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Kathy Fettke: Interest rates, energy prices, inflation, housing, apartments, storage, retail, hotels. We’re discussing all of it here on the Real Wealth Show. I’m Kathy Fettke, and thanks so much for joining me here. I am very excited to interview our guest today. I’m a big fan. John Chang serves as the National Director of Research and Advisory Services for Marcus & Millichap, where he leads a team of dedicated real estate research professionals who produce the firm’s vast array of market research publications. He’s here with us today on the Real Wealth Show to share some of his insights. Oh, John, it’s such an honor to have you here on the Real Wealth Show. Thank you so much for coming.
John Chang: Oh, thanks, Kathy. I love to be here with you.
Kathy: It was just a few months ago that we were in Denver, and we got to be on the stage together doing the infamous debate at the Best Ever Conference, and we got to be on the same team. Thank goodness, I would not want to be your opponent.
John: We did great.
Kathy: Oh, it was really fun. That topic was, will there be more sales volume this year than last year? Now, last year was a record sales volume year for commercial real estate, is that right?
John: Yes, absolutely. Last year was just off the charts. It was about close to 30% higher than the previous peak in terms of the total number of transactions. It was a really, really busy year for commercial real estate.
Kathy: Based on total number of transactions. Oh my gosh. What about actual costs? Do you have those numbers?
John: The dollar volume?
John: Total dollar volume was up about 45%. Not only were there more deals, but there tended to be bigger deals.
Kathy: Amazing. We got put on the side. I don’t know if you chose it. I just got put on the side that was that this year was going to be less volume than last year. We had to come up with ways to argue that. One of the things I said and I think we both talked about is interest rates going up this year, and how that might impact the market. Here we are, aren’t we?
John: We’ve made it. Those interest rates are starting to move.
Kathy: What are you seeing on your side? Is it slowing things down, or are people still frantically trying to acquire hard assets?
John: It hasn’t slowed things down yet, but we’re just getting started. The federal funds rate has risen by about 75 basis points. We see the 10-year treasuries now up around 3%. It’s gone up about 100 basis points. We’re starting to see those capital costs rise. You have to remember the transactions that are closing today, were put under contract, 30, 60, 90 days ago, and they were put under contract, and financing was locked in before the rates really started to move.
We haven’t seen a change in the number of transactions closed, and probably won’t in the first half. As we go forward, as we get into the second half of the year, there’s a good chance that we’ll see a little bit of a slowdown. The first half was very strong. In fact, first half is ahead of the first half of last year, but we are seeing some more pushback in the marketplace. Right now, it’s pretty mild, but if interest rates continue to climb, I expect that in the second half of this year, we’re going to see things taper back a little bit.
It’s going to be close though. I bet you that at the end of the year, when we count up all the deals, it’ll probably be pretty close to where we were in 2021, maybe just a little bit light. You’re just not sure. There’s so much capital out there. There’s so many investors active in the market looking for opportunities, looking for places to put capital, looking for ways to hedge inflation. Real estate’s really been kind of at the forefront of that.
Kathy: You know what I didn’t mention that, we won that debate.
John: Yes, we did.
Kathy: In fact, I think we had a record number of people who voted for us based on past years. Maybe we’ll end up actually being right that it’s still– I think you were saying it’s going to be still really strong but maybe just ever so slightly less strong than last year. It sounds like that’s where we’re headed.
John: I like for it to be busy, which is good. That’s our business. We’re commercial real estate brokerage but I also like to be right. Just a little bit less. That’s perfect.
Kathy: A lot of people get confused when headlines are saying that the Fed is raising interest rates. People think mortgage rates or loans. Can you just go over that? I did actually watch the video that just came out today that you did. It’s still very, very low. Even though the Fed is raising rates, it’s still historically low. What’s the Fed doing? What kind of rate are we talking about when we see that the Fed is raising rates?
John: Sure. The Federal Reserve really only gets to move one rate, and that’s the overnight rate. That’s what they charge banks for money when they loan it overnight. That’s very, very short-term lending. That’s a one-day lending rate. The Fed has been moving that. What they’re trying to do is move the entire matrix of interest rates. When you see the Fed move the overnight rate, then maybe you’ll see the three-month rate move, and then the one-year rate and the two-year rate, and so on.
It really isn’t tied to what you’re paying for a loan on a piece of property. There’s no direct correlation. Loans are more closely tied. At least fixed-rate loans are more closely tied to the 10-year treasury. The 10-year treasury is going to be tied more to bigger picture things like what’s happening with, first of all, the Feds movement, whether they’re buying or selling treasuries. That’s quantitative easing or quantitative tightening, and it’s also tied to what’s happening in the stock market because a lot of times when people are selling out of the stock market, they buy treasuries, especially the 10-year treasury, and that could put downward pressure on rates.
The Feds move in one piece. That’s what their overnight rate movements. They’re also just getting started with quantitative tightening, which is going to try to push up those longer-term rates, the 10-year treasury, but you always have to remember, they don’t control these things. They’re not really directly managing these things. They are managed by the market. The volatility in the stock market lately has been helping to hold those 10-year treasury rates down a little bit lower.
We’re seeing more money coming out of the stocks and buying the treasuries, and that’s pushing those rates down. There’s a lot of factors involved. In general, they’re both going up. We’ve saw the yield curve invert very briefly, but when people found out that the Fed would start using quantitative tightening, selling off their long-term treasuries, that you saw the 10-year rates start to rise up again. It’s an imprecise science, I guess, is the best way to put this.
Kathy: I think that one of the QT. The QT, the quantitative tightening is the big story really, that it seems like people should be paying attention to more. Because if we’re in a quantitative easing, QE, that’s when the Fed is coming in and buying those bonds and mortgage-backed securities, and keeping rates low.
Kathy: When they reverse that, which they’re doing right now, so they’re going from QE and buying and keeping rates low to QT which is nah, we’re going to let it go up. That’s the story, and that’s what’s going to really affect our business, our real estate rates. Got to keep an eye on it. I’m curious, when we were in Denver, there was a group there, people were whispering about who had bought a value-add property, or they had syndicated multi-family in Houston that I’d heard was around a one and a half cap.
Now, when you’ve got the 10-year treasury at 3%, doesn’t it seem like investors would go for the 3% instead of the– How’s that going to work out? As we see cap rates compress, are investors going to go to stuff that’s maybe not as risky?
John: Some will, but you also have to remember tax benefits with your 1031 exchanges. In particular, that’s a big benefit. The other thing is value add. I was thinking about our conversation, and I was reflecting back, why does real estate make sense right now? I remember in 1971, my dad bought his first rental property. I think the interest rate was 6.5% percent. He owns that property still today because he’s added value to it. He developed it, he made it better, he rented it and fixed it up over the years.
He bought properties all through the ’70s when interest rates were pushing all the way up to 10%. He’s done really well with all of that real estate. Apartments and single-family houses, because his mentality was, how do I add value? If you get a one and a half cap and that is a little bit of an extreme case, you can– I’ve even seen deals with negative cap rates because of the way that the property is operating, turn around and become very, very good investments.
It’s really about investors getting an eye for the property and understanding ways that they can improve it either through management, or fixing units up, or converting things. That’s the creation of value. I think, in a way, a lot of investors have gotten lazy over the last few years because interest rates have been so low. You can just buy into a deal, the cash flow is right up front, and you’re making money and you don’t have to work as hard. I think that we’re coming to a time where investors are really going to have to roll up their sleeves, understand the intrinsic value of a property, understand how they can create value, what their unique capabilities are, what they can do different than the previous owner, and then buy those properties.
The cap rate can be whatever it is. It can be below the cost of capital when you start as long as when you finish, maybe get done six months or a year later, your yield is outpacing the cost of capital and that’s what you’re really looking at.
Kathy: That makes so much sense. People who flip properties do the same thing and they always have. Even when our interest rates were so so low, to get the money that you need to buy the property and fix it up and sell it people were paying 10%, 12%. I was a private lender. I know they’re paying 10%, 12%, 15%. Even some of the deals we’ve done, we’ve had 15% preferred return this past decade when you could get such much cheap money because we knew the upside. We knew the upside. It’s like, “Hey, I don’t care that I’m paying this right now. We’re going to make so much money, just from improving it. Really good point, sophisticated investors don’t care.
John: They find a way to make sense. The ones I worry about are the people who are just trying to get in that are new. Again, research, know your market, know your properties, know your skills and your talent. Make sure you have the right partners because the newer investors, and there’s been a long train of investors coming into the space. If the investors are still new, they don’t really have a feel for the market as well as the very seasoned investors. Now’s the time for them to be a little bit more cautious and pay very close attention to what’s going on.
Kathy: Absolutely. It’s no longer a low-hanging fruit. You’ve got to get up the ladder. You got to be careful. All of that, stay away from the bees. Insulation. Some people are saying it’s peaked. Everybody’s gotten an idea and an opinion. Someone today just said, “Oh, yes, right before elections, we’re going to suddenly see inflation go down.” I don’t know. I’m guessing that there’s people from all over the world that are coming to US property because we printed so much money, and they’re said oftentimes that money ends up in real estate. Do you see that as like also an option that many of these companies are just buying real estate with the belief that it will inflate in price?
John: Well, I have been on calls with top investment funds all over the country and they’re talking about foreign capital coming in to the United States, through these funds, from Europe, from Asia. The reason is, because as many challenges as we have here, with our inflation and everything else, we put a lot of capital into the market, but so did everybody else. We had a global pandemic. It affected everybody.
Within that context, the US economy is about the strongest in the world right now. Our growth patterns are strong, and the real estate is doing very well. Real estate has intrinsic inflation resistance built into it, especially the ones that can mark to market like apartments, hotels, and self-storage. Those are all properties that you can move the rents very quickly. There is more capital coming into the US than we’ve seen historically but a lot of it’s coming through funds.
It’s very difficult to see. It’s very difficult to trace. We are seeing that money come in. With regard to inflation, there’s all sorts of stories out there. If you look at the underlying drivers, the price of oil is still very high and that risks we have what’s going on in Ukraine. We have all of the challenges with our supply chains. Those have not gone away. We’re getting better at dealing with it in the US. The cost to move a container from China was about $1,500 per 40-foot container before the pandemic is now $15,000 to move that same container.
If you look at what’s happening in China, which is the number one export country in the world, and where we get a lot of goods, the port of Shanghai, this entire city of Shanghai, which is the largest port in the world is shut down. It has been since the end of March and so that’s going to affect our supply chains. We’re just going to have a lot more difficulty accessing products. As a result, we haven’t slowed down our purchasing.
Retail Sales are up 7.5% compared to last year. We’re buying as much stuff as we can get, but there’s less stuff to buy, and as a result that’s one of the key reasons inflation is rising. I don’t know that that’s going to settle down anytime very soon. In fact, when you look at our forecasts, we’re expecting inflation to be elevated into next year in 2023.
Kathy: It’s really crazy timing on things because we had factories shut down for a year or two years and getting some of these factories back up and running is not that easy. Then you’ve got now this oil crisis. At a time when people are opening up their doors and going outside, they’re jumping on planes. I can’t believe how much travel I’ve got this summer. I was like, I really enjoyed not having that. People are out and about, and they’re going, and you’re seeing them on Facebook. Have everything shut down, and then open up, it’s really the speed of change that can cause problems, to shut down immediately and then open up immediately. It’s causing these jolts to the economy.
John: The other thing, you have a good point, people are going to be traveling. People are spending money. They’re enjoying themselves as the pandemic protocols are reduced or eliminated. You also have to remember, there is more savings today than any time in the history of the country. If you look at the savings versus the debt, for the first time in 30 years, there’s more savings than there is debt right now.
This is a big opportunity. People are spending money. They’re going to travel. They’re going to take vacations. We’re forecasting hotel occupancies to rise significantly, especially domestic vacation destinations. You still have some protocols for COVID, when you travel internationally. Domestic demand for hotels is going to be very strong this year, because people have money in their pocket, and they haven’t been out. They’re also buying products and consumer goods. I think prices are going to keep going up for a while.
Kathy: We have a little Airbnb, we just tried out, over the pandemic, and rates just keep going up. We don’t control it. It’s just the auto. The algorithm chooses the rate, and it just keeps going up. I would agree people are wanting to get out. That was one of the things that came up with the conference is, where can you still get a deal. There were different asset classes that, maybe are just at the beginning of coming back. Is that still the case? What are the deals right now?
John: They’re certain types of hotels. That’s not just for the basic investor, right? Hotels are very specific. You have to know the business, you have to have good partners and so on. Urban hotels, hotels that cater to conferences, those are expected to be on the upswing. We’re seeing a lot of momentum in retail. A lot of people thought retail was going to have big problems during the pandemic and they turned out to be small problems.
Most of the tenants kept paying. Most of the space stayed filled, vacancies only went up about 100 basis points, and they’ve come down most of that all ready. Retail centers are doing quite well and their outlook is very strong over the coming year. Of course, you have multifamily, and you have industrial, which have been bid up and they’re very, very spendy. There are markets around the country where you can still find opportunities, especially apartments in some of the smaller cities that have growth potential as people are migrating to those smaller cities.
Again, it’s really knowing what’s happening on the ground for those types of properties. There’s some people betting on suburban office to make a comeback. Actually suburban office is already recovering. Urban office is still having some challenges. Again, in areas where people are relocating to growth markets, suburban office has been gathering momentum, as well. Those are the properties. Oh, self-storage has also been doing very well. Also, bid up a bit.
Again, this is an opportunity for people who can do the research, who can dig down and understand that property in that sub-market in that Metro, and really make a case for ways to buy that right and add value to it. Those are the properties that are going to do the best. That’s where the portfolios make sense and to me, that’s, people who understand the market better.
Kathy: Boy oh, boy, do you need to be able to predict costs of things if you’re going to be improving, or building because it’s in flux. We don’t even know what those costs are. It’s almost impossible to bid things out. A lot of contractors just won’t because they don’t know what things are going to cost or they’re just saying I’ll give you my bid, but without the cost of materials because I don’t know if I can even get them. You’ve got to be flexible and have plenty of reserves for that if you’re planning on doing value add.
John: I was talking to a developer last week, they develop single tenant net least retail and they said they just, even when they have a low basis in their land, that they’re having a really hard time getting the numbers to pencil. Construction material costs are up 18% on a year over year basis. They’re up something 30% from pre-pandemic levels. Again, know the availability. Lumber comes and goes, steel comes and goes. All of those development materials are going to be key ingredients. The heavy lift developers, you need to know, you have to have people who know what they’re doing and who have established supply chains. That’s the other big part of it.
Kathy: That’s the key. Yes, we syndicate and I work with several developers who are small time, they’re little and we’ve gone into these little markets like outside of Bozeman. There was great need for housing, but we’re not a big builder. It’s hard to get the materials. That’s what a lot of people don’t understand is, how does that work? How come some builders have an easier time and others don’t.
John: They have relationships. At the end of the day real estate, the whole industry is a relationship business. You have to know people, you have to have those relationships, you have to understand the inner workings of it, and you have to partner with people who really know what they’re doing and have their relationships leveraged in your benefit, but a large builder in a region may have access to materials that other builders don’t or they’ve already secured it, they’ve already pre-purchased it.
They already knew that this wave was coming and that they were going to have the need. They bought it ahead of time and they have it ready to go for the next project, whatever that happens to be. We saw a huge issue with appliances over the last year or so, and where to the point where apartment developers were going down to Home Depot and simply buying all the inventory in the whole store.
That was what they were forced to do, even though they had good relationships. They may be six months out to get sets of ranges and refrigerators for their apartment units, even the large developers and builders. Secure that inventory, know where it’s coming. keep track of what’s in your local Costco, if you’re a small guy or Home Depot but it’s really going to be a dynamic. It’s still fluid. Those supply chains are not straightened out yet, and it’s still going to be bouncing for the next six months.
Kathy: It’s a capitalization thing. A small builder can’t just go out and buy all the materials in advance. The way that we did it was we raised enough money to buy the land and build the first 10 homes and then use the profits to build the next 10. We didn’t have that extra money to just buy all the materials for all the homes in advance like some other the national builders could do. If you’re going into this, make sure you’ve got those reserves on hand. Very, very important.
John: Yes. Well the easy parts, we’re over the easy part. The last 10 years have been the easy part. Now we get into part where experience matters. That’s where we’re going to see this play out.
Kathy: I am wondering, and this is a different perspective, but I know that there’s a lot of multi-family investors and just investors in general, a lot of new ones who came in the market over the past 10 years, who got into bridge loans were just planning on refinancing once their value add was finished. How’s that going to play out for people who just a few years ago just had no idea that we were going to be facing these massive changes. Do you think we’ll see more distressed inventory on the market and therefore more opportunity for investors?
John: Well, okay, the people who got the bridge loans, and they usually got them for very specific reasons, they were redeveloping, they were repositioning property. They were developing out a portion of it, something like that. They couldn’t get traditional financing because they had to prove the model, if you will and the intent was to transition over to regular financing.
The cost of capital’s gone up, some will make that round trip, they will get onto that next interest rate and they will get their financing locked in and some will continue to face challenges or might not be able to do it but I wouldn’t plan on seeing the distressed assets coming out because over the last few years, we’ve seen so much appreciation especially multi-family with rent growth, falling vacancy rates and appreciation by falling cap rates over the last few years that even if they get into a little bit of a bind, they can still come out to market at a fair market value and still actually make money on some of those deals. Nobody’s expecting to see a huge wave of distress coming out there through this rise in interest rates. There’s just too much appreciation over the last few years for that to happen.
Kathy: That’s a really good point. I know there could be some disappointed investors thinking they could.
John: Everybody’s waiting to, they did that at the beginning of the pandemic, right? There were literally billions of dollars of funds waiting for distress to come out during the pandemic. That money was just never placed. That was literally, I think we counted it up at one point, there was $6 billion sitting in funds waiting for distress property during the pandemic that just never got into anything because the distress levels were so low. Most investors have been well-capitalized and well-positioned.
Even in say office, which has really quite frankly been the hardest hit segment, most of those investors didn’t get into trouble. They knew and they were prepared. They didn’t overreach and they weren’t over leveraged. They were able to feed the beast over the last couple years, and now as the market starts to come back, they’ll be able to recover.
Kathy: Well, those fund managers were not listening to you, were they?
John: We had, it was on our video tape. We did a webcast in the beginning of the pandemic, and we said right up front, it was April, right after the pandemic started. We said, look, there’s a lot of money going into these things. These are probably not going to come out and here’s why. If you rewind the tape to two years ago or 2020 in April, our webcast, we got out there and we were pointing that out from the very beginning.
Kathy: Oh man. One last thing, I do know that everything depends on energy. We don’t really even think about how much we depend on energy, just getting anything done. There’s story about tapping into our reserves here. Are you concerned at all that we’ll have a shortage of energy that could really slow down the economy and affect things?
John: I don’t think so. The reason is that there’s a ton of potential energy out there. If we’re talking about oil prices, yes, they went up, we’ve tapped into the strategic reserve. We’re artificially holding those down. They can only do that for so long. The strategic reserve is there really as a guardian against the US going to war. That is, so we’ll be able to put fuel in ships and planes and everything else.
They can only move so much out of the strategic reserve, but there is still capacity in Texas, and North Dakota, a lot of the fracking and a lot of the oil drilling in those states was capped and put on hold. When oil prices fell, whatever was 10 years ago and, and those wells are still available. They’re going to start uncovering those. They’re going to start tapping into those but it will take time because it’s capital intensive and those oil companies are a little concerned that okay, we’re going to get started and we’re going to invest a bunch of capital.
Then this whole issue will go away and we’re left with all this capital expenditure. The price of oil drops from $105 down to $80 or $70 again, and they’re left holding the bag. They’re being careful. I was doing research in Canada, the Tar Sand oils up in Alberta, the same story, those developers, those oil companies have the ability and the capacity to meet the needs, they simply want assurances that if they go and invest the capital, that they’re not left holding the bag if things go another direction.
At the same time the US is still growing, its use of renewable energy sources. I think that’s going to be something that we have to continue to do and build and maintain and grow. It doesn’t meet all the needs, but over time we want to have both of these sides of the equation rising in order to ensure energy independence, if you will and to make sure that we don’t have a lot of disruptions from that side of the equation.
Kathy: Yes. It was just a few years ago that there was too much oil. The tankers were just sitting out in the ocean with no place to store. I could see where that investors might be like, “Ah, I don’t know if we want to go through that again.”
John: Yes. It’s volatile. You never know what OPEC’s going to do, because they can move the needle on oil production globally very, very quickly Saudi Arabia specifically. It’s a little bit of a dangerous game, so people will move carefully and cautiously. I think there’s a certain level of resistance point somewhere around $110, $120 a barrel where the government’s going to do everything it can to keep those prices tapped down.
They want to keep them $105 or lower, and try to keep them in that range. It still hits everybody in the pocketbook, but we also have to remember, people are generally making 5% more, 5.5% wage growth over the last year. Jobs are plentiful, unemployment rates down to 3.6%. We have 5.5 million more jobs today. Then we have people looking for work, everything’s moving in the right direction. We added 2.7 million jobs this year, no 2.1 so far this year. There’s a lot of momentum economically, we talk about inflation and risks and recession and all of these things and the rising interest rates, we can’t forget the underlying economic drivers right now are still strong and supporting demand for all types of consumption and real estate. People aren’t really hurting right now in general and so if we’re going to have things going wrong it’s good. Times have been pretty good actually lately.
Kathy: Love that, love that. That was my last question but I have one more. Is that okay?
Kathy: All right. I know you’re in commercial real estate but I still hear people in residential saying, “Oh, I’m just going to wait till prices come down before I buy.” What’s your response to that?
John: I see that in the news, I see people talking about that. I talk to you some of the young people who work for me and they’re thinking gosh, this is crazy. How does this work? If you look back historically at home prices they tend not to go down. They tend to go up. If you look at demographics today and where things are in terms of people buying homes, you look at the millennial generation they’re right in their 30s, they’re actually right in the prime range for home purchases.
Yes interest rates are rising and yes that’s crimping the market a little bit on a temporary basis because it’s a little bit of a shock to the system but at the end of the day we have a housing shortage and that housing shortage is going to get worse not better for the next 10 years. Yes if you wait 10 years to buy your first home you might be in a different market but we don’t know, if you look back when the baby boom generation was entering the age of home buying been the in the ’80s on an inflation adjusted basis from over the next 20 years home prices went up about 55%. The millennials are exact same spot and they’re roughly the exact same size of age cohort right about 72 million people.
They’re going to need housing. They’re getting married, they’re going out, they’re starting families, they’re going to need housing. They can’t live with mom and dad forever. They’re going to be looking at those opportunities to move out. That’s why our vacancy rate in apartments is down to the record low 2.4%. That’s why apartment absorption over the last year totaled over 700,000 units.
That’s almost two times the previous record of apartment demand. That’s why we’re seeing homes selling the inventory of homes down to two months of inventory. Even with rising interest rates, once we get over the hurdle people will adapt and I think we’re not going to see any corrections there, I remember when I was looking to buy my first home interest rates were at 8% on my first home purchase and they’ve come down since then I was able to revise as it went down and we’ve been in good times, it’s been nice. We’re going to be going back into a cycle where we’re going to see those interest rates rise and people will adapt.
The young professionals are doing well. Their income growth has been good and I think that they’re going to adapt to this and they’re going to start buying again. There’s a shortage of houses available. Hopefully actually this combination will put a little bit more slack in the market but I don’t see prices coming down.
Kathy: Intuitively I just looked at my daughter who just bought her first house and it was almost $1.2 million but you know what it’s in California, and it was a total starter home. I thought my goodness poor thing but then I went back to when Rich and I bought our house, our first house 25 years ago not feeling old but yes 25 years ago.
It was in the $500,000 range. Add for inflation it’s about the same, so that was a big purchase for us and it was expensive and it was hard. It’s always been hard, interest rates were 7%, 8%. It’s never usually easy to buy a house. There was a time in the 2000’s when it was way too easy and that didn’t work out well.
Anyone [inaudible 00:34:19] a house for everyone, look under your chair, there’s a house. It was giving houses away, that doesn’t usually work well, you’ve got to want it, save for the down payment and have good credit and all these things, those days are back. There was a blip in time where we just threw all that out the window and realized that doesn’t work nope, you got to.
Have the down payment and have the credit and show that you’re a good borrower and they are. The FICO scores today are so high of people getting loans. Anyway yes, when you just adjust for inflation, it’s these kids today are basically paying what we paid inflation adjusted. It’s just a higher price tag.
John: It’s exactly right, I remember the first house I bought we literally cracked open a piggy bank to cover closing costs. We were like taking it down to the Coinstar machine and throwing it in and hoping we had enough to cover our closing costs and we did and we got that first house. Then we grew wealth from there.
Real estate is a fantastic growth channel for wealth over time. It’s not a quick fix, It’s not something that moves super fast, some people make money in it very fast and God bless them, they’re doing great. In general it is a long term growth strategy that pays huge dividends over the long term and again the earlier people can get into that first purchase and then grow into their second, third, fourth and fifth. I think I don’t know anybody who’s ever regretted it.
Kathy: Yes, great advice. Yes, yes, yes. All right John such a pleasure to have you here on the Real Wealth Show. I just so appreciate you giving us all your insights.
John: Kathy it’s so much fun to chat with you and I love it and I hope to speak with you again.
Kathy: Thank you for joining me here on the Real Wealth Show. You can get access to our vast array of information on where and what and when to buy real estate at realwealthshow.com.
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