On this weeks episode of The Whissel Way Podcast Kyle and Jason talk about what Gary Vaynerchuk said about home ownership not being apart of the American Dream anymore.
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Full Transcript:
- Welcome, welcome, you are listening to The Whissel Way Podcast. My name is Kyle Whissel, your host, with Whissel Realty Group. Joined as always by Mr. Jason Hall with Team Home Loans and Jason, this is going to be an interesting one, because one of the people that I look up to the most-
- Well, thank you I appreciate that. when it comes to marketing.
- Oh, that's not me then.
- Is a gentleman named Gary Vanderchuck and Gary Vanderchuck is an amazing speaker, runs a huge media company, does a ton of public speaking, makes a boatload of cash when he does speaking events. Had the opportunity to have dinner with Gary not too long ago. Actually offered to be a booking agent for me for speaking, which is kind of cool.
- That's cool.
- I've always really looked up to Gary but Gary came out with some comments this past week that have really polarized the real estate industry. And Gary came out and said he no longer believes that home ownership is part of the American Dream. And so here's what's very interesting, Gary, just weeks prior, hosted an event called Agent 2021, which is catered toward primarily real estate agents. But then weeks later, comes out and says he no longer believes home ownership is part of the American Dream.
- And what does he mean by that? Have you found out more information?
- He basically says he doesn't believe it's the best usage of capital and he regrets owning the home that he currently lives in and he's never going to buy another home, as long as he lives.
- Can I bet on that? I would bet you that changes.
- Now he did buy a home in New York City and some people have done a little research and it appears he may have paid a little much for it and it's not worth as much as what he paid for it. So, you know some of the different thoughts on-
- You get burned, you know-
- On why he's thinking that. One, maybe he overpaid for his particular home and the New York real estate market had a little correction over the last couple of years, partially, because things were selling for so much money then they built a massive-
- Right, some of the developers show up.
- Amount of stuff, and if you guys watch Million Dollar Listing, you know they talk about all these developments that are going up. And I think that they overbuilt New York City so there was a little bit of correction. It seems to be back on track now. But I think might be part of his thinking. The other part of his thinking, and I think that it comes from what he does, which a big thing is venture capital. And so in venture capital, you need money that you invest into these companies. These companies grow, and you have the opportunity to make massive amounts of money. So I believe, part of his argument is that his money is better off being used for more venture capital deals as opposed to being used for home ownership.
- But we're only talking about a down payment, you've talked about this on many shows in the past, about leveraging. So let's say the market just goes up 5% a year and you buy a $500,000 home, that's $25,000 a year increase if we just take simple 5% math, so in four years, that's 100 grand. Now, most of our clients probably only put down maybe 5% so they're putting down 25 grand and in four years, they've taken that 25 grand and they've got a $100,000 return. I mean, that's a 400% return. How's that not the american dream? Still, I know the stats that have come out recently show the majority of wealth in the United States is because of home ownership, and those who own homes, and those like you who own multiple homes, more than one, right, I mean, so somebody that's started at 19 in this business, you've I'm sure, got a different outlook on that. But somebody that got burned, if that's his situation, I've seen a lot of people married for many years, they go through a horrible divorce and of course, they come out saying I'm never going to get married again. And I think, because they were burned and they lost a lot of money, a lot of sleep, emotions, kids were involved, you can understand why people go that. But somebody like Gary V, who's so well known, not only in the real estate but even listen to a poker podcast on our flight back, this guy listens to Gary V because he wants to learn more of the psyche and what people think. And that's what Gary V's so good at, so it's be kind of interesting.
- Yeah, I think Gary has assured himself of significantly less real estate speaking events moving forward.
- Unless he has a spin on it.
- I think some people may put him on to debate him, although, a guy I look up to, Steve Harney, runs Keeping Current Matters, already came out and challenged him to a debate, which Gary deferred and said he's not going to waste time debating anybody. So, I think he's definitely guaranteed himself less speaking engagements, especially when it comes to real estate. I think one of the stats that Gary might be missing here is the average homeowners net worth is just shy of $200,000. Want to take a guess at the average renters net worth is?
- Minus $10,000.
- 5400 bucks.
- Close.
- So, 195,400 versus-
- Difference between a home owner and a renter.
- 5,400, 36 times more.
- What's this guy going to rent, something he's paying 10, 20 grand a month? I mean, I've seen people do that. Even on these shows, they don't sell the listings sometimes because somebody can't get their money out of China but they rent these things for 30, 40 grand a month. Is that what he plans on doing?
- What's the angle? Now I will say, there are certain scenarios, certain locations, where renting might make more sense than buying. Like one specific example, here in San Diego, the rent to price ratio in something like Coronado, is totally out of whack. You can go rent something in Coronado for 6 grand a month, where if you bought it, it would be double that.
- Right, it would be like 10 to 15 grand a month
- Easily, very easily. And Coronado is kind of unique in that regard. But come out to East County where we do a lot of business, you can actually own a home for the same, if not less, than what you could rent that same home for. Like, in Santee for example, we have a listing right now that's on the market for 490, and that same home-
- Is renting for-
- Rents for $2,800.
- And that's probably what your mortgage payment is with a small down payment.
- And that's the big thing to is, small.
- And if you're VA, you could probably actually.
- Buy it with no money down and probably be cheaper.
- You could buy this particular, condo, for no money down and the mortgage payment is going to be almost the same as the rent payment. And then after you factor in some of the tax benefits, it's probably going to be lower. How does that make sense?
- Well here's the other factor, when we talked about this on previous shows that people don't think about, here's a tip for agents and lenders that are listening right now, part of your mortgage payment is a principle reduction, a lot of the financial people like Harney will tell you that is actually a savings account.
- People call it a forced savings account, yeah.
- Forced savings account, so if you're paying like $600 a month, that's $7,200 a year, that is forced, even if your value never goes up and stays the same, you'll get that money back when you sell the house, because you owe less on the loan.
- Right.
- Right, for renters, it's like an interest on a loan, it's going no where. It's almost like a negative loan as a renter because you're losing the appreciation and the landlord, like you in many cases because I know you own multiple units, you love having renters pay your mortgage payment.
- I mean there is a benefit to Gary's advice, is that now he can just help drive my rentals up and drive the price up for rentals.- Tell me you got a place in San Diego.
- Yeah Gary if you love renting bro, I got something for you, we'll put you in Logan Heights in one of my gems down there. I mean if you want to rent stuff bro, I got you covered.
- But it is interesting that a guy that speaks, I mean he makes millions of dollars speaking across the nation, and to a lot of agents and he literally says this, and now most agents won't actually call him anymore. So here's a little distract you, you're having fun someones bouncing a balloon, we're getting ready to catch them on video and do some cameras. Ya know, here's what they do at the radio show. Right, like young gal she's in her 30 having fun like she's fixing it.
- So a couple other points that you know that I think Gary is missing, one I think he's really missing the belt when you look at the average net worth of a home owner versus a renter, I think he's also thinking specifically about New York city which I think has some of that skew like Coronado does. To go buy something is just absurdly expensive where you can rent it for significantly less. And then I think he's thinking about, "well I'm a venture capitalist and I can deploy that capital for other ventures". And than the last part that I think he's really missing, is not understanding what the down payment requirements are. Right? Now, maybe in New York city where you're buying stuff for two, three, four million dollars-
- You need a lot more down.
- A VA loan an FH loan, does not exist. Right, you can't go get a VA loan for three million dollars. That's just not a possibility, but here in San Diego a VA loan, Veterans Administration, for those who have served, they can go buy a home with zero money down. So now they're deploying no capital to go buy these.
- You know what happens though, and we've seen Gary speak, he tells people do not make emotional decisions, and yet it appears, based on his advice right now, he's making an emotional decision based on what happened to him, and he's done very well with his life. Everything he's touched turned to gold, but one thing that did it was a bad purchase in New York and that means, oh you know the American Dream is dead and nobody should be buying real estate, is truly an emotion and he should take his own advice and just listen to himself two years ago, you have to step back and look. And that's what great about hiring a property manager to take care of your property and that's what great about hiring and agent and having a lender to help you through the whole process, right? It's huge to have somebody who's not emotionally tied like you are. Because its a buyer and a seller, you're emotionally tied and that's kind of think what Gary's seeing right now. Is this whole emotional stuff, I wonder what else we're going to catch on video, man? It's crazy, its nice to be on the radio. We get to do the podcast here on the radio, in the studios, right after the radio show, and its kind of cool to see what happens cuz we're got these glass walls.
- That's the beauty of 2019, is that we get to have Facebook live, and we get to have YouTube, we get to have podcasts, we get to have airways, I mean we literally get to be everywhere these days. So, Gary, I love you bro, and I respect you but I think you, I don't know if I want to call it uneducated, but I think you-
- It's an emotional decision.
- But I think you made a statement that is going to cost you a lot of money and I think you made a statement that is very flawed, is very inaccurate and I think its very specific to your situation. Its not specific to the world.
- Yeah real estates local investments are local.
- So maybe in New York City this advice might make some sense.
- It could.
- But here in San Diego California, in most of San Diego, again there are some coastal markets that the numbers are out of whack, but in most of San Diego the cost to own versus rent is very very similar. In some areas it might be a little bit higher to own versus rent, in some areas it might be a little bit lower to own versus rent, but for the most part they're relatively close based on today's prices, bases on today's interest rates, and so Gary I think you missed the mark my friend, I think you're encouraging people to be the $5,400 net worth people as opposed to the $195,000 net worth people 36 times higher for those that own a home. So Gary, my friend, you missed the boat.
- And didn't pops tell us, invest in what you know?
- Yes.
- Invest in what you know Gary, if you don't know high end real estate don't invest in there. Invest in what you know and what I know is San Diego definitely in that first time home buyer, that the mid market is a great great launcher investment and has been my whole 30 year career.
- I love it, so thank you guys so much for tuning in to The Whissel Way Podcast if you want to keep the conversation going, join our Facebook group The Whissel Way, we have a short cut for you to make it nice and easy, its thewhisselway.com Whissel is w-h-i-s-s-e-l, want to thank you so much for tuning in, we'll talk to you next time.
UPDATE: Gary added more context to his talk in a follow up phone call here:
