Bruce is joined by Derek Harms, NSDREI President- Part 2



A Board Member since 2014, and now the president of the board, Derek brings a multi-faceted real estate skill set to the organization.   As a realtor, he is a leader in the San Diego market with Compass Realty. His savvy negotiations and innovative marketing strategies join uncompromising integrity as the emblem of Derek’s service.

Having over 10 years of experience and a young and fresh perspective on the real estate world has helped Derek stay ahead of the technological curve. Employing the most cutting-edge marketing tools and techniques available, he has consistently reached the most eyes possible with eye-popping material.

Derek, being an active investor himself, can view the market from an analytical perspective to ultimately solidify his clients’ bottom line. Real estate investment is more than an income stream for Derek, it’s a lifestyle. He is an active residential redevelopment specialist in many different San Diego neighborhoods. Adding to the successful single-family home “flipping” business in Southern California, Derek owns numerous properties throughout the United States.



Episode Notes:


Narrator  This is The Norris Group’s real estate investor radio show, the award-winning show dedicated to thought leaders shaping the real estate industry and local experts revealing their insider tips to succeed in an ever-changing real estate market hosted by author, investor and hard money lender, Bruce Norris. The Norris Group proudly presents our 14th annual award-winning event I Survived Real Estate industry experts join Bruce and Aaron Norris to discuss evolving industry trends, real estate bubbles, inflation and opportunities emerging for real estate professionals. All proceeds from the event benefit Make-a-wish and St. Jude Children’s Research Hospital.

Bruce Norris  Thanks for joining us. My name is Bruce Norris and today once again, our special guest is Derek Harms. Derek is the president of NSDREI, Derek brings multifaceted real estate skill set to the organization. As a realtor he is a leader in the San Diego market with Compass Realty. Savvy negotiations and innovative market strategies join uncompromising integrity as the emblem of Derek’s service. Having over 10 years of experience and a young and fresh perspective on real estate world health, Derek stay ahead of the technology curve, employing the most cutting edge marketing tools and techniques available he has consistently reached the most eyes possible with eye popping material. Derek, being an active investor himself can view the market from an analytical perspective to ultimately solidify his clients bottom line. Real estate investment is more than an income stream for Derek it’s a lifestyle. He is an active residential redevelopment specialist in many different San Diego neighborhoods, adding to his successful single family home flipping business in Southern California. Derek owns numerous properties throughout the United States. I looked at some stats before our conversation. So, in San Diego, the the average listing and selling for about 105% of ask. I’ve never seen that.

Derek Harms  Yep. And it’s funny, I looked at very same stats, and it’s down a little bit from what it was like late spring. But it’s crazy how that, that is the case. And I wanted to on the show, I wanted to give an actual update of the real feel, you know how like, the weather apps will tell you like the will tell you the temperature but then they’ll tell you the real feel? Well, I think, I think the real feel right now in San Diego is maybe the data will still, will still show that but what we’re feeling is a homes are not selling the first weekend anymore. We’re not seeing this, this glut of offers, you know, I had 22 or 27 offers on a flip that we did back in May. I mean that was just it was just bananas. Like it’s just you know, people are offering of theirs, their firstborn children along with their offer. And it was it was kind of gross. But so we’re not seeing that right now we’re seeing home sit a little longer. We’re seeing instead of five, six offers maybe one or two, and it just feels like a little bit more of a normal, I’ll say an approach and we’re not having this crazy frenzy that we had, you know, even three months ago.

Bruce Norris  Yeah, that was the weird when they when you said that. I I kicked in the word frenzy in my head. Well, we’re past the frenzy stage, which is, which is healthier for the longevity of a market because the prices we think California probably went up over 30% in a 12 month period, which I think it was making up for lost time you had all these really good charts and almost no reaction you and I have talked during that time stretch sometimes where you’re going to go on Well, I’ve never seen a better set of charts produce less results. And then the Coronavirus hit, and I don’t I did not expect what happened after that to be honest with you. I didn’t see real estate becoming the hottest commodity and people. You know one of the things as a realtor, about 45% of the listings were pulled during the initial, let’s say three months of the Coronavirus and I don’t know what happened to those listings. But by and large you still have a month supply or less everywhere.

Derek Harms  Yeah, and it’s the same I mean I have the data pulled from just came out a couple of days ago. So, San Diego right now inventory as of two days ago. We have 210,017 detached single family houses on the market. So ,call it 210 detached houses with land that’s nothing and then we have less than 1000 we have 950 condos or attached properties on the market right now. So, combined about 3000 and if you average those two, were down Like 40-45% year over year in terms of inventory from August 2020. That’s but, that’s crazy. It’s bonkers. And, you know, if you think of a San Diego, you know, county with 3.3 million people, probably 21 homes with land on the market. And seems like, you know, you have, historically the fall and holidays are times of lower inventory as well, it seems like this is going to continue for the rest of Q4. And you know, what does that do to pricing? As long as rates stay low. I mean, you tell me.

Bruce Norris  Well, you know, what’s interesting is the, the new home building that hasn’t happened over the last decade, so California usually goes from, okay, 50 or 60,000 homes at a bottom, and graduates up to 150,000 over progression of successful real estate years. Well, we’re still at 50,000. So, you start adding up, okay, you have a 150 year and it’s still a 50 year. And last year, maybe it was what a 120, and you had a 50 year you start adding up all those numbers, you start saying, Wow, we normally have 500,000 more new homes in the decade than we have. And what, so what’s occurring is you get this crazy demand that has no place else to go, but on existing inventory. And so for the fourth time in history, existing inventory is now priced more per square foot than new.

Derek Harms  That’s, that’s as crazy.

Bruce Norris  Well, but, what, but it lends credence to what everything you said, when you own a rental, you own a basket of commodities, and also a basket of labor. So, everything you’re saying when you own a rental and you’re having to search for the dishwasher, and the guy that installs it. If you own something, it’s going up in value as we speak.

Joey Romero  You talked about real feel. Can you talk about the health of the club, you know, people go to investor clubs for you know, mentorship for, hey, what’s working out there? networking, you know, find deals, things like that. How is the last year affected the club? And where’s it at now?

Derek Harms  Great question. And so, let’s flashback to March 2020, we have a national stay at home order so we obviously could not have a large group meet in person again. So, we shifted strictly to a zoom platform, it took us a couple months, we took a couple of months off while we pivoted and figured out what the heck we were going to do. But what I will say is that the zoom platform opened our eyes to the fact that we can get national talent that is totally comfortable hopping on a zoom call in their living room or in their home office and hopping on with us for an hour and a half. That we just simply cannot get to come to Oceanside the third Tuesday of every month from 6pm to 10pm. I mean that that’s very she been so gracious and helping us and doing a stop for a very long time. And we’re very grateful for you and others who are willing to do that. But it’s really hard to get, to get consistent, high level individuals to do that. So, what we’ve done now is actually in the timing is pretty is pretty impeccable. I’m not sure when this will air but it probably be afterwards. But we just now are getting back to our first in person meeting after since those it’s a lockdown back last year. And what we’re doing now as we’re shifting to a little bit different approach we’re now doing a hybrid. So, we’re going quarterly in person events. And these events now are structured as more of like a network facilitation. So, we’re going to have four pros and what we call pros corners. Ward Hanigan, Christy Cirtwel, well which I know you guys know, Jay Sherman, and Bruce May with Trillion Capital these are all names you guys probably know under one of them so um, you know and the whole point is to maybe more for like a party slash networking event and I’m going to do some things on the mic to get people to interact and, and really generate that, that networking component real estate is so important about shaking someone’s hand and looking at, looking them in the eye and getting a feel for who they are as human and if you really want to do business with these people and then, then we’ll go to court or two months virtual and this way we can get people we normally wouldn’t and then go back to a quarterly in person event. And none of this is set in stone. We’re trying to be nimble again that term that we mentioned earlier and we think this is a really good model moving forward for the club and we’ve gotten a lot of really good feedback but I’ll know for sure after next Tuesday when we meet at Stone Brewery in Escondido. That’s been one of the, one of the hardest things is to bring value for whatever the membership is, you know cost them right for before it was like okay, every month I can go meet somebody new I can go to here what people that are successful in doing and so as the you know, for us on, on our end, it’s like how do we bring that Norris Group, you know, timing event, you know, how do we bring that value to the education space. And so yeah, I think this is a brilliant idea on your part. Thank you and I cannot take full credit for it. You know, we have a large board and everyone’s contributed. So, you know, I’m just one one piece of it. But yes, on behalf of the board, thank you for saying that.

Bruce Norris  Yeah, I know you guys have a really unselfish club of very good people. When you speak. It’s very interesting. You can tell why, why the club exists. You know, and very early on in my speaking career, I got invited to a TV show, and then to take, to speak at this guy’s club. And when I got there, there was an audience of disenchanted people. Because this guy, this guy had, apparently misuse their investment money and he didn’t show up at the meeting. So, it was about, let’s say that he was supposed to start at seven, five after seven. So, I mean, I’m a newbie, to speaking to real estate investors, but I understood the business. So, I said, hey, what let’s, let’s just go and I’ll teach. And so I taught for an hour and a half, and they were all happy until that guy showed up. And then it was ugly on Wow, what happened. So, you know, the cost of going to a club is so minute compared to the potential value with integrity that the people that are there, that’s just a no brainer to me.

Derek Harms  And so true, and thank you for saying that. And you know, the club has been around for a long time and in San Diego, we have the reputation of with no disrespect to the other clubs, because there’s really good ones, but of being the best. And I think that is because we really do focus on, on the people and education and the networking, the growth and essentially for taking action in real estate, which real estate investing, which will essentially help, help grow your wealth and give you the freedom that, that we all want and see. And when you meet the board members, when you meet everyone involved, like it truly is about the community that we serve. And it’s easy to just say this this stuff but you know, as you mentioned over the years, people who come back, they realize this is really, this is really what we’re all about. And so, we’re really happy to do it. And I’ll tell you what the coolest thing is getting an email or a phone call or a text from someone who came to the meeting. And either you inspired them to get started in real estate, or you introduced them to someone that they did a deal with or something like that, that comes back. Like that’s rewarding. That’s why we do this. And that keeps you going because you got to remember, these clubs are all volunteer positions, you know, we all volunteer our time and energy. And we all we all love doing it. And it’s really for that reason, right there.

Bruce Norris  Yeah, well, you know, it’s a lot of, a lot of reasons why people end up end up teaching Ward Hannigan, I mean he he’s so successful. What’s he doing teaching? Well, he loves he loves teaching somebody that changes their lives. I mean, that’s the whole deal. You know, and that’s nothing more exciting than getting a note or a message going ‘You know, because of you my life changed’, that’s no better feeling so Dabba club that has the right intent somebody that’s a speaker can smell that so quickly. So, congratulations that’s just a great club you guys have.

Derek Harms  Well thank you and thanks again for both of you, you know Bruce, you, and Aaron and really the whole Norris Group being being a part of it over you know, almost two decades now. So it’s, we’re almost there. So thank you for your support.

Joey Romero  Speaking of teaching, Derek you know, one of the things that you did with us is cashing in on a boom in your, in your hour that you little bit over an hour they talked about. You were really talking about having a relationship and dealing with city departments. That’s one of the things that has been a challenge for us in Florida is how is the Coronavirus effective dealing with city departments and government in San Diego

Derek Harms  It’s been like pulling teeth or scratching nails on a chalkboard or any unpleasant excruciating experience that you can plug in, plug it in. It’s been really difficult and in all the city buildings has shut down some, some certain incorporated cities have now been backed up to the public where you can actually go in but it for a long time. You couldn’t and you had to rely on electronic submission or you had to have a runner go down they had one person outside who would take your plans or whatever it was and it was very, very difficult to, to get any answers and you know the county was very the city in this case city San Diego was very disjointed early on and they had just moved buildings and locations and, and files were getting lost and it was, it was very difficult for a long time and it still is and you know this, this component of real estate investing I wish would somehow get cleaned up and streamline it would just allow so many more investors to create that much more inventory quicker. But it’s really backlog and It’s, uh, you know, I wish I had, I wish I had the answer, but I don’t. And so yes, the short answer is it’s been, it’s been pretty difficult. But I will add one more component to that, too, is the utility companies. Well, SDGE here in San Diego has a monopoly on the Energy Department here. And it’s, it’s anytime you need anything from them. If you want a meter upgrade, you want a panel upgrade, God forbid, you want to, want to move your meter from one part of the house to another, because you’re reconfiguring well jump in line and hope that you get a response in 10 or 12 weeks. And if you do, well, then it’s going to be another three to six after that before you get, you know, a plan or whatever. And it’s just like really? like, that just doesn’t seem that hard. Like what what is it? Like, I’ll even help all like submit plans, whatever it is, and but you’re hamstrung, right, because you can’t sell a house without that electrical meter without a gas meter, whatever it is. So, that part is pretty difficult as well. I know a lot of people listening right now would agree.

Bruce Norris  Yeah, cities, cities haven’t been fun to deal with in California for a long time. They didn’t need a Coronavirus to make it even, you know, five times worse, that’s for sure.

Derek Harms  Absolutely. And I wish that someone smarter than me would would come along and create the solution to make this easier.

Joey Romero  Now do you, do you have a lot of rentals and how is the rental market going.

Derek Harms  I do have a portfolio of rentals and the rental market has been extremely strong. And I will say I pulled a lot of property managers here in town recently, and I was getting extremely high collection rates, you know, 99%. And not many people were falling behind. There were a few here and there, depending on the neighborhood and the location. But for the most part, collection rates have been high rental inventory is low rental pricing has gone up. And you know, in San Diego, it doesn’t have too many new units being built. And I will say we do have some larger apartment buildings coming in. And a lot of those are A class properties. So you know, if your rentals are, are not a let’s say A your, you know, B properties or even C’s, whatever, you really don’t have much competition. So, of new the new stock coming online, so…

Bruce Norris  Right.

Derek Harms  You know, so it’s a it’s been really strong, and it’s feels like it’s only going to get better in the near in the near term.

Bruce Norris  But what’s really interesting about California as last 18 months, is you’ve lost a lot of migrating adults. And it has had no impact on price increases. Or vacancies. If you’re just loaded with everybody wants to house whether they want to rent it or own it. So, that’s a that’s an interesting outcome for somebody that looked at migration as a significant factor. And you look at that and go Wow, look at that. That’s a that’s really interesting to me. So, some of it. Some of you look at and go Okay, that’s a new one. I I have to think about why that’s true. Florida’s getting a lots of migrating adults. So, the fact that it’s doing really well, that seems very congruent to what I know. But when you’re losing a bunch and nothing happens, negative that’s, that was interesting.

Derek Harms  It is and I think, you know, before you purchase a property here in San Diego that you’re going to plan on keep for rental, which obviously you go through and underwriting and you kind of try to take a 30,000 foot level like what does the demand look like this long term. And if you look at San Diego, we have one of the largest biotech industries in the country between us and Boston and Berkeley were the three hubs in the country. Military is one of the largest in the country. We have a lot of tech now that’s coming in San Diego, tons of hospitals and nursing industry and we have a huge platform for that so and then you look at the geographic sex sector of San Diego while we’ve got Camp Pendleton to the north, we have mountains to the east and Mexico to the south and the Pacific Ocean to the west. So, there’s no real extra space to build. So, what does that do? It means you got to get more dense and you know, so I think if you’re able to get in front of quality assets here in San Diego, and be able to figure out a way to dig in and hang on long term, it’s gonna pay dividends for many years to come and especially with race where they’re out right now, Bruce.

Bruce Norris  Yeah, I was gonna say the only thing that’s on sale right now is interest.

Derek Harms  I, absolutely. So, get this I close on Monday on a refinance of a, it was a duplex that I bought and and turned into to a triplex out of the unit, and…

Bruce Norris  Not Bakersfield.

Derek Harms  No, no, it’s a suburb called North Park. So really urban hip region. And you know, I’m able to do a maybe I’ll do a cash out refinance 30 year loans at 3.25%. rate and non owner occupied and it’s like, Are you kidding me? That’s essentially free money. If you factor inflation…

Bruce Norris  That’s right.

Derek Harms  Why would you not do that? How is this not going to create wealth long term? And why not more people want to do this?

Bruce Norris  Yeah. Now that’s a, now that wasn’t that was Fannie Mae type loan or not?

Derek Harms  Correct.

Bruce Norris  Oh it was Fannie Mae. Okay, yeah. All right.

Joey Romero  Is there a lot of people in the club doing ADU’s and talking about density?

Derek Harms  Yeah, absolutely. So you know, the the popularity has grown lately, and there now are a lot of ADU specialists that are in San Diego. And you know, it’s a it definitely is, is a hot button. And there’s been some some density changes in San Diego’s, in San Diego’s code. And it’s only really actually in the zoning that have really opened up some some doors for investors. And you have to it’s a foreign language, and you have to know how to how to decipher it. And there are some really cool deals out there if you know how to look. So, I encourage anyone who’s interested in this is now getting really familiar with your local zoning laws and see where these, these, these density bonuses and, and helpful little things that are written in the code to inspire developers to add density, they’re in.

Bruce Norris  Now, I know Aaron is really much more of an expert on the ADU’s. Is there still a process that’s more state control than locality? Like a San Diego control? As far as if somebody wants to do an ADU, it has to be approved in a certain timeframe? Or do you get hung up on all the local stuff as well?

Derek Harms  So, my experience of ADU’s we’ve done quite a few now is that the certain timeframe means nothing, and the city reviewers will take their sweet time. And, you know, I think it’ll take I had one take three months, and I’ve had one take almost a year. And, and it’s a there was no rhyme or reason for the more difficult transit and property, like, you know, in easement issues, and etc. Like I thought that one’s gonna take forever, it’s like three months, and then I had a very slam dunk, straightforward one take almost a year. And so you just, you just don’t know, and I know that there’s been some state laws in terms of timing of how fast these things are supposed to go but everyone I talked to you, it’s just kind of it is what it is, and you know, you hope it gets pushed to the pile quicker.

Bruce Norris  Last question on ADUs, do you feel that when you put an ad you behind the existing structure, it changes who wants to rent the front structure?

Derek Harms  I think the answer is it depends. And it’s how you carve up the locks and how you make these homes feel. And I’m a huge advocate of spending the extra money and carving up your lots and make both feel extremely private. And and not like you’re connected to any in any sense determining fencing and vegetation and parking and whatever mailboxes and walkways and you know, lighting is like, you really want to make these fields like separate structures, if that’s your plan, right is to rent them out to separate entities and tenants and etc. And I think you can, you can do that too. And the more you do that, I think it then opens up your, your, your tenant pool, because more people will be interested in doing that rather than feeling like you’re staring into, you know, some other person’s master bedroom.

Bruce Norris  Right.

Derek Harms  No one wants to do that.

Bruce Norris  No.

Joey Romero  We have an investor in LA, who actually got asked, hey, you know, he’s like, Hey, I’m going to put an ADU. And you show them like what they’re gonna put in there like can I move into that instead? They’re, that investor just does a really good job with matching the high quality new ADU with the finishes and and things that are in the in the in the first house? Yeah,

Derek Harms  Absolutely. And you know, and that was one of the things I wanted to mention it as I you know, I talked to a lot of guys in town about Alright, what are you doing? What’s working? what’s not working? Like? Are you spending extra on renovations right now? Are you just slapping together and putting on the market? And I’ll say, overwhelmingly, the response has been no, we’re actually spending extra time right now in creating a space that people really want to live in or reconfiguring or putting extra money into better materials. And we really are trying to create a product that, that really, most people would want to move into. And, you know, I think there was a time in early spring this year it didn’t matter what you did you throw it on the market you were gonna sell it with multiple offers in the first weekend but going back to the ADUs and just with our renovations in general right now I think everyone’s doing a little higher quality that you know, the big operators are just doing higher quality and you’re getting, getting paid handsomely for it.

Joey Romero  So, one of the things that Aaron is talking about dealing with one of his new rentals in Florida because of you know, the, the industries that you talked about that are in San Diego with, with tech and with hospitals have you dealt in or do you know anybody that’s doing like I shared model where they’re doing, you know, renting the rooms instead of the whole house?

Derek Harms  So, the only person I know that does that is Kristi Cirtwil, and she doesn’t do it in San Diego. A matter of fact, she will be out our then next week. And so I’m looking forward to seeing how that’s going with her. I don’t know anyone in San Diego who does room by room. And I know there are some guys out by San Diego State area that that have models like that. But I haven’t really got the details on it and been too involved. I tried buying one one duplex by San Diego State a while ago and I was going to try it if I got the property, but I didn’t end up getting it. So I don’t have too much good data for you on that.

Bruce Norris  Think you can get a duplex in Barstow for under 400.

Derek Harms  I look back at the values now. Man if I would have held it you know selling…

Joey Romero  Hey Yucca Valley is on fire right now.

Bruce Norris  We just had somebody say that. Yeah, they, they had a bidding war for something that was 500 square feet. And I think it was in one of those areas. And it’s all for $400 plus a foot in a bidding war. And it was 500 square feet. Yeah.

Derek Harms  I remember when 400 bucks a square foot used to be a thing in San Diego. And it’s a, it’s really not anymore. It’s like it depends you go further east and maybe some some really far northeast counties or southeast counties. But it’s you know that, that number is you don’t find too often anymore.

Bruce Norris  Yeah, that’s, you know, when you’re in Florida, we’re building, you know, you’re building new homes for say, 300 grand. You’re just going, Wow.

Derek Harms  Yeah.

Bruce Norris  It’s just, it’s a different world in a way so…

Derek Harms  It is I’m actually going to be in in Pinellas County in two weeks, and my mom is out there. So, I’m going out there and I got my eyes on on a few areas. So, I’m gonna take a look and you know, when you start to look at some of the returns out there compared to what you’re getting here, it’s like you flipped one house here and you take that and you get to go buy something in Florida, it’s, you know, it’s not a bad option.

Bruce Norris  No, no, we’ve certainly encouraged did that with my own stuff. So anyway. Well, Derek, I thank you for joining us. And it’s always making you feel valuable part of your club and allowing us to educate the people that have attended your clubs. We appreciate that very much.

Derek Harms  Bruce, on behalf of myself and the board. And literally every one of our members and guests that as we listen to you speak at our club for more than a decade, we say thank you. We’re really grateful for what you bring to the table. And I know everyone listening to your podcast and just who knows you in general, we really appreciate your reports and everything you do and for so long, it means so much to so many people. And I really hope that you take a minute to actually digest the fact that like, it really is important and we really are also grateful. So thank you very much.

Bruce Norris  Thank you. Thanks so much. All right. Have yourself a good rest of the week.

Derek Harms  Well, thanks, guys. Joey thanks for talking to you guys. We’ll talk later.

Narrator  See for event details information on all our generous sponsors and to connect with our speakers. For more information on hard money, loans and upcoming events with The Norris Group, check out For information on passive investing with trust deeds, visit

Aaron Norris  The Norris Group originates and services loans in California and Florida under California DRE License 01219911, Florida Mortgage Lender License 1577, and NMLS License 1623669.  For more information on hard money lending, go and click the Hard Money tab.

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