Should you SELL *ALL* Real Estate | Why I'm Selling.

everyone meet kevin here last week i

posted a video called the fed just said

this coming housing crash and i

explained the evidence the federal

reserve gave for exuberance in the real

estate market they provided us three

really detailed charts and evidence as

to why they believe that there's a lot

of euphoria and fomo happening in the

real estate market something that also

preceded the 2008 real estate crash now

this is something that i've been warning

about since january of this year this

report from the fed came out about a

week ago and in this video i want to

give you an update on my plans because i

want you to know where my head is on do

i think it makes sense to sell what do i

actually think is going to happen do i

think and this will be more towards the

end of the video do i actually think

that real estate prices potentially

going down slightly could lead to a

larger recession and if real estate

prices do go down a little bit again

is it actually worth spending the money

to sell uh for for that short term fee

well let's talk about that so

first of all we know a couple things one

we know that interest rates are up

almost two percent since january that

reduces buyer purchasing power uh by

about 20

however the real estate market is still

screaming ahead because so far demand

has been substantially outpacing supply

inventory is still ridiculously low and

folks don't want to miss out on home

ownership so you could potentially be in

the scenario where there's like 30

excess demand to supply

real estate interest rates push down

that excess demand by 20 but you still

have excess demand over supply so you

actually could still see prices move up

albeit at probably a slower pace right

we also know that if the real estate

market does fall or when it does there

can be a substantial or substantial

slowing force on our economy as

individuals feel their net worth has

declined or is declining and then

they're inclined to spend less money on

things like going to home depot or

lowe's or hiring contractors or whatever

because they're not spending money on

home improvement because they don't feel

as rich anymore or they're not spending

as much money on travel or luxury goods

or going out to restaurants or whatever

because they see their net worth

declining a little bit right so these

are a lot of sort of baseline things to

know like the real estate market affects

a massive percentage of our gross

domestic product and if we get a

negative gdp print uh then two quarters

in a row then we're in a recession right

so how do we

reconcile all this how do we put all of

this together and what's potentially the

best thing to do and what am i doing

so let's talk about that first of all

when you sell real estate you've got to

know this you're going to

be

instantly taking a haircut on the value

of your home

why because you have selling costs taxes

and repairs so consider this let's just

say to make numbers easy you have a one

million dollar property and you have to

pay commissions of four to five percent

plus escrow and title fees of one to one

and a half percent plus repairs which

could be as much as one to two percent

you're probably going to be left after

selling about a million dollar property

maybe around nine hundred twenty

thousand dollars or about an eight

percent loss

on the value of the property that you

had and at this point you start

wondering geez well maybe in certain

markets it just makes sense to refinance

your home instead of selling because if

your equity is a million you're gonna

sell it you're automatically taking an

eight percent decline in the value of

your equity or actually probably more of

your equity right but of the entire

value of your home by selling so like

selling costs are really really high in

real estate which is a big barrier for

selling in my opinion a big reason to

refinance properties in january i

quickly refinanced properties that i

definitely wanted to keep because i saw

rates going up and we talked about that

on this channel as well

for most people in my opinion i think it

makes great sense to consider

refinancing a primary residence now i

know rates are higher now but if you've

got equity that you want to tap in your

primary residence and you want to

potentially use that money not to go do

crazy things like buy boats rvs and t's

tvs or whatever but to potentially

invest in other real estate deals for

the stock market well i still think it's

a good idea to refinance a primary

residence problem is it's getting really

expensive to refinance rental properties

for example i just got quoted to

refinance a rental property with a

jumble loan

5.5 inch percent interest

with three points

that's insane if you're not in the real

estate world it's insane if you're in

the real estate world it's insane like

it's absolutely ridiculous now i know

that was a jumbo property so you get a

penalty for that it's investor property

a penalty for that but five and a half

with three percent and no chance to

to get a zero point rate at you know i

don't know maybe five

point seven five probably six that

doesn't even exist for investor ones

it's absolutely nutty so i believe that

first for for individuals with primary

homes refinancing kids still make sense

for people with investor properties

especially more expensive investor style

properties it's starting to get a little

bit more expensive to refinance but

again if you sell you're taking that

immediate loss

and that immediate loss needs to be

outweighed with the fact that you're

possibly also going to pay taxes now

individuals holding a primary can get

exemptions up to 250 000 as a single

person and five hundred thousand dollars

as a couple for people who have lived in

their property for two of the last five

years that's great but again we still

think that refinancing makes more sense

for primary homes for investment

properties you'd have to either 1031

exchange into another property which at

that point it's like why have the

selling cost if you're just going to go

from real estate to real estate i mean

now you're selling and buying in a very

competitive environment probably doesn't

make sense so if you're selling an

income property you're probably going to

pay the taxes right now because you're

thinking okay i'm going to wait and

prices might come down a little bit to

where i could buy a better deal in the

future right

but again you need to offset an eight

percent of clients selling costs

potentially 25

in in long-term capital gains taxes

depending on your income tax bracket and

what state you're in and so on so you

really got to offset like a good amount

of loss by selling

rental property even right like you have

to expect that you're going to move into

a better opportunity and this is where i

diverge from

what what i think is probably best for

the vast majority of people now this is

a financial advice i'm a real estate

broker so in theory i could give real

estate advice but i can't give you real

estate advice because i don't know your

situation so even if i could give you

financial advice i don't know what your

situation is you've got to figure it out

yourself but i want to create this sort

of like little wedge here and i know

sometimes people make fun of me they're

like kevin you say never sell real

estate and then you send this to me you

say it's like everybody's circumstances

are different and i think the most

important thing is that we realize life

isn't binary it's not all one thing it's

not all in or all out right what what

life is is hey what are the

circumstances that we have right now and

what's the best decision that we can

make right now this video is brought to

you by public where you can build a

diverse portfolio of stocks funds and

crypto within a single super social

platform follow my stock comments on

public by going to met kevin.com public

signing up getting a free stock worth

all the way up to a thousand dollars and

seeing what moves i make on my public

portfolio at meet kevin worth noting

public puts investors first and doesn't

make money from payment for order flow

and stock trades are commission free

check out their stocks and crypto

opportunities at medkevin.com public my

guess is that for 98 of folks watching

it's to hold your real estate it's don't

pay those selling costs it's you know

focus on the long term for real estate

buy in good areas with declining poverty

rates with increasing population

binaries where people want to live quite

frankly i think real estate in

california as much as i hate california

politics and government

ironically it's probably a good place to

own real estate because it's so hard to

build in freaking california it

ironically means you have tighter and

tighter supply for housing year after

year after year and that naturally

drives prices up right so i think for

most people with primaries and

individual properties it probably makes

sense to just huddle because again the

taxes and just the costs of selling make

it

punishing to sell and really like how

much do we actually expect prices to go

down and so my thesis on this is that

we'll probably see some form of headwind

beyond that absorption of that excess

demand that we have because rates are

going up we might see some kind of

headwind of maybe five to fifteen

percent in prices but does that mean

that'll definitely happen no of course

not i mean prices could just keep going

right we also know that at some point

certainly by 2024 and 2025 rates will

come down again so you could probably

presumably refinance and we might see

that same sort of pressure for home

prices to go up again right so so really

does it make sense to try to time the

market for 5 to 15 if you're going to be

paying tax penalties and the selling

cost fees probably not it probably

doesn't make sense for the vast majority

of people so when i say that i'm

probably talking to 95 percent of people

who own homes or rental properties those

are very expensive things to do selling

real estate very very expensive trying

to time the market very very expensive

right

now am i trying to time the market and

why am i doing something different what

makes me part of that five percent of

people that it might actually make sense

to to sell for well i'm in a different

boat

because i have a really big opportunity

that i myself am creating now in my

opinion i'm going to be able to make

more money in my new opportunity which

is kind of like tbd but and i can't go

into too many details but basically if

you want to learn more about it course

members are going to be first to hear

about it and have the first opportunity

to invest in it and second anybody who

goes to metkevin.com series a they'll be

sort of the second batch of people who

hear about it and then we'll probably

talk about it publicly on youtube down

the road but i don't know if there'll be

any allocations left

if we have allocations we'll see what

happens for investing in it but anyway

uh so

a thought and again i can't give too

many details here yet but planning on

creating some form of to some degree a

real estate company

that can invest in real estate

throughout the country in in a model

that we haven't seen yet because i

really want to focus on just wedge deals

getting properties below market value

and so

uh without talking about that sort of

project more i want to talk about

what that means for my portfolio so

for my portfolio this is kind of like a

weird kind of coincidence of a time that

i kind of believe we are going to see a

little bit a little bit of a headwind to

real estate prices nothing like we saw

in 2008 but it kind of makes sense for

me to lock in

some of the pricing that i can get now

because i personally after even paying

the taxes and selling costs can take a

good chunk of cash and move it into this

opportunity and make way more money in

my opinion with this opportunity than i

could uh by worrying about you know the

taxes and the selling costs because even

though i'm going to get that say 30 hit

after taxes and selling costs and

everything

i think the amount of leftover cash that

i'm going to be able to allocate towards

buying deals when maybe they've become

slightly cheaper even 10 percent cheaper

but beyond that the way in which we're

going to be able to to buy these deals i

think is going to be a phenomenal

opportunity and so that's why personally

since january i sold 11 properties

already i have five more in escrow five

not listed yet i've got three in

construction which i'll probably be

stuck with and three that i refinanced

so within the next six days i expect to

be down from 26 properties to six

properties they're all ventura county uh

and you know so far the properties have

been selling for for more than i've been

expecting them to sell for for example

one property sold for

350 000 more than i thought i would get

for it which is really really incredible

but again now i'm gonna have to pay

taxes on that right but for me i think

my new opportunity is worth it so if

you're yourself kind of wondering like

hey kevin but like what if

the real estate market uh falls five or

ten percent shouldn't i get out now well

no because you're

that's a what if and again you're

guaranteeing that loss by selling

because of the selling costs and the

taxes right and so you've got to ask

yourself this this is what you have to

write down

is

is my opportunity where i plan to put my

money

worth taking a 30 haircut in my personal

situation the answer is yes

i would say for most folks who think

well i should sell and then they sell

and they sit on the cash

most folks end up taking that money and

spending it on butter items

frivolous expenses they end up

eradicating their net worth they feel

rich because they have all this cash and

they don't end up getting back into real

estate whereas like i'm selling

literally to just get into a better real

estate opportunity it just happens to be

around the same time that i feel like

yeah there could be a little bit of

downside pressure to prices we don't

even know if there will be i mean rates

have gone up and people are still buying

homes like crazy right now so we'll see

and know that real estate does take time

too this is another thing to know

regarding sort of the path of real

estate for example people closing on

real estate right now are the people who

are closing on real estate based on

interest rates when they were you know

three percent

well now they're like four and a half to

four and three quarters of a percent so

the people buying now are basing on

those homes closing today in terms of

price but they're paying a lot more per

month to own those homes they just feel

like hey well we're paying a fair price

because that's what the other things

have been selling for well when we get a

new batch of buyers in like three months

and they're like dang like we can't

afford it because rates are higher

and

we're maybe starting to see a little bit

of a decline in comps or more inventory

comes in the market then we might start

start seeing a little bit of a larger

kind of declining comp values again i

don't think more than anywhere between

five to fifteen percent reiterating why

i don't think it makes sense

to sell

uh unless again you have a better

opportunity now things could change

and the most important thing about

making predictions is monitoring your

predictions it's entirely possible that

real estate doesn't dip at all it's

entirely possible the real estate dips

more than that amount that's just my

base case now and i'm looking for signs

in either direction obviously if real

estate prices were to fall more then i

would delay when i would get back into

real estate and i'd be a little bit

nervous about a potential impact of a

recession to my stock portfolio if real

estate prices fell less or didn't fall

at all

no worries i'll get back into real

estate ideally by the end of the year so

i could play some tax strategizing to

offset some of the taxes that i've now

exposed myself to from my other

transactions and i could do this by cost

segregating new purchases or new

buildings right so a lot of things to do

and really i would say for the vast

majority of folks again bottom line is

it doesn't make sense to sell hey does

it make sense to wait to buy

maybe

but if you could get a good deal if it's

off market or you could get a really

good negotiated deal because somebody

else is trying to sell or you find

something that's a fixer-upper and

you've got a margin of safety then

that's a wonderful opportunity to buy if

i came across something that was a good

deal today i would also buy it today i

just bought a property like eight weeks

ago uh so you know that was a really

good deal

so i don't want folks to think like oh

kevin used to be all in a real estate

now he's not it's a transition happens

to be happening at a time where the

transition could be a very convenient

time to make

but uh no guarantees we keep monitoring

the situation but these are sort of

kevin's latest thoughts on the real

estate market and what's going on with

my portfolio thanks so much for watching

and we'll see in the next one goodbye