Part 2 of San Diego Housing Market with Lenska Bracknell and Bruce Norris

 

Lenska Bracknell is a Real Estate investor & broker, rehab educator & entrepreneur.  An independent real estate broker in San Diego working with real estate investors. Being a landlord and investor herself, involved in over 100 fix & flips.  Lenska’s background and expertise make her a valuable resource in understanding the real estate market, property evaluations, and acquisition. Lenska offers monthly investor tours for over 12 years in different San Diego neighborhoods evaluating houses and searching for deals. Teaching investors about Fix & Flip, Buy & Hold in San Diego, Out of state investing, Private Lending, Vacation Rentals, Accessory Dwelling Units & small multi-family investing.

Lenska is also an SDCIA board member.  SDCIA is Southern California Real Estate’s largest investor club. SDCIA’s mission is to Unite Members in a common bond to further their education and promote their success in real estate investment.

She loves flying airplanes, drones, and doing Zumba to J-Lo songs!

 

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.

Joey Romero  Thank you for tuning into The Norris Group’s real estate radio show and podcast. Joining us again is San Diego real estate investor and broker, Lenska Bracknell. Hope you enjoy the show.

Lenska Bracknell  Other investors that actually they have added ADUs to their main residence because they had dead equity sitting in their house built the ADU with that dead equity, and now they live for free.

Bruce Norris  Yeah.

Lenska Bracknell  Even in their main house. Now if you close to, it all comes down to age. People, people want to find other means of financial security. I see people paying down debt actually rather than taking on new debt. I went out a couple of ADU appointments and the baby boomers are hesitant to, actually homeowners are hesitant to spend or refi 300,00 out which would give about a payment of 16, 1700. But they would rent it for 25, right? They are simply not willing to do it because they want to reduce their debt.

Bruce Norris  Okay. The process in San Diego, or the process in Orange County to get an ADU, an ADU approved, is it the same? Or is the city’s have input and can get in the way of it?

Lenska Bracknell  No, Bruce, what was that for a question? Is city getting in the way of an investor doing something? I think that was a rhetorical question, right?

Bruce Norris  Well, I know ADUs are supposed to be treated somewhat differently.

Lenska Bracknell  So, here’s my big pet peeve about…

Bruce Norris  Anyway, we’re gonna get to one of them. Absolutely.

Lenska Bracknell  Here’s my pet peeve about, except, it’s called Accessory Dwelling Unit.

Bruce Norris  Right.

Lenska Bracknell  There’s nothing accessory about it when you deal with the city or when you talk about cost. I mean, you know, your chart on, on lumber prices 400% up it’s, it’s simply no joke either, right. But the city, I mean, LA there is a state mandate, right? The cities are all supposed to follow. So, that is the minimum standard. Some cities here in San Diego still don’t play ball. You know, they restrict the size of the unit. That, I mean the heights limit. They have some other restrictions. LA is probably one of the most liberal ADU laws followed by San Diego, we even have now an ordinance where they, you can add a bonus ADU which means if, for 15 years, you rent it to low income or moderate-income people for, it’s a deed-restricted, deed restriction.

Bruce Norris  Okay.

Lenska Bracknell  Now, if you’re in a certain zone, you know, and there are a few things to consider. But that is, that is if you want to really cram in as many units as you want but then you know, the quality of the rental might go down. But if you have the room that’s, that’s probably one of the best ways here in San Diego.

Bruce Norris  Right. Now, are you involved in some new home projects? Not ADUs but from scratch new homes?

Lenska Bracknell  Yeah. Funny you ask we’re still waiting for one entry door which is back-ordered for two two and a half months so the stucco guy is kind of waiting. But yeah, I’m you know, I’m one of the persons, I finance or involved with the financing and building of three homes in La Mesa.

Bruce Norris  Okay.

Lenska Bracknell  And same, same deal here. My way, we kind of lucked out that our material prices didn’t go up too high because it was framed out and, but for example, that was crisis specific when we were ready to pour concrete the concrete company literally ran out of concrete. So, we had to go to the other supplier which was then obviously I believe 30% more expensive.

Bruce Norris  Okay. Well on top of concrete you usually put lumber how did you have stability in lumber prices?

Lenska Bracknell  Lumber was good because we ordered it and you know, the, the price was locked in so that, that didn’t quite I mean, prices were up overall, but we could reflect it in the sales price. So, we got close to $900,000 for a 2200 square foot house in La Mesa.

Bruce Norris  Did you intentionally wait till the home approach to the completion before you put it up for sale? Or did you try sell it earlier?

Lenska Bracknell  We tried to sell it early. That was our goal, we did price in a price increase, right? So, and also the buyers can all customize their home. So, they oh now, it’s all going well. So, they can pick the color of the stuck with the roof. Oh, front door, the garage door.

Bruce Norris  …mine the week later ago. Ah, you know what? I don’t want anybody having that option. In Florida, we have, you know, we have a hot, a hot market as well. So, we don’t put up anything for sale until it’s pretty much got sod in the front yard and every decisions been made And then yeah, then it kind of goes crazy. As far as how many people want it. Maybe it’s it’s like the San Diego where people would foreign or other state licensed by just driving around. So I mean, you break around, you’ve got people coming up the door. Can I buy your house? It’s it’s constant.

Lenska Bracknell  Yeah. And I could have sold those homes four times over?

Bruce Norris  Yeah. Yes, that’s the, that’s an interesting market. Well, let me ask you, because you’ve been around this business in a cycle where prices went too crazy. And we paid a big price for it. Are you concerned about that at all this cycle?

Lenska Bracknell  Actually, I just thought about you yesterday, Bruce. When, when affordability came up, because affordability is obviously, down we, in 2009 or 10, you know, when we had like, what 30 or 40%? But the latest numbers and I don’t have the numbers, but it is obvious that the home prices rise much quicker than the median household income. And we can tell right now because we have so much stimulus checks and government money that we really don’t know what, what is really the income going to be once everybody has to actually work for a living and not just get a stimulus check and go to the beach. Our San Diego beaches out overcrowded.

Bruce Norris  Wow.

Lenska Bracknell  And I don’t know if people say that they’re working from home? I think they just put their, their computer on and their employers think they’re working because the beaches are too busy.

Bruce Norris  There should be a sign out there ‘Go back home and work’. But in 2006 and ’07, we got into a price point for a lot different reason. You know, that was all financed, driven and in capable borrowing when you know, when the rates changed and everything. It crashed and crashed really hard. You have a lot of loans in forbearance right now that it’s declining. So, do you have any concern that we’re going to have a route on prices? At the level they’re at?

Lenska Bracknell  I mean, No and Yes. No, because obviously, all the loans that are being issued right now the average credit score is 760.

Bruce Norris  Right.

Lenska Bracknell  Okay, that’s unheard of. Okay. So, if the lending style, standards are pretty high, we have very good demographic outlook with the baby boomers, you know, still living longer than any other population before us. The Millennials are being 33 years old, starting now to buy houses. I mean, they bought houses before because they had a dog, but now they’re having children. And so, now they’re buying and this whole crisis actually brought out you know, that your houses your castle, your lifeboat, your gym, your, your office, so that whole attitude has changed. And so, whatever we measuring right now, with old indexes really doesn’t, doesn’t give us a good outlook on what is really going on.

Bruce Norris  Yeah, I think there’s an emotional, emotional heart to this, you know, after the Coronavirus, it seemed like there were a lot of people. We said, Okay, we’ve got to do this. There was a whole group of people, you know, now you’re talking about statewide that said, okay, no one’s going to tour my home. I’m removing it from the marketplace. So, the statistical show a lot of listings came off, California wise, but you also had that group of people that had an urgent to buy, urgency to buy. And they may have had the capacity to buy for quite a while, but they hadn’t decided to. And all of a sudden boom. And so, you had urgency meet very small amount of inventory. And off to the races. We started and we are still there. It’s amazing, looking at the inventory, that’s for sale in San Diego, I did I just had about 15 minutes to look at a report I just got, but it looks like the inventory is going down 50% a month. That’s just what, what?

Lenska Bracknell  Yeah, and it but they sometimes they base it, obviously they base it on the year before. So, whatever our numbers are from now on, are all skewed because we didn’t have a normal year last year. Okay, so I’m like in and yes, pendings. Actually pendings were down 50% in March. But obviously, because the March in 2020. This is when we hit the pause button.

Bruce Norris  Right.

Lenska Bracknell  Yeah. So, very careful to look at all these numbers. I think this year, you have to go a little bit by on the, in the, on the on the ground intel, and your, your gut, in your experience for people that are in the trenches?

Bruce Norris  Well, we know like we were saying days on, days on market is almost non-existent. It’s a Okay, what do we do with 50 offers, you know, basically, you know, that’s how the time is consumed is deciding who’s going to be the ultimate winner. And the inventory levels being so low and the demand, so high, so you’re still being able to eke out a little higher volume of sales, but it’s landing on inventory that’s shrinking constantly. So, it’s really going to be an interesting thing, how this, how this cycle ends? Because that’s, you know, it seems like you’ll get to a point where the lender, if they’re in an honest lending environment, has to say no to some people, you know, it’s just like, Yeah, I know you want it, but you can’t say get a yes, answer.

Lenska Bracknell  Yeah. And that’s why we’re filtering out. And it’s, it’s really we do housing now by a Darwinism, right? Only the the toughest is going to survive, and with the best credit score, the good job prospects, or long term prospect, right. And, and, and stability as well or any anything. I mean, people, people have the savings. And that’s, that surprises me too, that people are able to remember just because you offer that much you still have to come up with 40,000 or whatever you offer above what it will appraise.

Bruce Norris  Wow, I didn’t think about that. So, the appraisals are not cooperating with the offer that’s accepted?

Lenska Bracknell  Actually, I mean, it’s what means not cooperating?

Bruce Norris  Other words? Well, the market is basically so hot, that an appraiser would be legitimately able to say we’re in a market that’s accelerating 3 or 4% a month or something, whatever the number is, and, and be that would be an honest appraisal, it would be.

Lenska Bracknell  And the appraisers I mean they operate from comps and obviously once a few people overpay or pay more than the list price, right? So, it raises up the comps so now they can sell. Yeah, so it’s, it’s, it’s, it’s really a spiral like it was in the, in 2006. It, and I don’t think that we are in we are obviously the whole financial market is in a bubble.

Bruce Norris  Yes.

Lenska Bracknell  And it’s, this time it’s not induced by the lenders, like it was in 2004, 06 now it’s induced by the Fed.

Bruce Norris  Yes.

Lenska Bracknell  So, is there a different, difference in, in that so could the market, I mean, once if the Fed would say tomorrow, interest rates are going to be 5% and we are not buying anything we know the market would crash down so which means we are in a bubble markets have a chance to crash, right? And I mean look at look at the stock markets, but people don’t even know what to do with their money. They can’t buy assets right? If they put it in the stock market, it’s, it’s even worse. So, in live the hunt for real estate is because at least when the market crashes, you have a hard asset. I mean, I can sell my house to buy bananas. I’m not sure if you can buy bananas with Bitcoin?

Bruce Norris  Probably somewhere you might be able to. What’s, okay, what’s the mood of the renter? Looking at this market that is maybe so far beyond their reach, they’ve like, ‘Okay, I’m never going to get to own’ type thing.

Lenska Bracknell  Okay, here’s an inch and I’m glad you asked that question, because I also need to vent on that subject. Because remember the narrative that came out when the COVID crisis hit, right? It says, Oh, don’t pay your rent. You know, we’re in a crisis. Millions, or 10s of millions of renters are behind and can’t afford and this and that, yes, it did hit the apartments, more than it did the single-family in the beginning to your original question, you know, how did it go down when the COVID crisis hit? It was practically I called all my property management contacts. I called you know, the investors, everyone, everybody was paying rent. So, the single-family, and home investors did actually very well. So, there were maybe a few, but that is to expect it. So, I felt like this whole narrative has driven actually this whole agenda of the moratoriums and, and the rental and forbearances as well. And we don’t we don’t know. So, the renters, actually, they improved even their rental units to make it more cozy or an office. And guess that people move. I mean, we didn’t have a downtown. I’m not that familiar with our downtown market. But we did see a, more listings in the downtown market, we actually saw because downtown has a lot of condos, right. So, in the first two months or three, we saw kind of the condo market, I wouldn’t say collapse but retreat right. Now, the today’s market stats actually that the sold listings are up 25% in the attached market compared to the detached market of just 8 or 9%.

Bruce Norris  Okay.

Lenska Bracknell  So, practically the condo market came roaring back. So, but, um, and so the renter’s, you know, that’s all I can say to that. And I wish we would end all the, you know, the moratoriums and so because I’m a little bit still afraid that a shoe could drop there. And especially for the smaller landlords that maybe some tenants didn’t pay, and they still have to pay the mortgage.

Bruce Norris  18:09

Yeah, every you know, what, it’s interesting, every state is handled that differently, of course. And so California was the more, most aggressive one probably that I am aware of. But it but it’s interesting that people still came through in California and paid their rent a huge percentage of the time. So, that speaks well to that. Okay, Joey, is there anything else that you would like to ask? Where did Joey go?

Joey Romero  I’m here, I’m here. You know, I had a lot of stuff you hit on. Where I was going on, on, on with, with the, with the somebody moving into the, the Accessory Dwelling Unit, I’ve heard of an investor that was putting an ADU in one of the rentals, and it was coming out so nice that the people in the main house asked to move into that into the ADU.

Lenska Bracknell  Yeah. Yeah, and I mean, if you have a good-paying tenant and even, why not reward them, right, and moving them into the unit, and then and maybe actually then fix up whatever else you had, because any improvements you can do with today’s dollars, and fix up your properties and set yourself up to have maybe two nice rentals that, that’s the way to go. I mean, when this crisis started, and I had to walk because the gym was closed. I couldn’t believe I mean, every second house, even on my street had some kind of a construction improvement and whatever else going, Okay, so people discovered their houses and it, and, and renters as well. But a lot of with the ADUs, what happens to is the what I see with the baby boomers is they add an ADU and make it so nice that they eventually going to move in themselves and then rent out the main house.

Joey Romero  Now, know when when we get a lot of calls here that people want coaching and it’s not something that we ever do. California having such a high barrier to entry into you know, starting a real estate investing career, somebody who comes to your calls your comes to SDCI and says, ‘Hey, I just want to get started’. What do you tell them to do? Like, where do you point them? Like what what can somebody do to get started in real estate in California in such a such a tough situation?

Lenska Bracknell  You know, like I asked everybody, I mean, how much money do you have? Just kidding, Okay. No, that’s not. That’s not what, it’s certainly not what we promote at SDCI. Opposite, SDCIA, We’re big in education, actually put your checkbook and your account balance, you know, in the lock it up and get educated first, right. And obviously to buy your, your first house is always the step to start. But nowadays, people you know, I advise them, buy your first house, but see if it has ADU potential.

Bruce Norris  Get it, get your feet in the door and own something that you live in. It’s gonna be interesting, there’s legislation that I guess it’s going to go through, you know, Congress and see if we can get passed for a $25,000. It’s not a tax credit, it’s been morphed into basically closing, you know, that type of thing. So, I think that’s an that’s an attempt to reach across the table to the people that haven’t had real estate impact their life, because it’s only for a generation, where, or a buyer that hasn’t had generational ownership? Correct. So if your folks own home, you don’t get this shot. I think the theory there is that your parents can write you the 25 grand check, which is probably true.

Lenska Bracknell  And I have clients that, you know, get their kids involved, but again, about speaking about equality and stuff, right? I mean, if your parents are in real estate, and you learn this stuff, and you you know, you save I mean, I’ve I sold the house to the guy who is I think close to 30, lifted home saved up, but mom still had to pay $100,000 to fix up the place, right. But then they refinanced. He could afford the new mortgage, and mom got the money back.

Bruce Norris  Yeah.

Lenska Bracknell  But you know, you have to have parents that are able to write that 25 or 100,000. So, they, I mean, there is great opportunity where parents can actually help, help their kids. to, to, to do that. And especially now with that Prop 19, you know, the kids need to be involved more on or in your real estate, business as well. So, that those are some, some huge changes coming up.

Joey Romero  I have one last question. Um, how did the pandemic affect SDCIA, the membership and meetings and things like that, because I think it completely changed the game for everybody just because, you know, we’re so used to, you know, speaking live in front of all these places with Bruce. And now, you know, it’s been over a year of none of that. So, how did how’s the membership? And how’s Is it still strong? How did, how did it affect?

Lenska Bracknell  So, I think every club struggles, right, because the strength was in the networking and networking, and eye to eye. And I personally believe there’s nothing better than doing an in person meeting. So, and the educational because of our digitization of learning, education, investing. I mean, you can find practically anything on YouTube, right? So, and I think and at the convenient, I mean, I can walk up and down my mountain here in hike, and listen to any podcast or any education, I want it. So, I think for the clubs is very important. What do we bring to the table and that’s why it’s important to actually talk to local people, right, and that is better done. I mean, that can be done online, or it can be done in person as well. So, we’re planning on going back to in person I think we said, June or July, they asked when are you ready? I said I was ready yesterday. Yeah. So, if you have been vaccinated, vaccinated and take your vitamin C and exercise, right, let’s all get back together. And you’re more than welcome to stay six feet away. And so we’re trying to get back in person. But yeah, membership, we did see a membership decrease, right. And but we have seen that before the crisis, because right now, it’s a tough investor market in San Diego. So, the fix and flip business is, I don’t want to say is dead. I mean, people are still fixing, flipping, but it goes to the really professional companies. So, it changed.

Bruce Norris  I think we’re scheduled to speak in San Diego. Correct? Is that December?

Joey Romero  Yeah. It was funny because Anne asked, you know, ‘Hey, would Bruce be willing to you know, if he’s not? Well, you know, we’d love to have him on zoom still.’ And I think Bruce has never responded any faster than said, ‘Yes, I’ll be out there live’.

Lenska Bracknell  And we’re getting because the Scottish Rite center is going through renovations or something. So, but they build a new facility, not they but there is a brand new facility, which we’re trying to get for the big holiday meeting, because somehow I have the feeling. I think this New Year’s Eve or this holiday season will be probably one of the biggest ones if we talk about pent-up demand and people get together. Yeah, so we would love, love for you. Nothing more than showing up your full person.

Bruce Norris  Yeah.

Lenska Bracknell  You know, don’t hold back, Bruce.

Bruce Norris  No, I will I have missed speaking in front of an audience. There’s no comparison to doing a zoom meeting and doing it in person.

Lenska Bracknell  Yeah, and you don’t see the faces and you don’t. For me, I don’t hear the laughs, right. Yeah. And, and this is, the this is, this is a big, big thing for me. Even so, sometimes people do not understand my, how can I say, my dry sense of humor?

Joey Romero  You got uhm, you got to know you’re on your phone, put a laugh track on it. So, you know, you say joking, just hit, hit your phone. Give yourself some laughs.

Lenska Bracknell  Okay, Joey, you know, at my age, I’m glad if I find the stop and start button and maybe look in the camera and you know that, that is already challenging, challenging enough.

Bruce Norris  I’m glad you said that. Yeah. If I didn’t have a skill people around me I’d be still in the dark. That’s for sure.

Lenska Bracknell  That was the biggest learning curve because any real estate, you know, professional, had to know, do the zoom meetings and get more you know, more technical and believe it or not, so, you mentioned that I do those field trips, right. So, actually two months ago, I, I did a live streaming event.

Bruce Norris  Okay.

Lenska Bracknell  Ask me how it went.

Bruce Norris  Okay, how did it go?

Lenska Bracknell  I don’t think I was the picture. But you have to try and you have to grow and test out different, different things. So, I can live stream with my drone. That one I mastered, right. So, get ready for that.

Bruce Norris  Okay. All right. Well, Lenska. Thanks so much for joining us. I think we had fun,

Lenska Bracknell  Invest smartly, you will be rewarded.

Bruce Norris  Absolutely.

Lenska Bracknell  Did we hit the record button? Yeah. Okay.

Bruce Norris  All right.

Lenska Bracknell  Do we have to do it over?

Bruce Norris  No!

Lenska Bracknell  No, we’re good.

Narrator  For more information on hard money, loans and upcoming events with The Norris Group, check out thenorrisgroup.com. For information on passive investing with trust deeds, visit tngtrustdeeds.com.

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 www.thenorrisgroup.com and click the Hard Money tab.

HELPFUL LINKS

CONTACT US

Scroll to Top