Doug DeMuro's SHOCKING Real Estate WARNING

Holy smokes. I knew I love Doug from his

car reviews, but I have to say I wasn't

expecting him to also be a real estate

expert. At least the advice he gives in

this podcast, which are going to react

to this section, provides five really

good tips, not just on real estate, but

also on finance. I'm going to break them

down to you in a very simple noob versus

pro style. We'll keep it easy, but let's

get into this. Let's play the real

estate portion of this and then we're

going to break out the critical lessons

that most people get wrong when it comes

to real estate and I want you to avoid

those mistakes because real estate it's

what I do for a living. Let's check it

out.

>> Adman sidebar here. Do you agree that

it's that's a Stradman sidebar to make

it clear?

>> His house isn't even done. Like you

watched the video where I went through

his house.

>> So we visited him and we saw his house.

Gorgeous house but needs the backyard.

needs the basement.

>> The basement's like just pl it's just

like just like

>> it's just it's a it's a lot of m it's

it's it's tough either way because if he

finishes it,

>> I don't think he's going to get back

dollar to dollar what he spent.

Absolutely.

>> But if he sells it unfinished, it makes

the market so much smaller for whoever's

willing to buy that house with an

unfinished basement to spend more money.

This is the problem that I think a lot

of these people run into is that um

>> they end up buying these these they get

a little young people get money and

they're like, "Oh, I want a I want a

palace with a moat, you know, like a

lazy river that goes around the whole

thing." And they do all these things and

realize those places are expensive to

keep going. And often in order to get a

place like that, you have to buy land so

far away from where land is desirable

that it makes it hard to justify putting

that much money into the land because at

the end of the day when you go to sell

it, the buyer pool is really small. I go

on Zillow and I see these like 25,000

foot houses in the middle of nowhere.

It's just like

>> you're never

>> asking $4 million for it. $100 a square

foot,

>> right? And it's like your buyer pool is

limited and even at 4 million like this

this is going to sell for 1.6 six in

seven years when you come to terms

mentally with the fact that it's only

worth 1.6.

>> It was tough with him because I remember

talking to him before he was building

the house. And his mindset at the time

was I I I just want like a 20 car

garage, but I can't just build that cuz

they won't permit it. So, I have to

build the house for resale value so that

I have a structure that a family or

someone else would want to buy. The

thinking I thought was correct, but it's

just

>> it snowballed a little. I have this

severe belief,

>> maybe militant, that you you should live

somewhere where your land is more

valuable than the improvements you make

to it. Like

>> that's a very California thing to say.

>> Yeah, it or or dense area to say, right?

Like that's also true in nice

neighborhoods in a lot of like I only

ever buy old homes that are that are,

you know, in kind of historic type

neighborhoods that are very um

established long term. And I there is a

lot to break down here. Let's get

started with this just one at a time and

then we'll come back to it. Okay, first

of all, this is already really great.

It's like, how can I add to this? Well,

I could add to this in a few ways. If

you really want a high value property

with a lazy river, you could do it, but

it's going to cost you a lot of money.

Look at, for example, Ben Mala's

listing. Ben Mala is listing a property

off the coast of Clear Water, Florida.

Absolutely gorgeous. I've been in this

property before. Uh, I've stayed over

the property. I've been in the lazy

river. Gated home. absolutely gorgeous

20,000 ft² property and I think Ben Mala

did this right because this particular

property is in a location that people

want to be in. It's right on the ocean.

Yes, people are worried about hurricanes

and it just flooding away one day. But

one thing that Doug also mentions which

is really smart and we'll talk about

more of this in just a moment, but it's

really expensive to keep these up. If

you've ever watched a, you know, a a Ben

Mala video, you see him complain about

how much money he spends just on the

utilities or pool cleaning or after

there's damage from a hurricane and all

this gravel and the palm trees get

washed away, how much it cost to fix it

all or to get all the sand out of the

pool in that very lazy river that he

has. Right? So, yeah, if you want to pay

it, it's going to be a pretty pricey

ticket if you buy it in sort of a denser

area. This is Florida, so it doesn't

have to be California, right? But this

is a very desirable part of Florida.

Now, in fairness, if you go across the

bridge, you could get homes for like

$400,000.

So, it can change very rapidly. The

same, mind you, is also true in

Manhattan. And I'll show you about

Manhattan in just a moment. But first,

let's hit the first lesson. Everything

in real estate starts with the first

three rules. And you probably have

already heard about these, okay? The

noob always always forgets the first

three rules. The noob says, "I just want

that 25,000 square ft of property and

then I'm going to hyper customize it

with that 20c car garage or whatever."

Of course, you could argue business

purposes for that. But always remember,

ultimately real estate is meant for

people to live in whether they're

renting it or buying it. And the more

you stray from what's normal, the harder

it is to have what's called liquidity.

Now, the pro understands this and this

is why the pro looks and says, "Hey,

yeah, great idea. Want to have a 10,000

ft home in Colombana, Ohio for $3.5

million." Just an active listing here on

Zillow I found. Looks gorgeous. Got a

tennis court. You got your own lake. I

mean, you got a garage or side house

here that looks bigger than than the

house that I live in. And the problem

with this is here you've got a person

who's trying to sell it, but look how

long they've been trying to sell it. 932

days. That's incredible. That's 2 and 12

years that they've been trying to sell

this. And they just had a $559,000 price

reduction. The problem is this location

is not in demand. How many people in a

town of less than $7,000 people in

Colombana have $3.5 million to spend on

this property? Uh, spoiler, nobody. And

so your buyer pool is like zero. Even

Ben Mala, who is in a highly desirable

area, is struggling to sell this $35

million property even though it's in a

great area. So location matters first.

But that's not the only problem. Pros

know this. Just to give you a second

example on location, here is a Mount

Vernon property. So you've got less than

20,000 people who live in this city.

Also, gorgeous home. Place was built in

' 82. 23,000 square ft and multiple

different structures, a lot of land,

$2.5 million. Price cut $200,000. Can't

get it sold. Now, if I take that same

money and I put it as a house for sale

in Palo Alto, California, outside the

tech district, it's going to sell fast.

Now, you might say, "Oh, but Kevin, I

mean, look at all those icons there.

Those are a lot of sales, right?" Key

point, these are a lot of sales. These

are sold listings. If I go to active

listings, I've got nearly nothing in

that under $3 million price range. I got

four homes to look for if I'm looking

for a small home under 1500 ft². Uh it

it just shows you that location is the

number one thing that matters because

that introduces your buyer pool. The

fact of the matter is when you've got

Nvidia employees who are working, you

know, 20 minutes away, they can pay

these prices because they're getting

paid massively in stock comp for a

company that's now worth $5 trillion,

right? Anyway, so location number one.

We always seem to forget that though

because we balance our desire versus

what's smart for liquidity. And see,

that's what matters. Number two, and the

pro understands this as well. If you

struggle to sell a property because

you're not in a high demand location,

you're also going to struggle to rent

out the property and that kills your

liquidity. Can't sell fast, can't rent

fast. And the closer you are to jobs is

where you maximize your liquidity.

Always remember that the value of the

properties, no matter how old or how new

they are, isn't driven by the size of

the home or the pool. It's driven by the

value of the dirt because of the

proximity of your ability to earn money.

And if you can go pay a few thousand

bucks more per month for a home, but it

means you're closer to a job that pays

you an extra $10,000 a month, it's

usually worth it. A great place you

could see this, by the way, is look at

Manhattan. So, if I want a place in

Manhattan, let's say I want a uh let's

go for a three-bedroom, two bath, and

I've got a budget of uh let's say 4

million bucks. Okay, so I got a $4

million budget. What can I get in lower

Manhattan? I can get a three and two

condo for $4 million. Or maybe I could

go to like one Wall Street. I'm going to

get a little condo for four million

bucks. Right? The more you go away from

the jobs, the more rapidly the prices

will decline. This is always normal, but

it's a perfect example to show you what

you know or or what you should know

rather. See, if I go over here to

Kingsbridge, a $1 million property will

get me the same three-bedroom, two- bath

condo I pay $4 million for on Wall

Street. If I keep going further north, I

could go to Binmar Park. Now, I get a

three-bedroom, 2 1/2 bath, $1,800 ft²

home for under $1 million in Yonkers.

And now it's going to take me an hour to

get down to Manhattan, maybe 45 minutes.

Uh, but I can also just keep going out

and the further you go out, the more

square footage you're going to get. The

more it's going to feel like, hey, I'm

getting more bang for my buck. But I go

out here to Yorktown Heights and I spend

$500,000 for a threebedroom, two bath

that was 4 mil or a mill or, you know,

700K and is now 500K. Great. My price is

going down. But the reason my price is

going down is because I have fewer

buyers who are willing to make that

commute. It's all about where the jobs

are and the pros know that. Now, let's

go back to Doug for a moment because he

said something very interesting about

customizations. Let's hit that and then

we've got some other important pro tips

that he gives here and we're going to

highlight these by just replaying this

segment right here.

>> Seven years when you come to terms

mentally with the fact that it's only

worth 1.7. It was tough with him because

I remember talking to him before he was

building the house. And his mindset at

the time was I I I just want like a 20

car garage, but I can't just build that

cuz they won't permit it. So, I have to

build the house for resale value. So,

that

>> Exactly. You have to build a house for

resale value, but not just for resale

value, but because of permitting. And

when I hear home building and I hear

permitting, you know what I regularly

think of? I regularly think of how the

first thing that home buyers always tell

me when they want to buy a home because

I've spent a career uh spending time

with first-time home buyers saying, "Oh,

Kevin, you know, I want to buy a home.

Can you help us buy a home? You're a

real estate broker." The first thing

they always say is, "I don't want a

tracked home." The tracked homes, they

don't have character. There's no

character. I want character. Great. But

you know what the tracktos have? And

this is what the pros understand that

the noobs don't understand is that the

tracked homes are building what the

majority of people want, like actually

want today. Not what they think they

want, but what they actually want today.

And so you create a modern style tracked

home that most people want. You might be

different. You might be like, "No, man.

I I want the historic home. I want the

1920s Spanish style home." That's fine.

But for practical purposes, most people

don't want that two-in-one knob and tube

1920s 100-year-old home. And the pros

know this. The pros know that most

people instead of that twoin- one want a

functional home with a master bedroom,

master bathroom, separate guest space,

four bedroomedroom, 2 and 1 half bath,

twostory home that they can grow a

family in. Tracked homes, even though

they're hated, pros know have the best

liquidity. They have the best speed of

sale, best speed to rent, and the fewest

customizations.

Tracked homes for a professional

investor are considered hyperlquid

because they are at the complete

opposite end of unique and custom

because every customization you make

reduces that hyperlquid nature. Now,

Doug goes on to say something else here.

He says he likes where the land is more

valuable. We saw that Graham makes the

joke about California and this is true

in some parts. We know Graham doesn't

like Santa Monica rightfully so. And

that's really a topic for a different

video, but Doug mentions something about

historic established neighborhoods and

he actually hits on a professional tip

that most noobs don't understand. Let's

listen to that part again.

>> That I have a structure that a family or

someone else would want to buy. The

thinking I thought was correct, but it's

just

>> it snowballed a little. I have this

severe belief,

>> maybe militant, that you you should live

somewhere where your land is more

valuable than the improvements you make

to it. Like

>> that's a very California thing to say.

>> Yeah. Idiot or or dense area to say,

right? Like that's also true in nice

neighborhoods in a lot of like I only

ever buy old homes that are that are,

you know, in in kind of historic type

neighborhoods that are very um

established long term. And I worry about

the deep suburban living and ma massive

house that is unsellable in the future

kind of.

>> So this is a pro tip right here. So what

he says is and this is also a risk by

the way of some tracks. Notice I'm not

saying new construction but tracktos

newer can work but there's a risk with

newer because it doesn't give you the

benefit of something that Doug just

said. See, brand new can come with this

risk of crap. It's in an unestablished

neighborhood. The pro knows that new

construction is great after it's settled

for a few years. See, in my opinion, one

of the best homes that I could buy right

now would be a home that's in like a

1990s or an early 2000s neighborhood

because I can drive that neighborhood

and I can see what's going on. as a pro,

I could look and see, all right, you

know, how many people are actually

taking care of this neighborhood. You

don't know that in new construction

because it looks its absolute best day

one and it decays from there. But what

it settles down to, you know, what

resistance level for those stock buyers,

right? What resistance are we hitting?

What low point are we hitting of quality

in the neighborhood? That matters. And

so there's a neighborhood not too far

away from me that's actually a 1980s

neighborhood that's known for one having

one of the best reputations for raising

families quality uh upkeep in the

neighborhood. Anybody who doesn't upkeep

their home kind of gets shunned in the

neighborhood. So even the tenants upkeep

their homes to keep up with it. And I

compare that to another neighborhood

that's actually 20 years newer, but

people aren't upkeeping the

neighborhood. And so anytime a new

person moves in, they also kind of let

their hands fall and they're like, "Ah,

what's the point?" So Doug's point here

on hitting on established is so key.

Now, that's where I though defer from

him. He said the word historic. This is

where I have a difference of opinion

than Doug and it's okay. I like newer

tracked homes, but that are not brand

new that are newer where I could see

that they're established, right? So, I

I'll take an 80s, 90s, 2000 some. But

historic is a red flag where I tend to

operate because as soon as you get a

historic designation, your ability to

actually sometimes just maintain the

building or rent it out really gets

crimped by rules and regulations imposed

by cities. For example, technically

where I live, any home over 40 years old

is called historic. And you have to go

through historic planning commissions

just to do stupid things like replace a

broken window to do it right at least.

And that's crazy. But it also keeps a

crimp on building which increases resale

values for the existing owners. As

usual, it just screws new homeowners,

but it benefits older homeowners.

Anyway, then we got to get to the last

financial bit of advice which Doug

suggested early in this segment, but I

really want to highlight it here and it

goes to the cars.

>> What's going on with people leasing

these cars these days is like a lease to

own.

>> Yeah. Cuz I guess if you're doing it for

your channel and you own the biz, you

can write off a significant amount of it

something.

>> And I I got I realized you could do this

too late and I never once did it and now

I don't own the biz anymore, which is

unfortunate. So, but it's a it's a big

thing that I think all these guys are

doing and everybody's like, "Oh, you you

don't own the car then." Well,

>> the leases aren't set up. People think

of it like a traditional car lease. It's

not really like that. Like, at the end,

you have this you've you've a lot of it

has gone into equity. The car is not

depreciating really. Um, you can you can

reup the lease. People lease these cars

sometimes two or three or four times.

>> Wow.

>> Yeah. Yeah. This segment here is talking

about an exotic cars, the ability to

sort of almost lease to own some of

these units where you can actually build

equity in the car. But there's a bigger

issue that comes up here and it comes to

when we talk about Stradman's monthly

payment on a certain vehicle. Let's

listen to that part.

>> But the drawback is these massive

payments. I mean, so Stradman's making

like $20,000 payments, whatever it is in

this con. That's not out of the norm, by

the way, in that segment of the market.

A lot of guys do that.

>> Yeah. Oh, Steve Hamilton, his payments

were just through the roof. But for him,

he was like, you know, I financed these

at low interest rates. Yeah,

>> I'm not doing that anymore, but on all

the ones I got like three years ago, it

makes sense to have these payments at

3%.

>> Yeah.

>> Even though I mean, think about what the

cash, right? He would have lost out if

he had put all that cash under those

cards at the time probably. So, it was

the right call. It's just it's an

astronomical number to see, right, in

your bank account coming out every

month,

>> right? I'm sure of the 30 I think he

said his payment was like 33,000 a

month. I'm sure of that probably 31

goes towards equity my guess and then

his balloon payment at the very end is

going to be a small amount

>> right like at the end it's going towards

the car that he owns which is fine but

like

>> damn

dam is right so this really depends

people hear oh I could finance these

cars and most of the money is going to

go to equity got to be careful of that

today a lot of these exotic car loans

are run at 8 to 10% % interest rates.

Let's take the midpoint and go 9%. You

get a $3 million exotic car at 9%.

That's costing you in interest $270,000

a year. That's a really good salary just

in interest. And in that case, if your

principal and interest payment is like

30 grand a month, $225,000

are going to interest every single

month. That's money that's going poof,

gone. Now, sure you could argue, well,

the interest is a business write off,

but monthly payments are what lead to

bad financial decisions. So, the noob

initially goes, "Oh, it's a business

expense." That's what they want you to

think because the government wants you

to spend your money. The worst person,

the worst rich person is a person who

just sits on their money. They hate

Warren Buffett. He just said, "Not the

Billy." They love the rich person that

blows it all. They don't care if you go

bankrupt. Ultimately, you're supporting

the economy. And those big payments are

damn. This is why because I think we're

in a sensitive state in this economy. I

personally have paid off all of my debt

and sold any kind of asset that had a

loan on it because I don't want it. I

think it's too risky. And so I think the

pro should look and say, "What can I do

without burying myself in these insane

monthly payments to where I have to

work?" Because as soon as you feel like

you have to work for somebody else's

salary to pay a staff member or 10 staff

members, like Lionus, I think he's got

like 20, 30, 40, 50 people work for him

for working for him. I love him and I

love his channel, but I'm like that poor

guy's got to crank content to make pay

those bills. Ouch.

payments lead to, in my opinion, poor

financial decisions. And maybe that's a

little Dave Ramsey, but I think the pro

understands that if you wipe out

payments, you can actually hyperfocus on

what you want to do and what's going to

be the best for your future rather than

be trapped by what's going to help me

make this payment this month.

>> Why not advertise these things that you

told us here? I feel like nobody else

knows about this.

>> We'll we'll try a little advertising and

see how it goes.

>> Congratulations, man. You have done so

much. People love you. People look up to

you.

>> Kevin Praath there, financial analyst

and YouTuber Meet Kevin. Always great to

get your take.