The State Of The Real Estate Market With Ron LeGrand
Episode 538: The State Of The Real Estate Market With Ron LeGrand
We’re undeniably in a very weird market. House prices are going up at a speed as we’ve never seen before. At the same time, we have about a 4 million house shortage in the country. With so many things happening, who can tell what the future will be? If we can’t get the answer to that, then the best thing is to understand what we’re currently facing now. There is no better person to help us than real estate expert Ron LeGrand. In this episode, he joins Mitch Stephen to talk about the state of the real estate investing economy. Why are house prices increasing? Is private money inflation-proof? How can you get into real estate without using your money or credit? Ron answers these questions and more! Don’t miss out!
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I’m here with Ron LeGrand. I don’t have to tell you who he is. If you don’t know who he is, then I might explain that we started learning from him in 1996. That’s me personally. I don’t know exactly when he started but I know that he has changed the lives of many people with his strategies and eye-opening approach to the business of real estate investing, the ability to go in with no money and make something happen positive and put some money in the bank on your side. It’s all good stuff. How are you doing, Ron LeGrand?
I’m doing outstanding. Every morning I get up, it’s going to be a good day.
Do you ever get tired of people thanking you for all you’ve done for them? Even when I’ve been in the room with you, you must hear it ten times. The last time I saw you, I was hovering in the background and a lot of people credit you with changing their lives.
No. I will let you know when I do.
I wanted to talk about the state of the real estate investing economy and the economy in general and what your thoughts are on it. There are a lot of stuff flying around and a lot of things going on. I don’t know how deep you want to go into it. What’s your general feel for real estate across the country?
It’s going up. Nobody in our lifetime has seen it go up. It’s a weird market we’re in now. In many ways, it’s a very good market, especially if you’re selling houses. Inflation is our biggest issue. If that keeps going up, the market can’t help it come down. The higher the interest rates, the fewer people are going to want to buy.
On the flip side of that, we got about four million houses shortage in this country. We’ve never seen a situation like this before. This is not 2008. You don’t have the same conditions and reasons. The truth is I don’t know, you don’t know, and there is nobody else alive that knows what’s going to happen in the future of the economy.
I don’t even listen to them when they try to tell us what’s going to happen. I didn’t believe them in the last 4, 5 or 6 cycles we had. I don’t believe them now. I don’t think anybody knows. Not to get political here but it has a great deal to do with who’s in the office. If we keep doing the crazy things we’re doing and spending money like it’s free, we all know there’s going to be a downturn. I have no doubt about that. We just don’t know when. That’s the big question. I don’t care because it’s the best thing that happened to real estate investors as we all know.
I didn’t invent this saying but I signed my book with it all the time. It’s “Wealth comes from chaos.” It’s an anonymous source as far as I know or I give credit for it. I always say wealth comes from chaos because that’s what entrepreneurs do. They find problems and figure out a solution and a little space where they can make some money. Why are house prices going up so fast like never been seen before? Do you have any idea what that’s about?The American dream of home-ownership has never died. Click To Tweet
The lower interest rates are a big part of it. The economy is doing well. People feel comfortable that they can turn loose of the money. The American dream of homeownership has never died. I’m not an economist but in my world, I just adapt. We adapt to the times as you do. This is a beautiful seller’s market. It’s a great time to sell.
I teach against personal guaranteed debt. It’s a great time to get out of personal guaranteed debt while the market is up. You can cash out of them, get top dollar for them, and then go out and get into all the non-recourse debts you can possibly get into and build your empire as you do. You’re a great example of someone who has done exactly that.
I don’t do a lot of buy and hold unless it’s self-storages. In houses, I like to do seller financing. I carry the note from my buyer for 30 years at 10%, more or less. That has proven to be very durable and dependable. I’m losing all the assets. As a buy-and-hold guy and a landlord, you have a lot of liabilities.
That’s everything from the mailbox at the front curb, all the way to the back fence and everything in between, water heaters and all that. As a financier, you’re just the mortgage company. If the air conditioner breaks or the toilet leaks, it’s not your fault because you don’t own the house. You just own the payment. I like that. It has proven through the last two recessions to boom because the bank is usually closed.
They come and go.
If you’re using private money to buy the houses at half price during the recession, the key is you can’t need a bank on either end. You don’t need a bank to buy and your buyer doesn’t need a bank to buy the house from you because you’re financing him. You’re in the recession. You’re blowing and going. You can’t even keep up.
You are the loan committee. You are the one who controls. You are the gatekeeper. They got to go through you. The only difference between what you do and what I do is I lease option them instead of selling them with owner financing. You live in Texas. You can get the house back faster. I cannot evict them here.
On the other hand, you’re giving up the depreciation and I’m getting the depreciation. I want the depreciation because the government is getting way too much of my money. That depreciation helps with that, plus I get the upside. You get some of yours back and you get the upside on some of those, but as long as I own my control to the upside, that’s fine.
I’m buying a house for $0.60 on the dollar, $0.65 on the dollar and I’m selling for 100 cents on the dollar or 110 cents on the dollar. Since I’m on the loan committee, I don’t need an appraisal. I don’t know how much appreciation you want. I usually do that on my average days on the market for the last 150 houses. I wait until I have 5, 10 or 15 notes, then I pledge them at the bank and buy a self-storage facility. Now, I got $1 million worth of depreciation.
I don’t get it per house. As I get some free and clear houses or some things, I go buy a storage facility. My CPA called me up and said, “Do you know that 283-unit storage facility that you built in 2021 that we got to deal with in 2022?” I said, “Yes.” He goes, “Was it welded together or bolted together?” I said, “All the components were screwed together with nuts and bolts.” He says, “We can accelerate your depreciation in one year.” I got an $800,000 tax write-off because it was affordable. It was not a permanent building.
What’s the difference between bolted and welded?
One is permanent and one is temporary. It’s like people say, “Should I use a C corporation or an LLC? I said, “In real estate, you don’t want to use C corporations.” It doesn’t matter what you pick, just learn how to win. That’s what you taught me. Pick a plan and win.
I do have some C corporations and mostly LLCs, but C corporations have an advantage. Mainly, they don’t show on my tax return, plus it’s a lower tax bracket than I would be in personally as a flow-through from an LLC.
The first rule of the game was you have to learn how to make money. Shortly after you learn how to make a lot of money, you’re going to know that you need to go back to school to learn how to keep your money.
That’s correct. There’s a whole school on keeping it from the IRS. That’s one gorilla we don’t want to dance with.
There are legal ways to deal with it.People learn during COVID how to make a living because they have no choice. Click To Tweet
Yes. When you sell that self-storage unit, I imagine you’re going to exchange it because you don’t want to recapture all that appreciation you got this year.
Absolutely. I have no basis anymore because I took all my depreciation in one year. I always have mixed emotions like, “If I take it all this year, what do I do next year?” Someone said, “You just have to buy another storage facility.” I said, “Do I have to buy one every year?”
At least until they change the tax law. We know they’re going to.
Why is there a shortage of houses? The interest rates have been low. Builders have been building like crazy. Are we having that many babies? Are there many illegal aliens coming across the border? Why are we so far behind houses?
One thing is the low-interest rates. Another thing is as we’re post-COVID now, with all of the pent-up fear that came with going through that, people realize they can survive and make a living somehow. I heard someone tell me one time that people learn during COVID how to make a living because they had no choice. They were forced out of their jobs and businesses. The whole world has changed post-COVID. Every time I go into a business, they can’t find help. Everything has changed. Restaurants can’t find help. They change the way they do business. They are closed part-time or totally because they can’t find help. That’s the bigger question. Why is that going on?
It has something to do with the attitude during COVID and after COVID, combined with the interest rates and the good market. In my experience, most people have no idea what this inflation is doing to us. They never stop to think like that. We are losing more than we’re gaining for the most part in this high inflation. I did a little speech on inflation and how much things have gone up. I use some national averages, for example, gasoline at 58%, which is even higher, beef at 40%, the cost of the materials to rehab the house at 27%, cost of a used car over 30%. That’s only in one year. That’s going to certainly have an effect on us going forward but I don’t know. I’m not an economist.
I was averaging nine days on the market with my owner-financed homes before COVID. When COVID hit, I dropped to four days drastically. It’s been four days ever since. The people started showing up with more money down. I don’t understand why, but that fear pushed people into some mode where they felt they needed to have some control of something and at least own a house. My mobile homes and land outside the city evaporated. People wanted away from the crowd. Let’s talk about inflation. People are trying to liquidate because it’s time to liquidate. I’m not sure you want to trade your real estate for cash because your real estate is more inflation-proof. Is it not? Am I wrong there?
You forgot the rest of that sentence. Get rid of the personally guaranteed debt, then get deep in non-recourse debt and buy all the houses you can without personally guaranteeing the debt. I’m in a terms business. We buy with terms and sell on terms. We don’t guarantee anything. When we get private loans, we don’t guarantee the debt either. I want people to get out of guaranteed debt because that’s the biggest mistake they make.
You ask people who went through 2008 and they’ll swear to that. If you can build your business without guaranteed debt, every house you go out and buy without guaranteed debt is going to have cashflow. The loan is not in your name. There’s nothing on your credit report. When a recession comes, nobody is coming after you for any money when things go wrong.
A lot of people go through life thinking they’re in control when things are going to go wrong. If you live long enough, you know that’s baloney. I didn’t start the recession but it sure penalized the crap out of me. I’m not going to forget where I was back when I had all this guaranteed debt doing real commercial real estate developments. I want people to operate without risk. Go out and get more real estate but do it the right way. Don’t get guaranteed debt to do it.
I took that lesson from you. On the first of every month, I make payments, non-guaranteed debt to private lenders, collateral only on $26 million. I owe about 80 people combined. I needed whole different collar money than the fix and flippers and the wholesalers. I didn’t need money for 6 months, 8 months or 1 year in and out. I needed money for 10 and 15 years.
I need affordable money. I need a non-recourse and I need it wrappable. I had a limiting belief for many years until I worked my way down. I had 8% 5-year interest-only money that was wrappable, non-recourse, and then I got so much of that. I started asking for 10-year money on a 15-year amortization. I got too much of that. I started asking for fifteen-year amortization. You get what you believe in and what you ask for.
When we talk about private money, a lot of people’s big question is, “Who’s going to loan you money for fifteen years?” The answer is anybody who wants to get a good return on their money. The fifteen-year period can easily be fixed. I can’t tell you how many times I’ve taken one lender’s loan and sold it to another lender to get the first lender paid when he has to have the money back.
It isn’t like the money has got to stay out there for fifteen years if that person needs that money back. That doesn’t mean we have to put a balloon in it. I always did tell my lenders, “If you have to have this money back, you let me know. It’s going to cost you five points if I have to go sell it to somebody else. I’m not going to do it for free.” They always got an extra strategy.
I understand. It’s the same here. There’s always someone getting paid off. My buyers are inherently flawed or they wouldn’t be borrowing my money. They will never be able to go to a bank 95% or 99% of the time. They put the house up for sale. The realtor lists it. They find a new buyer who can get a loan and now I’m getting called for a payoff. That happens every month to me. If someone needs their money back, it’s usually pretty easy to replace them with someone else.
They don’t have to pay off the loan. I assign the mortgage to another lender. It’s that simple. That lender puts in the money to pay off the other lender. There’s nothing to it. It’s one sheet of paper.In the world we live in today, it's never been easier to buy houses. We're so systemized and automated. Click To Tweet
I had the limiting belief that no one was going to want to do a fifteen-year loan. That limiting belief kept me not finding that money for a long time until I finally decided I was going to try. Guess who shows up? It’s the 25, 28, 30, 35 and 40-year old who can’t take their money out of their retirement plan until they’re 59 and a half. They got nothing but fifteen years. They would rather do one loan and forget it.
There’s about $15 trillion sitting in people’s IRAs. They don’t know what to do with it as well. Money is everywhere. Money is the easiest part of the equation. Most people have no idea what to do with it. They hate letting it sit at the bank. You and I both know getting private money has always been easy.
I learned that way back in 1984. It took me two years to figure out I could get my own after I started. In my world, most of my deals come with terms. I don’t have to even go raise private money. I either buy it with owner financing or take over their debt. There’s no private money required. I do that and they stick a buyer in.
I got so used to having private lenders. I got good at finding them that I forgot to even ask my sellers if they would finance me, which was a bad mistake. It all worked out fine but what a shame. I wasn’t even asking them anymore. We fall victim to our little habits.
There’s no better financing than seller financing. Don’t forget that there’s a big discount potential at the end. I’ve never paid off a seller finance loan where I didn’t get a discount. Many times the profit on the back end was bigger than the profit on the front end for the discount.
For those of you who don’t know what he is talking about, what he’s saying is usually when the seller finances you the purchase of their property, you let them know every year, “If you ever want this money early, let me know,” which they always find the reason that they need the money early. You offer them, “I can’t give you all of it but I’ll give it for a discount. I’ll pay you off now.”
First of all, I don’t pay them off until my buyer tells me they’re going to close the loan pretty soon. I call a seller and say, “I got some money coming. I’m trying to figure out who to pay off with this money. I thought of you. Would you rather have cash now? Would you rather keep on collecting payments for the next number of years?” The answer is always, “Of course.” “If I paid you cash now, I would have to have a pretty hefty discount. If I did pay you up, what would be the least you could take?”
They’ll give you an answer and you’re like, “That’s the best you can do. I can do a lot better than that with cash. I’ve got places to put it. You got to do a lot better than that. What’s the absolute least you can take?” You would be amazed at how far they’ll drop. If they don’t drop enough, I come in with a number. I get them down as far as I can. “I can’t give you what you want but I could give you this if you want it. You got to make up your mind because I’m going to have to do something with this cash.” It never fails.
With those seller finance notes, you never have to pay with the face amount.
In reality, probably about 75% of the houses that I buy come with debt already on them. We wind up making that payment for that seller on that debt until it’s paid off or way off into the future. Any money we owe the seller above that, we just do a wrap. They wait until this thing gets cashed out for them to get that money that they have in the deal. Everybody doesn’t want to do owner financing but there’s a bunch of them out there that do. There’s this long list of reasons why they’ll do it.
I hope you guys are enjoying this conversation we’re having. If you’re interested in the creative real estate market, bettering yourself, learning something new or getting coached, go to 1000Houses.com/freeconsult. Ron is offering a free consult from one of his course advisors. They will figure out where you’re at and where you might want to start. The man is up to here in the different courses he has taught. If there’s anything you need to know about any aspect of it, he has covered it. You’ve had enough time to cover it, Ron.
It’s not about my courses. This is a call to get acquainted and guide people who want to know how to get into the real estate business, what it takes and what to do next, including the good, the bad and the ugly, especially if they have questions about if this stuff works. It’s a hot market. Will it work here? Will it work for me now?” They need to go over all of the issues that are going around in their brain. Can you imagine how many things you used to think were a reality that now you laugh at?
This is a conference call to get you acquainted with what you need to do to get into the business. Nothing is going to be sold on this call. This is a coaching call for you to help you get started if you have big questions about that. All it takes is an application. We’ll get back to you. We’ll set up a time. It will be about a 30-minute consultation.
Go to 1000Houses.com/freeconsult if you want to get your hands on that application. We’re talking about all these limiting beliefs and that’s the problem of a newbie. They have either misinformation or a limiting belief system. “Who’s going to loan me money?” I have news for you. It’s not about you. It’s about the deal.
You don’t need your money and credit. We have trouble making the people understand how that’s the case. I bought over 3,000 houses. I quit counting many years ago. I don’t know how many. I don’t even care anymore. I don’t use my money or credit and I never have. If I bought that many houses and I got hundreds of thousands of students all over North America, maybe there’s something to this no money and no credit stuff that you ought to investigate.
That’s the way you should be buying properties, including the one you live in. I want people to go out and buy beautiful homes and neighborhoods and pick one to live in, no guaranteed debt, nothing on the credit report, no 20% down and no bank to qualify for. I often tell people, “I hope your credit score is minus 680 and then you won’t be tempted to go apply for a loan.Change your thinking about real estate, and then change your thinking about what they're worthy of. Click To Tweet
Buying with other people’s money and buying with non-recourse and collateral-only money or non-guaranteed money is a huge piece of mind. It took me a long time to get my arms around that it didn’t take money to make money. If it took money to make money, nobody I know in this business would be in this business because none of them had any money. When you don’t have money, what happens? You got to trade your time and expertise.
In the world we live in, it has never been easier to buy houses. We’re so systemized and automated. There isn’t much for us to do except make decisions. Everything is done for you. We have VAs to make calls, a company outside that takes calls and a CRM system that runs your whole business for you. There’s not a lot for you to do. You and I go back to the days when we didn’t have the internet. I remember when I used to run classified ads in the newspaper which costs me $850 a month.
I like that better though. I could wake up at 8:00 in the morning and by noon, no matter what day it was, I’d have a perfectly good deal. There was no one out there. If you screwed up, you got two deals and you didn’t know how you were going to pay for them both.
The internet changed everything for sure. It’s all automated.
People say, “It’s a hot market. How are you finding the deals?” I’m on a record pace in 2022. It’s the end of the first quarter. We’ve already done 50 transactions. I’m used to doing about 100 transactions a year. That’s my comfort zone. I stay there because my office and infrastructure can handle it. I have enough private money to handle it. It all fits right there for me. That’s where I like it. I’m sure there’s someone out there doing 500 a minute but I like my 100 houses.
It looks like in 2022, we may go over that. I don’t live where it’s good. I live where it’s not good. I live in the divorce and the disease. I live where there’s chaos. There will always be chaos. I don’t cause that chaos. I show up where it’s happening and that’s where I find my deals. With people like you learning how to pull this certain list and search certain criteria, I know how to show up in those spaces.
I’m going to guess that you work in areas where you would not want to live. Is that a good guess?
For a lot of the time, yes.
You’re working in the low end of the market, which I have for a long time. In terms of business, I like the other end. The low-end market is where you’re going to find the deals that you buy and sell. They’re most plentiful. They’re the people that can’t afford to fix them the most and have financial problems the most. They’re also the market where people can afford to buy a house, first-time, last-time home buyers. You’ve got both ends covered. I agree with that. I would teach the same thing if I were doing what you’re doing. I do what you do but I prefer to go in the medium price and above and do lease options. If I’m going to do the junker business, I want to be down below the medium price. That’s where the deals are.
My town used to have the most affordable houses in the world and it’s stressing that strategy. You have to do some other things. Maybe take a left turn into raw land, some subdividing or mobile homes and land. The mobile home and land are the last batch of affordable housing.
Mobile homes are hot now.
Go to 1000Houses.com/freeconsult. Get over there. If you’re considering going into this industry, you owe it to yourself to get these 30 minutes and see what Ron and his team have to say. His stuff has always been dead on. I’ll tell you a little secret. You’re either going to pay for an education or you’re going to pay for a street to slap you down to the other end of the city limits. It’s going to wear you out. You’re going to pay for a coach or the street. The street is ruthless.
You’re going to pay one way or another. I learned something way back. If you think education is expensive, try ignorance.
You said that to me in 1996 and that’s when I decided, “I’m pretty ignorant. I better get my checkbook out, hurry up and get some good information that I can use.” When you get the right people and you’re listening to someone who knows what they’re doing, that money goes out but it should come right back in if you’re not a lazy bum and get off the sofa. It’s not whether this stuff works or not. The question is, “Do you work? Are you willing to go to work?”
There are hundreds of thousands of people out there that prove Ron’s theories and my theories. None of us invented these theories. We might have invented some angles or caught onto them early but it’s there for everyone to use. You need a person like Ron LeGrand to show you decades and decades of experience of how to do things so things go your way and how not to do things. If you do them the wrong way, they’re going to go against you.
I started my 41st year at this in 2022. Where did it all go?We have to start with the education, but it's kind of worthless unless we do the implementation. Click To Tweet
You have had tons of students. I’ve never been as prolific as you were but I have my Tuesday night call and my stuff. I learn a lot from my students. Usually, if the teacher is paying attention and he has got any brains at all, he’ll be the smartest guy on the planet because he is getting feedback from everybody.
You and I both touch a lot of people but I can tell you one thing that I see over and over again. The only problem that we have to fix is between the right and left ear lobes. Most people come out with false beliefs and with dream stealers or trying to take their dreams away. They’re all coming with fear of some sort. One of the biggest things we have to fix is their fear. Sometimes when you ask them what they’re afraid of, they don’t even know. They’re just afraid to move forward.
The first thing we got to work on is to change their thinking about real estate and what they’re worthy of. How many people have you run across that don’t internally believe that they have the right to make a lot more money than they’ve ever made in the past? They internally do everything to fight against it. We push them and that first check is the biggest one. That’s the shut-up check. “Shut up. Go away. Leave me alone.” That’s one of the first ones we try to get people to do.
I had to get that first check for my wife. I call it hush money. I said, “I made more than you make in a year in one month.”
My first check, I spent it so fast. My wife didn’t even know I had it until I was over with paying the bills. That was 1982. I needed that check too.
It all started over with a washer and dryer.
It did for me.
You had to struggle to get a new washer and dryer. It made you mad.
How many times do you think I look back and wonder what would happen if I hadn’t gone to that person or missed Dallas on TV? My hero is J.R. Ewing that night. It was a big decision. I go to the seminar. I know it’s a scam but I didn’t watch Dallas on TV.
That one decision changed the whole course of your life.
Not just my life but hundreds of thousands of lives since because I didn’t watch J.R. that night. Everybody has that look-back moment, “What if I had done something differently?” Sometimes it’s such a small marginal decision that had a huge impact on your life and other people’s lives. I’m glad I went.
I hope you had a good time. Please go to 1000Houses.com/freeconsult. Get 30 minutes with Ron’s folks and see what the opportunities are out there. See how they can help you and what they have for you. Go with an open mind. Don’t go all boxed up or go there like a fool but with an open mind and listen.
It changed my life. I’ve been listening, working, practicing and studying Ron LeGrand since 1996 because it worked for me. I’m always fond of Ron because I walked into his seminar one man and I walked out a different man. I’ve been that different man ever since. I’ll never forget it. I know a lot of people that have the same story. Ron, is there anything you want to say to the folks before we wrap it up?
I can say one thing. First, we have to start with the education but it’s worthless unless we do the implementation. What we’re so good at is helping with the implementation. We have so many years of building systems for you. Without systems, you’re going to be a chaotic mess, trying to do everything. The hardest thing I learned was to get help. I didn’t think anybody could do it except me. I had to do everything myself.
My whole life was minutiae until I finally figured it out, putting out one fire right after the other. I learned there’s not one thing in my business that I can’t get somebody else to do for me. You know the same thing. How many years did it take us to learn that? I hope you will let other people do what they do best. Get out of way and let them do it. It costs pennies to do it. You got take focus on your whole business and not get caught up in the minutiae. You can’t be in minutiae all day and get anything great accomplished.
It’s embarrassing sometimes. People go, “Where did you get your VAs?” I’m like, “I don’t know where I got them.”
We got those for you. That isn’t a problem.
“Does your CRM do this?” “I’m not sure. I don’t know. I don’t ever use my CRM. My people use the CRM.”
Our VAs will handle that for you. It has never been easier.
Ron, it’s a pleasure. It is a new world out there. There’s systems software and plug and play. You just got to get with the people that have already done it. Don’t try to reinvent the wheel because it’s too big. I’ll see you in the next episode. Bye, Ron. Thanks a lot.
About Ron LeGrand
Master the art of buying and selling real estate without using your money or credit with help from Ron LeGrand, a real estate expert. Backed by many decades of experience, Ron has been teaching longer than most agents in the industry. As an added bonus, you learn nearly every detail from Ron himself!
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