Ep022: The Seasons of Real Estate Investing (Part One)

Chris McAllister: Welcome back to the Landlord Profitability Playbook podcast. I’m Chris McAllister with Roost Real Estate Company and I’m joined today by my podcast partner Laci LeBlanc. Good morning, Laci. 

Laci LeBlanc: Good morning, Chris.

Chris McAllister: Well, today I want to talk about investor seasons. So real estate investing moves in seasons or cycles, but it never ever moves in a straight line. And I want to kind of talk about how to read the market at a macro level today and how to think about seasons past. The present season and season’s yet to come, and all of that.

I wanna wrap up with, with the overall theme of how investors who really do make a lot of money in real estate do so by working with the seasons and never against the seasons. So it seems like that’s a a lot to cover today, but that’s been on my mind a lot the past couple of months. 

Laci LeBlanc: Well, I think it’s, I mean, it’s.

Big. It’s huge if you’re an investor because otherwise what happens and you know, we can talk about the ideal, right? If you do what you’re supposed to do then and, and work with the seasons. But what most people are probably experiencing is not working with the seasons. And then you have everything come at you at once, you get burnout.

So in the off season, if there is such a thing, then you, you don’t do the things that you could be doing to prepare for the next busy season because you’re so burnout from. The previous one. So I think it’s, it’s, you know, if we’re looking to automate your rent collection and get on with your life as we say, then this is really, um, the most basic step you have to take to do that.

Chris McAllister: Yeah, it, it sort of does touch on, on everything that we do as real estate investors and definitely everything we do, and I think it’s been on my mind the past, well, maybe even more than a couple of months, is that. We have owners that, you know, have several properties and they’re, and, and they’re very successful.

And when we ask them, you know, what’s the one thing that, that we could do to, to help you, you know, get to your next set of goals and so forth. The one thing that consistently comes up, the one answer we hear over and over again is, I’d love to buy more properties. And it’s frustrating for the investors and it’s.

Frustrating for us right now because the great deals, or even the good deals have been few and far between the past few months. So it got me thinking, well, when you’re in these, these, uh, fallow seasons or, or winter seasons or neutral seasons, you know, how, how should you think about them? And, and, and more than that, you know, what, what can you do to, you know, maximize whatever season you’re in?

Does that make any sense? 

Laci LeBlanc: Yeah, it does. I hadn’t even honestly considered that. I was thinking more about, you know, the way we think about it in real estate in general, which is there’s a busier season, there’s a but, but this is different. Um, if you think about kind of your bigger goals, um, and buying property and, and really just being prepared when that comes, like it sounds to me like when that opportunity comes, you have to be ready.

So, you know, doing the work in those, you know, winter seasons, like you said, is the only way to do that. 

Chris McAllister: But you also have to be ready for the slower seasons, you know? And, and that’s where I think it’s easy to get distracted from taking the long view. And when it comes back to buying opportunities, I mean, they, they don’t come in a steady stream, you know, they often do come in waves, however, and there are years.

In multiple years in a row, you know, when good deals are everywhere. But there’s also deals, like, there’s also years like we have now, where deals just tend not to pencil out at all. They, they just don’t make sense. And a lot of times, seasons change slowly, or at least it feels like they change slowly. And other times, you know, something happens dramatic in the, you know, broader economy and, and the season shifts overnight.

But the problem is you can’t just look at a calendar. And, and know, you know, when they’ll beginner end. You know, last weekend was, you know, the fall started right this past Sunday, you know, and, and we know that’s coming on the calendar. We know winter’s coming, we know spring is coming. The real estate seasons, we don’t know.

So I like to think of it as there’s three seasons and they are the buying season, the neutral season, and the seller season. I know that’s not terribly creative, but. You know, but it is just, it is what it is. And with the buyer season, this is the one you know every investor waits for, right? You make your money when you buy.

And a true buying season is when multiple conditions align in your favor, right? The prices are good, sellers are motivated, you know, financing is available, and, and, and it, and it feels like it’s, you know, fairly priced. And in these moments, you know, you can lose a lot of money by hesitating, right? If you can’t recognize the fact that you’re in a buyer season and you’re not prepared to act quickly, somebody else will, and you’re gonna get left behind.

So the best investors move quickly. They get creative with the terms, they make sure their financing is lined up, you know, before everybody else, and, and they’re set up to, to really strike while the iron is hot, so to speak. 

Laci LeBlanc: Do you think that the buying season is more challenging now than it was five years ago, 10 years ago, 15 years ago?

Because people have access to so many tools. Um, technology mainly. Uh, do you think it’s more competitive? What do you think the difference is, you know, and what’s changing in that buying season that, that investors should be prepared for? 

Chris McAllister: I, I would, I would argue that we’re not in a buyer season right now, so my concern is for folks that are out there trying to put deals together because they think that’s what they’re supposed to do as real estate investors.

Right. So, you know, the, it’s, I guess my message is, or what I’ve been really, you know, struggling to get clear on in my own mind is what do you do, you know, to maximize your portfolio? What do you do to get ready? In these times when the deals are few and far between now, even in a buying season. And I would argue that, you know, we haven’t had a, a buy or buying frenzy since, well, the crash in 2009.

And then there was a, a buying frenzy, you know, during COVI. Um. Uh, but it was a different kind of frenzy because people were, you know, pushing hard to buy houses that were clearly at the top of the market and, and at prices in many, you know, ways. It didn’t make sense. But the key is in a buying season, and maybe COVID is the best example, you know, it doesn’t mean that you just jump out there and.

Everything in sight, right? Smart investors, the ones that are in it for the long term, they, they really think about the property. They do the math, they work the numbers. You know, another term for that is they underwrite their deals and they do it very, very cautiously. And they run worst case scenarios, right?

They stress test, you know, what could happen? What, what’s the best thing that could happen? What’s the worst thing that could happen? What’s the likely scenario? And they even think about, you know, how am I gonna exit this property? You know, what, what, what, what am I gonna do over time to make sure I can maximize the appreciation?

The point is that during the buying season, they are incredibly discerning and they don’t get caught up in the frenzy. Now buying seasons are a gift and they don’t last forever. So yes, on the one hand you’ve gotta be prepared to act fast, but on the other hand, you don’t want to act rashly. And sadly, I think a lot of the folks that, uh, you know, are, are trying to sell their investment properties right now, especially in hot places like Columbus.

You, you know, are doing so because they really didn’t think it through or didn’t have all the facts available to them when they, when they picked up these properties. 

Laci LeBlanc: So, you know, go, go with your gut. We hear a lot, but it’s not just about gut instinct. That’s to an outsider. No, you gotta know some math.

You gotta do 

Chris McAllister: a little arithmetic, right? So you got the buyer se buying season, and then you’ve got the neutral season. So in the neutral season, you know, deals are out there, but only if you control the value creation, right? So if you’re paying market price and you’re simply hoping that rents are gonna go up, or you know, you’re not.

Investing, I mean, at, at, at worst, I guess you’re gambling, right? You know it, it’s not necessarily a bad thing to pay market price if it fits in with your over, if that, if that property fits within your overall portfolio strategy, I. But you know, as a wise men once said, hope that rents and go go up is not a strategy.

Hope is never a strategy. You know, the way that you win in a neutral market is it’s, you’re able to buy and force appreciation, right? You’re able to manage the appreciation and you do that through, you know, renovations. Whether that’s bringing them up to the neighborhood standard. If you’re fortunate enough to buy a house that that, uh, has some upside to it.

Um, and maybe it’s repositioning what you’re doing with the property. Maybe it’s a refinancing, it it, you know, or maybe you’re buying the property because you know it’s in your neighborhood. Right. You know, a lot of us try to buy properties in one, you know, one section of town, one block and so forth. And, you know, even in a neutral season or a selling season, if that one special property that you’ve had your eye on.

For quite some time comes on the market, you know, you’re going to, you’re gonna still do your math, you’re gonna make sure it pencils out, but maybe you’ll make a deal for that property that you wouldn’t make for a property, you know, say on the other side of town. 

Laci LeBlanc: Yeah, that makes complete sense. 

Chris McAllister: And like for instance, I bought a property in Florida, I guess it was 2022.

And the reason I bought it was it was down the street from, from the house we already have in Florida. And I already had a tenant in place. So yes, I do feel like I overpaid for the property. I wasn’t too thrilled with the interest rate, but at the time it made sense for what I needed to make happen within my investment strategy, within my goals and and with my portfolio.

I had a similar situation when I bought the building where our office is in Springfield. It was in 2017. So you know the best part. Of if there is a best part, but there is for investors, the best part of the crash was behind us, right? In 2017. All that great stuff happened in or bad stuff, you know, happened between 2009 and 2014.

So an opportunity came up to buy a building in 2017. And, uh, it was from a past client. It made perfect sense for where we were at the time. And, you know, I made a decision to buy that property. And, you know, fortunately we’re eight years later and, you know, we’ve done some things to the property, the value has gone up.

We were also able to buy that property next door. So we own a nice little block of real estate there. It’s like playing, you know, monopoly, putting the houses on the corner, you know, so that made sense. I, I, um, another reason sometimes, you know, deals in the neutral make the season makes sense is when you’re buying a property in support of your, of your business or your other business, right?

Maybe you’re a real estate broker and buying a property, you know, to support your agents. Makes sense. We’re working with the client now in Columbus who has a, a really interesting office building. That she has bought and been managing herself over the years, and she asked us to help out. But she has a, a building where she keeps her, um, her health business in there.

It’s a holistic, um, health counseling business in there. And, and she has over the years, she bought the building where she was renting. And over the past few years, she has filled it with other types of healthcare practitioners, right? So she’s, she bought a building to support how she makes her living, and then she was able to expand on that by bringing in other people who do work like her within the community of people that she.

You know, knows, works with, competes with whatever, and she’s built a, a wonderful little business for herself. So there are times, and there are opportunities in these neutral seasons where it still makes sense to invest as long as you’re doing it for, you know, a valid reason within your investment strategy or with whatever your other entrepreneurial endeavors are.

Laci LeBlanc: Yeah, I think that this all sounds very formal to me, right? Like you need to be sitting down at your desk with a piece of paper and saying, okay, it’s a buying season, or It’s not a buying season. What should I be doing right now? But I think that investors who have been doing this for a long time probably do a lot of this naturally.

Because they’ve figured out maybe by trial and error what works and what doesn’t. So we talk a lot about Nana on this podcast, and Nana has spent the last year or so, um, reinvesting in her properties. So properties that needed upgraded floors and upgraded siding. And so she hasn’t bought anything new. Um, but she has spent some time and resources.

Um, upgrading properties that have been, you know, kind of the same for a long time, to get ’em kind of back up to it, the neighborhood standard, um, to make them more appealing. And she’s been able to charge a little bit more rent, um, because of that. Yeah. So I, I feel like, and Nana doesn’t have any of this, you know, probably on paper planned out.

She just thinks through it. Um, so I think this is some, some investors who’ve been doing this a long time are gonna feel like, oh, this is a normal, natural thing. But I don’t think it comes naturally to everybody. I think you kinda have to learn probably through some mistakes if you don’t 

Chris McAllister: listen to this podcast 

Laci LeBlanc: first.

Right. 

Chris McAllister: And it helps to live a little bit too. You, you, you almost need to get a few years in at it. And, and, and again, we talk all the time about taking the long view like Nana has, you know, and I’ve got 25 years in this now, but then when I started, you know, I thought I had to just buy no matter what, you know, X number of houses a year, no matter what.

Or, you know, that’s what successful investors do. And I learned the hard way that, that’s clearly not what Nana did. Right. Let’s, let’s put it that way. 

Laci LeBlanc: Yeah. Yeah. And I think that, you know, my family is always on the lookout for a deal, right? That filtered down in our blood genetically from generation to generation.

And so, you know, just being poised for that deal and doing the right things in the meantime is how they’ve become so successful at this. Um, and they didn’t have anybody necessarily kind of. Educating them in the process. So, you know, I imagine there were lots of mistakes that they had to learn from. When you say, you know, live and learn that, that’s probably part of it.

But because it, it has been such a long game, you know, Nana doesn’t have payments on most of her property. She’s just paying property taxes. And so it’s really a good time for her, um, to upgrade and invest. 

Chris McAllister: So you’ve got the buyer season, you’ve got a neutral season then. Then we’ve got the seller season and seller seasons I think are.

Are the most dangerous for, um, less than, let’s say, seasoned investors, right? Seller seasons are seductive, appreciation is hot. You know, suddenly your houses are worth a hell of a lot more on paper than they were say five years ago. You know, there’s buyers that are lined up, you know, it’s, it’s easy. And that, that sort of describes.

COVID, right? You know, if you’re on the buyer’s side in the seller season, you wanna be very, very careful and it’s probably time to keep your money in your pocket. But the other thing I wanna speak to is you’ve gotta be very, very careful as an investor in the seller season. Because it may, it may feel in the short term that, you know, selling off, uh, uh, you know, some of your properties, it makes sense to to, to get a nice big payday and so forth.

But the thing you have to ask yourself is. Unless you’re cashing, unless it’s the end, right? And you’re, and you’re cashing out and you’re gonna go put your money someplace and hopefully live off the interest, I guess, you know, I, that’s one thing. But what we’re seeing now are people who bought really good properties, they’ve already suffered through the hard part, right?

Getting ’em, getting ’em fixed up, getting, getting them rented with good tenants and the desire, the. You know the shiny object syndrome right? To, to cash out and put money in their pocket because it looks like everybody else is making a killing. Man, that’s hard because when you’re in a market like that and you, and you get that and you take that money.

What do you do with it? Right? There’s no other deals available that are, that are gonna have the same rate of return. So seller seasons, you know, they’re seductive, but, but they can be dangerous, right? And, and if you’re, if you’ve got cash in your pocket and it’s a seller season, you know, that’s when people tend to overpay.

They over-leverage. They get themselves in bad situation. But smart investors in a seller’s market, you know, they do something, they do it a little bit differently. They see it as an opportunity not just to manage or, or cash out on a property and make a killing. Seller seasons are a fantastic opportunity to manage and, and upgrade and improve your portfolio.

Right? So a, a great, you know, a, a. Very intentional, successful investor will use this as a time to prune their portfolio, right? Maybe it makes sense to sell some underperforming assets, get out of some property problem properties. You know, maybe it’s time to do some 10 31 exchanges. Maybe it it’s not into another single family home.

Maybe it’s into a small apartment building. You know, maybe it’s time to, you know, consolidate or, or, or go ahead and move on from some single family homes into. A more valuable asset that you’re comfortable will appreciate over time. But again, it comes back to, it takes some thought. It it, it takes some, it takes some math, right?

If that makes sense. But I have seen so many people, you know, I, I just think they’ve been shortsighted. They’ve taken the big payday. It feels good in the moment, but I honestly don’t know. When the next buyer season is going to come around, where they can actually deploy that capital. Is, is that making sense?

Laci LeBlanc: Yeah, it does. And I mean, it’s, it’s really about asset management in the end, and it’s not that much different. You know, asset management for an investor with a, a portfolio of properties is not very different than asset management for an individual or a family with a portfolio of financial accounts.

Right. Um, yeah. And the thing that I like to talk about is like, my parents are at an age where they could downsize. Um, they could sell their house for far more than they paid for it. They could take the big pay date, but they’ve still gotta have a place to live, right? So they have to go buy something else.

And at this rate, right where I live, um. Buying a smaller property like downsizing is gonna take most of their, you know, profit from, because prices are high, right? It’s not the market to do that in. And I don’t think ob obviously if you’re an investor, you’re maybe not thinking about going to live in your property, you’re gonna keep your house.

But the idea is not. Dissimilar, right. You have to think about it the same way is if I sell this off, then am I ever really gonna get as good a deal on a, on a similar property as I got on this one? You know, what are, what are my potential alternatives? 

Chris McAllister: Yeah. We’ve got, I actually, when we finished today, I’ve got a call to make to one of our owners in Columbus.

And, and she has, um, I think it’s a couple of doubles and then a single family home. And I think she bought them all during, um, COVID and, and she’s local. It is not like she was, you know, buying from California site unseen or whatever, but there was one property that she bought that, you know, over the past four or five years.

For whatever reason has just not worked out. It’s, it’s been an aggravation. It’s kept her awake at night, you know, tough tenants, you know, extra money than she had hoped for or planned for, for rehab and maintenance and for her own peace of mind. You know, she, she wants to sell that property. While she can get the best possible price she can and, and she’s being very thoughtful about it.

Right. You know, I don’t know exactly what she’s gonna do with that money, but, you know, it might make sense to put some of that back into the, the doubles to make sure she’s maximizing the rent in the neighborhood. Maybe she’s going to, you know, keep some of that cash. Set aside for the next buyer opportunity.

But the point is there are times when it makes sense to sell, but the best of us are very, very thoughtful about it. And when you think about these, these, um, seasons, you know, right now, honestly, I, I believe that we’re sort of in an extended neutral season. You know, we’re almost in hibernation, you know, winter season is where very few acquisitions.

Makes sense Now, it doesn’t mean that there’s nothing to do, like we’ve said, it just means that you’ve gotta shift your, your strategy. You can maybe play a little defense, you improve what you have and, and you get ready for, you know, the day when the season turns. Again, 

Laci LeBlanc: go with your gut, but do the math.

That’s what I’m hearing. 

Chris McAllister: That’s right. You know, keep an open mind that you gotta fall back on the, on that spreadsheet. So how do you know, you know, objectively what season you’re in, right? We’re Laci, we’re talking about gut feelings and, and so forth, and, and that’s very, very valuable. But how do you really know objectively what’s going on?

And, you know, my position is that you, you watch the dials, right? And, and there’s three of ’em. And those three dials are price, momentum, supply. Borrowing costs. So price momentum is, is, you know, pretty obvious, right? Are property values rising? Are they flat or are they falling right? So momentum in either direction sort of sets expectations.

Rising prices make sellers confident and buyers cautious, or that should make buyers cautious. Falling prices do the opposite, right? Falling prices make sellers cautious and they make buyers, you know, very, very confident. It. It’s not just the numbers in today, at this moment in time. It’s about which way they’re going, of course, but it’s also about how fast they’re changing.

And as an investor, you can’t just look at the national headlines or you know, listen to the podcast or you know, whatever your news source is. You gotta look at local comps. You gotta look at, you know, what the appraisals are coming back on, you know, what’s actually closing, right? Not just in a market like Columbus or you know, Indianapolis, whatever.

You’ve got to look. In, I guess the best term is sub-markets. You gotta get down to the neighborhood level, you gotta get down to the street level, you gotta get to the block level. You know, you don’t make money in real estate by, you know, looking at the averages or figuring out what’s happening in Columbus.

It’s, it truly is block by block. And if you ignore the momentum. You know, you risk chasing deals at, at peak or freezing up when there actually is an opportunity. If things are fast moving down, it’s probably not the time to, you know, be, be paying full price. If things are clearly on their way up and there’s going to be multiple offers, then you better get, and it’s a property that makes sense.

You need to get in and make your best offer early and, and tie that property up. 

Laci LeBlanc: The second dial. What I’m hearing some of, sorry. What I’m hearing some of right now from folks who are calling in, um, to ask about property management, to inquire about property management services, we’ve had several, um, homeowners call in their properties had been on the market.

Uh, and they weren’t getting the offers that they wanted for them. And so they decided that they might, uh, want to rent the property instead. And, you know, we provide what we call a market rate rent report. And so, you know, Gretchen runs that and, um. Sends it back. And what I’m seeing, you know, in some scenarios is folks are wanting to charge more rent than is really viable for the area.

And it’s because their payments that they’re making on those properties are, are high. Does this, and that would be an accidental landlord kind of situation I feel like. But tell me how that. Like what, what role does this kind of price momentum in, you know, central Ohio, come, Columbus, Dayton, those areas?

Um, like what does that look like? I’m looking for a practical example, I guess, to kind of illustrate this, just because it’s a little bit, um, of a, a abstract concept. 

Chris McAllister: Well, you know, I guess there are two ways to look at the, look at what’s happening. You do have people that, that we work with who, you know, bought a home when interest rates were ridiculously low and they don’t want to give up that rate just on general principle.

Right. They made a good deal, but, and they don’t want to give it up, but. You know, for whatever reason, you know, personal reasons, they need a different house. Either they’re being transferred or you know, there’s another baby on the way, whatever. So those folks, when they come to us about property management, it makes wonderful sense, right?

As long as they can afford to get the mortgage on their next house, they’ve got a great interest rate. They can cash flow, they can have their tenant pay down the, the, the mortgage for them. That’s a beautiful thing. Now, on the other side, you know, I, I feel bad for folks that are in a situation where, and I don’t think we’re there as a rule yet, you know, in any markets that we serve.

But, you know, the same person who has to get a, a rent amount that’s above market rate in order to make a mortgage, sadly, is the same person who can’t sell their house for, uh, you know, what they owe on it. And pay the selling fees. So, you know, I feel, I feel bad for those people. They, they clearly bought at the top of the market and, um, you know, they’re having trouble getting an exit strategy that doesn’t require bringing money to the closing table.

Fortunately, I’m not seeing, um, a lot of that. Um, but I do. Have a concern that, you know, there’s probably some of that coming, which, you know, honestly is really looking ahead to the next season, right? Which, which could be the next buyer season for, um, for investors. So, you know, one person’s, uh, gloom and doom is another person’s opportunity.

But back to these dials, right? So you’ve got price, momentum, and then you’ve got supply. So. You know, economists, track supply is months of inventory, but all you really need to ask yourself in ask yourself is who’s in control? Is the buyer in control or is the seller in control? Who’s got the leverage? If there’s low supply, it means there’s competition.

It means there’s multiple offers, you know, um. Sellers are getting everything they want. High supply means that the, the power shifts back to the buyers and, and properties tend to stay on the market longer, and sellers get real really, really fast in the neutral seasons. You know, supply tends to be balanced.

It’s when, you know, selective investors can still find opportunity, but they’ve gotta really be creative about it. And they’ve, they’ve got to, they gotta know their numbers. Respecting the supply dial keeps you from getting blindsided by competition or missing chances to negotiate, and it still comes back to, you know, the very, very best, most successful, wealthiest real estate investors among us are also the most patient, patient.

So you’ve got price momentum, you’ve got supply, and then the third dial is borrowing costs. So for most people, you know, they think about a 30 year fixed rate mortgage. But for investors it’s more than that. It’s the entire lending environment. It’s the, um, it’s the interest rates, it’s underwriting standards.

It’s is, is there money available to, to lend, you know, a property that cash flows at a 5% mortgage rate may lose a ton of money at a 7% mortgage rate. Um. Then you’ve got the situation where, you know, sometimes the posted rate that the lenders advertise looks pretty good, but then you find that their loan standards or their, their, um, internal, uh, rules, policies and procedures.

Um, are such that, that, that, that they don’t, they don’t pan out, they don’t make sense for the investor as they get, dig deeper into the terms of that loan. 

Laci LeBlanc: That’s why like when you’re looking at the car, uh, commercials and they’re like 0% financing for well qualified buyers, and then that gets everybody to the lot thinking they’re gonna get their new, you know, Nissan for 0%.

But, um, well-qualified buyers might not mean what, what you think it means is that Yeah, similar. 

Chris McAllister: Yeah, and you know, there’s penalty, different penalties for early payoff and you know, there’s a lot of different covenants restrictions on some of these loans and that’s why, you know, I, I always suggest that people.

You know, have relationships, you know, be able to pick up the phone and talk to loan officers at multiple lending institutions. And, you know, one of the, you know, our partner right now, not right now, our partner, uh, that we refer all of our investors to is called Lending One. And they specialize in, you know, uh, working strictly with.

Real estate investors and they’re, you know, fantastic people. They lend private money and so forth. I would urge everybody to get in touch with them, even just to start to establish a relationship and understand how they work. But at the same time, I would also urge you to, you know, sound out, investigate local, you know, lenders in your community who work with investors, and just see what’s available and, and, and honestly go out there and make some friends.

You know, when that, uh, borrowing cost style turns back in your favor, you want to be ready. To act before, uh, before it gets too late. 

Laci LeBlanc: Does that change for people who are paying cash? And we can, you know, we could, we could debate the merits of paying cash. I don’t, versus, and using other people’s money. But what changes about this for people who might be paying cash for their properties?

Chris McAllister: I, you know, other than, you know, giant institutional investors with, you know. Multiple people putting money into their funds. I don’t really know or work with any investors that have unlimited cash to continue to build their portfolio when it makes sense. So I think that any investor who’s been at it for quite some time is very judicious about.

Using leverage, but they, but they use leverage, um, in support of building their portfolio and building their wealth. So, um, nothing wrong with cash and the best situation you could be is to be able to go in and buy the house with cash. But even the folks that are doing that, they’re still coming back and then financing the property after the purchase or possibly after, after they get it rented.

So every dial matters, right? Then. There’s no single one that defines a season, but when you have at least two dials. That line up, then you can pretty well confidently, you know, figure out which season you’re in and when all three of ’em align, you know the prices are right. Supply is good, financing is your favor.

That’s the buying season. And, you know, that’s what we all dream about. That’s all we all, you know, can’t wait for the next one to roll around. But those times when all three dials align, you know, it doesn’t happen very often, but that’s where fortunes are made. And that’s exactly what happened after the crash between 2009 and 2014.

And I worked with a ton of owners that, uh, my god, they, they bought everything in sight and, and they, you know, they’re set for life at this point. And, uh, I, I wish I would’ve had more money back then or had a better understanding of what was happening back then because in retrospect, I, I, I would’ve done a heck of a lot more.

So the market we’re in now, you know, it, it, I feel like it’s, it’s in hibernation and, and it, you know, as I said earlier, it’s just a a, a strange place where not a whole lot of deals make sense, not a lot happening. But the reason is, is because yes, we still have some price appreciation and yes, there’s still some rent appreciation, but.

The velocity has just gone so far down right. Prices are maybe going up, but they’re going up incrementally. Rent prices may be going up, but they’re going up incrementally. We’re talking two, three, 4%. Everything has slowed down dramatically in the past few months, and yet oddly, supply is still constrained out there, and the sellers are still in charge.

And then, you know, the third dial that’s, that’s not exactly in our favor right now is that borrowing costs are still high. And that’s why this winter season, this neutral season feels a heck of a lot more like, um, hibernation right now. And it’s hard to say when that season is going to change or, or when things are gonna shake, shake loose again.

But the thing that I just want to stress is. Investors go bankrupt when they ignore the seasons and they end up making deals for the sake of making deals. Right? You know, it feels like I’m an investor. This is what I do. I quit my job. This is my full-time thing. If I’m not making deals, I, I, I, I don’t know what I’m supposed to be doing.

Well, I’m here to tell you, there are times when it doesn’t make sense to make a deal. It never makes sense to make a deal for the sake of making a deal. But I will tell you that investors get rich, really rich when they patiently. Are able to wait out the winter seasons and act with strength when spring comes.

Laci LeBlanc: And that’s really, that’s really in your head a lot of that, right? Like just, just being able to, to be in the right mindset. 

Chris McAllister: Yeah. I, and like I said, it’s, it’s frustrating for me both as a, a broker, a manager, you know, and an investor that, you know, there’s just been so little to get excited about, but I’ve done some really, I.

Things I’m proud of with my portfolio, though for the past few months that we’ll get into a little later, probably on the next episode. But anyway, before we kind of jump into, um, you know, some tactics like what to do in the downtime, I still want to use this time that we have together today, Laci, to kind of go through the six mindsets that the best investors among us.

Have, you know, the, the guys that guys and girls that’s, that went across multiple investment cycles. They just have mindsets that I certainly didn’t have, you know, when I first started buying real estate, you know, almost 25 years ago, you know, at the end of the day, the markets reward patients. They re reward discipline.

Not just hustle, you know, hustle only gets you so far. So I know I’m preaching today, so thanks for bearing with me. But there’s six mindsets that I just want to touch on today before we close out. And the first one I call patience over fomo, right? Patience over fear of missing out. You know, in real estate, the fear of missing out is super real, right?

When everyone else is buying, it feels like you need to grab something, anything, or you’re gonna get left behind. And that’s how investors end up with properties that don’t cash flow or tenants they can’t manage. And we saw so much of that happen to people, you know, during COVID and coming out of COVID.

The best of us. Don’t let FOMO drive us. Right? They’re perfectly comfortable sitting on the sidelines for years if the deals don’t make sense. You know, I have to tell you some of the people I sold, I, I have one investor, uh, client that I think I probably sold close to a hundred houses, uh, to them, you know, coming out of, uh, the crash.

And honestly, they haven’t bought another property, you know? Since probably 20 12, 20 13. Now they’ve done some other things, um, outside of our area, you know, larger investments and things like that. But as far as single family homes, you know, they bought everything that, that came up for a good five, six years or whatever, you know, four or five years.

And they haven’t bought another one since. So, you know, there’s people that sit on the sidelines. For a long time if it doesn’t make sense. And now other folks who are actively managing their portfolio, they reinvest in their existing properties. Just like you know, Nana needs to upgrade the bathroom, or she’s gonna do vinyl siding or add an air conditioner, or whatever they reinvest in their properties where there’s an opportunity to get a better return based on the other properties in the neighborhood.

They bank cash, they build relationships with lenders, and they understand that sometimes what feels like or looks like doing nothing. Is often the smartest and most profitable move they can make. And what I want to say to people who, who feel like they’ve got to do something, patience isn’t the same as being lazy, right?

Patient, is it? It’s active discipline. It it, and it takes some courage. You’ve gotta be able to look at an opportunity and, and, and know if it fits or doesn’t fit and prepared to, to walk away. Let everybody else pile into those uh, uh, properties that you know. I don’t wish anybody ill will. But you know, if it looks like on paper, you know, for your criteria that this is a bad move, don’t buy it.

It doesn’t matter what anybody else does. 

Laci LeBlanc: Yeah. They say comparison is the thief of joy, but I also think it’s the thief of profit in a lot of cases. Uh, just because everybody else is doing it right. Or if you’re on social media and you see all these, like your algorithm, if you’re an investor probably includes lots of, you know, investing related content.

And you see people buying and flipping and renovating, or you see people doing all these things and, and that can make you kind of compare. Yourself to those people. And that’s that feeling. I think grab something, grab anything while other people are to, to be busy to be doing this. But really it’s that, that patience and that you have to hone in on your specific strategy, what you’ve decided your goals are in the end, and you have to stick to it.

And I think it’s a really important statement that you made about patients not being passive. It’s not laziness, it’s not a lack of anything. It’s a very. Active discipline, you said, and I think that’s a really good point, is, you know, when doing nothing is the best thing you could possibly do to reach your goals.

In the end, then I think that you have to look at it as doing something. Not doing nothing. 

Chris McAllister: Yeah. And I, you know, I, I still, you know, fall victim to the FOMO thing, you know, I. I’ll go to the gym and every morning one of those TVs, you know, that you look at when you’re on the treadmill has HGTV on it and it’s showing somebody renovating a house and they, you know, God knows when they filmed it, but, you know, they just bought this house, you know, they renovated it, they made a killing.

It’s like, wow, there’s gotta be one of those out there for me. But, uh, you just, you’ve gotta have some of that. Uh, you, you just have to have the discipline to, uh. Not fall prey to fomo, so preparedness over luck. When the market finally turns it, you know, it looks like some investors just got lucky. You know, they happened to have the cash ready, whatever.

It wasn’t luck, believe me. They were just prepared and they were able to move faster than everybody else. You know, again, you’re in the off season. You want to build liquidity. You want to bank cash, right? You, you want to, you want to just save, save, save, and be ready when the opportunity arises, discipline over noise.

You know, every cycle comes with noise. There’s breathless headlines. The end is here. Right. It is, you know, we’re never gonna recover or, you know, everything’s great. There’s noise, right? Whether it’s headlines, the, the pundits, the neighbors, right? Neighbors boasting about how much their news estimate is, uh, you know, for their house.

You know, there’s always something, whether it’s doom and gloom, or whether it’s, you know, unbridled enthusiasm. But elite investors, they tune it out. They stick to their underwriting standards, they stick to their plan, they stick to their strategy. If a deal doesn’t cash flow, they don’t buy it. If a market or a neighborhood doesn’t meet their criteria, they don’t chase it.

They’re, they’re disciplined enough to say no far more often than they say yes, and honestly, fantastic portfolios we built on the back of hundreds of deals that they passed on, not the, not the handful that they actually went through and closed. 

Laci LeBlanc: Yeah, those social media posts and the, the news reports and none of that has your specific goals and your specific circumstances in mind.

I think that’s the really important thing, whether you’re looking at, you know, losing weight and exercising more, or buying rental properties, you know, what you see on the screen or what you hear around you. Uh, it doesn’t include your specific circumstances. It doesn’t take into account your specific goals much like, you know, the point we talked about before, but, uh, that’s what makes it noise.

Chris McAllister: Yeah, exactly. The next mindset is adaptability over rigidity. Right? Cycles don’t just test patients, they test flexibility. Investors who thrive are the ones willing to pivot between roles, buyer or an operator, or a seller, you know, or a re investor, right? And, and by re investor, I mean somebody who’s willing to put some money in their property in order to be able to, uh, increase the value of the asset and raise the rent, you know, in, in one season.

Uh, you know, those who are adaptable, you know, maybe they’re buying and the next, maybe they’re upgrading existing units in a seller’s market. They’re pruning their portfolio, getting rid of their underperformers. You know, a lot of ’em aren’t married to any one strategy or one asset asset class either. You know, if a single family home doesn’t make sense, maybe they’ll look at a small amount multifamily or a mixed use building or something like that, so they’re open to new opportunities.

But they’re not chasing shiny objects, right? Being flexible, being adaptable doesn’t mean that you go off the range, right? You, you, you don’t chase shiny objects. You stay true to your fundamentals by being open to different ways to apply them. Stewardship over speculation. Real estate rewards, stewardship, and this is the boring stuff.

Everybody, you know, steward real estate rewards, careful management. It, it re rewards long-term vision and it rewards time. Right? Steady compounding over time, you know, things become more valuable. It, it, it’s just the, it’s the just a wonderful. Fact of the world we live in, that compounding exists, and if you have the patience to, to leverage it and make the most of it that you know, you can’t help but make a heck of a lot of money over time.

The best investors treat their portfolios like professional fund managers. Would they re invest in existing asset? Again, they prune weak performers. They focus on cash flow. They don’t get distracted or seduced by quick flips or speculation. You know, they, they play for decades. They don’t just play for quarters.

And, you know, the, at the end of the day, this mindset, this whole idea about stewardship over speculation, it turns, you know, the idea of a landlord into a true asset manager, you know, they’re not just owning property, they’re stewarding wealth. And I think that’s, that’s a. A thing that I, I think most of us overlook when, you know, we, we see or meet or learn about somebody who’s been very successful in real estate.

Laci LeBlanc: Yeah. I don’t think this is very unlike, again, you know, a, a portfolio of financial assets versus, you know, portfolio of rental properties. I, I do wanna make the point that, you know, this might not be everybody’s. Particular skillset. I think that with a lot of experience, a landlord can certainly be an asset manager, but it’s okay to go outside of yourself and, you know, in my case, you know, our family and have a second set of eyes.

Have another person look at your portfolio and give you some insights. Um, you know, that, that they see. Uh, because once you’ve been, like, you might be too close to it, right? Once you’ve had a lot of properties for a long time. You might not see month over month that there are some of them that are underperforming, um, or that there might be a better opportunity somewhere else or so I just feel like that, you know, it’s, it’s important to make the point that.

You know, not all landlords need to be their own asset manager or they don’t need to do it all alone. Um, you know, if you’re with the right management company, if you’re with the right, you know, if you have the, a relationship with the right, you know, agent, then you might be able to get some outside insights that could, you know, propel you to that kind of next level.

Maybe you don’t have to wait, you know, 40 years like, like Nana to, to get there. 

Chris McAllister: Okay. The last mindset I wanted to touch on today, I call conviction over fear. When the market finally shifts into a true buying season, you know fear is everywhere, right? Headlines scream about downturns. Neighbor tell you, you’re crazy.

You know, most people freeze because there’s estimates dropping. Right for, for the house that they live in. But conviction, right? The courage of conviction is what separates the winners from the, from the losers. The best investors act boldly when conditions are right. They trust their preparation, their relationships, they trust their math, and they move when others hesitate.

History shows that the greatest returns are often made during moments of fear, and, and that’s exactly what happened during the downturn after 2008. Conviction is what allows investors to buy when everybody else is selling, and more importantly, and this is the harder part to hold steady when everybody else is panicking.

So to wrap this up, that’s, that’s really the framework that I want everybody to be thinking about real estate moves and seasons, and don’t try to fight them. You know, you, you, you read the three dials that tells you what season you’re in, and then you lean on the six mindsets that the very best and most successful real estate investors among us share.

To make the right moves. You know, that’s how smart investors avoid getting burned in a frenzy and how they put themselves in a position to win big, you know, when the opportunity comes around again. So next time we’re gonna do part two of this, and we’re gonna take it a step further. Instead of, you know, mindsets and psychology, we’re gonna talk a lot more about, um, the exact tactics.

That investors can use in, in lean markets. And we’re gonna talk about a strategy that I, I call the long bur. I, I, you know, people who have investing for a while, they, they’ve heard of the term, the bur method. We’re gonna touch on that, and then we’re gonna touch on, uh, my adaptation of that, that I call the.

The long bur. And then the other thing I’m kind of excited about taking everybody through. I’ve done some research and I’ve actually have a, I can actually show and discuss every real estate season, and this is residential real estate season that Columbus, Ohio has gone through over the last 30 years. So I want to talk about how these concepts of investor seasons have actually played out in our own backyard.

So before we wrap up, Laci, did I miss anything today? 

Laci LeBlanc: I don’t think so. This was a, this was an excellent. I think intro into what I’m really excited to talk with you about next time. Okay. We wanna see that we, I, I want the, the real life examples. I want the practical examples. Uh, you know, it, it is, we talk about being touchy feely sometimes, or we talk about kind of having these abstracts in these.

Theories, um, and how that can feel woo woo to, to some folks, especially people who are in this day in and day out, right? But we can’t ignore it. You know, this is the fundamentally fundamental foundation, right? This is the first step. This is the foundation of everything else that we’re gonna talk about when it comes to the actual strategies or tactics and the actual things you have to do, um, is all based on this, you know, theory, this foundation.

No, I. 

Chris McAllister: I agree, but I, I, I guess it is theory, but I guess the takeaway for me, you know, when I look back is telling myself that patience is not laziness. Right. You know, I always feel like I’ve gotta be doing something. There’s gotta be the next thing I, I’ve gotta be adding value, you know, whether it’s for myself or others, but sometimes.

There’s, the best thing to do is to sit tight. And that doesn’t mean you’re, you’re being lazy. But I guess that’s a, another podcast about the My Puritan work ethic and the, you know. Yeah. 

Laci LeBlanc: I mean, we have to be clear that this is not theory in the way that it’s like, oh, we, we’ve mapped it out in our brains and think it might work.

This is reverse engineered from successful landlord ship or property ownership over the years. Right. So I don’t, when I say theory, I don’t mean that. I just mean that, you know, it’s, people don’t wanna talk about the ideas behind the actions, but um, but it is emotional. 

Chris McAllister: It is emotional, yes. And I think sometimes use the biggest investments in your life.

This is your wealth. Give people a moment to, to feel it, right? It goes back to the whole idea of your why. Why did you decide to invest in real estate to begin with? So, um, yes, but I know everybody loves the tactics, so we’ll do that next time. But, uh, anyway, I just wanna remind everybody before we wrap, we wrap up.

You know, our goal at Roost Real Estate Company is to not just be your property manager. You know, we see ourselves as true partners. And, and we wanna help you manage. We wanna be your asset manager, and we want to help you manage your entire portfolio. You know, if you’re a serious investor, you know it’s about not just about collecting the rent checks, it’s about protecting your capital, maximizing your return on investment, and making the right moves at the right time, regardless of the season.

That you’re in. And, and that’s, that’s, that’s where we come in. So we work with professional investors to manage not only the day-to-day operations, but also the big picture strategy, pruning, pruning under performers, you know, reinvesting existing access assets and positioning your portfolio to take advantage of the next buying season.

So if you’re ready to work with a team. To reach your properties like an asset manager would with a focus on growth, stewardship, and landlord profitability. Please reach out to us at Roost Real Estate Company. We’d love to talk to, to you about, uh, how we can part you partner with you and help you reach your goals.

So, Laci, thanks so much. This has been fun and, uh, we’ll move on to part two next time. 

Laci LeBlanc: See you next time.