TMIREI – Everything from AI, to Interest Rates, Banking Situation, and Various Investment Strategies

TMIREI - Everything from AI, to Interest Rates, Banking Situation, and Various Investment Strategies

by This Month in Real Estate | Patrick Grimes, James Brown, Nathan Turner, & Luke Andrews


James Brown: All right. I’m your host James Brown, and I help fellow investors reach their passive income goals through our hybrid investing model, as well as other traditional types of investing. Reach out if you want to learn more. If you’re watching live, feel free to comment and ask questions. Our guests today are Patrick Grimes, Nathan Turner, and Luke Andrews. Looks like we’re still waiting on Patrick, but we’ll get things started off. Why don’t we get started and have you guys introduce yourselves in that order, Nathan first and Luke, and share your background and what types of investing you focus on?

Nathan Turner: You bet. Thanks so much. I’m glad to be here. This is a new one for me. I don’t do a lot of real estate shows, a lot of real estate information. Reason being is because I’m a note investor, so I buy mortgage notes. I have done a lot of real estate investing, and real estate is very closely tied to mortgage notes, but I’m not in real estate per se. A little bit of my background, I started flipping properties back in 2005, 2006. 2008, I got started into doing some note origination where I was creating loans, and then in 2010 started buying existing loans. And that has kind of been my bread and butter so far. To me, it’s just a fantastic business. I love being in notes and everything that it offers and more flexibility and options that it gives you compared to traditional real estate. So I’m coming in with that perspective today and we’ll see how much I messed things up.

James Brown: Awesome. I’m really fascinated by that side of real estate. I’m sure we could talk a bunch about that.

Nathan Turner: Yeah.

James Brown: All right. Luke?

Luke Andrews: Yeah, so I’m Luke Andrews. I’m out of Louisville, Kentucky. My real estate experience kind of runs the gamut a little bit. I am a real estate agent, so I do help people buy and sell, but I also have a team of 21 agents. But I also have a real estate investment business as well, so a little bit of the fix and flip, but primarily buy and hold, and then some of the short-term rentals as well. I was fortunate enough to be in the 40 Under 40 club, so I was able to purchase my 40th rental property right before I turned 40. And then with that, I’ve done some books, written some books, done some education, a few things like that, but really excited to be here and get to learn from you guys.

James Brown: Fantastic. All right, Patrick, glad you could join us.

Patrick Grimes: Yeah, great to be here. Yeah. So Patrick Grimes, CEO and founder of Invest on Main Street. I started out real estate back in 2006 and ’07, lost it all ’09, ’10, ’11 in pre-development. Shifted to single family, did a bunch of buy-in holds, then traded those up to larger multifamily. Founded a private equity firm, Invest on Main Street now, holding about 500 million general partner on that multifamily and diversified into oil and gas of about 200 million on that side.

James Brown: Oh, interesting. Awesome. Well, thanks guys for being here today. Let’s just jump into the news. So through Moneywise, “‘The Fed screwed up’: Real estate billionaire Sam Zell warned that hot inflation isn’t going away anytime soon. Here are the three shockproof assets to help protect your wealth.” And he names fine arts, wine, and of course real estate being a hedge against inflation. Anybody want to jump in, start off the conversation about why real estate is a hedge against inflation?

Patrick Grimes: I wrote an article in Forbes on that topic, actually specifically why income-generating existing construction real estate. So where I lost it all first time not buying existing construction income-producing. But the hedge is pretty clear with rent. Rents tend to grow with inflation. As long as your debt products are fixed interest, which is biting a lot of people right now, or you’ve ponied up and paid a rate gap so that your interest rate doesn’t take all your cash flow and you can ride out a downturn, then you’ll find that in a recessionary environment your rents can oftentimes outpace your expenses and sometimes grow your NOI. That can happen as long as your tenants can still pay it. So at one point you have stagflation and maybe you can’t continue to raise the rent, but there is hedging on both sides of the coin there.

Luke Andrews: Yeah. I tend to agree, Patrick. I mean, you kind of talk about the recession and potentially if the housing market does pull back due to interest rates. You’ve got fewer people that are actually buying and transacting. They still need a place to live, so you could potentially be flooded with renters. Very similar to 2008, 2009, that’s when I got started in the rental piece. I was actually able to go shop while everything was on sale and then being able to… Like I said, the market just had this influx of renters. They were all good quality candidates. They got themselves into a spot to where they couldn’t particularly buy, and with supply and demand out there, supply being low and demand being high from rental perspective, I was able to have more of a choice of higher quality tenants and was actually able to raise the rents through that as well, actually increasing my income quite a bit.

Nathan Turner: That’s awesome. And Luke, same thing in 2008, is when I got started and instead of rentals what I was interested in, I’m too lazy for that. So instead of rentals, I would rather sell the house on terms, doing a seller finance deal, so that I don’t necessarily… Depending on how you set it up, but I can set it up so that I don’t actually own the property at all. With a rental, you’ve got the roof to fix, you’ve got the toilet to fix, you’ve got tenants in there. When I do a seller finance deal, I transfer the title over to a homeowner and then I just collect the payments. So I get all of the income that comes in the same as the rental, but I don’t have to worry about the roof, the toilet’s not my problem. And I’m not dealing with tenants, I’m dealing with homeowners. So I agree with what Mr. Zell was saying in the article. I think real estate is definitely one side of it. I would suggest take a look at notes, even some seller finance and look at that as another hedge as well.

James Brown: Yeah, I live in that world with seller finance and lease options. There’s pluses and minuses, of course, which way you go with that. But I know we’ve got investors, they just want to be hands off, similar to the note investing, where they just want to carry the note, be the bank, and not deal with those phone calls in the middle of the night.

Nathan Turner: Yeah. Yeah, exactly.

James Brown: So we’re talking like rentals or rental income. What do you think about the appreciation in this kind of an environment where we’ve got materials and labor going up, pushing the value up? And I know a lot of the markets tied to new build, there’s indicators with that. Do you guys have any comments on where that’s heading?
Nathan Turner: Again, rentals, they cost money to upkeep as well. So you’ve got the cost in there for the purchase and then you’ve got cost to upkeep that property that can really eat into your profits. And again, I promise I won’t just hijack and say do notes, do notes, do notes. But that is a factor. I will point out though that the downside of that is, you talk about inflation, and with inflation comes appreciation as well oftentimes. In the case of notes, that’s the downside. So I want to point that out early on, that is the downside. So with a rental property you’ve got that increasing equity over time. When you own the note, that is a depreciating asset. So that’s something that you will miss out on. But laziness has its drawbacks, I suppose.

James Brown: Gotcha. Well, let’s dive into the next article from Commercial Observer. WeWork is in talks with their lender to restructure three billion in debt. I assume you guys read this and have some opinions. Anybody want to jump in with what they thought about this?

Patrick Grimes: Well, I’m actually a fan of WeWork and their mission and what they did, being I got two master’s degrees while traveling constantly. I was a subscriber and I would jump into WeWork all time. I even was in Singapore one time walking through the street and I saw my phone connected to a WeWork wifi. I looked over and there was a WeWork right there. They grew too quickly, too fast. They were too aggressive and too optimistic. And like many commercial real estate investors, they’re finding themselves both on the debt and private equity way over leveraged. And that’s where I was back in 2007 and ’08. But most people that didn’t lock in long-term financing and fixed interest. They find that because interest rates are going up, cap rates are the way that commercial real estate’s valued, they’re inflating, and when cap rates go up, values go down. So the effects on the appreciation have been devastating to them because now their equity’s been drained. And coming out of COVID, their income’s very low. So it’s a very tough time for them.

Luke Andrews: Yeah, I tend to agree, Patrick. I think they’re a phenomenal concept but they probably did grow a little too quickly. Their amenities, the few that I’ve been in, they seem to have very high amenities, very high quality there. And I was always wondering how can this be sustainable long term because there’s a lot of upkeep that goes along with that. I think at this point, even with the cash injections that they’re talking about, they’re most likely going to have to have some version of a decrease in quality and then even potentially coupling that with increase in monthly rent and costs from the actual tenants and the end users. So I’m just wondering how long that can be sustainable with. You see this sometimes with restaurants too where they come out with over high-quality food and try to do it at a price, and then gradually over time decrease the quality while increasing the price on the backside, and it’s just not sustainable long term.

James Brown: Yeah, I saw that they laid off 300 employees in January. That’s probably going to hurt their customer service or whatever roles those people were in because they cut the fat.

Nathan Turner: Yeah, and Patrick you mentioned the low interest rate and then now we’re coming into highest interest rate. So again, we’ve got these people that are going to try to make those payments, all of a sudden that payment’s going to jump significantly. So that hurts. And that’s not just WeWork, that’s all kinds of office space.

James Brown: Office space was hit hard. In fact, our next news item, unless you guys have more to add to this, we can jump into the next one. So the other next article is from GOBankingRates, 10 US cities with the most empty office buildings. Oh shoot, hold on, I got to the wrong screen, away from my notes. Hang tight. Okay, so top of the list was Atlanta, LA, Denver, Phoenix, Chicago, D.C., San Francisco, DFW, Houston, and San Rafael, California.

Luke Andrews: My initial thought on this, and it was just an initial glance, especially the top five, the way the list is broken out with Atlanta, LA, Denver, Phoenix and Chicago, my initial thought being in all of these cities very recently is, traffic is horrendous in each and every one of those. Outside of really Chicago, the public transit systems in any of those cities are kind of subpar. I think it’s interesting you don’t have a New York City on this list, the subway system tends to work very well. But I kind of look at it as a product of too much traffic, too much time lost in commute, and just the advent of working from home. That’s something that COVID brought out, is it shows that many more roles can be done from home. And I really thought that coming out of COVID, that a place like WeWork would have jumped pretty significantly, but I think there’s still some commute times that go along with that. But that’s my initial take, was it all has to do with traffic, lack of public transportation, and then increased commute times and just working from home.

Nathan Turner: Yeah, agreed. Luke, I think a lot of people figured out that during COVID, man, there’s a lot of things that we can do outside of the office. Not only this that for a lot of people are more preferred to stay at home and work, but then at the same time a lot of these larger corporations see how they can trim a lot of fat off of their expenses and not have to pay for all this office space. So it’s kind of a perfect storm for the office space world. I’m not sure we’re going to fully recover, certainly not anytime soon.

Luke Andrews: I was in part-time real estate leading into ’14, ’15. I was in a corporate role in a Fortune 100, and they were starting to transition. I mean, this is obviously pre-COVID in ’14 and ’15, but they were really transitioning, trying to lessen that footprint for all of the costs, the overhead that they had. We were actually required to work from home two days a week, and we lost really all specified designated space within the office. There were just multiple different types of work stations that were there based upon the work that you had to do for that day. So they were kind of ahead of the game in that front.

James Brown: That’s interesting. Where’s-

Patrick Grimes: It’s interesting hear you say that because… Sorry, go ahead.

James Brown: No, go ahead, Patrick.

Patrick Grimes: Pre-COVID, I have some colleagues that worked at places like Amgen and Genentech, and they were already moving to this office space 2.0 where you literally had high school style lockers and open Starbucks areas with snacks and coffee, and people were expected to meet for meetings. They only had, I think it was half to three quarters of enough office space for their employees. A lot of them were traveling pre-COVID and then COVID happened. So I think that in general there was a sense already of people wanting more freedom, coming out of this need to come into the office. COVID obviously accelerated that. We’re no exception. I’ve been remote in my position. My wife does feature-length animated films for Disney and Dreamworks, and for the first time ever they all went home during COVID. Here they were producing animated films in our back office and it wasn’t… But a couple weeks before, my wife came out and said, “Let’s move to Hawaii.” So we moved to Hawaii two and a half weeks later.

So we’re one of those people that contributed, and she’s never gone back. There’re remote VPN into their computers. It’s just large ghost buildings that ultimately could just be a server rack, and it’s kind of a wonder of that matter of time. I think the triple net leases are really great investments in office buildings and retail until they’re not. They’re very low maintenance, they’re not a lot of work. They’re perceived as very low risk until you lose your one keystone, cornerstone tenant. We’re seeing that happen dramatically across the asset class right now, which is kind of a vote for multifamily or more diversification than all in one tenant. That’s my perspective.

Nathan Turner: Mm-hmm.

James Brown: Mm-hmm. Antonio, our producer, just put a note that they’ve got these big ghost buildings in China. They’ve just been standing there empty. It’s kind of a fascinating thing, but I guess they’re starting to demolish them, which is, I’d like to see what’s going on behind that. I don’t know if you guys have read about that. I was going to point out too, in that article, there was a lot of CEOs saying that they actually had a competitive advantage when they had people coming into the office over those that were remote. I suppose it depends a lot on the type of work. If there needs to be more interaction within the office, it is harder when it’s virtual. I mean, we’re working together basically on Zoom all the time. But what do you guys think about that scenario? Any comments?

Luke Andrews: I think there are options, like Patrick was talking about, just really decreasing that footprint and saving some overhead, but keeping some space that’s around that are… Larger corporations almost creating their own WeWorks within the system, so it’s like they’ve got just big open spaces with… We had picnic table type setups and a couple of almost like restaurant booths with high backs so there are small senses of privacy and then just small little glass rooms that we called phone booths if you needed to step in and take a private personal call or even a private conference call. So I think there really are some great opportunities to still have some spaces available in case people need that interaction, because I do know that there are some that they thrive on the person-to-person interaction while others really prefer and are more productive working from an at-home environment where they can eliminate the commute.

Nathan Turner: I think a lot of the younger generation too, they’re more practical in terms of, “Tell me why I need to travel. Tell me why I need to go into the office. They have to make a really good case for it or I’m just going to stay home.” We’ve seen a lot of migration over the last couple of years to smaller towns or outside of larger centers where people are buying houses out there so that they can have office space, so that they can just have their home office and work from home. So it’s going to be really tough. I know Antonio jumped in here again and saying there’s a lot of companies saying that, “Come back to the office or else.” That’s only going to go so far in my opinion. I think that there’s going to have to be made a really strong case, otherwise the shift is going to stay to the home office and remote working.

James Brown: Yeah. We’re holding the control during COVID and then with the job market being pretty tight, hard to get employees, so they were kind of like, “Hey, do you want me to work? Let me work from home.” So you see how this all breaks down. We got Cindy Coleman just comment, “I don’t think it’ll be the same. I agree with Luke’s comments 100%.”

Luke Andrews: That thought was nice to hear.

James Brown: Yeah.

Patrick Grimes: Yeah, totally. There’s a comment about Apple Tim Cook actually punishing. I’ve heard Elon Musk is trying to punish those employees which are not coming back. They’ve enhanced tracking now. They’re tracking their employees. On the other hand, other companies have won big. Ones that have adapted to the changing culture and have embraced remote workers can get better talent and they can potentially pay less in other markets where it’s less expensive than their headquartered. So I know that the relocations that Facebook are doing and Twitter are doing, if you do relocate, they’ve reserved the right now to adjust your salary because they’re not going to pay you what you would be if you were living in the middle of San Francisco. So that was a really good move by the employers, but it does certainly reward those that are more agile and allow for more freedom.

James Brown: Cindy comment again, “The problem employees are seeing is, productivity is down. Employees are doing personal tasks instead of their job.”

Nathan Turner: There’s softwares that you can use. I mean, we use those with virtual assistance to monitor what people are doing anytime, whenever they’re on the computer or not, so there may be more of a shift to that. I mean, at the same time there might be more of a shift to using virtual assistance in general if everyone can see that, “Oh man, we can do a lot of these things virtually.” There’s a much cheaper labor market out there.

Patrick Grimes: It’s interesting to hear you say you’ve had success with that. We have probably a dozen virtual assistants, and we’re using screenshot monitors and ones that have intelligence that can actually monitor all the apps they’re running, ones that will tell you whether or not they think something’s fishy or there’s patterns. But they have mechanical clickers now on their mouse, gaming mouses that randomly click, and we’ve just found that having the monitor gave them the ability to fake it out and work less. So we actually just started saying, “Okay, we have the monitor only for clocking in and out.” The only way we can monitor their progress is by results now. And we have to literally track their calls, their emails. And we have a whole VA, that’s all she does. Are they actually working? Because we can’t get any of the monitors to work. I’d be very interested to hear if you had similar trouble.

Nathan Turner: For me, honestly, bottom line is results. So is the job getting done? Is the work getting done? That’s all I really care about. If it takes them five minutes to do something that would take me an hour, great, good for you. But I just care about the results, I just want the end.

Patrick Grimes: Agreed.

James Brown: Well, hey, let’s take a break to hear from one of our sponsors.

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James Brown: All right, great. Let’s get back into it. From Wealth Management, “Real estate investors brace for liquidity squeeze amid bank sector turmoil.” I’m talking about Silicon Valley Bank and New York Signature Bank. Comments right off the bat.

Patrick Grimes: Liquidity squeeze… Sorry, go ahead.

Nathan Turner: No, go ahead, Patrick.

Patrick Grimes: The note guy should answer this one.

Nathan Turner: This is, everyone else’s bad news is our good news. Like I said, I got started in 2008 when everything was crazy. So when I started buying notes in 2010, I mean everything had already hit the fan and was coming down, and we’re there to pick up the pieces. So this is something that… Actually, if you go and talk to note investors, we all thought the shoe was going to drop in 2019. We’re all just waiting for something, some kind of a catalyst to put it all into motion, and it just didn’t ever come.
All of a sudden COVID shows up and we go, “This is it. Get ready for the wave of defaults.” And then that didn’t come either. And that goes back to what that other article we were talking about with Mr. Zell. He is talking about the government pumping up the economy and throwing a whole bunch of money at it, which I think was the right thing to do, honestly. At the same time, that kicked a can down the road and I think it’s kind of starting to come to a head. So I don’t think we’re 2008 all over again, but this is definitely a rideable wave, in my opinion, we’re in for.

Luke Andrews: Nathan, I’m curious in your perspective, what’s the strategy? Let’s forget about large government policy strategy, but for local investors who are looking to, “Hey, I’ve got some cash. I’m willing to take a little bit of risk. How do I ride this wave that you’re talking about? How can I financially benefit from what’s going on right now?” Somebody like yourself, what’s the plan there?

Nathan Turner: So, two things: Number one, I’m raising money. I’m actively raising cash so that I can go out and buy some more of these notes because I foresee a lot of defaults coming down the road. At the same time I buy defaulted notes. I also buy current notes where people are making regular on-time payments. Those regular on-time payment notes, I foresee those coming from a lot of seller financing. So as banks fail and then tighten up their lending policies the same way they did back in 2008, ’09, ’10, it turns to seller financing, and the seller financing world is ramping up more and more. It’s already a $30 billion a year industry, so it’s a huge, huge sector. And that’s only going to get bigger for the mom and pops or for the institutional that are doing this on a more regular basis. For the note investor, that’s a way to help them recapitalize cash out and then go and do it again or do whatever they want. I will go ahead and buy those notes and just collect.

James Brown: Nathan, are you just in single-family home notes or do you get into other stuff?

Nathan Turner: I’m just single-family. And commercial is the first thing, and this is what this is talking about, a lot of the banks, this size of banks, they’re more in the commercial real estate space. I just don’t have any experience with it. I’d like to learn because I think it’s going to be a very interesting space, not so much maybe the office space like we were just talking about, but I think there’s a lot of opportunity in the commercial as well.

James Brown: Yeah, I didn’t realize it was the small banks that typically do that commercial stuff and they’re the ones that end up failing. The bigger banks tend to stay away or at least keep a smaller portion of their portfolio in the commercial stuff.

Nathan Turner: Yeah.

James Brown: Oh, Patrick, you’re muted.

Patrick Grimes: So on the commercial real estate side, which is where I live, there is fear ish, I would say, from lenders. But the Fed responded they were going to raise the interest rates 50 basis only with 25, and we’re going to kind of see what happens. There’s some lenders that want to delay things. We have two closings right now. The lenders have kicked the can down the road in 20 to 30 days. So there is a little bit to be said for the ability to get debt and also investor capital. We’re talking about raising capital, I think more so than something like a banking scare can then cause tangible effects to returns in real estate. It can affect the ability to raise capital because of the fearmongering that happens.

What I’m seeing on the energy side, for example, because we do diversified energy portfolios, a huge number of investors from real estate pivoting to energy. It is another essential need that’s non-correlated and doesn’t use debt. So it doesn’t have interest rates as a way to diversify. And the conversations have recently gone much more so on the side of fear of real estate. So let’s get into something else that’s not attached or correlated to it. I’ve seen a big wave of that as the interest rates rise and especially as we’ve seen this banking pseudo crisis happen. I say pseudo crisis because a real crisis would be a real crisis. We’re not there yet.

James Brown: Nice. Any other comments before we jump into the next news item? All right, let’s jump in. From Business Insider, “Gen Z is coming for the housing market.” I love this one. It’s kind of a surprise because they called out Soli Cayetano, I follow her on Instagram. I think she started her investing journey when she was 22, used technology and figured out how to do it remotely. She was in California and bought in Cincinnati her first property. And now, I think it’s just like two years, she’s got 30 some properties, and partnering with some other people. So she’s not done it all on her own, but she’s orchestrated it at all. Just incredible what she’s done and now she helps teach. So, any comments on that article?

Luke Andrews: I think Gen Z, it’s going to look a little bit different than it has in the past, and I think that’s been, where they talk about in the article, the new American dream. I think Gen Z has done a really good job of embracing the technology side of it, from both an education piece and a tools piece, that has allowed them to do things on more of a global scale. I know a lot of people in my market, kind of heartland of America here, they liked the real estate space because it was something that was tangible, that they could go out and they could just touch, that they could just go visit each and every day. But Gen Z has really embraced from working remote, working from afar to also managing and owning from afar as well. It’s like, “Hey, I may not be able to afford in my own city, but that doesn’t mean that I can’t go out and I can’t utilize the tools at my disposal and build wealth by buying in less expensive markets.”

James Brown: I think Soli got started with bigger pockets. That’s how I got started learning about investing. There’s a lot of tools and they’ve curated some really great books. I’ve got one on long distance investing.

Luke Andrews: There are, but I can tell you, from working in the real estate sales side, it has created a lot of faux investors, we’ll call them, people who don’t really know what they’re doing, who are trying to go out and they’re trying to be wholesalers. They’re in it to just make a quick buck and not really in it to actually make an impact or build a portfolio or build any sort of sustainable revenue. So it’s created some challenges. So it does, as both agents and then buyers and sellers as well, we have to make sure that we’re doing some additional due diligence to make sure that the party on the other side actually knows what they’re doing, that they actually have the right to be able to sell a specific property, and that we’re… It’s taking a lot of additional work, and like I said, due diligence on our side to make sure that everyone is protected in this instance because there are a lot that causing some problems. They know just enough to be dangerous.

James Brown: Oh, yeah. I have wholesalers reach out all the time. Okay. I start asking questions. Are you really a cash buyer?

Luke Andrews: Yeah.

James Brown: What’s going on behind the scenes?

Nathan Turner: Yeah.

Patrick Grimes: I have very-

Nathan Turner: Go ahead, Patrick.

Patrick Grimes: Well, I love this panel because we come from completely different businesses. We’re all approaching real estate in completely different capacities. Because I read that article and it’s like, “Housing market’s coming for you. Gen Zs are coming for you.” And I’m like, “Well, what they’re coming for is, they’re becoming a renter nation in my world.” And I heard that embracing technology, yes, they’re embracing technology, the remote. They’re also embracing the technology in our multifamily buildings, and Gen Zers are not buying homes, and the boomers are retiring and they can’t afford new homes.
So what we’re seeing is, especially from the Gen Zers, just huge demand for millennial-type amenities in our apartment buildings. And that’s new. That’s new for multifamily. The American dream was always, go buy a home. Well, for the millennials that went through 2006, they don’t like what that did to them and their family and their parents. They remember that. So for my lens, I don’t understand it. I don’t believe it. Because the reality is, if you look at the data, they’re all renting in our A and B class apartment, large apartment communities, packed full of amenities.

Nathan Turner: And Patrick, is that the millennials that are renting or the Gen Zers or both?

Patrick Grimes: Both. Yeah.

Nathan Turner: Interesting.

Patrick Grimes: The trend is moving away from buying homes and kicking the can down five to 10 years later to doing so.

James Brown: Yeah.

Nathan Turner: Again, I got to plug notes. When I introduced myself, I didn’t say where I’m from. I actually live in Canada, so I’ve been doing notes from Canada in the US since 2008. So talking about embracing technology, technology is what allows me to do what I do. So for those that are those Gen Z, those millennials, my two cents, I’ve managed property from afar. I’ve had rentals on the other side of the country, and maybe they’re doing it better than I did, but I found it really difficult when a renter moved out and then I had to go out. It was more economical for me to actually go out myself and take care of that property to turn it around than it was to hire somebody locally to do it. With a note, I don’t have to worry about that. That’s not my problem. So again, I get all that cash flow, none of the headaches. So it’s a fantastic thing to do from afar. So my people talk about investing in your backyard and I say, “Yeah, I just have a really big backyard.”

Patrick Grimes: I like it. You went the complete opposite direction as I did. I actually wrote an article in Forbes on how single family is a nightmare and how the asset protection issues associated with signing on loans and putting properties in your own name. And instead of doing more three-bedroom, two-bath, and you went, “Well, let’s just do the debt,” well, I went from three-bedroom and two baths, and my first multifamily deal was 86 units. That allowed me to have onsite manager so that I didn’t have to do any chasing. I didn’t have to chase a property manager, non-recourse debt, so that I’m safe. And I was an income producing asset and a better market further away. And you went totally different directions to solve the same problem.

Nathan Turner: Yeah, same principle with two different approaches.

Patrick Grimes: Yeah.

Nathan Turner: Real estate is amazing.

James Brown: Yeah, that’s what I love about it. There’s no perfect solution. Right? There’s upside or downside.
So let’s jump into our next one. From Commercial Observer, “Fed indicates possible end to ongoing increases after 25bp hike.” Jerome Powell is looking at 5.1% by the end of 2023 and inflation down to two. This is kind of world, I’m not really-

Nathan Turner: Again, I kind of hope they do keep hiking just for my own benefit. But at the same time, actually, I think there is… To me, it makes sense that they do have to raise up the interest rates. It has to create a squeeze. There has to be a little bit of pain so that the economy slows down, and this is the way they’ve chosen to approach that. I don’t know if there’s another approach, but I believe that that’s what they’re trying to accomplish. So as raising interest rates continue, that’s what the outcome is. And I think that’s what they’re after.

Patrick Grimes: Well, I hoped Jerome didn’t hear what Nathan just said because I would prefer that they don’t keep raising rates. I want them to solve the problem, and that’s inflation. We need that for the health of our nation and national security, for everything. The problem is, they don’t have very many knobs to fight that. And they’ve been effective, it’s been very effective in the past. Crash the economy through raising interest rates, keep raising until something breaks. Well, the banking system, not the whole banking system, but a couple banks broke, banks that were not allocating too heavy into bonds, but they’re keep going.

They need to solve the inflation problem. I think, ultimately, our nation has to have that fixed. So they’re going to keep raising it. They’re going to keep raising it until we do see enough hurt in the economy to fight to stabilize and get it back to 2%. But in the meantime, I think in real estate, and I think in oil and gas, and I saw Anthony made a comment here about oil and gas, I think in essential needs, and that’s really what it comes down to, housing, food, and energy, those things that are still needed, those tangible assets, those are the things that you’ll find yourself winning through an inflationary environment. So that’s what I tell people.

Luke Andrews: I’d agree a hundred percent, Patrick. There’s a price elasticity to it, of them trying to continue to raise. It is a very simple example, but it’s really no different than $11 beers when you go to a professional baseball game. I mean, they’re charging $11 and everybody complains about it, but everybody’s still paying it. Right? I mean, if they thought that they could charge $20 and people would still pay it and the system wouldn’t break, as you say, they would be charging $20. They’re going to get to a point to where things break and then they start dialing it back to get it fixed.

James Brown: Yeah. Yeah.

Patrick Grimes: Agreed.

James Brown: Let’s take another break to hear from our other sponsor.
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James Brown: All right. From Business Insider, “The AirBnbust proves the Wild West days of online vacation rentals are over.” I like how they bump up these headlines. Oh god, the sky’s falling. Are any of you guys in short-term rentals?

Luke Andrews: I am.

James Brown: Okay. And what do you think? What are you seeing?
Luke Andrews: I hate it. Absolutely. I hate it. I’ve got a business partner that loves them, that thinks that they’re fantastic. But management fees are exorbitant. The turnover, sure, the revenues are significantly higher, but the risk is also significantly higher that goes along with that. It’s constantly trying to make sure that everything is updated. We are chasing ratings and rankings and finding a great deal of, if you want to call them tenants, patrons, whatever you want to call them, who are now in a spot where they’ll rent for a weekend or a week, get to the end of it and say, “Hey, oh, by the way, we have these problems. If you don’t knock 50% off of my weekly fee, then I’m going to trash you online.” And just one or two bad reviews will absolutely kill an Airbnb. So there’s just a lot of things that go along with it, that it can be great, but there’s a lot of challenges and struggles.

Nathan Turner: I have a question-

James Brown: So you use a company to… Oh, go ahead.

Nathan Turner: I was just going to say, how levered are these? When they see the income, in the article it talked about that one example where it’s going from $7,000 a month income down to three, how levered are these? How badly does that hurt? Again, I don’t know.

Luke Andrews: It’s pretty significant. I mean, they’re financed very similar to any other property that we have.

Nathan Turner: Okay.

Luke Andrews: It’s typically a 75-25. Some of them tend to be unique properties because people now, as they’re going on the Airbnb, they’re looking for experiences. So you’ve got these unique properties that may or may not have a lot of value outside of the Airbnb market. So it can be a real struggle that if we decided we wanted to move away from the short-term rental and just move into a full 12 to 24-month lease tenant, it’s difficult finding some tenants to come in and take those over.
James Brown: Yeah, you got to look at plan B, on any real estate, right?

Nathan Turner: That’s a good point though, James, what is plan B? Is it just the 12 to 24-month rental? Is that your best bet?
Luke Andrews: So for me, plan B is, well, one, it’s packaging and selling if at all possible. But the other option is coming through and looking for longer term tenants, someone who’s willing to come in. But again, we need very high revenues with these properties because they tend to be a little more expensive on the front side. So you need more than what just a traditional month to month tenant’s going to provide.

James Brown: How difficult has it been for you to find somebody to manage the day-to-day, manage the cleaners, and keep cleaners on track?

Luke Andrews: It’s not terribly difficult, and ours is in a remote part of the state, a state that’s very heavily trafficked. It’s in a large state park that is probably our most popular state park. It’s an interesting property, and we do have a property manager down there, but they’re charging 28% of the monthly revenue to come in and take care of that. Now, that covers cleaning fees, that cover some maintenance, things like that. But we’re still paying to have the lawn maintained, still paying pest control plus cable, internet, water, electricity, all of the traditional utilities that are there. So yeah, it’s a bit of a challenge.

James Brown: What state-

Patrick Grimes: I’m really interested… Sorry.

James Brown: I was just curious what state that was in?

Luke Andrews: Kentucky.

James Brown: Okay.

Luke Andrews: Yep.

Patrick Grimes: I’m really interested to hear you say that because I haven’t heard recently from… I hear from Airbnb investors occasionally because both single family and Airbnb and small multifamily that have the same hair pulling like, “Hey, I’m tired of it. I want out.” And oftentimes they’ll call me, say, “Hey, can I 1031 exchange my profits, sell it, and trade it into a multifamily, deal with you as a partner?” So we’ll do that. So I hear stories on both sides. I hear stories like, “You can never compete with the cash flow I’m getting. I can retire on just a few Airbnbs, but it’ll take a whole lot more of these larger multifamily passive investments to retire.”

I guess the question is really, is it worth it? Where are you at with your need for cash flow and appreciation, the economics? And is it worth the hair pull? I don’t have any hair left, so I tend to have larger multifamily existing assets, but then I diversified into energy and that has its own problems. So I guess I can’t talk about that risk profile. But it’s interesting to hear, do you see people exiting Airbnbs? Because really, that’s the only voice I ever hear on my side

Luke Andrews: I hear people exiting all the time. Now, I don’t necessarily agree with the article that the Wild West days are over. I think that there are still a significant number of people looking for Airbnbs to rent on a monthly basis. But a lot of the owners who got in thinking that it was easy money are realizing that it’s very difficult to get them turned over and to keep those ratings up high. Where a lot of people I see are having some great success are with the traveling nurses.

So in my city, for instance, if you are inside, and really even my county, which is the entire metro area, they’re trying to get away from Airbnbs completely. So they’ve passed a lot of laws where it’s very, very difficult to even have an Airbnb. But the way to get around that is to either have your property zoned commercially, or the tenants can be there for 30 plus days. So they’re renting them out to traveling nurses. These are people who are coming in for 30, 60, 90-day contracts who are getting very generous housing stipends. So having a great place for them to set up, it’s longer, more sustainable revenue and income with generally a very high quality of tenant, but allows you to take advantage of some of the pros of the Airbnb by continuously being able to raise the rent every 30 to 60 days as the market requires and as the market allows, as opposed to being stuck in a 12 or a 24-month lease to where you’re pretty well locked in even if the market has jumped significantly.

Patrick Grimes: Do nurses pay similar rents to typical Airbnb?

Luke Andrews: They do. I mean, it’s also one of those… So they’re going to pay a higher rent than somebody traditionally coming in signing a 12-month lease, but it’s not going to be quite as high as if I had it rented on an Airbnb 30 days a month. But that’s also not typical either. So if it breaks even, it’s a 15, 18 days a month that I’d need to rent it out as an Airbnb. I think that’s a win all day long because who knows if I’m going to be able to rent it essentially every other day throughout the month, especially during some of the slower months because they all tend to be a little bit seasonal.

James Brown: Yeah. There’s so much less management going on. I was a super host, renting out a room in my house. I started out letting people rent for one day at a time. That was insanity. I bumped it up to two or three days minimum. That way, I wasn’t having to clean and prep every day, so I could really see the midterm rentals being great. Even if you’re not making as much profit, you’re not putting as much effort into it. I’m just wondering, I hear about it all the time, people starting to convert or at least offer that, but how many traveling nurses are there?

Luke Andrews: There’s a lot right now, especially in some of the mid-size markets. Dayton is one, Louisville is another, St. Louis, Huntsville, Alabama. There’s a lot of these mid to larger size markets that they need a significant number of traveling nurses.

James Brown: And there’s corporate rentals too, right? I’ve got a friend that that was his main deal. He said there was risk to it. They’d have some amazing months pulling in hundreds of thousand dollars and then some months not so much.

Luke Andrews: You got to put in a lot of legwork on those on the front side, building up those relationships. And without those relationships, it’s virtually impossible to break into that.

James Brown: Yeah. You have to be able to deliver, not screw up, otherwise, whoop, you’re blacklisted from a whole company that was feeding you, right?

Patrick Grimes: Corporate housing is, when I hear that from a broker, I get excited because it means somebody has built their whole model around a single or maybe two employers. And when they pull out, they’re distressed, and the note guy is about ready to take the property because they’ve fallen under their debt-covered service ratio, and we swoop in and lease it up with regular long-term residents. That’s a pretty risky play. And it can fall very quickly because those lenders, you lose over 20% of your residents, 30%, depending upon the terms, they can move in very fast and take that property.

Luke Andrews: Mm-hmm.

Nathan Turner: And the note guy is always on board. He’s ready to go.

James Brown: Vulture.

Nathan Turner: We’re there to help solve problems, but it has to be a problem first.

James Brown: Awesome. Any last minute comments on that one? All right, let’s jump in. The New York Times, “Bank crisis could cast pall over a commercial real estate market.”

Patrick Grimes: I missed that. What was it? The New York Times cast what?
James Brown: New York Times said, “Bank crisis could cast pall over commercial real estate market.” I know borrowers are scared. I’m talking how there’s fewer loan originations recently. So banks are definitely tightening up. I can go back to that other article where we’re talking about the difference between big banks and small. Smaller ones are more or less risk averse, more nimble, but still, everybody’s kind of clinched up.

Nathan Turner: I think, in more than anything else, it puts even just regular Joes on edge, because memories are short, but at the same time I think a lot of people remember that 2008. So when we started hearing about banks closing, that really gets people tensed up pretty quickly. And is it going to continue? I don’t know. I don’t know, maybe. And at what rate and which banks and what effect is that going to have? That’s a bunch of unknowns and it’ll be interesting to see how it all plays out.

Patrick Grimes: It’s hard for me to comment on that without going back to the prior article because the reality is, the Fed’s intention is to cause pain. This is the first sign of real pain. Was it a couple months ago that they announced 500,000 jobs were added to the economy over the last year? Well, that means that all this effort of raising interest rates and all the pain that it’s caused, our economy’s still just kicking it. It’s just still, it’s booming. It’s like, “Come on, slow down for a minute.” Yeah, of course it’s going to cause lenders to be skittish. It’s going to cause investors to be skittish. Right now we have a $9 million asset and a $50 million asset that didn’t close on time and we’ve kicked the can down the road twice, all lender related items. So we’re just trying to get things sold. So we’re like, “Investors should have your capital back next month. Oh wait, I mean, next month. Oh wait, I mean…” So that causes problems.

Nathan Turner: I know some British lenders if you’re interested.

Patrick Grimes: Can you loan on $60 million multifamily deals, Nathan?

Nathan Turner: I can’t, but I’ve got some colleagues that could.
Luke Andrews: So Patrick and Nathan, I’m curious to get your thoughts. I think banks, with the way that they’re set up now, as they start to contract a little bit on the larger commercial projects, they’re still going to need to be lending money and bringing in some revenue in that point. Do you think that they’ll shift? Do you think they’ll just tighten completely? Or do you think that they’re going to shift their focus into moving down more to the single-family borrowers and buyers and kind of pump that way and focus their business in that direction?

Nathan Turner: I actually had the same thought, Luke, when reading through this article, that same thought of, does that mean then there will be a shift more to residential? And they look at that a little more closely. At the same time though, we’ve still got higher interest rates. They’re not sky-high, but they’re higher, which is starting to discourage people. We’ll look at the next article when it’s starting to discourage people from getting out there. Especially if they’ve already locked in at 3%, they’re really not very motivated to go back to a bank and lock in at six or 7%.

Luke Andrews: Sure.

Nathan Turner: So-

Patrick Grimes: It’s really… Sorry.

Nathan Turner: No, just to say that it’s interesting. I don’t know what their plan B is.

Patrick Grimes: To your point, the motivation, it’s really the sentiment of it all. It’s the sentiment driven like, “Should I wait right now? Are they going to rebound or interest rates going to go down?” Because you look back in the ’80s, interest rates were well north of 10%. People were doing real estate deals, people were making lots of money. It was fine. But people weren’t feeling like they were getting a bad deal because it went up a percent, up a percent, up a percent. People were still doing deals. During COVID, we actually did see a contraction of the banks on commercial properties, and there was a long period of time where it was almost impossible to get a loan on commercial properties. But Fannie and Freddy stepped up with their tasked by Congress to provide liquidity in a recession. And we were able to get loans even during COVID when all the banks had dried up.

I think the other side is, it’s a capitalistic market, which is part of the problem why we’re having a banking crisis because the banks get way too aggressive. Especially the Silicon Valley and the New York type of banks, they get way too aggressive. First Republic, by the way, which is teetering, I mean they offered me like a $200,000 line of credit. They do wild things. But that capitalistic market, that’s the market that’s going to drive… Somebody’s going to come loan to you, somebody’s going to provide some kind of loan to you at some kind of interest rate. And new players will come on board that weren’t on before because they didn’t want to lend at those low interest rates. And all of a sudden you see new insurance policies and all kinds of different players coming on board. We’ll be able to find liquidity whether it’s different players given the note or it’s the government in the term of their Fannie and Freddie agency. We’ll still be able to do deals. There’s not going to be a mass migration to single-family. We still have to house America.

Luke Andrews: Yep.

Nathan Turner: Agreed. Again, what I was saying earlier is that it may shift into more seller financing deals where the banks maybe aren’t necessarily lending, but somebody will step in. And if that’s a seller finance, somebody who either owns a house, a second house, they’re willing to sell on terms, or somebody that’s just doing it as an investment and they go out and find a house and then seller finance and sit back out. Maybe they’ve got an Airbnb they’re trying to get rid of, I don’t know. But yes, the economy will keep going.

James Brown: Yeah. That’s what we’re doing. And even this is kind of interesting. We’ll might have an investor that can’t get financing but has some money to put down, we’ll have another investor buy a property for them and then once they can get financing, they can step in. So there’s a lot of different ways to do deals here.

Luke Andrews: Almost like a financing arbitrage.

James Brown: Yeah.

Nathan Turner: Yeah.

James Brown: Yeah, exactly. Maybe a way to get Gen Zers going.

Nathan Turner: Yeah.

James Brown: Let’s jump into the next one. From Fox Business, “Florida’s red-hot real estate market cooling down. ‘Gone are the days of bidding wars,’ broker says.” We’ve had Florida, and I think every month we’ve had some article talking about how hot it is there. But do you guys have any experience with Florida specifically? Patrick, you’re nodding.

Patrick Grimes: I knew. Yeah. But I mean, those articles, somebody’s writing that article every single year in the history of the United States. Probably an identical title. In fact, if you told ChatGPT to write an article that’s the most commonly written article, it would write a devastating article about some market collapsing. Right? It’s going to be nonstop like that. I personally am not a big fan. Because going through recession, having lost it all once, I want to be the tortoise and not the hare. I don’t want to buy in recession resilient markets, and so those that have diversified employment. So I don’t like buying where I live in Southern California, Orange County. I like buying in places like the southeastern states and Texas. Those were tax advantage and landlord friendly.

Where Florida fits that, it doesn’t fit the diversification of employment. So those much more, and so they’d be the Orlandos and Miamis and Fort Lauder, are much more associated with hospitality, but that is very recession affected. And I don’t like having any large piece. I like having that, but I like having a lot of other things like education and health care, finance, logistics, a piece of technology as a healthy makeup of an economy. Not like you see in Silicon Valley. But in Florida, that really only leaves places in the north, like Jacksonville, where there’s heavy logistics, military, education, and it’s not super heavy, but you can still take advantage of the tax advantage, the influx of people. It’s kind of on the north side of Florida, the great weather. That’s my take on Florida.

I do see Florida, if you look at the FRED, you can type in FRED yourself statistics and the Federal Reserve post statistics in every market. You can do the graph of the housing prices in every market. Places like Houston just steady climbed. When 2006 happened, they leveled off and they went up again. Places like Las Vegas and Phoenix, Orlando, they went up like this, then they took a nose dive down, and it took 12 years for them to just get break even. They started going back up again. While Florida has made some progress to diversify their economy into more recession resilient markets, they’re not as heavily indexed as they were back then. It’s still going to be a rollercoaster in Florida. They’re relying purely on people moving there right now to fuel that.

Luke Andrews: Well, and Patrick, I really agreed with your first statement where you talked about that this article could be really written about anywhere and could be written every year. Specifically, in this article, I’m looking at it now, it says that the Palm Beach County single-family home sales are down 21% and condo sales down 38% from one year ago. Well, yeah, they have dropped some, but they’re coming down from all-time high sales.

Patrick Grimes: Mm-hmm.

Luke Andrews: What we’re seeing really across the country and from being a boots on the ground agent and leading a team of boots on the ground agents, is the market slower this time this year than it was this time last year? Absolutely, it was. We’re back to closer to 2019 market statistics, 2019 sales. At the time, during 2019, every agent in town would’ve told you that that was the best year that they had ever had. So it’s not like we’re going to 2008, 2009 where it was some of the worst years that they’ve ever had. We’re just taking a slight step back. But the headline absolutely gets a lot of clicks. It gets a lot of people talking about it. And yes, is it down a little bit and could that potentially be an indicator for what’s to come? Maybe, but I don’t think that it’s any reason to incite panic at all.

Nathan Turner: Totally agree. It’s an article where it’s… I mean, news agencies are exaggerating. What? Yeah. For properties that I’ve taken back and resold, things have slowed down, like you said, Luke, from all-time highs, so I’m not concerned. Not yet. Few more bank fails and maybe we’ll see something else happen. I don’t know. But no, it’s fine. Slowed down. In the title of the article, it’s cooled down a bit. I think that’s a pretty good description. It’s cooled down a bit. It’s not crashing by any stretch.

James Brown: All right. Let’s jump into our fun news item for the month. From CNBC, “Finland is the world’s happiest country. Now it’s giving away free trips to show travelers why.” Well, Finland has gotten the world’s happiest country six years in a row. It says they base it on income, mental health, physical health, social support, generosity, corruption levels, and freedom to live without discrimination. So what they’re doing is giving away free trips for a four-day masterclass, and they cover Finnish philosophy and work-life balance. They also talked about it being like a skill. I think it’s just a mindset thing really for them that the rest of the world isn’t caught up to. What’d you guys think of that article?

Luke Andrews: I think it’s a very interesting experiment. I think they’re teetering on potentially a little danger there. I think it’s great from a perspective of, let’s increase tourism, let’s highlight what we’re doing here. But I think that things like this tend to attract a lot of skeptics and a lot of people trying to prove it wrong. So you invite a whole lot of people in to come in and scrutinize and analyze, and all of a sudden you’re bringing in a lot of negative energy, which could potentially have some opposite or some negative effects.

James Brown: Got a comment. Is Finland as capitalistic as the United States? Can’t imagine. Scandinavian countries are pretty socialist.

Nathan Turner: Yep.

James Brown: But they’re not afraid of money.

Patrick Grimes: They’re very wealthy. Yeah. They do have significant oil reserves, and so they do come from a place of abundance when it comes to income. They’re born into… Most of them are, from my limited understanding, they’re countries are very wealthy, and so you have a little bit more, yet you start off in those countries a little bit more privilege, but that means you can expand your mind. You can be more inclusive. They help out with health care. They help out with education, and they’ve done very well by doing that. I have friends that just moved out of Southern California and went up to Scandinavia and just set up shop for a year or two because of it, and they loved it. They had a great time. So I love those people, and I think they’re great countries. I mean, I like the fact that they’re promoting their inclusiveness. I mean, it’s not far off from my beliefs in a lot of ways too. So, more power to them.

Nathan Turner: I love the line there where he talks about their close relationship with nature and down to earth lifestyle. We recently moved from Montreal, which is more kind of a city vibe, to Alberta where we’re near the Rocky Mountains. And I got to say, I think there’s something to that where we’re closer to nature, closer to more of a down to earth lifestyle. I tend to agree. I think that’s pretty good.

James Brown: Yeah. I was born in Alaska, moved to Colorado. I love being out in nature.

Nathan Turner: Yeah, it’s good for you.

James Brown: Yeah. This reminds me, it’s been quite a few years, but I believe it was Norway, was incentivizing people to move there to work, and they would pay for their housing for first year or something, teach them how to speak the native language. It was hard to resist for some people that were in countries where they did not have a good lifestyle. I’ve heard too, some Swedes kind of feel a little jealous of Norwegians because Norway’s got more oil reserves. Maybe they’re just going to be a war between them.

Patrick Grimes: I really want to go there and go dog sledding. Maybe you can do it up in Alaska too, but I’ve just heard great things about dog sledding up there.

James Brown: Oh, yeah.

Patrick Grimes: That’s the masterclass I want to attend.

James Brown: Yeah. I went to Norway for a Red Bull snowkite event up on the Hardangervidda plateau. It was fantastic trip.

Patrick Grimes: Wow.

James Brown: Middle of winter. Very isolated, but it was amazing up there. Got to see the fjords. If anybody has a chance to go, definitely do it.

Nathan Turner: It’s on the list.

James Brown: Yeah. Well, let’s jump in. We’ve got a bonus question. This is new to the show. So what is ChatGPT? The answer: ChatGPT is a large scale language model developed by OpenAI based on the GPT-4 architecture. GPT stands for generative pre-trained transformer, which is a type of artificial intelligence designed to understand and generate human-like text. ChatGPT is designed to engage in conversations, answer questions, and provide information on a wide range of topics. By the way, the answer was given by ChatGPT.

Patrick Grimes: I was wondering that.

James Brown: Yeah.

Patrick Grimes: I was going to, what’s your source for that answer?

James Brown: It’s such a trip, isn’t it? Are you guys using it in your business yet? Do you plan to?

Luke Andrews: I use it regularly. My team is actually using it now to write listing descriptions.

James Brown: Yep. I can start doing that too.

Luke Andrews: Plug in some very basic information and it will write phenomenal listing descriptions. We’re using it too for creating social media content. We can do it significantly faster. I mean, we came through and decided at one point, we said, “What are 100 basic terms that everyone should know about real estate with definitions?” So it cranks them out and then we asked, we said, “Okay, well, we wanted these videos to be at 60 seconds or less.” And we realized that the average rate of speech, most people talk about 120 words a minute. So we asked, it said, “Constrict every definition down to 120 words,” and then we said, “Write it at a fifth grade level,” and so it created all of this. We were able to just upload it into a teleprompter, and then you can just knock out these videos with very minimal time, thought, editing, anything at all, because with the script right there, it eliminates the uhs, the ums, all of that other stuff that we tend to edit out of there.

James Brown: That’s fantastic. Yeah, I tried it on this last listing I’ve had. I always struggle with those listing descriptions, and I did exactly what you said. I just kind of put the basic information and had it rewrite it out. I have to edit it a little bit, but oh my goodness, I was like, “This is awesome. So do you guys think copywriters will be eliminated?”

Luke Andrews: I don’t know. I think it shifts and changes. I mean, to me, the real value of ChatGPT, I think, is going to be who can ask the best questions. Now that it’s been kind of democratized and it’s open to everyone, it’s going to be about who can ask the best questions and frame them the best way. That’s going to be most successful using it.

Nathan Turner: And that might be the copywriter shifting into that role instead of actually writing the copy themselves.

James Brown: Yeah, it’s a tool, right? Whoever knows how to use the tool best. I was a graphic designer for 25 years. I had the same tools that somebody else could use, but I knew how to manipulate them and create effective, amazing graphics. But somebody that doesn’t know what they’re doing, you don’t even know where to click. That’s the key.

Patrick Grimes: And every big technology leap, there’s been scares of it causing mass unemployment, but all it’s done is enhance and accelerate the sophistication and the growth of the human race. For the better or for the worse, the last hundred years were very different, very different world than we will be in the next hundred years. With these kinds of tools and the other AI tools going out, it’s going to happen at an exponential rate. It’s going to be exciting to see what happens. I think if you’re an individual and you’re not embracing the technology, then you’re at risk. Right? But there’s going to be jobs, my belief, as long as you’re willing to work, which we found right now coming out of COVID, a lot of people don’t want to work, and we’re seeing that as delinquencies and we’re getting pushed out. So eventually, people will find that they need to find a job, and those jobs require a bit more sophistication potentially, or they’ll choose a different kind of role.

James Brown: What I really find fascinating as a designer is the graphics they’re creating. I’m just in shock what they’re coming up with. Words is one thing, but graphics?

Patrick Grimes: Mm-hmm.

Luke Andrews: It’s pretty interesting. And I’ve also seen a couple of mid-size influencers, who send out regular emails, will feed a lot of their old social media posts, a lot of their old emails in there, and so it gets to know and understand their voice. So its responses, going forward, tend to write in their voice. So it sounds less ChatGPT ish and more like yourself as you’re coming through.

James Brown: Yeah. I was kind of thinking, “Oh, this is just advanced algorithms,” but when it’s learning, that’s true AI, right? Crazy. Another comment that’s writing code, seen some examples of writing code. Going in and somebody commented in the chat too. You can adjust your answers and tweak your questions to keep refining and having it help you. It’s not just a one shot, “Oh, here’s what you got.” You can go, “Oh, well, I’d rather have it sound more inviting for a property description.” Interesting, interesting stuff.

Nathan Turner: Very cool.

James Brown: Yeah. Well, guys, this was great. I’d like to thank our sponsors, Jason Pallisers’ 2 Day Investment Blueprint and REI Content packs. Our guests have been Patrick Grimes, Nathan Turner, and Luke Andrews. In that same order, why don’t you guys let people know how they can connect with you?

Patrick Grimes: Yeah. So Patrick Grimes with, Invest on Main and then It’s [email protected] if you want to shoot me an email. We do give away a free copy of my Amazon number one bestselling book. If you’d like, we ship it for free on our website, Persistence, Pivots and Game Changers.

James Brown: Cool.

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