Real(ty) Talk
Real(ty) Talk
Turning Real Estate Challenges into Opportunities
Join us as we break down the latest trends in the Southern California real estate market, from the Federal Reserve's decision to keep interest rates steady to new Airbnb regulations in Palm Springs.
I also reflect on my journey from selling alarm systems in college to entering the real estate scene in Manhattan Beach, California. I share a pivotal moment involving a lease-to-own deal that almost fell through until an unexpected high offer turned it around.
Whether you're an experienced realtor or just curious, this episode offers valuable lessons, personal stories, and strategies to help you navigate the ever-changing real estate world. Tune in!
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Stephen Couig:
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The house was awesome. My vision was demo this house in the garage, build two units, sell one of them, keep the other, and I'll probably make enough money to just pay for my house and live there forever. So I'm in the process of that, like I've got an architect on retainer and we're getting the plan structured and talking about how to go and build it and what should it look like, and all this stuff, and I get a knock at the door and it's this random person I've ever seen before and he threw out this crazy number. Like you know, I bought it for 1.2 and it was like well north of that yeah, and they're saying I want to buy it.
Speaker 1:Welcome back to Realty Talk, your favorite podcast on the planet. This is episode number five. We are excited. We've got a couple of interesting topics to discuss. Today We've got Suzanne Sini, the queen of the closing table has done billions of dollars of real estate transactions as a broker and as an agent. That's a little joke we were just discussing before we went.
Speaker 2:It's a big number, it's a big number.
Speaker 1:Yeah, we were just discussing this funny experience she had. She probably tells it better than I do, but she had a media experience and there was a very distinguished guest and they were quoting the books that were New York Times bestsellers.
Speaker 2:And then, when they got to your introduction, they saw the number, the number of volume that I did and kind of stuttered on it and then just basically said Suzanne Sini, oh, she did a lot, she did a lot of real estate, she did a lot of business. So that was my intro. So yeah, it was, it was a fun moment.
Speaker 1:We're going to go with queen of the closing table. We are missing our third host, stephen Kuig. We call him the lending king. There are other nicknames out there but we'll leave those out.
Speaker 2:That's what we're going with?
Speaker 1:Yeah, we'll go with that today. So just the two of us, but I feel like we have a lot of exciting stuff to talk about. I mean first, just general market. I mean, what are you feeling in the Southern California retail market right now? In the Southern California retail market right now?
Speaker 2:It's interesting. I think our theme we were talking to the agents last week at our brokerage meeting and going through all the numbers and the stats from the previous month and not a huge jump overall I think the theme of it is we're really seeing pockets of. It is we're really seeing pockets of areas where things are moving really fast and then we're seeing pockets that are moving, not moving at all or moving very, very slow. So it's really hard as a whole in Southern California to just make a blanket statement. It's really important to dig into each market because, like you know, we have a property in Palm Springs. That it's, you know, it's been, you know, fun, to say the least. But you know that is still on the market and it has been on the market for a while. But the Palm Springs market is completely different than what's happening here in Orange County or in Newport, you know so yeah, it's been interesting.
Speaker 1:Yeah, I think there's a lot to unpack there. About mid-June the Fed announced they are not doing anything at the moment, keeping rates steady. If you're new to our show, we talk a lot about the general dynamic of real estate and we kind of hone in on the things that move it. The Fed announcing rates staying steady. That affects the 30-year mortgage. 30-year mortgages affect buyers and sellers of real estate right and the micro markets. What we're talking about you know we're discussing that actively, it feels like almost on a daily basis in Southern California, but at a national level as well. You know Steve's missing today, but we were just looking at some interesting data. Florida is having the opposite issue that we're having their inventory is starting to creep up. Certain pockets of Florida. You know we're seeing upwards of inventory is starting to creep up Certain pockets of Florida. We're seeing upwards of a year of inventory now, which is kind of crazy because there are pockets here in Southern California, like San Diego for example, where it's maybe less than a month of inventory.
Speaker 2:Exactly, and it's been that way for years now. So, yeah, it's, you know all over the place. I think it's so different and it's hard to say, but I think to your point, the interest rates. I feel that buyers are just really they're waiting. They thought and I think the message coming into this year was rates are going to go back down and so yeah, we were expecting a couple rate cuts maybe two or three by now. Yeah, definitely.
Speaker 1:Yeah, palm Springs too. I mean that one is a unique market. You know full disclosure, we're not specialists in that pocket. You know we probably bought a couple of deals that we shouldn't have purchased in that pocket.
Speaker 2:We can tell stories on that later.
Speaker 1:Yeah, but what the feedback we're getting in that market is that the city made some adjustments to the Airbnb permit dynamic.
Speaker 2:Right.
Speaker 1:And so they created this grid or certain sections of the city and then they allocated a certain number of permits and so you now have to have a permit to actually be able to post your property on Airbnb or VRBO or these short-term rental sites. So if you don't have the permit, you're going in line to get it and they're making it somewhat complicated. But overall, what we're hearing is that short-term rentals are being rented less, down by about 30%, and with that shift in the limitation on the number of permits, there's a glut of inventory. People that live in LA that had a second house that kind of Airbnb-ed it every once in a while but now aren't using it so much, are unloading.
Speaker 1:There has been some appreciation in that market, so there is equity and now there's a lot of inventory. So something that might have sold last year for a million is now selling for 8. Lot of inventory. So something that might have sold last year for a million is now selling for $850,000, $900,000. Yeah, so we're seeing a little bit of correction just because of that glut of inventory in Palm Springs which is kind of weird.
Speaker 2:Yeah, and honestly, that can happen anywhere too. So, I think it is something to be aware of if you are purchasing a property solely to do a short-term rental. I mean that can potentially happen anywhere.
Speaker 1:Yeah, short-term rentals can be a great business model, but you've got to be very aware of what you're getting into.
Speaker 2:Exactly and, I think, have a contingency plan. Make sure you're reading all the rules about what you could do moving forward, in case that does that rug gets pulled out from underneath you it's probably a subject to talk about on another episode, but you know we had an example of that.
Speaker 1:We've got a product that we're in the process of creating at Innovate Realty where if a seller has got a great house but it's not, you know, fully renovated and not ready to take to marketing and extract top dollar today, you know we'll actually put the money forward and help execute a renovation so that it extracts top dollar and then Innovate will get the listing. And one of our very first deals last year was that exact situation. This gentleman had a small cohort of investors. They bought a property in Huntington Beach, california Great property, thought that they would get it on Airbnb or VRBO and start to make great money. But they didn't take the time and their agent that represented them on the purchase didn't take the time to understand that Huntington Beach doesn't allow that.
Speaker 1:So they buy this house, they get it fully furnished, they're ready to go, they go to Airbnb and it's like crickets they can't get the listing done and then when they go to resale it's now staged for an Airbnb and it's not perfect. So they luckily called us and we got it worked out for them and sold it, saved the day. But yeah, that is something to be wary of. So if you are interested in becoming an Airbnb investor, do your research, Look at the local market. Make sure that if you need a permit, you understand yeah.
Speaker 1:If the city actually issues those and you know, so on and so forth, We'll see if we sell our Palm Springs deal.
Speaker 2:Yeah, we'll keep you guys posted.
Speaker 1:Yeah, on market now.
Speaker 2:Yeah, Well, I think so in our last episode we were telling real estate stories. So we heard from Steve, from myself, but I think it's your turn to be in the hot seat, so talk to us what is the most difficult personal real estate transaction that you've had?
Speaker 1:Well, if you so, I will start by saying I'm not avoiding your question, but if you haven't listened to those episodes I think it's episode number three and four awesome stories. I think Suzanne's was really unique. You know, if you've never purchased real estate outside of the US, it's got a lot of hairy, really emotional details that are you know we'll let you go and listen to it.
Speaker 1:But it was awesome. So, and then, steve's, you know stateside here in Orange County was pretty unique too. So you know my story. You know, if you ask the question of the toughest one, the actual transaction was awesome. It's looking back is what makes it tough. So you know a little bit of backdrop.
Speaker 1:You know, if you haven't listened to previous episodes, I've been an entrepreneur for a long time. I actually I, if you haven't listened to previous episodes I've been an entrepreneur for a long time. I actually I started my career. I was swimming at the University of Utah and I needed to make some money in the summer in four months to not go into student debt, and but I had to continue swimming to, you know, remain eligible to be on the team. And so I went door to door and sold alarm systems in Cleveland, ohio, and it was a unique experience. I did a lot better than I thought I was going to do and you know, after that you know my sophomore year in college I started my own business and have been an entrepreneur since then.
Speaker 1:Going to my situation in real estate, that was kind of a tough one for me. Looking back at it now. We'll fast forward a bunch of years. I think this was 2008 or 2009. We were recently coming off, for me at the time, the most successful liquidation or transaction. It was a really hairy transaction. We'll talk about it another time but I was at the time managing a large sales force for a big company. We had started the company from scratch and when we started I had no equity. I had this kind of really complicated commission or override structure and I got to a place where the business couldn't support paying me the cash. So they started paying me equity. There was this really nasty tear apart, it was a father and son-in-law that ran the business. Son-in-law was my best friend and they. There was a divorce situation, so they started separating and I was living in Scottsdale and had a little condo there, which was awesome, living the single life, which was unique.
Speaker 1:And in that separation I was basically given a bunch of cash, and then the California companies and so during that process it's like I guess I'm moving to California and so, you know, came out, looked at a few places and found this awesome single family house in Manhattan Beach and I was just enamored with the city, I mean living the life yeah.
Speaker 1:Single. You know LA and Manhattan Beach specifically if you're not familiar. I mean, it's this awesome little section, you know, in the South Bay, south of LA. You know what people pride themselves on that live in that area or live in that city is that, you know, on Friday you park your car and you don't drive it again until Monday when you go to work. And it's true, I mean, it was like restaurants and bars and everything was awesome.
Speaker 1:And so I actually was just going to rent this house. So it was a four bedroom, three bathroom, you know, detached garage. It was zoned R2. So we're three houses off the water in Manhattan Beach. And as I was getting to know this guy that owned it, he's like, yeah, I'm going to rent it for. And as I was getting to know this guy that owned it, he's like, yeah, I'm going to rent it for one year as I'm looking to move, but then I'm going to sell it. I'm like, oh well, this is a pretty cool opportunity. I'm just moving here, I'm, you know, going to reformulate this business and, you know, maybe I'll just buy it from you and I'll go and, you know, work this project out.
Speaker 1:And it was a perfect site to tear the existing house down, build two structures, and then that was basically my plan. So we negotiated this lease-to-own deal and I mean, looking back, it was the worst decision I've ever made. The best decision to get into the lease-to-own deal, but I'll tell you the rest know the best decision to get into the lease to own deal, but you know I'll tell you the rest that you know that was the worst decision. But so, anyways, I get this lease to own deal done.
Speaker 1:It was like $1.2 million is what we agreed to purchase the property for. He wanted a 10% non-refundable deposit and he would give me one year to buy the house. Percent non-refundable deposit and he would give me one year to buy the house. So I give him 120 grand. I move in. I had my head of sales in my company and actually funny story and we can dig into that another time but the father-in-law in that big business. Separation was given half of the California companies and then I had the other section of it and so he moved in with us.
Speaker 2:He became your roommate.
Speaker 1:Yes, and he became my tenant and you know so fast forward. The house was awesome. I mean it was older but it was nice. So I start to dig into getting plans built and my vision was demo this house in the garage, build two units, sell one of them, keep the other, and I'll probably make enough money to just you know, pay for my house and live there forever.
Speaker 2:Yeah.
Speaker 1:And so I'm in the process of that, like I've got an architect on retainer and we're getting the plan structured and talking about you know how to go and build it and what should it look like, and all this stuff. I'm actually on a Sunday morning sitting on the couch watching a football game and I get a knock at the door and it's this random person I've ever seen before and they're saying hey, I met the guy that you know either owns this place or used to own the place. I ran into him at a bar and I overheard that you know he sold the place to you and I want to buy it. And I'm like well, I'm buying it.
Speaker 1:so you know, it's not for sale and he threw out this crazy number. Like you know, I bought it for 1.2 and it was like well north of that yeah. And you know I actually hadn't purchased it yet. I just had this cash out and I was in the process of reformulating this business. So it was like a half a million bucks to go and dump into our business, and so I unfortunately took it and I sold this property. I was actually dating my wife now.
Speaker 2:Oh yeah.
Speaker 1:She every day reminds me that it was the dumbest real estate decision that I've ever made. She thought it was a cool house and everything. But yeah, I mean it was so stupid. The person that purchased this went forward with the plans. I connected him to our architect and, you know, looking back at it now, I mean you know I probably left five or six million bucks on the table.
Speaker 2:Yeah, that's painful.
Speaker 1:Yeah, I mean the South Bay, because this was 2009.
Speaker 2:Yeah.
Speaker 1:The South Bay since then has been just a rocket ship.
Speaker 2:Right South.
Speaker 1:Bay since then has been just a rocket ship. I mean, we just looked at a deal at Bye Bye House in the South Bay that was on the strand on the sand that was selling for like 4,200 a foot, oh wow. And it's not necessarily new construction, I mean, and some of the stuff that's newer construction on the strand is getting more than that. So if you're familiar with price per square foot, I mean that's a that's a pretty big number, yeah and so, yeah, looking back to answer your question, the worst real estate transaction, or the most painful for me, was selling that house.
Speaker 2:Yeah, the decision, the decision, the transaction wasn't painful, but yeah.
Speaker 1:Yeah, I have a lot of great memories of that house. I mean it was. It was perched up on the you know it's hillside. Everything in Manhattan Beach is on the hill. We're like three, four houses off the water, but we're on that main road in Manhattan Beach and the house was just above a liquor store 20s, you know we're just post transaction.
Speaker 1:We've got some money. You are living your best life. We're building this business like we think we're going to be professional beach volleyball players, even though we don't know how to play it. It's like super popular and you know we're steps away from great wine and beer in this liquor store and yeah, yeah, looking back, well, you've got the memories yeah, that's all, it'll be forever. Yeah, great well, great.
Speaker 2:Well yeah, I think that's a good one. I think you know, I think that's it's different. We each had a very different experience with a personal transaction.
Speaker 1:I have some other ones, but not, you know, nowhere near as painful as that. That is the episode today. We've got a few episodes coming up that we're really excited about, Some topics that I think are going to be really, really interesting. If you haven't subscribed, subscribe on YouTube or wherever you're watching this, tell your friends, tell agents, tell lenders, tell everybody about it. You know, obviously, taking our ego aside, we think we've got some really unique content to talk about, some real conversations.
Speaker 2:That I think not a lot of people are talking about.
Speaker 1:Like real tea talk.
Speaker 2:Yeah, exactly.
Speaker 1:Just the best podcast on the planet if you're interested in single-family real estate or multifamily real estate. But check back. We'll see you guys soon, see ya.