📈 Market Snapshot

📰 Headlines

• 🛠️ Institutional homebuyers are paying way less for homes than you are

• 🌇 How much renters need to make to afford the average US apartment

• 🏠 Rents are on the rise again, heading toward all-time highs

• 📊 Understanding real estate lingo sucks - here’s a list of silly things agents/sellers say to get you to pay more and what they actually mean

• 📋 There are 6 things you should know with certainty before you close on a deal - save this list!

🏚️ Deep dive

You’ve been told cash-flowing real estate is your ticket to passive income and early retirement.

You were lied to.

Over the next 3 minutes, I’ll explain why.

And change the way you think about the next 3 years of rental returns.

But first, tell me where you’re at:

Interest rates have been 6%+ since ~ Jan ‘23.

If you bought a unit in that time…. is it cash-flowing?

Don’t answer yes unless you’re 100% confident (most investors think they cash flow but haven’t totaled up their P&L in months).

Interest rates have burned the concept of cash flow to the ground.

They used to be a 20% hit to your rent income - now it’s more like 30-40%.

Where’s the room for profit?

Quick story:

My agent is awesome.

He’s 29, bootstrapped his brokerage to 40+ agents in 4 years, and nets multiple 7 figures.

He’s closing on one of the most expensive houses in Columbus right now for his personal residence.

And….. he has no idea if his properties make any money…

Why on earth is my realtor (a brilliant guy with access to the best deals in Ohio) buying properties that potentially lose money?

Appreciation.

Your real estate returns = cash flow + appreciation + tax shields

Historically, cash flow made up enough of that formula to be interesting.

Then ~4 years ago prices went crazy.

The average house in Columbus, Ohio (my hometown) went from $240k → $340k.

That’s a 40% return in 4 years… 160% if you put 25% down and used a loan for the rest.

So now the market looks like this:

• Many properties aren’t cash-flowing

• Investors know it

• They still buy because they think housing prices will keep going up

Are they right about prices over the next 3-5 years?

In most markets, when the price of an asset (houses, stocks, etc.) gets wildly bigger than the cash that asset produces, that’s bubble territory.

And you run away as fast as you can.

We’re in a really weird real estate market right now though.

There is NO supply of houses.

TONS of demand for houses.

It’s only a bubble if supply suddenly jumps up way over demand, so….

What do you need to believe for supply to go up dramatically?

1. People go underwater on their equity while the economy tanks (forced to sell)

2. Many more people decide to move (want to sell)

3. We build more houses (we don’t have to wait for anyone to sell)

You can quickly see why we’re stuck:

1. Forced to sell: Foreclosures are at all-time lows - no one is underwater and unemployment is in great shape.

2. Want to sell: Why would anyone sell? If you bought a house before ‘21 you have a 2-4% mortgage. You would be crazy to give that up to buy a house with a 6-7% loan.

3. More houses: Over-building before ‘08 led to under-building after… and it turns out when you under-build, it takes a very very long time to catch up.

There is no ‘release valve’ to take pressure off of low supply.

And that means prices have nowhere to go but up.

What I’m doing about it:

Don’t misunderstand - my verdict is real estate is still awesome.

But you need to know the game you’re playing.

Multifamily rentals is the long game.

I buy RE for future 35-year-old Nathan - he’s going to think 26-year-old Nathan rocks.

My short game needs to be different.

I’m lucky - I’m not at my realtor’s level, but I’m 26 + have a few million bucks.

That’s fine but frankly feels like nothing when I look at houses in LA / NYC.

Or think about financial security (and my own personal insecurities, ha) for 30+ years.

The question I need to answer is how to get to $10-15M over the next 3-4 years.

That’s the game I’m trying to play.

And I might not have what it takes (that’s what I’m figuring out).

But it means 80% of my time needs to be focused on building cashflowing businesses (cash NOW, not later).

And 20% on real estate.

Think about the game YOU want to play.

And don’t let anyone convince you that you can buy a few properties, collect rent checks, and never work again.

It ain’t that easy, folks!

Note: (If you’re very active in RE - raising a fund, doing flips full time, etc, then this appreciation thing works in your favor - but I assume most of you want to do real estate part-time).

That’s the letter

-Nate

P.S. - I’m going to host a dinner for investors in Columbus this summer. Super informal - just cool folks who want to jam about real estate.

Is that you? Tap below to get notified when the invitation goes live.

📊 Chart of the Week

You just heard me talk about housing supply.

There are a ton of new builds starting in single-family / large-format multifamily that will be completed (in 2-4 years).

Nothing is happening in small format (1-4 doors).

Again (IMO) - prices have nowhere to go but up.

Especially when considering a lot of large-format (5+ doors) is luxury, which is a fit for only a small % of rental demand.

🐤 Real Estate Rizz

#1

Again - real estate is amazing. Just know you’re playing the long game… your net worth will go up significantly over 10+ years (not 2).

#2

I’ve always wanted to house-hack.

It’s such a right of passage.

You might see me in Vassor Village later this summer!

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Note: If you’ve joined in the past 2 weeks, you’ll automatically be taken to a special page to receive 80% off. 

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