your rent is going to go up. I can not now. I cannot not pass the savings onto my customer. And that goes for any business. That business is either going to go out of business or that real estate investor is going to get foreclosed on because if the taxes and the expenses run too high and he can’t make up the difference, he can’t make his loan payment. And maybe that’s what some of you people out there want. I don’t think really. Generally, I don’t think my listeners want atter or fall into this category. But whether it’s business, whether it’s groceries, whether it’s residential, you know, rentals, apartments, mobile home parks like we invest in, it doesn’t matter what it is. We are going to pass the savings onto the customer. And I saw this mean the other day that said, oh, you were supposed to tax the landlord. Why did my rent go up? Well, there you go. It’s simple economics. So, you know, we’re we’re in for some real estate challenges. That’s the that’s the bottom line. And not just real estate challenges. I mean, jobs are not coming back. Businesses are failing. And let me get into the core discussion. So what do you do? Is there going to be an opportunity in real estate? Yes. [00:21:37] But I think what’s going to happen, you know, most of the time people miss out on the golden opportunities and they get in too late. And here’s why. We start seeing a correction. Foreclosures start going up again in July. You know, 32 percent of people in some way, shape or form missed a percentage of their mortgage payment. There’s people in the banking industry that are saying that they’ve got 30 percent of their loans right now that are in some sort of trouble. Doesn’t shock me at all. So what begins? [00:22:04] What happens is, you know, it takes a while for that stuff to work through the system, sometimes a year. And so you start seeing foreclosures and in you know, people start just letting their houses go. And the first thing that happens, they have to get foreclosed on and then they move into rentals. So is there an argument that rentals are going to do well? Yeah, I think apartments are going to do well. I think. You know, manufactured housing that we’re in, it’s going to do extremely well. It’s affordable housing. People are going to lose their homes and they’re going to move out and then they’re going to move into rentals for a while. So rentals, you know, rental prices are at an all time high right now and the demand is going to go up for rentals. As that demand goes up, the price goes up for a while. Well, then what happens is the foreclosures works through the system and, you know, real estate opportunities and deals. [00:22:46] And by the way, even before foreclosure, you might start finding some opportunities in people that want to get out of the deal without it go into foreclosure. So will you see some opportunities even now and that? But, yeah, I think you can start. There’s probably going to be some distress starting here shortly. But I do think it’s gonna be anything like 2008. What really made 2008 after 2008, what made it great for real estate investors was. You know, is this experiment in quantitative easing and easy financing, which we can still get right now, and so that’s really that’s really what’s profit all this up. I mean, financing is still available. Interest rates are low. Supply is low. [00:23:22] So it’s keeping real estate prices high. But what’s going to happen at some point time, they have to raise interest rates. And I don’t know. I mean, that could be years from now. Who knows? I’m not going to get into that conversation. But supply is going to catch up. People are going to start getting foreclosed on, which is going to create more supply. Demand is going to go down. That’s going to be what causes real estate prices to crash. Now, the challenges and I just want to get you thinking about this a little bit. Financing is not going to be that accessible when real estate prices start to decline unless you’ve got cash. So back to Pat’s question. Is cash trash or is cash king? Well, I think long term cash is trash. But I think right now cash is king. And so that’s the reason why I’m even considering selling my house. I’m restructuring everything that I possibly can right now that isn’t performing or producing. And if you’ve got investment properties, you need to be doing the same thing. If you’ve got businesses, you need to be doing the same thing. But by the way. Even if you don’t have real estate investments and even if you don’t own a business, you need to be doing the same thing in your personal life. Cut out everything that isn’t producing for you right now, because right now, cash is king in the short term. You are going to find opportunities. But if you don’t have liquidity and you don’t have financing and I know I’m a big proponent of seller financing, et cetera, and you probably will get some of that. But there’s so many more people today that are interested. I mean, 10 times, 100 times, probably more people that are interested in real estate investing today. Then there was in 2008 than there was in 2000 or 2001. So there’s there’s a lot more people chasing that seller financing, trying to find scrappy deals, trying to do low money down, trying to borrow private money. The competition is fierce. So if you can figure out how to shore up your life and get some liquidity. Cash is king right now. But I say that in the short term, I think cash is king for the next, like, let’s say one to three years, probably realistically the next 18 months. Cash is king. So what do you do with in the meantime, you know, we’re so used to. I’m a big proponent. You know, if you would ask me 12 months ago, like, you know, if you would have said to me, I’ve got 300 grand in the bank, I got 500 grand on. Like, what are you doing? Why isn’t that money producing for you? But today, right now, there’s only a couple areas that I would say, you know, you should really be putting your capital on. I’m not here to give investment advice or anything like that. But whatever you put your money into right now, you need to make sure that No. One, it’s safe through a pandemic. You know, just think about that. People are not going back to work. People are going to need housing and affordable housing. So where if you decide to invest that money in something long term, just make sure that it’s pandemic proof and in recession resistant. But that being said, I think the best place to if you if you if you’re not comfortable having cash in the bank. Figure out where to put it. That’s somewhat liquid. And I’m not saying that this is what you should do. I’m just giving you options. I talked to a very smart guy the other day that’s sitting on some cash and he’s putting it in 28 day treasuries. [00:26:16] You know, it’s not that great of returns. But, you know, in the short term, it’s probably one of the safest places that it could be in. Yeah, I know the you know, the U.S. and the way we print money and blah, blah, blah, long term, I don’t think that’s a safe place. But in the short term, maybe it is. How about gold and silver? Yeah, it’s a little risky. I wouldn’t put a bunch of, you know, all your cash in there. But Rickards says right now of your liquid networth, you should be 30 percent in cash, 10 percent and precious metals. And the other 10 percent of your liquid net worth should be in passive investments. So whether that’s investing with someone like us in real estate. And by the way, I’m not trying to pitch our investments, but the reality is right now, if you’re a new real estate investor and you’ve never invested. I’m not sure how aggressive I would get right now. I would be pouring everything I have into learning and studying and, yes, looking for deals, because that’s going to teach you a ton. And guess what? You might just find one. But now’s not the time, in my opinion, to be learning to aggressively. [00:27:16] With with your money, I mean, like going out there and actually buying a rental and and learning the actual ropes again, unless you’ve got just a home run and if you think you have a home run. Reach out to me. We’ll both. We’ll put you in the Facebook community and we’ll go live. And I’ll spend fifteen minutes analyzing your deal. I want to help during this time, and that’s really why I’m sharing what I’m sharing today. So cash is king right now. You put it into some gold and silver, you know, but that’s volatile. I do believe it’s going to go up. May. Might there be a dip? Yep. But with everything going on, I think, you know, gold and silver are going to perform well. Well, it’s a safe place. I think a lot of investors are going to run into so. Let me pull us together for you. Here’s the meat of this and and sorry about the doom and gloom on the real estate and the market in general and all that. But I want to make sure our head is not in the sand. That’s what’s going on. [00:28:04] So I’m going to talk a little bit more about this in a series coming up in the Monday, this Monday, short episodes with just me, but I’ve dropped this a little bit. But, you know, we’re moving to buying businesses. And when I say moving, I’m not I’m not stopping. Investing in manufactured housing at Park Place Communities and for Peaks Capital Partners were as excited as we’ve ever been about manufactured housing. But I have the same problem that I’m telling you you’re going to experience. It’s really hard to find deals right now because there’s really dumb money going after deals. And so what we’re doing right now, a park place and in four peaks, we’re doing the same thing that I’m telling you to do, fortify like get rid of anything that isn’t performing in your life. Were when when Cauvin hit, we broke all of our portfolio into A’s, B’s and season A’s are doing well. The Beazer, you know, probably going to perform great. The seas are like, OK, well, we have challenges here for X, Y, Z, or it’s just, you know, like we have one community that it’s just so big it’s going to take forever to fill up. So we’re looking at all that and we’re just looking at fortifying and, you know, basically anything that isn’t performing or producing in our life we need to get rid of. So I’m doing the same thing that you’re doing. We’ve streamlined our team, Andrew, my partner at Four Peaks. You know, he’s really stepped up and shined during this time. Were, like I said, we’re we’re we’re reanalyzing everything. We hired a CFO firm to just come in and help us really just look at everything and help us build our forward looking plant. [00:29:36] So, yes, I’m still excited about manufactured housing. We’re still investing in manufactured housing. It’s just like I said, there’s just stupid money coming after it. It’s really hard to find good deals. I think that this is this period of time is going to present the opportunity for us in buying businesses, and this is not the first time I’ve said this. But up here, Breckenridge, there’s a really smart person, her name’s Cody Sanchez, you should look her up. You should get on her list because she’s got a newsletter. That’s amazing. But she shared some things that I want to share with you guys. So there’s about three million businesses right now in the range of one to five million dollars in revenue for cell. And nine out of 10 businesses that are actually that exist will never actually sell or that are listed. They’ll they’ll never sell. The owners get frustrated. You know, they go through multiple deals. You know, people giving them offers, but then they just never close because their books aren’t in order or because, you know, we were we’re too far apart on the valuation, et cetera. So nine out of 10 businesses will never sell. 10000 baby boomers are retiring every day. And I don’t want to go off on a tangent here, but that fact alone, forget about buying businesses. But that fact alone is really scary for the coming financial crisis because the pensions aren’t there. The stock market’s at an all time high. I get that our fall in case theoretically look great. I know a lot of people are struggling there, too, but I think there’s a stock market crash that’s going to wipe people out. It’s common. And so with 10000 baby boomers retiring every day, a lot of those are business owners and they’re wanting to sell 19 percent of the 10000 baby boomers retiring every day own a small business. So that’ll kind of tell you, you know, what’s coming there. Only one in 11. We’ll sell. Oh, so I was wrong on the you know, the one out of ten it’s only one in eleven will sell within 12 months of being listed. And then I think it’s only one out of nine that ever sells at all, or one out of 10. That leaves 91 percent of businesses for sale in the market with motivated sellers for more than one year. Those are just staggering statistics that really should get you thinking about. You know, buying a business. It’s a perfect time. There’s a bankruptcy chart that you can find on Bloomberg Finance. Just just Google. Bankruptcies. But you can see there’s this hockey stick of bankruptcies that are that are coming because there there’s a trend line that follows unemployment rate. And when the unemployment rate spikes, there’s a trend line that follows a bankruptcies. And, you know, you know what’s going on with unemployment right now. So bankruptcies are going to be at an all time high. [00:32:13] The nice thing about businesses is there’s the ability to leverage debt like through the SBA, again, just like real. It really parallels real estate a lot. So if you’ve been studying real estate, how do I get in with Solera financing? You can do that in a business. How do I get into a business with hard money lending? You can do that in a business. You can leverage the business and get an SBA loan or get a bank loan just like you can in real estate. So the same things that you’ve been thinking about in real estate and how to get into real estate and and how to leverage real estate, you could do with a business. [00:32:48] Typically, businesses are backed by hard assets. You know, there’s receivables, that kind of stuff. And the one thing that Cody Sanchez said, too, that’s kind of interesting in this won’t apply to all of you. But, you know, you can buy businesses that are what she calls add ons. Right. And so if you’re you know, if you own like a a property management company and then you buy out a, you know, a carpet cleaning company, like, OK. Now you just became your own best client. Right. So think about that a little bit. And again, I’m not going to spend too much time on this now, today, I just wanted to get you thinking about, you know, where we’re at, what I think’s covered with real estate, and then just start having this conversation again about business. And again, I’m going to continue on the Monday is going to do a small series on on buying businesses itself. But here’s what I’m doing. I put my money where my mouth is. And I’ve had this idea since 2011 something, you know, I had a construction business, but it was a big portion of it. So I was a plumber by trade. We had a plumbing in each back company. There’s there’s one part of that business that I really love, and it’s the residential service side of it. And we had actually bought out a couple of companies along the way. But then I sold in 2014, as most of you know. And for the last few years, we’ve been penciling out, you know, launching a fund to go out and buy HPC companies. And I’m not gonna get too far into this right now. I’ll tell you the strategy later. But we’re going to roll up HPC companies. I’ve got 60 different markets that we want. We basically want 60 different companies that we’re gonna roll up and create efficiencies and just kind of disrupt that HPC industry. Those are cash flowing businesses. Again, the baby boomers statistics, the people retiring. A lot of these guys that own these companies have been in it for 30, 40 years. They’re they’re tired. They’re wore out. They just went through their third financial crisis. They had to lay off a bunch of their employees on and on and on. It is the perfect time to buy businesses. And what we’re shifting to is the HPC business. And the reason why I’m sharing that. I want to get you thinking about this for all the reasons the deals are going to be in businesses. This is a business crisis. This is not I’m not I’m not saying there isn’t going to be a real estate crisis, but the opportunity isn’t going to be as large in real estate and there’s a lot more people in it. So, you know, when you go in with the crowd, I mean, the crowd is going to try to rush into real estate. It’s still rushing into real estate and it’s buying at the top. I mean, I again, I have so much appreciation in my house. I’m like sitting here. I’m I’m I’m going to sell probably. I think about us offloading some of our communities, like now’s the perfect time to sell. It’s not a perfect time to buy it. [00:35:14] So the crowds still rushing into real estate. And when the crash happens, you know, people are going to try to rush in even more, which is going to probably keep. I don’t think the deals are going to be as great. Let’s just leave it at that. I think there’s gonna be amazing opportunity and amazing deals in business. And so I really want to get you thinking about this. It doesn’t have to be HBC. The thing that I really want to make sure that you think about is that, you know, we buy cash flowing businesses, so. [00:35:40] And also businesses that people are going to need. So we’ve seen through coded, coded, really showed us what are recession resistant. Right. So just be thinking about that. What businesses are recession resistant? What businesses spin off cash flow? What businesses potentially you’re not going to, you know, get me working 90 hours a week. [00:36:03] What businesses can I go into that I can leverage other other people, whether it’s the employees or whether it’s through 10, 99 contractors. What are those businesses look like? And there’s businesses obviously you probably want to stay away from right now. Like I mean, just look around you. What? Businesses are struggling. Sorry. All you gym owners and all that stuff out there. But I probably wouldn’t get into a gym right now. I probably wouldn’t get into restaurants right now. I probably wouldn’t get into retail right now. So, yeah, I mean, I got to tell you what to do. But just the writing’s on the wall. Just just just look around you and you’re going to see. What businesses just look at the help wanted ads. Go to monster dot com. And, you know, just look at your local help wanted ads in and your job boards. And that’s going to tell you what. Businesses are thriving. We can’t find enough technicians. That business is going to thrive. You get into like roofing, home services, anything to do with the service industry that that people are going to need service on. [00:36:59] You should think about that. And if you got a background in it even better or you got a partner you can partner up with. That has a background in it. Even better. Or, you know, somebody that, you know, like and trust that struggling in business. And you’ve got some capital and you can partner up with them and let them continue to be the operator. But you’re now an investor. So many things to think about. But I will leave you with this. It’s definitely a crisis for businesses. If you can solve one of the challenges that we have right now, as is unemployment. And so if you can figure out how to put people back to work, you’re probably gonna do pretty well. You’re going to do good and you’re going to do well, as my good friend Jean Greeno says. So just, you know, I know I want to get you thinking about that. [00:37:40] We’ll get a little bit more tactical again on the Monday episodes over the next few weeks. I want to drop this down as I as I close here. We are looking for each VCM plumbing service companies that are 80 percent roughly. That does have to be exact. But 80 percent in the residential space on the service side, 20 percent in know commercial light, commercial service. [00:38:02] I am not looking for big construction companies. You know, doing plumbing in a vacuum like big new construction. I’m not interested not interested in service to our target acquisition is, you know, basically a company doing three million dollars in revenue. They probably have somewhere between 18 and 40 employees, depending on how efficient they’re running. So that’s kind of our target avatar. And, you know, we’re looking in larger communities. You know, I’d like it to have a probably at least 100000 thousand people, but that’s not that hard and fast number either. So the reason I’m telling you this now, this isn’t gonna work in some states. And, you know, there’s a there’s a precursor here. We got to check local laws and all that good stuff. But I am paying a finder’s fee. If you bring me it off market listing, we will pay you a 15 thousand dollar finder’s fee if we close on that and it’s not listed with the broker. If you know somebody that’s in the HPC industry and you’re thinking they might want to sell. Kick him over to me. And again, if we end up closing, I’ll pay a fifteen thousand hour finder’s fee. Now, again, there’s some areas that is not going to allow that. And so there’s a legal preface here. If it’s illegal in your state or whatever, then we can’t do it. If you know somebody that’s interested, though, just reach out to me, DME on Instagram or send me an email at Mike at Michael Eila dot com. And if you know somebody, send them to sell your H.V. AC dot com and there’s a little landing page there that tells what we’re doing and they can fill out a form and we’ll get in touch with them. So. I really just I just wanted to spend a little bit of time talking about this and get your guys, you know, minds open to the fact that the coming opportunity, I believe, is in business and putting people back to work and focusing on high demand service businesses. So the one thing I want to just kind of, you know, put the icing on the cupcake here. I am still optimistic on real estate. We’re excited about real estate, but we’re experienced operators to. If you’re a new person in real estate, you know, make sure you’re getting a mentor. Make sure you’re getting into a course. It’s never been more important to have somebody that knows what they’re doing, putting their eyes on your deal. And again, I’m going to be launching a real estate one to one course here, so if you’re interested, not just also send me an e-mail. Mike at Michael Yellow dot com and just say, hey, I’m interested in your real estate course. And we’ll put you on the list. So. Go out there, have a good day. This is not all doom and gloom. You know, we’re in for some tough times, but tough times create opportunities to so go out there and prosper.
OUTRO [00:40:36] If you found value in this episode and you know someone who’s wanting to start or move further along in their journey toward investing for freedom, I would be forever grateful if you would share this show with them and help me get this message out to more listeners. Also, if you enjoy what you’ve heard, I would appreciate it if you’d take 30 seconds and leave me a five star review and share this with your friends. And until the next episode, cheers to moving further along in your journey of investing for freedom.