I Survived Real Estate 2020 National and Commercial Panel Part 3


The Norris Group proudly presents its 13th annual, award-winning black-tie event, “I Survived Real Estate”. Industry experts join Bruce and Aaron Norris to discuss perplexing industry trends, head-scratching legislation, and opportunities emerging for real estate professionals headed into 2021. All proceeds from the event benefit Make-A-Wish and St. Jude Children’s Research Hospital.

This episode features Kathy Fettke of Real Wealth Network and Neal Bawa of Grocapitus Investments.

Platinum Partners:


  • Norada Real Estate Investments
  • San Diego Creative Investors Association
  • The Outspoken Investor, Tony Alvarez
  • Think Realty Magazine
  • Wilson Investment Properties
  • Realty 411

Gold Sponsors:


  • 7 Figure Flipping
  • Inland Valley Association of Realtors
  • Keller Williams Corona Keystone CPA, Inc.
  • Las Brisas Escrow
  • Leivas Tax Wealth Management
  • Pasadena FIBI
  • Real Wealth Network
  • In A Day Development
  • Spinnaker Loans
  • uDirect IRA

See below for full video and resources.


Episode Notes:

Narrator  Welcome to The Norris Group’s 13th annual I Survived Real Estate Gala. The Norris Group would like to thank the following Platinum Partners: Norada Real Estate Investments, San Diego Creative Investors Association, TheOutspoken Investor Tony Alvarez, Wilson Investment Properties, Think Realty Magazine and Realty 411. We’d also like to thank our Gold Sponsors: 7 Figure Flipping, Inland Valley Association of Realtors, Keller Williams Corona, Keystone CPA, Inc., Las Brisas Escrow, Leivas Tax Wealth Management, In A Day Development, NorCalREIA, NSDREI, Pasadena FIBI, Real Wealth Network, SoCal Cash Flow, Spinnaker Loans, and uDirect IRA.

Aaron Norris  Kathy, I, you’re in the Turnkey space. But you know, I was just thinking, I love your insights on the media as well. You work with the media like I do, and they’re always looking for a salacious headline. I warn people if Trump is not the President didn’t matter if it was this year or four years from now. I’m expecting a wave of media to go under in the next year.

Kathy Fettke  Wow.

Aaron Norris  Yeah.

Kathy Fettke  Okay.

Aaron Norris  I think he has been the reason that’s keeping a lot of them profitable. He’s the best thing for media. Writing for several outlets, I have to take seminars on how to write salacious headlines. It’s, it’s very clickbait, and I’m sure you get pressured a lot. I get asked about foreclosures a lot. Just real quick. I mean, you show up on these media interviews is are there is there any pressure for you to write salacious headlines about our industry?

Kathy Fettke  Oh, my gosh, I worked. I have my degree in Broadcast Communications. I’ve worked at CNN and ABC News in San Francisco and the Fox Channel there. And you know, if it bleeds, it leads, that’s, that’s the bottom line. It’s a business and that and I, you know, it’s Rich was just telling, my husband Rich, was just telling me that Disney bought, oh, Fox, I think, and, and I was like, why would you buy Fox? Oh, it’s a business. It’s a business. So, people forget that, that you’ve got to have eyeballs that sell, you know, the whole idea is to bring people to have as many eyeballs as you can, so you can sell them stuff. That’s it. And I was in that business for years. I couldn’t stand it. And I thought I’m gonna create a good news show. And you know what, nobody wants to watch that because we are wired, Rich does this seminar every year, he’s actually going to do one in January, he does it every January about how we’re just, as human beings, we spent so many thousands of years trying to stay alive and wondering what’s going to kill us that, you know, our brains are just wired that way. So, it takes a lot of self-control to unwind that, and you can see it today, you know, just people. You’d see it everywhere today.

Aaron Norris It’s going to be very interesting that just from a small business and a marketing standpoint, to the algorithms, some of the decisions that some of the social media channels had played in this election and muting some voices, I think they’ve really run amok. It’s going to be very interesting to see how they get out of this if they lose their two or three status. And I warn people early on in COVID, you know, you are the product, nothing’s free. And when it’s free, you’re the product and so you know, depending on what aisle you’re on, it’s all day every day one voice you’re in an echo chamber. It’s, it’s scary for me just knowing how the algorithms work. It makes me sad knowing how, how dire situation we are and I don’t know how to fix it. It makes me sad.

Kathy Fettke I just think you, you are, you are by doing education. Helping people focus on what matters. And, and the more we can focus on our own lives and building our own businesses, it really doesn’t matter. What else is going on out there

Aaron Norris  Touché. All right, well, sorry, I wanted to take a little media side trip, because I know that your background and you’re asked to be interviewed all the time, and it’s something that I’m doing a lot more. And, you know, they’re like, what’s the foreclosures and like? Nothing?

Kathy Fettke I mean, I’ve gone to so many. So, I’ve been on the set. You know, there’s this huge visual behind me saying ‘housing crisis’. And I’m like, Oh, is that what we’re talking about today? There? Which one? The fact that there is no housing and prices are going up?

Aaron Norris Wrong housing crisis is, exactly.

Kathy Fettke Right. We got to. Yeah, so.

Aaron Norris Well, welcome to I Survived Real Estate. I thank you, you’ve been a longtime sponsor of this event, as well. And we couldn’t have got here without your support. But, you know, you’re, you’re all over the country very interested in hearing what you’re seeing from investors and the areas that you’re investing in. What, the sort of sense that you’re getting?

Kathy Fettke  Yeah, I did not provide slides this time, because I figured Marco would do it for me. And he did a wonderful job because we do a lot of the same things. We have 40, 54,000 members in our network, we have been helping people buy rental properties outside of California for 17 years now. So, I really do have my finger on the pulse of other markets besides California. And I can answer any kind of question about that. Because we see it every day, we, I was just looking at the numbers, we have 200 properties in contract right now of our members, rushing to buy things selling California, it has literally been one of the busiest six months of our lives. I think we have 100 new members at the network every week. So, it’s been very fascinating to watch. Just to observe what is happening. And I tell you what, in March, I’m not sure I could have predicted this, but in January I could have and I did. So, that’s been interesting and, and feels really good to, to first of all be here. I admire you so much. And Bruce Norris, man, I just wish I’d listened to you 15 years ago, I’m glad I finally found you. But I wish it were earlier. And I’m really just honored to be here. Really, I just love what you guys are doing. And you, you actually inspired Real Wealth to do what you’re doing. And we have raised half a million now for charity. And that’s because of you guys.

Bruce Norris Congratulations. Thank you.

Kathy Fettke Thank you. So, in, in January, I was in front of a room of 1000 people saying don’t get too excited about what appears to be good. Because something always happens that can take us by surprise. And I even had a picture of a black swan on my screen in January. Because there was so much, you know, talk of Oh, this economy is amazing. And we were at that place again, where people were making crazy decisions. I don’t know if you guys know Ken McElroy, but he buys apartments. And he, he was selling an apartment that he had already raised the rents as high as he could get it already renovated it. He’s Ken McElroy, he’s an expert at apartments. He wasn’t messing this deal up. So, he was selling it for top dollar. Well, the person who was going to buy it put together a ppm, a prospectus. And somehow it got back to kin. Nobody tried to have him invest in his own deal. And he looked at that he looked at it, and basically it said, we, we as a group are buying this, we’re gonna renovate it, it hasn’t been well managed, we’re gonna raise the rents. And you know, he’s like, Oh, my gosh, I’ve already done all of that they can’t push these rents any further. So, these kinds of things were happening. We were at that phase in the cycle. And let alone we know that in September, the Federal Reserve was already bleeding, it was already creating, doing quantitative easing, trying to bail out the market, creating more money very secretly, very quietly. Something wasn’t quite right back then, when supposedly we had such a robust market. So, again, people weren’t noticing those fundamentals. And it just seems so obvious that some kind of Black Swan event could change everything in a moment. So, when that happened in March, we were freaking out. We were so freaking out. We have like I said, thousands of investors we’ve helped strategically by an areas where there’s population growth where there’s job growth, yet it’s still affordable. And you know, where the demographics are going, which is very much the southeast and Florida and Texas and, and Georgia. Now the Carolinas. We’ve been helping people doing that for a long time. But I was really afraid that maybe our plan was going to fail. We, you know, we just didn’t know what was going to happen. So, we, we brought off the 15 property managers that we work with across the country to figure out how are we going to get through this if people can’t pay their rent if they’re losing their jobs? You know, what, what are we going to do? And the property managers came up with solutions. It was amazing. Helping tenants, really the focus came to how are we going to help our tenants pay their rent, when they’re not either allowed to work, or they can’t work or they lost their jobs. I mean, this was such an unusual time to be in. And the property managers found, you know, we all got together and said, well, let’s help them make sure they know how to get their stimulus checks, let’s give them a list of jobs that are hiring. Let’s tell them about charities that they can go to and get help. And April came, and rents were paid, more rent collection than we’ve had an ever in the past. And at the same time, more applications for rent than we’d ever seen in the past. So, that was weird. We thought, okay, it’s just the stimulus, then May came, same thing that I was like, well, when August comes in, and the stimulus is gone, people aren’t going to be able to pay their rent. Nope. collections were just as high if not higher. And Aaron, I don’t know if you know this, but we also are we I’m a syndicator, we’ve raised about $140 million for residential communities across the country. Just, just building and selling retail, not, not rental communities, although we’re looking at the build to rent but we raise money and we buy land, and we build homes and sell them. So, again, I was like, Oh, boy. What? How are we gonna get through this, same thing. I mean, it was a little scary in March and April. And then, bam! we have sold more homes, I, Park City developer just called and said, we’ve sold out completely, our Reno project sold out. So, it’s been a very interesting last six months. But the good news is that the business that we’re in, is important. It’s essential at a time when, you know, when you look at the charts and the jobs that were lost, there were so many negative, you know, negative marks on job losses and housing was positive, Home Depot positive, people were spending money on their homes, because home has become the New Castle, it really is. You’re working at home, you’re teaching your kids at home, you’re entertaining at home, you’re cooking. Think of all the people that all of a sudden learn how to learn how to cook, you know.

Aaron Norris  And that’s why the divorce rate is up.

Kathy Fettke You know, as far as residential, I’m just so happy I used to be so jealous of you know, and I still am. Tom Wilson, you know, these people and these big sexy commercial projects and stuff and I was boring little single family industry and, and I’m so happy we are because it really has moved up to such a high priority. I we already know how you know, shelter, food, shelter and clothing. Are essentials, right? Well, shelter moved way up high in priority. That’s a good thing.

Aaron Norris  What’s it, what’s been the, the sense that you got? I mean, since you’ve been having so many California investors, helping them get out? Has the mood shifted? Was, were you experiencing the same thing from before people were just tired of the politics or do they think, was it just they had a good ride and they were diversifying because they didn’t want to be greedy?

Kathy Fettke Well, we’ve been, we’ve been out this for 17 years. And it really started with the Real Wealth Show Podcast that I’ve, that I’ve had for a really long time. And I had Kiyosaki on the show back in 2004. I was a mortgage broker at the time. And it was, it was back then in 2005, that he taught me the fundamentals of cash flow, right, being born and raised in California, with a dad who’s a dentist who just didn’t, didn’t know how to invest and made some everything you invested in didn’t seem to do well, except the real estate he bought. And, so, I just kind of saw that and learn that and watch California prices go up. But it was Kiyosaki that said, you know, you know that these loans are bad, you know that people can’t pay them back. I knew it because I was a mortgage broker. And I could see the there’s no way when this reset, there was no surprise. And of course, Bruce taught this, there was no surprise about when those loans were going to reset. That was very well laid out there were charts showing when these loans were going to reset, it should have never taken anyone by surprise. So, in 2005, he was on my show saying, these loans are going to reset starting next year. People cannot pay them. It’s already reached a peak; they think they can just refi take the money and go do it again. They’re not going to be able to so, he explained how you’ve just got to time the markets properly. If you get into California at the right time, you can make a lot of money to get in at the wrong time. It’s going to be a long time before you make your money back. So, he was just explaining then, sell, you can sell one property and exchange it for maybe four in Texas, where they’re not having the same kind of bubble because they were stricter on their lending. They been through the SNL crisis. And Texas was not going to go through that again. So, you couldn’t do this crazy kind of loans, there.

Aaron Norris I’m gonna have to ask a question. I’ll ask it later, Marco, you got to be thinking about this tool to the California mindset. It’s not easy. California is exciting. It’s a fun ride. If you were buying houses in ’09, and you’re getting out now you’re sitting on a ton of equity, and you’re gonna go to Oklahoma. Really?

Kathy Fettke Well. And that’s what, that, you know, and I am jealous of you guys for buying a lot of California property in 2009 when I was buying in Dallas, but at the same time, we were, it was very boring. People were laughing at us because I did, as soon as I got off the call with Kiyosaki, I booked my flight went to Dallas and came home with five properties. And and I mentioned that in the podcast, and our phone started ringing off the hook of other people who wanted to do that, because they could kind of see the writing on the wall. So, one, one woman at the time called and said, I’ve got these three properties in Stockton, there are $420,000 each, they are dilapidated, constantly in need of repairs, I bought them for retirement, I get 1200 dollars a month rent, but by the time I have to pay for all these repairs, I get nothing. I hate real estate. It’s a terrible deal. She goes, but I heard you on the radio. And I want to hear what you have to say. But I really just hate real estate. So, we helped her sell those three properties for 1.2 million. somebody bought them, that’s the important thing to consider. Somebody thought, probably from the Bay Area thought, I’m gonna buy a $420,000 stopped in C minus property. And that rents for 1200 dollars. And so, someone bought those, she took her money and was able to buy nine brand new properties right outside of Dallas for about between 120 $140,000 each. They have tripled in value since she never experienced a downturn during the Great housing crisis. And in fact, she was able to quit her job immediately, because her cash flow quintupled from that one transaction, that 1031 exchange, and her rents only went up during the Great Recession. So, that’s just kind of an example of being able to be kind of recession proof.

Aaron Norris  We’re just addicted, addicted to equity in California. It’s just a fun ride.

Kathy Fettke And I love it too. I’m born I was my parents bought a house in Atherton for $70,000 when I was in high school, you know, it’s worth I don’t even I can’t even imagine now, because we sold it too soon. But, you know, there are times, it’s a time and it’s like now, you’re not probably not going to sell, although I have my niece is a real estate agent in the San Francisco Bay Area. And she’s busier than ever. So, people are still buying, they may not be renting as much. I know two people who manage apartments in the San Francisco Bay Area, and they’ve never seen the kind of vacancies they’re seeing. And rents seem to be going down. But my niece, is busier than ever selling houses because there’s low interest rates.

Aaron Norris  Interesting. Okay. Well, Dad, you have a question before we move to our final speaker of the evening, and then we’ll move back to more Q&A?

Bruce Norris Yeah, you know, in 2019, we had 4%, unemployment, no foreclosures, a perfect market for an appreciation level over 10% in California. And we basically got nothing. So, I’m just wondering what your take and why, why 2020? When we have the uncertainty, and we had none of it in 2019, in 2020, all of a sudden, we’re off to the races. median price goes from 600 to 700. And inventories half at, half the levels. Were twice the unemployment or worse. I’m just wondering what your take is. And what happened.

Kathy Fettke In California or in general?

Bruce Norris Yeah, in California, what happened in 2019? That didn’t kick all that stuff into gear.

Kathy Fettke I can’t answer that. Except that I, the only thing I can think of is in the end of 2018, when the Fed was raising rates, and that really brought the housing market in California to a screeching halt. And across the country. And again, I was on TV show and radio show every day with TV hosts saying “Oh, the housing crash”, you know, even though it was just a slow down, so, I think it was part media freaking people out and kind of led into 2019 with and then it was 2019 that I believe the Fed started lowering rates and that started to stimulate the economy again, and then of course, 2020 rates are so low that for many people, I think it’s just cheaper to own than to rent is just my, my guess you know, and it’s become cheaper. And and with people, a lot of people are working a lot of people have more money because they, they aren’t doing the massive commute to work and, and they get to be home and they can maybe move out of the city, you know, if they’ve been, they can move out a little bit and to something they can afford more like our Reno properties, we were doing pretty good. And now it’s just like the amount of people that can move to these huge homes we’re building in Reno, that cost six to $800,000. That would be $2 million, three hours away. They can go live in this beautiful place near skiing. But still they got to go to the office one day a week they can you know.

Bruce Norris  Right. Okay. All right. Thank you.

Aaron Norris Thank you, Kathy. And last, but certainly not least, Neal, I got to do a great interview with you in PropertyRadar, and I loved your story. And you also invest in a lot of different areas, but you’ve got your roots in the Bay Area. I’ve loved your story about how you got into housing and your data driven approach. And now you’re doing all kinds of fun stuff. So, interested to hear what your take is on the market and some of the things you’re doing in areas.

Neal Bawa Yeah, thank you. Um, firstly, just delighted to be here. I have such fond memories of what was it? Was it the Carter presidential? Yeah, in the library that we held the I, I Survived in?

Aaron Norris Presidential, Carter, Nixon, Nixon.

Neal Bawa Nixon, Nixon.

Bruce Norris Nixon library.

Neal Bawa Nixon, that’s what I said. Yeah, it was, it was such a delightful experience. And the quality of people that come to these events is incredible to be part of this is I really feel blessed and, and also Aaron, just developing a relationship with you and having a chance to, you know, bounce ideas off of you has been wonderful. And I know you’ve asked me to look at the, the Bay Area market and talk about some prices and really talk about the impact of telecommuting in the Bay Area market. There’s obviously some urban flight going on here. I really like that. Because, though I don’t invest in the Bay Area. Like it’s been a while since I’ve invested here. The truth is the Bay Area market is both a trendsetter. And also, it can be the odd man out. And also, what’s really fascinating to me is how the multifamily market in the Bay Area is seeing it day and night divergence from the single-family market, I have never seen a divergence this high in any part of the United States at any point in the last 20 years. And, and so, you know, if you know what we do, we started off, very similar to what to, you know, to some of the other folks that are on here in terms of buying value add multifamily. And I quickly realized that we were always chasing our tail, we were always coming in last. And so, we, we basically switched our company from being a real estate company to be an analytics company. So, now what we do is we basically look at trends to start saying, where do we go next? That’s early. Right? So, you saw some wonderful examples from Norada on, you know, some of the markets that they’re looking at. And there’s no question those are good markets to look at. We made it our job to actually look at what would be the next market after that. And so, we’ve made it our business to look two and three years out, and I’m going to talk about some of those markets today. We also started looking at asset classes, what is the next asset class. So, as, as you can imagine, we invested in industrial, we loved it. We invested in self-storage, so we move beyond multifamily. And we’ve been very delighted with that move. We started investing in an asset class that Kathy briefly mentioned, it’s a very powerful asset class. I believe it is the most powerful asset class in the next 15 years. It’s called build to rent. It’s where you build single family homes in large communities, or you build townhomes. So, people started doing single families. In the end, the financial didn’t work. So, now they’re doing townhomes and COVID, massively accelerated build to rent because obviously people want to live in less dense areas, townhomes have this feeling of, you know, single family home. So, we’re building now build to rent communities throughout the United States in markets that you’ve never heard of. None of these have been mentioned on these podcasts. And I’m looking at both their, their technical strength and as well as their momentum. You know that word momentum comes from the stock market. And we basically match that up and come up with markets that you’ve never heard of. To me, the strongest market in the United States is Idaho Falls, Idaho, and there’s lots and lots of reasons for that. But if you go and actually do research on Idaho Falls, you’ll be stunned at just how incredibly strong this market is. Especially because of the Boise effect. Then you have markets like Huntsville, Alabama that are actually benefiting not from Alabama, but from the boom in Tennessee then Nashville market, Memphis, Chattanooga, these markets are driving prices up and Huntsville is actually the beneficiary. So, we thought, look at these secondary markets that are in a region that seeing growth and we go in and invest in those markets. The, the Coeur d’Alene, in markets is seeing a boost from Spokane. So, I’ll talk about that. But I’m going to start by showing you actually where the California market stand. That’s what you asked me to do. And one of the things I didn’t want to do is, is used PowerPoint, because what’s happening is, I build a PowerPoint. And then 30 days later, all the data is completely nonsensical, because we’re moving so fast. And so, what I’m what I’m actually pulling is live data. So, I’m going to go ahead and share my screen and pull some live data for you. Right, this is, you’ll see that this data has just come out in the last few weeks. So, so, here’s the first thing I wanted to show you, right? Every market’s been impacted completely differently. In this, in this pandemic. I’ve never seen a pandemic, or I’ve never seen a black swan event, and there’s haven’,t, haven’t been a lot of them. But the impact is so varied. Take a look at Salt Lake City, the change in employment in Salt Lake City, you know, is just one and a half percent. I flew into Salt Lake City to go to Idaho Falls, and the airport was completely packed. When I was leaving, when I was in Oakland, flying to Salt Lake City, the airport was like completely empty. I mean, they, there was like the zombie apocalypse in Oakland. But it was perfectly fine in Salt Lake City to look at the difference here. Just a 1 point 5% reduction. Austin obviously a seen a small reduction. And now we look at California, we look at the cities in, in California, they are at the bottom as you can imagine, right? So, the maximum amount of job loss is, is right here. So, you see Oakland here you see San Francisco, you see Orange County, huge job losses, right. So, it doesn’t really matter what your job rate is today, what you want to see is how many jobs have been lost because of COVID. I think that’s a much more important number than just looking at raw jobs because that just takes you in the wrong direction. And unquestionably California is the worst-hit look at, the San Francisco, Oakland, Los Angeles, Orange County, all in the bottom 5% in the United States, and the markets that you’re seeing at the top, surprise, no surprise, there are markets like Utah, you’ll see Texas here you see Arizona, again, and again, Indy actually was very interesting, in that in how quickly it recovered Atlanta, no surprise there, markets in Colorado doing well, again, San Antonio, Texas market. So, when you look at the difference, look at this, one and a half, 2% 3% job losses. And here you’re seeing 10%, 11%, 12%. So, very diverse, this pandemic. So, that’s the first thing I wanted to talk about when it comes to the barrier. But then the barrier market, my home market, completely bizarre the stuff that we’re seeing in the Bay Area market. I want to show you and Kathy mentioned this briefly, she talked about rents going down, right, I want to show you what home prices look like in that marketplace in the last few months. Let me see if I can find this here. I’ve got so many of these windows open, I want to make sure that I find the right one. See, boom, boom, boom.

Bruce Norris Aaron’s going to be jealous of how many screens you have.

Neal Bawa  That’s right. I’ve got way too many at this point, actually. So, let me see. Error. All right. Well, I think I’ve somehow managed to lose that one screen that I had up. So, give me a second, I’m going to pull it up live. So, I was in BayAreamarkets.com. So, I’m going to just pull it up on my screen and bring it to you. So, Bay Area markets at this point, every single market in the Bay Area, including San Francisco has seen price increases on the single-family. But we’ve seen a divergence, as it says here, housing, house markets still continuing to go up in every single county in the Bay Area, but condos have stalled. Why? Well, smaller amount of space at this point, people are really, really looking for large amounts of space. And so, we’ve seen a stall there. San Mateo County, if you look at San Mateo County prices are increasing there. So, here’s San Mateo county. So, you see that peak here. And, and as Kathy mentioned, as the Fed started raising prices, we saw drops, and then you know, the strong season it came back up and then dropped again. And then at post COVID. It’s just on a tear. So, I looked at every single market, every single county, we’re seeing the same exact trends, the only weak market actually San Francisco, but it’s only weak for condos. So, the question that Bruce asked a while back is obviously double the unemployment, weakness in the economy. How is it that prices in the most expensive market in the US are going up? I believe that Bruce, it’s simply because people at this point, are emotionally looking to buy homes. I’m talking with people here in the Bay Area. I look here and it’s near. I know interest rates matter a great deal and obviously, we have these rock bottom interest rates, but I don’t think that’s it. I think it’s the fact that at this point, home has become a castle. That statement from, from Kathy really resonated with me like home is truly a castle. I did a full renovation, not afraid of COVID. I had 70 plus workers in my house, I renovated every last inch of my house. Because to me, being at home meant something I wanted to make it worthwhile. I wasn’t traveling. So, I renovated every single aspect of my house. I’m really happy about that. And a lot of people are doing that. Home Depot’s are so busy that the price of lumber in the United States is up 53% from Feb, 53% that can possibly be just the Home Builders market. Because it’s too soon, right? Homebuilding takes a long time you have lots to, to plot, a lot of it is single family, people are doing a humongous amount of work. And so, we’re seeing a price go up for lumber, obviously, some of that is because of the fires in, that we saw in California. So, it’s clear that there is a psychological impact and that’s driving up prices, then the big question is, does that psychological impact last? Is it going to actually be there three to six months from now if we find a vaccine? That’s the $64,000 question. But I do think that the Bay Area market may continue to rise even from here because affordability is jumped up a little bit because of the interest rates going down. In the Bay Area, a 1% reduction in loans can actually mean a huge impact to, to affordability so, we might see the party going on here for a while. But we are seeing very distressing trends, problematic trends in the San Francisco Bay Area, and that the first thing I wanted to show you in, was this trend here suburbanization, right? This has been going on for a while, people have been talking about this in the last six months, they’ve been saying people are moving out to the suburbs. This has been going on for a while. Take a look at 2010. And this is this is central business district vacancy. And this is suburbs up here central business district, the suburbs were vacant, or had the highest level of vacancy ever in 2010. Noticed by 2018, the suburbs had the same vacancy as central business district. We were already seeing a flight to suburbia; this, this clearly shows that and it accelerated because of COVID. So, what we are seeing now is number one we’re seeing in the San Francisco Bay Area of flight to the suburbs. So, we’re seeing areas 40 or 50 miles away be harder because of the, the concept of telecommuting, right, San Jose, San Francisco, Los Angeles are the three cities that can lose the maximum number of people in the US if telecommuting was allowed. 2 million renters could turn into homeowners in the US. And the biggest portion, San Jose, San Francisco, Los Angeles, San Diego, not a lot of people can afford to buy simply if they’re telecommuters in Jacksonville. So, that’s a market that people will want to go to words. But they’ll want to run away from some of these top markets, where telecommuting can actually, you know, turn people into homeowners. And where do they go? Well, they either go far out into the suburbs, or they’re going to go into other places like Jacksonville, Houston, Charlotte, Tampa, Atlanta, these are the markets that we really see a trend to words. And we’re seeing these trends really, really accelerating in the last in the last few months. And you can see, these are polls, 42% of area workers would move if they were allowed to be remote. Now, I don’t really think 42% of these people will move. But if 4.2% of the people in the Bay Area moved, because telecommuting was allowed. It would change the pricing structure in single family. So, I think that there’s a lot of changes coming. And I’ll tell you why. This is the aha moment for me. In the next 20 years, we wouldn’t have trained this many CEOs around the world to run their companies remotely as we’ve done in the last six months. We couldn’t have done that in 20 years with technology. So, the fact that they were forced to run their companies remotely, there’s going to be some convert there say 5% of them think that a hybrid model is better. It still changes things in expensive markets like Los Angeles and Seattle in the San Francisco Bay Area. I disagree with, with Tom when Tom says people will come back into the offices, I think they will. My point though is if they don’t if 5% don’t come back that changes the cost structure of offices. So, I think that while currently we have not seen any stress any distress in the office market in the US nothing right? We’ve seen distress in malls we’ve seen distressed in retails nothing in office, but I think in the long run. I think that strip malls will bounce back maybe Baltimore but strip malls will bounce back because as he said, you still need to get a haircut. Right? I think offices in the over the last next five years are going to see some serious pain. That’s what I believe. And the largest area of pain is going to be the San Francisco Bay Area. We saw the first major Lee’s get cut, Pinterest paid $89 million to get out of a lease to get out of a lease. Right? This just happened a few weeks ago. I believe this is the first of many. So, you’re gonna see a cascade of all of these things happening in the marketplace, you’re also going to see a different trend. And again, once again, I’m going to go back to Kathy, right, she, she said, we’re thinking about this new concept of bill to rent, right, Kathy is doing bill to sell because that that’s, that’s what makes profitable sense, no doubt about that. But built to rent, we believe is going to become an insanely powerful asset class. This is a completely new asset class. It was really invented two years ago, when the first read form. We’re gonna see all across the US people building, not single-family homes, I think that’s a fad. Because I don’t think single-family works from a rental perspective. It works the way that Kathy is doing it, where you build these things, and you sell them, or you have these older buildings. But if you want to do 200 300 500 units, I think the single greatest trend we’ll see in the next 10 years is going to be people building townhomes. Because if you can’t afford a single-family, if you pass beyond the point of ownership, what is the next closest thing? Well, it’s a townhome, maybe it’s three-bed, two baths, and it’s got a nice little patio in the back and a little strip of green. And that’s your you’re fundamentally still feeling like you’re living in a single-family. So, we think that that’s going to be the biggest explosion that we’re going to see in the next 10 years. So, we are following that built around track. The other piece that we’re following is this, we believe that the time of the tertiary has come. So, you know, a lot of people have been talking about secondary markets, outperforming primaries, that’s certainly the case in the last five years. But we think that the time of tertiary has come. We are now seeing institutional funds for the first time invest in tertiary markets, right. And I’ll tell you because I’m covering the barrier, I’ll tell you, I’m gonna take a slide from Marco center rallies, I screenshotted it because it’s like this guy is making my point, I’m going to, I’m going to screenshot his slide. So, I’m going to pull this up on screen here. This is Marco’s slide from earlier today. And he was showing the hardest markets in the US notice that in California, the hardest market is Fresno, Fresno is now seeing the lowest vacancy rates in its history. And it’s seeing absolutely incredible home price growth. Next to Fresno Madera where I own 10 homes. It’s the price the that rent growth is just phenomenal. And that’s because you’re seeing basically a growth of a tertiary there’s no argument that Fresno is a tertiary. And notice that if there’s one other market you pick on this graph in California, it’s right here Riverside, once again, a tertiary I considered to be a tertiary even though you can drive there from Los Angeles, but the current traffic in Los Angeles so horrible that you’d really have to look at Riverside as a tertiary. throughout the US. We are tracking 700 markets, places you’ve never heard of like Idaho Falls places like Dalton, Georgia, the carpet capital of the US. We’re seeing consistent trends of incoming money from investors that would have never invested in tertiary. Now, we don’t know if this is a long-term trend. But I can tell you right now, there is a pivot that’s taking place in California. It’s happening in Central Valley, and it’s happening in Riverside. If you look outside, there’s so many of these smaller markets. Right now. Greenville, South Carolina, one of the people I think it was Marco mentioned Greenville, South Carolina, that’s a great market, because it’s on the way to Atlanta. So, you go Raleigh, you go Charlotte, then you hit Greenville, then you get to Atlanta. In these corridors, we are seeing the tertiary is really, really boom. And, and the data is pointing to a bunch of markets that we wouldn’t have invested in the last five years. And that’s, that’s what we’re seeing a ton of that money, Aaron is coming from the San Francisco Bay Area, huge amounts of it coming from the Bay Area. Right now, people are taking out home equity loans simply because you know, home prices are going up. But we do expect that market to flatten within a year. You know, I, depends on how low interest rates stay. I think this is a psychological impact, people right now want to buy homes, because they’re afraid if a vaccine comes in a year from now, they may not be afraid. So, I think that the boom will slow down in the Bay Area.

Aaron Norris Thank you, and then please, if people want to start sending in questions, let’s do that.


Joey Romero Thank you for tuning into I Survived Real Estate 2020. To watch the full video in its entirety, or to learn more about speakers and sponsors. Please go to Isurvivedrealesate.com and be sure to tune in next week for more I Survived Real Estate 2020. Thank you.



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