Is it Time to Quit Real Estate? A Brutal Reality Check

Michael Zuber (0:00)

All righty, folks, the real estate market without question is challenging. But you know what? It's really challenging for the folks that got in in the last three or four years. For guys like Jason and I who have decades, we kind of look at this market like, yep, we've been here before. But we're gonna talk about why lots of people are quitting real estate, why flips are blowing up left, right, and center, and then what does it mean for the future?

Jason, how you doing, man? Thank you for chiming in. I know you're out in the cold weather of Napa, so we appreciate your time.

Jason Hartman (0:31)

I don't know if you can see my breath, but it is 46 degrees. No, you don't see the breath. It's not that cold.

SPEAKER_3 (0:39)

Not quite that cold.

Jason Hartman (0:41)

But, man, it is chilly out here, and you probably can tell where I am. It's probably not too hard to guess.

Yeah. Anyway, so first of all, Michael, good topic. I didn't realize this until you kind of mentioned it before we started recording today. And, you know, when you say real estate, of course, we have to be very careful with the term real estate because it's such a huge industry, it's such a blanket term. What does real estate, quote unquote, mean, right? And so, yeah, I know that flipping has been difficult for several years now.

We're not doing much business at all with flippers. You know, in the mid-2000s, circa 2015, give or take, a lot of our business was selling remodeled properties to our investors. And now it's almost all new properties, although we do have some renovated flips as well. So it has changed. The market is always changing, no question. And certainly the syndicators and, you know, the people doing multi-family have experienced a lot of turmoil lately.

Michael Zuber (1:57)

Yeah. Yeah, what's really interesting to me, because again, I'm, you know, obviously we're both on YouTube and, you know, I have a little following, you have a massive following. But it's interesting to see how many people are truly quitting, right? The big name of last weekend was Ryan Panetta.

And I actually interviewed Ryan over the weekend. So the video comes out tomorrow on his channel.

But basically, he quit for solid business reasons, right? Real estate in his world took up about 1% of his time.

And the business has been doing frankly terrible. And again, he's primarily a wholesaler. So really anybody who relies on an exit in this market, AKA flipper or wholesaler, they're getting spanked.

Jason Hartman (2:40)

Because, you know, that's such a good point right there. You just made the point. Don't exit, right? You know, the exit is kind of the problem.

The exit from buy and hold rental properties is death.

Michael Zuber (2:57)

Death or 1031?

Jason Hartman (2:59)

Well, 1031, of course, until death. And that's a great exit, by the way, because Basis steps up on the inheritance. It's fantastic. It's such a great deal. You should do the plan the government is encouraging you to do, and that's the plan they're encouraging. They're not encouraging flipping.

Michael Zuber (3:16)

No, and this is where I think, I've talked about operators.

Earlier last year, I talked about operators winning. And those are the people that are going to do the work. They're going to grind, they're going to write multiple offers, they're going to follow up, they're going to seek the desperate sellers and make a deal. But if you rely on an exit, like a flipper or wholesaler today, you're gambling, and I don't like your odds.

Jason Hartman (3:43)

I agree with you completely. That is the speculator's mentality. And, you know, it's really, I think both of, both you and I have the Warren Buffett philosophy of real estate investing, which is just value investing. It's just really simple, just buy good stuff and keep it. And that's the mentality that wins the game. As I have been saying for 22 years, the people who flip properties, they have spending money, but the people who buy and hold have real wealth. And this really tests your mettle, you know? When things are boring as they have been for the last three years, nothing exciting is happening. No one's saying to you at a cocktail party, wow, you're so lucky, you're a real estate investor, you know? It's just sort of boring, right? This is the time you're an operator.

You just chill out and you just operate your portfolio and you just hang on to it. And another thing I've said, when I used to train real estate agents in the 90s, this is a group of people who are pretty interested in instant gratification, real estate agents, okay?