How I'm Preparing for the Housing Market Crash of 2024

so the last time homeowner affordability

was this bad was back before the 2008

housing crash where individuals with

over 100 percent loan to values on their

homes neg am loans no income no job no

asset massively subprime loads or buying

homes many times on the speculative

belief that the value would simply go up

and they'd be able to refinance and when

joblessness struck and we entered into a

real recession well that housing bubble

fell apart there are a lot of folks who

believe that because home ownership

affordability is just as bad as it was

before 2008 we are going to set up for

the same kind of crash in this video I'm

going to break down my response how to

protect yourself and have I started

buying real estate again where am I

buying or better yet what am I buying

let's talk about all of that in this

video keep in mind and the car is on

self-driving mode and I am hands-free

recording this as I've got a little Dash

magnet over here so let's get into the

video as I head on over to the airport

so number one the most important thing

to consider when you're buying real

estate in any Market doesn't matter what

Market you're in because you have to

have a Warren Buffett style margin of

safety that is beautiful I'll give you

an example if you can buy a 500 000 home

in a 700 000 neighborhood and that house

takes 50k to fix up now you're into the

deal for about 550 maybe with closing

costs and holding costs call it 560. so

you're into the deal for 560. in a 700

000 neighborhood gives you a 140

000 buffer or wedge we like to call it

that off of seven hundred thousand

dollars is a 20

buffer real estate prices would have to

decline 20 20 percent and guess what you

would then be at a break even you

wouldn't even be in a position where you

needed to sell imagine if somebody told

you you could buy Tesla stock at 160

dollars when it was actually trading for

two hundred dollars that would be a

similar 20 wedge and I'm not talking

options here I'm Legit saying day one

something's wrong in the market where

you can buy the stock for twenty percent

less than it's worth the reason you can

do that in real estate is because the

home buyers who are buying today are not

buying properties they can't move into

these are hoarder homes which are

exactly the kinds of homes that I'm

looking at they're moldy homes they're

massive fixer-uppers they're basically

properties that can't be on the market

they need that 50 Grand now we don't

want to get into something you have to

rebuild because then you're becoming a

developer right that's a different world

we're talking about how can you fix an

issue like maybe you had swamp cooler

that leaked through the roof through the

attic through the floors and down in the

basement

and you can solve the water damage while

repairing the Cosmetics for 50 000. well

that's the kind of work that a home

buyer is not going to be interested in

doing however you as somebody who's

looking to build your wealth might say

you know what I might be able to find a

way to borrow from friends or family on

a second I've got money saved up for

that kind of fix-up I'm willing to put

that effort in I want to buy that home

for five compete against the multiple

offers which remember anytime there are

multiple offers it's not a red flag of

competition it's actually a green flag

of desirability if you're writing an

offer on a deal that you think is a good

deal and there are no other offers guess

what it's probably not a good deal of

course if you can get deals off Market

that's great people send me off Market

deals all the time because they want to

work with us they know we're a no hassle

buyer we're actually going to close our

deals if we say we're going to close a

cash deal in five days guess what we

close the cash deal in five days they

get paid they have a no hustle buyer and

they have a relationship with us so we

can keep doing deals I'm getting deals

sent to me all the time California

Nevada Arizona Salt Lake Oregon uh

people are sending us deals all over the

place all the time starting with those

close to us that we're also very

interested in areas uh in Florida and

Texas Idaho to some extent but what's

important is you've got to have this

wedge and you can Arbitrage the market

now because people are so fearful of

doing work the opportunity to get good

deals and create a massive buffer is

insane let me give you some scale to

this especially since my startup house

hack will plants do exactly this at

scale if we can get our hands on 100 of

these style fixer-uppers that nobody can

rent nobody can live in nobody can buy

and we can fix up a hundred of them with

50 million dollars about 500k in on each

deal then that gives us about 10 million

million dollars in gross profit on

actually doing these deals after all the

fix up is said and done for the

properties 100K wedge times uh you know

100 properties is 10 million dollars of

course this is fantastic the 110 million

dollar return year one on 50 million

dollars would be phenomenal I'm not

making any promises obviously but those

are some of the goals that we have and

the opportunities that we see so the

goal is how can you get your hands on

Wedge deals and here's the trick folks

after you identify wedges and you know

what you're looking for the next rule of

thumb is you have to be fast wedge deals

come on the market at 11 o'clock and

they're sold by two o'clock I know

because guess what I've been saying for

over a year now that we will start

buying in Q3 or Q4 2023 and that's

exactly what we've done with this

formula deal came up at 11 o'clock way

to cash offer in within a couple hours

and we had the deal signed by two

o'clock within the next day there were

eight other offers way higher than ours

but they went with us because we're easy

to work with and we rode fast we gave

them a one day due diligence period and

they thought hey let the other offers

come in while Kevin does is one day due

diligence oh look Kevin wants to buy it

even got a little bit more off and great

now we're done the easy deal let's do

more so why though buy when the market

is uncertain like oh you know are things

going to crash again what about all this

unaffordability it's not unaffordable if

you're able to buy in cash obviously if

you're financing it is unaffordable

right now now is that going to lead to

the subprime disaster that we've

previously seen my belief is that most

of the pain that real estate has seen so

far short of some kind of surge in

inventory is behind us over the last

year we've had pain in real estate

prices because rates have exploded rates

have exploded that has led to some

markets especially in Arizona and Idaho

correcting about 20 percent they've

since bottomed out and come back about

10ish percent but some of these markets

are still down 10 percent creating a

potential by the dip opportunity

the danger though obviously is that

inventory rises again that we have some

kind of surge in inventory however if we

look at history usually real estate

surges in inventory uh do not end up

driving

a crash what drives a crash is a surge

in foreclosures and short sales

distressed sales that's not what I'm

expecting we're going to be facing at

all especially since we could probably

lose about 20 to 30 percent equity in

the market the market could drop 20 or

30 percent and you're still only going

to be sitting somewhere around eight

percent of people underwater that's

insanely low and not all of those people

are going to sell just because all of a

sudden they owe a little bit more than

the property is worth they could also

resort to renting out the property

however I do believe that a lot of

vacation rentals and rentals that are no

longer profitable are going to start

testing the market however these are

generally investors who are just facing

less cash flow rather than all of a

sudden urgent needs to dump their

properties like what we saw in 2008.

this is what I've been experiencing for

about the last year as we've been making

sure that a inflation is gone uh which

basically is trending gone sure we could

get a little bit of a bumpy ride coming

down come on Mr Max you want to just

hang out here for a sec while I finish

the video I'll leave the AC on for you

uh we can be in a situation where uh you

know people people decide look I'm not

going to do long-term or a short-term

rental anymore what do they do they jump

on over to short-term rental what or

long-term rental rather you go from

short to Long right point is there are

ways that even investors who own right

now who need to transition don't have to

sell on distressed manners if we were

going to see any level of distress it

would have most likely been in December

of 2022 and even then we didn't see

distress that's when prices were

slightly lower than where they are now

no distress then not expecting massive

distress going forward however even if

distress comes that wedge insulates us

so if we're down 10 in many markets

we're looking at now and we get another

20 on top of that we in my opinion have

up to 30 correction to protect us that

means the downside is really insulated

and even then we wouldn't have to sell

because we're buying cash in my opinion

though the upside is a lot greater that

we can buy these wedge deals and likely

spend the next two or three years buying

these properties nobody wants to

renovate as soon as rates come down in

the long term two or three years expect

the valuation of these properties to

really adjust now I know to the upside

no guarantees now I know a lot of people

say Max I got like 30 more seconds all

right now I know a lot of people say oh

but Kevin when rates come down we're

going to see these properties uh you

know everybody's going to put more throw

more inventory on the market we could

see some pain again and eventually we

have to correct back to these prices

that we saw in uh in in pre-covet right

because before covet maybe you had a 650

000 house that's an 800 000 house now

and the reality is while that could

happen it doesn't need to we don't need

to undo the inflation that we've had

what we do need to do is wash the car

but the cool thing is we got a new plate

on this actually I think they're gonna

I'm gonna pay to have them wash it here

look at that 69 for peepee

but anyway

um so if you're looking at 800 000 house

today that was selling for about 650

previously that represents about 18

inflation which is roughly what we had

if you look at CPI from Fabish 2020 to

now that's roughly the inflation that

we've had is about 18 so point of all of

that being said we are in a position

where we believe the actual facts the

actual data we're facing right now does

not portend some kind of massive crash

ahead any increase in inventory will

actually be welcomed for us over the

next two years to buy as many of these

fixer-uppers as we can and actually

bring that Supply to Market which helps

people who need to rent or in the future

potentially need to buy so we're really

really excited if you want to learn more

uh for when we're ready to start

fundraising for househack go to

househack.com otherwise these are my

thoughts on the upcoming real estate

market crash that everybody's worried

about I think actually that fear is

exactly exactly what I want to be buying

because everybody else is so fearful

about real estate that that's the time

that I really want to be buying I like

buying when people are fearful and then

you have to be greedy when everybody is

fearful that's the Warren Buffett quote

right be greedy when people are fearful

whereas when everybody's being greedy

it's the time to consider selling and so

I think now is that time for Real Estate

to buy when everybody else is fearful my

take thanks so much for watching I'll

keep you updated on how things go it is

true we are closing on our first house

hack deal and it's in my opinion an over

100 000 wedge that I got against eight

offers it's the first offer we wrote

instantly got it it was fantastic stay

tuned there'll be a lot more deals and a

lot more coverage thanks bye