A Year In Review With Bruce and Aaron Norris #620

Bruce Norris radio

Aaron Norris is joined this week by his dad and president of The Norris Group, Bruce Norris. Aaron said this was their opportunity to take a break from all the many things they have been working on this busy year. Therefore, this broadcast focused on the “year in review.”

Episode Highlights

  • What was their reason for establishing the Portal for their website?
  • Why did they choose to cover the four topics accessory dwelling units, short-term rentals, mobile home park investing, and adding square footage at Cashing In On A Boom?
  • With the introduction to the HyperLoop, what ramifications could this have on home values?
  • Was there anything from I Survived Real Estate 2018 he was surprised to discover?
  • What is unique about the city Truckee that makes it more unbelievable that 3D printed housing might become a new thing there?
  • What does Aaron see as becoming very popular in the coming year?
  • Where would 3D printed houses fit in the housing or manufacturing category?

Episode Notes

In September, the Norris Group had two big events: I Survived Real Estate and Cashing In On A Boom. For the latter, they added three new chapters and renovated a fourth. They have changed the model on how they are doing education. When they first started the portal, the concept was that they had to be experts at everything and personally done everything. However, so many things are changing, and they are not doing every single strategy. Therefore, they were not allowed to include it in the portal.

However, it went over very well and they were able to cover things never covered prior. Bruce said what was excellent about the concept was there was no way he was going to be an expert at everything anyway. You have people with great niches, and this is where they have concentrated. The fact they are part of the loop and team and willing to share what they know is a big advantage to anybody attached to the website.

In Cashing In On A Boom, they covered accessory dwelling units, short-term rentals, mobile home park investing, and adding square footage. People looked at the four together and wondered why they covered all four. It was fun to build throughout the day, and you learned why. Even for the mobile home park investing they wanted to have that conversation because of accessory dwelling units. In California, part of what you can do is manufactured homes with ADUs in the back. Bruce said the ADU is a new toy. There will be new things, kind of like short sales. There’s no reason to talk about them now, but that day will come. ADUs is a new toy. You don’t always have the opportunity to add new square footage in California and make a profit, but right now you do. This has probably been true for the last four years.

The thing about the website is that it is mobile. It is flexible, and now they have ability to update it. This does not just mean the old material like charts, but with any new concept they can add appropriate information within months. They plan on doing follow-up radio shows to focus on the timing pieces. Two shows ago, they had Senator Wieckowski, who was very instrumental in developing the ADU regulations. There has been two rounds, and in the radio show he said there was going to be a third. Next year, they may have to completely redo the chapter, and it is fun to have that flexibility and find out what is really going on in the streets.

As part of the research, Bruce and Aaron are planning on visiting cities in Florida to see if they have contemplated some of those same concepts. They have a lot of seniors and possibly the ability to live with another family member, although not necessarily in the same house. This is an interesting thing they might could suggest that could fill a need they haven’t thought of or reacted to yet.

Aaron is fascinated with ADUs for a few reasons, seniors being one. The concept of a senior downsizing in their own backyard and renting out the front helps to supplement their income. It’s a big deal and the only thing we have yet to see if it really takes off. If seniors want to stay put, this is a viable option. It will just be interesting to see if it sticks. When it comes to rent control, it’s hard to keep up because every city has their own rules and regulations. Some charge upwards of 5 figures, but they are not supposed to do that. This has been the frustration with the state as this was not the point. We need affordable, and they are putting up roadblocks. They need revenue, and they see this as a new toy. It is a lot like when the REOs came about and they had vacant damaged homes. They would charge $1,000 a day, or $100 a day per fine. If you had a house with 5 taken away, it could be $1,000 a day. It was nuts.

Regarding the senior living in their backyard, sometimes necessity is the mother of invention. One of the chapters in the new book talks about senior readiness to retire in their money situation. There are a lot of people who live on social security as a major part. If you had a home in Riverside that rented for $2,200 and could build an ADU unit that cost you $500 a month for the construction, you just doubled your income. This is not insignificant. If the state is going to push it and really grease the wheel, it’s coming from them. If they consider this as somehow in the world of green, if it becomes the new toy that backing is really important. For urban planners, you are utilizing the same infrastructure and not expanding suburbia. You are building more density, which hopefully more people will use. Mass transit builds that density where it does different things.

Aaron watched a lot of YouTube videos on urban planning. At one point, he thought he wanted to get a degree in that. Having lived in New York and LA, he was fascinated by this. These are different ways they have dealt with lots of people in one area. New York has had that system underground for cars forever. Aaron told everyone if you are ever in New York City, go to the transportation museum in Brooklyn. Here, you can walk through subway cars. He always suggests that to anyone who takes their family out there since the kids love it and the parents get to walk through cars with wicker benches and ceiling fans. It is really hard to imagine being underground in New York City in the dead of a humid summer with the ceiling fan being your only relief.

Aaron asked if there was anything in Cashing In On A Boom on vacation rentals that peaked his curiosity and interested him. Bruce said the thing he was most excited about was the value of the day for the audience. Part of it was they were thinking he was going to be giving it. His opening statement was that there was an auction chapter in the training, and he earned the right to teach this by attending many auctions. At the back of the room, he could watch flaws to where he could detect advertising and see what was going to be a wonderful auction.

One time, they even videotaped a small auction. He made $500 grand from this auction because he bought every house. The auctioneer didn’t know, and Bruce had a right to teach that. The people who got up were the right people to teach that day. Some realized by the end of the day how good that day was. Bruce could not have taught that day. He could have pretended some of it, but this is not what we want to do. We want to give really good value, and Bruce was excited just listening to these people and seeing how they changed their lives. Real estate has a chance to do this, and each of them did it in a different way.

Aaron said he loves this business because you see people come into it from so many different angles. They end up falling into these niches they end up owning and loving, and they make it work for the personality types and skillsets. Aaron feels like it has given them permission to expand what they do to be even more meaningful. He is definitely excited about the year ahead, and he is definitely not done yet. Bruce said he and Aaron have helped peaked interest in people of what they will do next as Cashing In On A Boom was a very valuable day.

Only a few weeks later, they had I Survived Real Estate. Sometimes Aaron has gotten follow-up emails asking why Bruce didn’t cover certain topics, but people don’t understand it is no their intent to debate people on the show or make them uncomfortable. They just want information for their own research or to get their expert opinion. Bruce said what has been really great about the years they have done this is since they sometimes have repetitive people on the panel, they trust each other. You can have disagreement without combativeness. There is not someone trying to win. Sometimes it felt like that, but now it does not. You can have difference of opinion with very intelligent people, and sometimes they talk about the solutions. This is an exciting thing.

Sometimes there are topics he does not get to cover. He studied so hard for that night, as did Aaron, and at 7 minutes left he realized he would not be able to cover everything. He wrapped it up the best he could by asking everybody what they thought was the most important and what most concerned them. This was a disappointing thing for him because there were topics he wanted to deal with, and he never got the chance to do it. It is like doing a radio interview. You have a sequence of questions that change instantly with the first answer. It’s best to listen because you then don’t have a staccato interview. You can always tell when you are being interviewed by somebody who is just reading off a list.

Aaron loved the panel this year, and it was the most diverse set of topics they have covered. There was a huge technology angle. Sean O’Toole really shined this year talking about what he liked to discuss. It was both fun and mind boggling since he knew what he was going to be discussing. He went on the web and looked at some of it, and what is about to occur is astonishing. He sent Aaron a link where hotel rooms can leave the hotel and transport you around. You can reconnect at the end of the day. It’s happening faster than a lot of people think.

With 5G technology coming, it is solving the connectivity issue. It makes it more viable. Innovation is definitely outpacing regulation, which is nerve wracking at times. Bruce asked if the 5G is a race between nations, which Aaron said it is. He does not enjoy politics and tries not to watch the news as you just have a lot of talking heads yelling at each other. It is so political, no matter what channel you watch. Trump had said something about wanting to federally fund 5G infrastructure. Other countries are funding things like this and it’s a race, as was discussed at I Survived Real Estate. We don’t want to be the last of the party. There are countries going all in, and Aaron is fascinated by Dubai, the infrastructure, and what they have done in 30 years to diversify their assets so they can survive when oil is no longer their lead income generator. They are doing Hyperloop investing and so much infrastructure that it is fascinating to watch. He would not want to live there though.

When you think about the concept of HyperLoop and talk about the ramifications of that, there’s two sides. On one side, you can live in Riverside and work in San Francisco. But on the other, what will that do to the value of San Francisco real estate? Sean O’Toole mentioned the road on the way to Vegas and how once upon a time towns were really reliant on those people who had to stop who only had 10-15 miles a gallon in clunkers. Once the cars started getting more miles per gallon, those towns disappeared. What happens to the cities in between Vegas and LA? You don’t want to be in a city where they no longer need to stop. If you are on the outskirts and thinking you want to buy land near Sizzix, it may not be such a good idea. Once upon a time, you had lots that did nothing but hold the earth together.

Aaron has become not only fascinated with the technology, but also its application to all these different things. He also gets involved in the city’s brain trust. They are looking at the future and saying what they plan to do. You try to think about how we can assist that journey and whether there is a benefit to becoming a partner to this concept. You think of this when going into Florida and see what they are dreaming.

Aaron asked Bruce if there was anything from I Survived Real Estate he was surprised to discover. They mentioned the 3D printed housing and how Sean basically has one on order. This is more meaningful than one might think because he lives in Truckee. This city has the most ridiculous roof pack load requirement. It has to withstand 20 feet of snow, and the code has to measure to meet up to 100-year snowstorms and 100 year earthquakes. How you 3D print a house that matches that is amazing. You will never have a worse spec in the world, and soon someone will be able to 3D print a house. This is a game changer.

When Bruce went to a show a couple years ago, it was all over his head. He was trying to introduce Aaron’s brain to it since he thought he might get it. He is all in now and is fascinated by it. He thinks 2019 will be the year we start hearing about it. He thinks modular will get very popular this year. Amazon invested in the modular homebuilder in Fontana, and it will be a necessity and land at a unique opportune time if they do not have a major downturn where none of this makes sense or financing gets messed up.

In a way, this next downturn might facilitate some of that. When you have quantitative easing, which is the way we solved what would have been the Great Depression #2, it was prevented with this and zero interest rates. What happened was assets exploded, and there is a social cost for that. There were those who had assets and those who did not. Therefore, the gap became bigger in the last 8 years. The people who had things became very wealthy, while those who did not went the other way. Their wages did not keep up, nor did their assets, and they did not have anything. Now you have this social discord that is going on too. You need to have a little bit of swing to see how you can help the people without things, like the homeless. You can’t just ignore this anymore. If the technology can say you can effectively do this and give somebody a chance to get off the street, then this is a very valuable thing to consider. If 3D printing can facilitate this, then that would be very exciting.

Aaron said the few politicians he has talked to said 3D printed houses is not on their radar. Bruce understood this since it is hard to conceive of it. It’s so secretive right now. We have tried to get this 3D printer, and they are so under wraps. They are having conversations with the Gates Foundation; so Aaron thinks it will explode but nobody wants to talk about it. Aaron said when he asks them, he wonders how they are going to fit within the code. He also wondered where it fits, whether it is manufactured housing or stick built on a permanent foundation. He wondered where this will fall, especially when it comes to size. For example, tiny houses are regulated under the DMV. It sounds like they want affordable housing so bad that they may loosen up regulations and say you can have a few tiny houses within your backyard. Aaron wondered how it would be regulated if the 3D printed houses fit and if you can change the thickness of walls to fit earthquake codes with just the push of a button. It will be really fascinating to watch and see if it has hurdles or if it goes through faster than anything ever has.

If the political will is there, that is an interesting thing. There are certain loans that can do green improvements to homes under the HERO program. Here, the financing comes superior to a first trust deed. This is what they want and why they thought of it. Aaron is involved with a public relations company that helps out one of the major PACE funders, and he was fighting Aaron on it. Aaron told him he did not have to sell him on it since he knew what he was trying to sell and thought it was terrible. He told him if it’s such a great product and you believe in it so much, go into second position.

They next went on to talk about iBuyers and lenders. A lot of these new concepts have not been tested by a downturn or even a blip. It will be really interesting to see the role of realtors. He has a good realtor friend who is aching for this downturn and specifically said that up until recently you just had to list the property, and it sold. It did not take any talent. All of a sudden, realtors get to prove their worth. This was nice to hear, and this was why he was itching for a downturn.

A transition is about to occur on borrowed time regarding what we can buy on discount: marginal locations and properties. Everything has been fined well into the last year of the boom. When you are at the end of that boom, all of those things start to matter. Bruce himself has a home on a dirt road that is about to be completed. He is not as comfortable as he was a year ago since he had sold four of them on dirt roads in the area, and it was not a problem. However, the market has changed somewhat. He has a home that has still not closed that was built and finished four months ago. It was pending, fell out of escrow, and went pending again. This did not really happen a year and two years ago. Investors have to be careful about the type of inventory they take on, and they have to take a look at the rental portfolio they have.

In the chapter that deals with rentals, there are three questions to ask: Why did you buy this? Has it done its job? Most buy rentals because it escalates in price. California usually does not provide tons of cashflow, but it provides escalation of price. Finally, would you intentionally sit and hold this for the next 8 years if you think the price was going nowhere?

If you have not seen I Survived Real Estate 2018 yet, you can watch it on both YouTube and Amazon. It is completely free if you are a member on Amazon, or you can check out www.isurvivedrelastate.com. All the content from Cashing In On A Boom was recorded and is part of the portal, and it is $350. In the next segment, they will talk about the upcoming timing report and his new talk that will launch in December. Cashing In On A Boom is part of the subscription. If you want to save money on the upcoming market timing report, you can save a couple hundred bucks on that..

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