fbpx
In Wichita Falls, Airport Officials Are Waging War on Egrets

In Wichita Falls, Airport Officials Are Waging War on Egrets

by | May 29, 2023 | News Feed, Newsfeed

- Originally published at Texas Monthly - Christopher Collins

Critters

In Wichita Falls, Airport Officials Are Waging War on Egrets

It’s a bird, it’s a plane, it’s a bird crashing into a plane!

By







0

European Starlings fly in front of a plane at an airport in Texas.
European starlings fly in front of a plane at an airport in Texas.
Chris Hamilton/Peloton Land Solutions

Earlier this month, Wichita Falls officials announced that they were doing battle with a familiar foe: the cattle egret. You’ve probably seen one before, even if you didn’t know its name—it’s a tall, white bird with a proclivity for perching on the backs of cattle, dining on the swarm of insects stirred up by a herd. The migratory bird lives in Mexico and Central America year-round and uses Texas as a breeding ground each spring before the state’s simmer turns to swelter. Wichita Falls, a city of 103,000 located on the Red River that blessedly separates Texas from Oklahoma, has been a popular egret hangout for years. 

The birds are persona non grata for city officials and the top brass at Sheppard Air Force Base, which hosts an international pilot training program and shares a regional airport with Wichita Falls. That’s because egrets have the unfortunate tendency to fly across local airfields in search of food, putting them in the paths of departing and arriving aircraft. As you might guess, birds and planes are not a match made in heaven—or even in the airspace slightly below it. In 2013, an egret collision knocked an $8 million training jet out of the sky at Sheppard. The two pilots were able to eject before the plane crashed; they escaped with minor injuries. You can think of egrets as the wildlife equivalent of a party crasher: they show up uninvited, eat all the food, and then start fights.  

Local officials have worked to keep the birds away from aircraft in subsequent years, enlisting various techniques to shoo them off runway-adjacent areas, says John Burrus, Wichita Falls’ director of aviation, traffic, and transportation. Among these tools are noisemaking devices such as propane cannons and pyrotechnics, along with habitat removal and, in the most extreme cases, live ordnance. A waterslide at the city’s municipal water park does double duty as a makeshift egret observation post. Officials have even resorted to name-calling, describing the birds as “noisy” and “messy” in a previous press release. “They’re nasty . . . and unfortunately, this is the time of year that it hits us,” Burrus says. A Sheppard spokesperson said in a statement that the crop of egrets has been beaten back after a six-day offensive. “Since executing the project, there have not been any egret sightings over the airfield,” she wrote.  

Such situations arise regularly in Texas and abroad, though egrets aren’t always the culprits. Grackles, geese, and vultures also cause problems because of their size and inclination to travel long distances for food and water. Last month two United Airlines flights were forced to land in Houston after being struck by birds. Hundreds of bird strikes are reported at the city’s George Bush Intercontinental Airport each year. In 2019 a bird whacked the Plexiglass canopy of a jet returning to U.S. Joint Base San Antonio–Randolph, shattering the canopy and forcing an emergency landing. Officials at these and other airfields across the state have tried to prevent future strikes by making their landscapes incompatible with avian life: removing large trees that would be attractive roosting sites, filling in low spots that collect water, and eradicating seed-producing weeds. Experts say the steps have been met with positive results.  

Perhaps the best-known bird-strike incident didn’t happen in Texas at all, but in New York. In 2009 a commercial jetliner hit a flock of geese near the Hudson River. The collision caused both engines to shut down, and pilot Chesley “Sully” Sullenberger (who grew up in the North Texas town of Denison) was somehow able to land the plane in the river with no deaths. It was dubbed the “Miracle on the Hudson” and was later memorialized in a film starring a mustachioed Tom Hanks.

Texas airports reported 1,400 wildlife strikes in 2022, according to the Federal Aviation Administration, which tracks the incidents in all fifty states. Most strikes happen during the day, and about half occur from the months of July to October. The agency says the number of strikes is increasing, and it has opined that birds have less warning of approaching aircraft because modern engines run more quietly than they did in the past. 

The San Antonio airport system is one of the only airport systems in the nation that employs a full-time wildlife biologist. Marcus Machemehl has had the job since 2009, and he has his hands full. Once he had to catch a rhesus macaque that was running amok in the baggage claim area. “Any day I come to work, it’s never the same,” he says. The airport system counts approximately one hundred wildlife strikes a year, though only one or two of them do serious damage. The number would likely be higher if not for Machemehl’s proactive trapping and relocation program, which sees him capturing an average of thirty raptors per year (mostly red-tailed and Swainson’s hawks) and releasing them sixty miles away. Any time a strike occurs, Machemehl tries to identify the animal that caused the damage. When he can’t, he uses an alcohol swab to clean the affected area and sends the swab off to the Smithsonian Institution, which does DNA testing to solve the mystery.      

It’s not just birds that pose problems for aircraft, either. Pick any critter—it’s probably caused a Texas airport operator to lose sleep at night. At Sheppard Air Force Base, the rural area surrounding its airfield has an endemic population of jackrabbits that sometimes draws coyotes onto the runways, where they can be struck by planes’ landing gear. At the small airport in Bridgeport, northwest of Fort Worth, officials have dealt with deer clambering onto the airfield, says Austin Hill, the wildlife biologist who developed a mitigation plan for the airport. (He suggested they build a fence around the property to keep the animals out.) Chris Hamilton, another biologist who develops mitigation plans for Texas airports, says he once saw nutrias clog a drainage pipe near a North Texas airport. The resulting flooding created a waterfowl-friendly wetland that was airport-adjacent. “We’re in the Central Flyway for waterfowl. So this time of year when waterfowl are migrating, any water body is attractive,” he says.         

Some airports have invented creative methods to deter the presence of anything with wings or a snout or more than two legs. At the Dallas–Fort Worth International Airport, a wildlife biologist performed autopsies on dead birds to determine what they had been eating. With the help of a botanist, she zeroed in on seeds from specific plants; officials then worked to eradicate the plants from the grounds. Other airports have taken a high-tech approach, enlisting the help of drone operators to send problematic birds packing. A company in Alberta has even created a drone that looks like a real falcon—the wings flap and everything—to do the trick.

Federal law restricts the removal techniques available to airports after migratory birds have built a nest, so it’s key that they’re removed before that occurs. Burrus, the Wichita Falls aviation director, says, “You can get yourself in trouble if you do the wrong type of mitigation, particularly if they’re already nesting.” After all, “egret” is only one r away from “regret.” In Wichita Falls, a tentative victory has been claimed over the birds, though local aircraft won’t be in the clear until mid-June, a Sheppard spokesperson says. With any luck, the egrets will stay away—at least until next year. “It’s an ongoing thing for us,” Burrus says. “If you would have asked me twenty-five years ago, I would have said, ‘Eh, it’s not really a big deal.’ But guess what? It’s a really big deal.”            

As the Son of a Soldier, I’m Proud. As a Latino, My Feelings Are More Complex.

As the Son of a Soldier, I’m Proud. As a Latino, My Feelings Are More Complex.

by | May 29, 2023 | News Feed, Newsfeed

- Originally published at Texas Monthly - Aaron E. Sánchez

Politics & Policy

As the Son of a Soldier, I’m Proud. As a Latino, My Feelings Are More Complex.

My father spent twenty years in the Air Force. I value his service, but generations of Latinos have sought equality through the military only to remain suspect citizens. 

By







0

The Complex Nature of Latino “Warrior Patriotism”
Getty

I grew up an Air Force brat raised on G.I. Joe at the tail end of Reagan’s America. By age four, I could look up into the sky and identify airplanes by their silhouettes. I was surrounded by the rites and rituals of patriotism and nation and performed the catechisms of duty, obligation, and service daily. The pledges of allegiance to the flag—not prayers for daily bread or forgiveness—echoed in chorus. I could see the discipline required for national discipleship in the way my father stood at attention, saluted, and listened to the anthem.

I learned my first Latin not in the church but from the Air Force. Not the “e pluribus unum” found on our coins, but the “mors ab alto” from the patch on my father’s uniform. The messages ran together in my young mind—”out of many, one” and “death from above.” The phrases reinforced each other. It seemed that the ability to rain death from above provided the ability for many to become one.

My father was a soldier, and as a family we were proud of that. He served twenty years, and we spent a good deal of time on Air Force bases. In fact, my two siblings and I were born on one. But people have still yelled at me to “go back to where you came from.” 

The writer's father in uniform.
The writer’s father.Courtesy of Aaron Sanchez

In the eighties, my father made a return trip from boot camp to his hometown of El Paso; my grandfather drove him to the airport. In the middle of their goodbyes, a Border Patrol agent interrupted and demanded that my grandfather show his papers as proof that he was in the country legally. My father stood next to him in his uniform. He’s told me, sometimes only half-jokingly, that he didn’t learn he was Mexican until he joined the Air Force.

My Mexican American father was not alone in being a soldier and a suspect citizen. Many Latinos experienced this before him. Their patriotism couldn’t always change their place in the nation and their part in its imagination.   

In 1941, a twentysomething poet from Brownsville wrote a poem called “The Four Freedoms.” That same year, President Franklin Delano Roosevelt had delivered a speech by the same name, announcing a world founded upon four essential freedoms that were to be the pillars of a new peaceful international order that the U.S. would help create after World War II. Down in South Texas, the poet, Américo Paredes, was not convinced. “Este país de ‘Cuatro Libertades’ / nada nos puede dar,” he wrote. (“This country of ‘Four Freedoms’ / can give us nothing.”) Paredes, who grew up during a period of state-sanctioned violence against Mexicans and Mexican Americans, wasn’t so sure the U.S. was in any position to promise his community freedom and justice, let alone the world. And yet, the same year he wrote that poem, he enlisted in the Army. He wrote for Stars and Stripes and even covered the Japanese war crime trials after the war. After nearly four years of service, in 1945, he wrote a poem describing his complex nostalgia. Scenes like the ones painted by Norman Rockwell, or photographs like the famed kiss celebrating Victory Over Japan Day in Times Square, portrayed the nation a certain way. That nation never existed for Paredes. He wrote that he was “homesick for a home I’ve never lived in.”

In 1948, the remains of Private Felix Longoria were returned to his hometown of Three Rivers, Texas. Longoria had been killed in action in the Philippines. The only funeral parlor in town refused to hold his wake because Longoria was Mexican American. Civil rights leader and American GI Forum founder Héctor P. García wrote letters and op-eds about the injustice of segregation that had haunted Longoria even in death. Eventually Longoria would be buried with full honors at Arlington National Cemetery, but he would never receive his rightful homecoming.    

The importance of the military was not lost on Latino populations in the postwar years. Many saw military service and the GI Bill as the avenue to the middle class. The military, more than any other institution, allowed access and promised socioeconomic mobility. A storied 1947 conversation between famed Mexican American lawyer Gus Garcia and liberal politician Maury Maverick Jr. at the Gunter Hotel, in San Antonio, highlights this notion. It was rumored that García, after debating with Maverick for a lengthy amount of time, turned to him and exclaimed, “You damn gringos can have the Alamo. We Mexicans want Kelly Field.”

Hundreds of thousands of Mexican Americans and other Latinos served in the military during the decades that spanned the two world wars and the Korean War. Their service created within the population a sense of “warrior patriotism,” as historians George Mariscal and Lorena Oropeza have described it. Military service was directly connected to Latino civil rights during those decades. These were real men and real Americans because they had fought and died in American wars. Their service, they reasoned, made them first-class citizens and should have given them access to government-subsidized home loans and college tuition. Instead, many encountered discrimination. Returning Latino GIs were not always allowed to purchase homes in the neighborhoods of their choosing. Government maps marked certain neighborhoods as safe for home loans and others—overwhelmingly communities of color—as too risky. Unable to build in neighborhoods like West Dallas or purchase new homes in suburbs, many Latinos were relegated to the barrios. Famously, in Los Angeles in 1949, city councilman and veteran Edward Roybal was denied by a builder because he was Mexican American. And while many Latino GIs attended college on the GI Bill, many more were denied admission by individual institutions.

Yet by the sixties and seventies, plenty of young Latinos were still enlisting. Raised on the South Side of San Antonio, the Chicano author Michael W. Rodriguez explained in a short story that “serving in the Armed Forces of the United States was something we grew up knowing we were going to do, so we did it. De verdad, we looked forward to it.”

While President Lyndon B. Johnson believed the war in Vietnam overshadowed his War on Poverty, his assistant secretary of labor, Daniel Patrick Moynihan, believed that both wars could work toward the same purpose. The military could be a mix of finishing school and technical college for those who had failed to learn in public schools, churches, or their own homes. “Very possibly our best hope is seriously to use the armed forces as a socializing experience for the poor,” Moynihan said. Vietnam vet and historian Ignacio M. García pointed to this critically in his memoir, writing that “the armed forces had often been the Chicano college life.” García, who grew up on San Antonio’s West Side, had good grades, decent test scores, and two scholarship offers. What he lacked was a quarter to make a phone call to verify the scholarships. Instead, with no money, he boarded a bus to see the Army recruiters. A short while later, he’d find himself in Vietnam.

Like their fathers, many Latinos hoped the military would lead them out of the barrios, in step with their fellow soldiers. But upon their return, they did not always find what they were promised. In a poem inspired by interviews with Mexican Americans in San Antonio, Carmen Tafolla describes a mother’s experience with her son when he came back from Vietnam. Both are still living in a housing project on San Antonio’s West Side. The mother is thankful her son returned at all, but she’s worried about him. He fights constantly because of racist insults and slights. She tries to comfort him, reminding him that his father had similar experiences and that things were much worse then. Even so, her son still cannot find a job. 

Latino warrior patriotism was supposed to prove Latinos deserved to be treated equally. It hasn’t worked. Tens of thousands of veterans have been deported due to a law passed in 1996. Within the military, Latinos are underrepresented in leadership positions. Latinas have enlisted at higher rates than Latinos in recent decades, but the military is still plagued by issues of sexual harassment and sexual violence. The college exemptions allowed during the Vietnam War meant that working-class young men were forced to do most of the fighting, and today’s all-volunteer military service is still seen as operating a shadow “poverty draft,” with promises of college tuition and job training for primarily working-class teens. A 2020 report on Latinos in the military from Syracuse University found that “educational benefits” were the top motivation for enlistment; a close second was the desire to serve one’s country. While impoverished schools cut other kinds of educational programs, they are often funneling students of color into the Junior Reserve Officer Training Corps, a program that has tripled in size since the 1970s. Over 70 percent of Latino veterans would be happy if their children joined the military, but it is worth asking why some people’s children are duty bound while others’ are college bound. 

My son has photos of his maternal great-grandfather, who served in the Navy, and his paternal grandfather, who served in the Air Force, on his dresser. He is proud of their service, and I am too. But I am torn. There were few opportunities available to them, and they saw the military as their only way out.

While my son keeps my father’s Air Force induction photo on his dresser, I often think of another. In it, my father is in his early twenties, with a wide, youthful smile—mischievous and innocent. It is a smile I don’t recognize, a smile lost to age and responsibilities. It was taken after he and a group of friends got too loud and the military police were called to rein in the party. When an MP knocked, my father and the group of soldiers serenaded the officer to “Roxanne.” They snapped a picture. It was a silly stunt that could have happened in a college dorm, not a military barrack.

Our forever wars have begun and ended with Latinos. The first American POW to escape a Vietnamese prison was a Mexican American from El Paso, Isaac Camacho. The first Marine killed in the Iraq War was José Antonio Gutierrez, a 22-year-old Guatemalan immigrant who arrived without documents when he was 14. Five of the last soldiers to die in the retreat from Afghanistan were Latino.

Service to the nation is not wrong. But for Latinos, our patriotism must do more. After all, what good is it to rename bases after Latino generals when we can’t bring ourselves to say the names of Latinas killed on them? What justice will Fort Cavazos bring to Vanessa Guillen? What good is warrior patriotism when it does nothing to change the fact that we are still suspect citizens?

How To Calculate Debt-To-Income Ratio

How To Calculate Debt-To-Income Ratio

by | May 29, 2023 | Investing, News Feed

A sound understanding of how to calculate debt-to-income ratio is critical to your overall financial health. Rather than guess and hope for the best, this blog post breaks down everything you need to know about the debt-to-income ratio. 

What is a Debt-to-Income Ratio?

Debt-to-income ratio (DTI) is a financial metric that shows how well you manage debt repayment in relation to your total income. 

In short, it’s the percentage of your gross monthly income that goes towards paying your monthly debts. Lenders use this to gauge your creditworthiness and risk level, influencing whether you get approved for loans and the interest rates you’re offered. 

A lower DTI signifies stronger financial stability, which means you’re not overburdened with debt. Conversely, a high DTI may suggest financial stress and make securing loans or desirable interest rates challenging. 

What is the DTI Formula?

The debt-to-income ratio formula is straightforward: divide your total monthly debt payments by your gross monthly income. From there, multiply the number by 100 to convert it into a percentage.

Take, for example, a consumer with $3,000 in monthly debt payments and $6,000 in monthly gross income. Here’s the debt ratio formula you can use: 

  • $3,000 / $6,000 = 0.5 
  • 0.5 X 100 = 50%.
  • DTI = 50%

With this simple formula, calculating your DTI is something you can do at any time.

How to Calculate Debt-to-Income Ratio

A few steps are involved in understanding how to calculate your debt-to-income ratio. 

First, add up your monthly debt payments. This includes mortgage or rent payments, car loans, student loans, credit card debt, and other recurring debts. 

Next, determine your gross monthly income. This is your income before taxes or other deductions. 

Finally, as noted above, divide your total monthly debt by your gross monthly income, then multiply the result by 100 to get your DTI as a percentage. 

Tip: as you calculate your debt-to-income ratio, be sure that you’re using up-to-date and accurate numbers.

How Does DTI Affect My Ability to Get a Loan?

When comparing DTIs, lower is always better. A lower number increases the likelihood of loan approval at the lowest possible rate. 

The lower your DTI, the greater the chance you can comfortably manage your monthly debt loan on the income you earn. 

Generally speaking, a DTI of 36% or lower is viewed as favorable. On the other hand, a high DTI, typically defined as above 43%, suggests you’re carrying substantial debt relative to your income. This could raise red flags for mortgage lenders, making them more hesitant to approve your loan. 

What is a Good Debt-to-Income Ratio?

The word “good” in the debt-to-income ratio varies from lender to lender. Generally speaking, a good DTI is anything below 36%. A number in this range shows you have a manageable balance between debt and income.

Taking this one step further, most lenders closely examine the expenses within your DTI percentage (front-end and back-end DTI). For example, if you have a DTI of 36%, they may work off the assumption that no more than 28% of your gross monthly income should go toward housing expenses. The remaining 8% should cover other types of debt, such as car payments, credit card payments, personal loans, and student loans. 

It’s important to note that while a lower DTI improves the odds of securing a loan at a competitive rate, it’s only one factor that lenders consider. They also look at your credit score, credit history, credit report, credit utilization ratio, employment history, and bank account balances.

What is front-end debt-to-income ratio?

The front-end debt-to-income ratio is a subset of your total DTI. It represents the proportion of your gross monthly income that goes towards monthly housing costs like mortgage payments, property taxes, homeowners insurance, and any applicable homeowners association dues. A lower front-end DTI generally indicates better financial balance.

What is back-end debt-to-income ratio?

The back-end debt-to-income ratio is a broader measure of your financial commitments. In addition to housing expenses, it includes all recurring monthly debt obligations like auto loans, student loans, credit cards, and child support. All loan payments are factored in. Depending on the type of loan, debts are likely to be paid off at some point, which will improve your ratio. 

Your total debt obligations are a percentage of your gross monthly income. A lower back-end DTI is typically more favorable in the eyes of a lender. 

Now that you know how to calculate your debt-to-income ratio, you can track your overall financial health more accurately and consistently.

Join the Community

Our massive community of over 2+ million members makes BiggerPockets the largest online community of real estate investors, ever. Learn about investment strategies, analyze properties, and connect with a community that will help you achieve your goals. Join FREE. What are you waiting for?

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.

Remember and Honor Those Who Gave All

Remember and Honor Those Who Gave All

by | May 29, 2023 | News Feed, Newsfeed

AGENTS: Did you know you can share a personalized version of this post? Learn more!

How the Pandemic Polarized America’s Property Market w/Lance Lambert

How the Pandemic Polarized America’s Property Market w/Lance Lambert

by | May 29, 2023 | Investing, News Feed

The US real estate market is a bit complex. In the South, homes are still quickly getting under contract as those from the North and West move to warmer climates. But demand is brewing in states that you probably haven’t even considered. Plus, a comeback no one expected could be on the horizon. In a market like 2023, anything and everything is up for grabs, and we could be back to the wild housing market we thought was left behind in 2022.

To put each area of America head-to-head, we’ve got Dave Meyer, Henry Washington, James Dainard, and Kathy Fettke, representing the Northeast, South, West Coast, and Midwest, respectively. Each of these markets has its own set of benefits, ranging from affordability to strong job growth, optimal climates, and appreciation. So which area could be the best bet for investors in 2023?

We’ll touch on the latest housing market data to see where each of these regions stand, where median home prices are heading, why often overlooked markets are finally getting the attention they deserve, and whether or not the West Coast truly is the best coast. If you want to invest but don’t know where, stick around! 

Click here to listen on Apple Podcasts.

Listen to the Podcast Here

Read the Transcript Here

Dave:
What’s up everyone? Welcome to On the Market. I’m your host, Dave Meyer. Joined today by Henry Washington. How’s it going man?

Henry:
What’s up buddy? So good to see you again. Feel like I haven’t seen you a little bit. Glad to see you.

Dave:
I know, it does feel like a little bit. It’s like probably been one week.

Henry:
That’s long enough, Dave.

Dave:
Yes, it is. Far too long. What have you been up to?

Henry:
Oh, man, it’s been crazy. I’m buying deals like crazy right now. Things are selling. It seems like a great market right now.

Dave:
Well, I’m glad to hear that. That’s awesome. Like normal seasonality, like springtime, people are buying, things are getting put on the market, that kind of stuff?

Henry:
People are getting the bug, they want to go buy something, they want to move.

Dave:
You’ve been playing a lot of golf too. I’ve been watching you on Instagram.

Henry:
I have. I have. I’ve been playing is a loose word, playing might indicate that I know what I’m doing or that I’m good-

Dave:
You’re on a golf course though?

Henry:
Yes, I’ve been on a golf course.

Dave:
You’re standing on a golf course.

Henry:
Swinging a stick at a ball and hoping it makes contact, yes.

Dave:
That’s what I do and I would love to do that. We should do that next time we’re together.

Henry:
Sold.

Dave:
All right. Well we do have an awesome episode for you today. We have Lance Lambert, who is a journalist, he is the Editorial Director of Fortune Education and writes for Fortune Analytics. He is probably one of my favorite housing market Twitter follows, because he just does great visualizations and for data nerds like you and I, Henry, he’s always putting up these cool heat maps and helping make data really understandable, and he’s got an incredible wealth of knowledge about what is going on in the housing market. What were some of the things you enjoyed most about the conversation?

Henry:
I loved his kind of personal experience that he wrapped into what got him into being able to be an expert in this. And I love, when you talk about the heat maps, I mean, one of the articles that he’s recently written, when you take a look at it it really kind of shows you just how local real estate is because you’re able to see on a per state basis, what areas of the state or counties within that state are trending up, and some are trending down. In his Fortune article, things are getting really weird in the housing market. He’s got some super cool heat maps from a state basis that show just how local real estate is. You can see where, even within the same state, there are pockets that are going down in price and pockets that are going up in price. And so just literally being able to see the data like that gives you some great perspective on what’s happening across the country.

Dave:
Yeah, absolutely. He really shed some light on some of the local differences between markets and give us just a phenomenal synopsis of what has happened and sort of led us to this position where we are right now, where it’s sort of hard to believe, but the housing market is showing signs of life and he does a really good job explaining the backstory and the data for how you get there.

Henry:
And you want to stick around to the end because I did put him on the hot seat and made him try to tell us where he thought interest rates were going to be.

Dave:
You did. You even invented a whole new segment for the show?

Henry:
I did, I did. You’re welcome.

Dave:
Now we have the On The Market hot seat.

Henry:
Henry’s hot seat On The Market.

Dave:
Ooh, Henry’s hot seat, that’s even better. All right, Kailyn, we’re going to need some cool music for that, which Kailyn is an expert out, so we’ll definitely have some cool music. All right, well we are going to take a quick break, but then we’ll be back with Lance.
Lance Lambert, welcome to On the Market. Thanks for being here.

Lance:
Yeah, thanks for having me. Housing, housing, housing, always a lot going on.

Dave:
Yeah, absolutely. Well we knew that you were the right person to bring on to talk about, there’s always a lot going on, but it feels like right now maybe there’s even a little bit more than usual. Before we jump into all of that, can you just introduce yourself, Lance, and let people know how you are involved in the housing industry?

Lance:
Yeah, I’m the Real Estate Editor over at Fortune Magazine and I’ve kind of, throughout my career on and off, kind of covered the housing market a bit. I used to work at realtor.com, where I was really immersed in housing data. And when I came over to Fortune, I didn’t come over to cover real estate or housing, but what happened is during the pandemic, the housing market awoke and so it’s really absorbed a lot of my attention and mind space and I’ve kind of moved my career, during the pandemic, more and more in the direction of real estate.

Henry:
Well you picked a good time to move in that direction, man. It’s been a rollercoaster since then.

Lance:
It has been. And right off the bat when the pandemic hit, my wife and I, we were living in the Upper East Side and we had a three-year-old, so we didn’t have a lot of space. I told her, I’m like, “Well, we’re probably going to be remote for a month, so this would be a good time to show that I could do my job remote and then let’s get out of the city sometime this summer and move back home.” We’re both from Cincinnati. And that’s what we ended up doing. Except remote work, of course, wasn’t just a two, three, four week thing, it was a life changing event and then this whole movement helped to awake the housing market in a way that we hadn’t seen in 14, 15 years.

Henry:
Yeah. So on that, give us your, what’s your hot take, what’s your 20,000 foot, what’s the housing market look like to you? Because there’s all these air quotes words that have been thrown around for the past three years, it’s crashing or it’s correcting, or now people are saying, is it normalizing. So how do you feel about the housing market right now? Are we getting back to normal levels or what do you think?

Lance:
Yeah, so I think it’s important to take a step back and look at it from what happened when the pandemic hit. And when the pandemic hit, you of course had … housing markets are really just an extension of a job market regionally, like a metropolitan area, the distance to commute in, that is the job market, it is also the housing market. But we saw that distangle or disconnect a bit during the pandemic, where you know had all these people who had higher incomes in these markets that suddenly they could work from anywhere almost. And at the same time of the low rates and the demographics, the five largest birth years of millennials are 1989 through 1993, and so between 2019 and 2023, they’re all hitting the important first time home buying age of 30. So it all kind of happened all at the same time.
And as that’s all going on and in 2020, housing is already off to the races even though unemployment’s still at double digits, which is interesting, and the Fed really got behind there. As we moved into 2021 and they continued to stay very much in quantitative easy mode, the stimulus, of course, we got a second and then a third package. And all at the same time, people were kind of ignoring the housing cycle and it was rolling, it was cooking. We ended up getting our largest 12 months ever for home price appreciation. We went over 21% in a one 12 month window, which is interesting. And so as we moved into 2022 and the Fed kind of realizes, oh, we got behind, but not only did we get behind, a big driver of this is the housing market. And so last year we had a series of Fed papers come out that showed just how interested the Fed had become on housing during the pandemic.
One of the papers by the San Francisco Fed, which I talked to one of the researchers there, and what it found is that there was a huge elevated demand for space during the pandemic, not just the people who could go and work from any market they wanted, but also decoupling roommates. So elevated demand for space, the elevated household formation that occurred during the pandemic. And the San Francisco Fed said that drove 60% plus of the home price growth during the pandemic. So that’s the first paper. The second paper is the Fed comes out and at the time, everyone was talking about how this was all very much supply driven. Well the Fed came out and said that, in a Fed paper in June, 2022, that the pandemic housing boom was driven by demand and that had supply increased by 300%, it still wouldn’t have matched all the demand that was created there.
And the thing about the demand during the pandemic is you can’t see it on the metrics. If you go look at new home sales or mortgage purchase applications, yes you can see the elevation, sales went up, but what you don’t see is all of this demand that was never met, the people who were bidding on the homes that didn’t get the homes, all of that. And so it’s hard for people to really understand just how gigantic that demand was at the top of the pandemic housing boom. And so that was a paper and then another one came out from the Fed and it showed that they believe that 40% of non housing inflation was driven by the growth in home prices in the housing market, which doesn’t get talked about much, but this is a Fed paper and this is from the Fed Board of Governors-

Dave:
Sorry, Lance, can you say that again? So you’re saying that-

Lance:
40% of non housing inflation was driven by housing.

Dave:
Just people feeling flush basically, the equity growing in their house?

Lance:
If you have 40% growth in home prices in a 20 month, 22, 24 month window, everybody feels so wealthy. Now I think the wealth impact also is crypto, stocks, all of it, but that whole feeling high on the hog type effect and it was kind of a release and it was a release into big purchases, big renovations, big lifestyle changes, second homes, third homes, RVs, all of that stuff. And so I think those three would show the demand for space, the fact that the pandemic housing boom was demand driven, and then the fact that the growth in home prices was helping to drive overall inflation, is very much why I think and some of my reporting has suggested, why the Fed was came out last year and did the fastest rate hiking cycle in 40 years.
Because what they’re trying to do is they’re trying to signal to the long-term rates to get very high, very quick. And that’s what we saw with mortgage rates. They went from three, four, five, six by June, 2022 and then later in the year, they kind of hit seven. But some of that was driven by some of the financial stuff that was happening overseas at the end of the last year, it rolled over the housing cycle very quickly. And what the Fed was able to achieve is they were able to essentially stop home price appreciation for about a year. So they were able to stop that. They were able to stop any of the taps in equity because are you going to refinance your home to pull out equity if mortgage rates are six, 7%? And that kind of helps to tame down the wealth effect. I also think that the negativity that floated over the housing market in the second half of last year, helped the Fed.
Although not all those very bearish things came to fruition, it was like a psychology change where people were like, “Oh, this could be ’08 again.” And it pulled back some of that excess that was kind of unleashed and that exuberance that came with the pandemic housing boom. And so that was a long-winded way to get myself to your question, which is about normalizing correction crashing type thing. Because I still think the biggest story here, the OA and that cycle, the 2000s housing cycle, what we remember most from it is not the ride up, it’s the ride down. It was the crash, because it was just so bad and it took out so many different industries. My dad, he had a business doing home additions, so you’d add another bedroom to your house type thing in the early 2000s and ’06, ’07 his business didn’t go down 10%, 20%, it went down 100%. It was just poof, gone.
And so we remember the bust last time more than the ride up. I think this one, we’re going to remember the ride up much more than this normalizing period or correction or whatever you want to call it. At least that’s what it appears to be telling us. And so that’s why I wanted to get in by starting by looking back at that boom, because I just think it’s such an important economic story and lifestyle story, anyway you want to look at it, that was just very significant. And so what we’ve seen over the past year is once mortgage rates spiked, the housing market slipped nationally into correction mode, what I like to call correction mode. And in the western half of the country, that actually materialized in house price declines very quickly.
Now it’s not something that it was, taking us back super far, 10% drops in some of these markets was only wiping out three, four months of appreciation because the end of the pandemic housing boom was just so exuberant right there at the end, especially spring 2022. And so we did see a correction in a lot of the western half of the country, the eastern half of the country last year, while you could look at median sales prices or list prices and you would see them going down, I think that was a head fake. And that’s why when I put out housing data and my housing charts, I do seasonally adjusted data because at the end of every year things get a little softer in the market. And so a lot of the price drops that were being reported for the eastern half of the country were really just seasonal declines. There wasn’t that much there.
And then low and behold, as soon as the market rolls into the busier season, the markets that were flat, not down on a seasonally adjusted basis, a lot of them were off to the races, so to speak, this year, once we came into the spring. And then the markets that corrected in the western half of the country, more of them had a little bit of a bumpy start. Some of them are getting going now with price growth for the spring. And then you have what I consider kind of true down markets, like in Austin. I think there was just a level of the exuberance there and prices went up so fast, so quickly and it priced out a lot of the local job market there, that they’re a little detached from fundamentals. And so what’s happening there could take a little more time to kind of play out.
But I refer to what we’ve seen over the past year as a correction. It’s the huge, pressurized affordability, mortgage rate spiking after a 40% run up in national home prices, pressurized affordability. And so the market’s reaction to that is what I call the correction. Everything that the market’s trying to do to get back to getting transactions rolling and getting back into a groove, that is what I consider the correction. And that could be things that aren’t necessarily declines in prices. That could be things like seller concessions. The builders on the builder side, they were very aggressive because they had the margin to do it, mortgage rate buy downs, things like that. Of course, not having to waive things like inspections and all of that stuff is a part of the correction process. But while it’s happening, I call it correction, but I think if you zoomed out and you looked back at this period in say five years, I think you would just say, “Oh, that was a period of normalization. It was just the market normalized after a huge boom.”
But I think going through it, it’s not necessarily that because it was so sharp because interest rate hikes were so aggressive that the long-term tail, the mortgage rates went up so quickly, it was just such a sharp mortgage rates shock.

Dave:
Lance, that was an incredible description of everything that’s gone on over the last two or three years. That was amazing. Thank you for sharing that. And I tend to agree, and I’m so glad you said that about seasonal adjustments because I feel like I’ve been arguing with people on social media more than is mentally healthy to do about that. But I do want to ask you about the Fed and basically what you were saying, that they’ve released these papers talking about housing contributing to inflation. Given what’s going on, is this a big enough correction for the Fed? Do they want to see the housing market under more stress, or is there risk that given that it plays such a role in non housing inflation, is it possible that this could drag out the fight against inflation?

Lance:
Yeah. And so when it comes to home crisis, I don’t necessarily know if the Fed is eager to pull them down more than has already occurred, because there becomes a certain point, if prices go down too much in some of these markets, you affect people’s actual lives. Some of the markets like Seattle that have moved down 15, 20% in some parts of this market, that’s kind of getting to that dangerous level where the people who bought at the top, that could really hurt them. But I think the concern for the Fed here with housing is, okay, so the builders had these very frothy margins during the pandemic. They built up huge margins, they could charge whatever they wanted and although the inputs like lumber and everything were going up so high, they had a lot of flexibility to move prices up faster.
And so they took that big margin and when the mortgage rate shock occurred, they just pulled down their margin and they cut prices in some communities, they did their incentives, and then they really got into a groove with the mortgage rate buy downs. And that is allowing the new home side to recover, it looks like it could be a faster than expected, I’ll say that. And so why that matters is that the housing market is a transmission vehicle for the Fed. So if they jack up mortgage rates or put upward pressure on mortgage rates by telling the market, “Hey, we’re going to move up rates by so much for the short term,” then the long term tail moves up. And so then they can push down activity in the housing market fairly quickly. But if the builders had the margin to just pull back on price and that now allows activity to rebound, the transmission of slowing the overall economy through the housing cycle is affected.
And so the greater concern might be for the Fed less about, okay, home prices are moving up a little bit in some of these communities and more, oh, the builders who are the real economic engine of the housing market, they could get going a little bit here and that could strengthen the overall economy. Because one of the goals of the Fed that they’ve said is that one, the housing market was overheated and they’ve stopped that, two, that the labor market is overheated. Well, if the housing market you were able to stop, but it’s now getting back to life before you’ve stopped the overheating in the labor market, then have they achieved their goal? And so I think that’s the potential concern, is if they can’t cool down the economy as much as they would like to because the resilience in the housing market.

Dave:
What about the correction in terms of housing affordability? It seems like your whole premise here that you’ve been saying is that there was so much demand that even with higher interest rates, as demand gets pulled out of the market, it’s still there and there’s still enough. Is there risk of that running out though if rates stay this high for a while? Is there a potential that the market may be stabilizing now as it sort of works through that excess demand for the last couple years, but then shows weakness once things sort of work through?

Lance:
Yeah. So if I had to say where my kind of reporting is, it’s not like, oh, last year was red and then now we’re green, in terms of, oh, the housing market was bad for the housing market and now good for the housing market. It’s more of a yellow. It’s like there’s some caution here. Affordability is very pressurized, we don’t necessarily know where the overall economy’s going to go and we don’t know what could happen once … like labor could break, if jobs claims and unemployment were to start to rise and then how that could potentially affect the market.
But the market’s health here, well, so the thing that’s hurting the market is affordability, we’re pressurized at levels that we’ve only been at a few times in history, like the late ’70s, early ’80s, the top of the 2000s housing bubble, and then now. So affordability is the issue, but what we don’t have a lot of is the supply overhang. We don’t necessarily have a lot of the overbuilding, because even if something bad were to come, the builders are already kind of winding down and getting into a better position. So we don’t have as much of that issue. And then also you don’t have the glut of the bad loans from last time. But I do think there is some caution, especially the fact that you do have some of these markets at least like Austin, that on paper look like down markets. And so being a down market, while unemployment is at three and a half percent, 3.4, what does that then look like if things were to change in that regard fairly quickly?
But I think the economy right now is signaling some strength. And Mark Zandi, I talked to him last week, for mortgage rates, his outlook is six, five for this year, which he’s been at for 10 months. And then by the end of 2024, he’s 5.5 and a lot of that coming as the spread between mortgage rates and the 10-year kind of shrink. But he says if the economy continues to prove resilient, there is some risk that we could go up and test seven again for mortgage rates this year. And so that that’s something to look out for too.

Henry:
So I think you touched on what most of us are saying is the million-dollar question, I’m sure everybody wants to know where you think mortgage rates are going to go. But before you get there, you touched on this a little bit, you talked about supply issues and it kind of seems like as a country, we have supply issues. I know here in my local market when we look at the supply numbers, supply is up from the boom of 2021, ’22, but we’re still at about half or less of the houses on the market that we had pre-pandemic levels. And so even with interest rates fluctuating, hovering, say they get back to the seven, it’s hard to see how that’s truly going to have an impact on sales when there’s still so much … there’s so little inventory. How do you see supply affecting the housing market going forward?

Lance:
Yeah, so last year I think that we very much saw the decline in sales that was driven by affordability getting so pressurized and demand pulling back so quickly. But then now this year we’ve seen the equilibrium of the market get into better balance and that’s helped some markets to see price growth to return. But now the potential growth for existing home sales is very much constrained by the lack of inventory, the lack of new listings coming onto the market. So yeah, I think there’s two C words for the market right now, depending on where you are and one is constrained, there’s just not a lot coming onto the market and so it doesn’t quite feel like a normal market. But then also, depending on where you are, the other one is competitive, it can be competitive, you can have a constrained market that is also competitive and it’ll be interesting to see how that kind of changes and moves from here.
But I think the good news for the market is that essentially since October when affordability was the most pressurized, when mortgage rates were what, seven three, 73.7 I think is the highest mortgage news daily rating last year, since then, affordability has improved gradually. And even right now as prices kind of inch up in some of these markets, it’s still not occurring as fast as incomes are growing right now. And if mortgage rates could come down a little more and price growth doesn’t exceed income growth, then on a real economic basis, affordability would gradually continue to improve. And as that occurs, the gradual improvement in inflation adjusted affordability, plus what economists would call acceptance, people being like, “You know what? Mortgage rates are six, they used to be three four, but three fours gone. I have another kid, I just got to go move. I need another house.”
And so that churn of the move up buyers and sellers could slowly start to come back as affordability improves a little bit, plus acceptance, people just accepting things have changed, this is how it works now. And I think acceptance, improved affordability and then seasonality is already what put the market into better, closer equilibrium when we entered this year.

Dave:
I’m curious, when you look at the market, and you do a lot of this, at least I’ve seen on Twitter, of comparing different regional markets, based on everything that you’re seeing, this competition of constrain and competition, what is the distribution of outcomes for housing markets that you’re seeing in forecasts? I think last time I saw Austin was down, I think 12, 13% year over year, something like that. There’s still markets that are up double digits. Is that where you are seeing things ending at the end of this year, that things will be so polarized in the housing market even as it plays out for the next six months?

Lance:
That is something I was thinking about today actually, which is, I don’t know if you saw the map that I posted for Tennessee, rural Tennessee’s kind of on fire. The first three months, a lot of those markets are up 5%, those zip codes and 5% on an annualized basis. So 5% in three months, annualized, that’s 20%, but we shouldn’t annualize it because it is the spring, the peak season. But there are going to be parts of the country that are up plus 10% this year, unless something really dramatically changes, that’s what it looks like the trajectory’s on. And actually some of those markets could hit the 10 just in the spring alone. And there are other markets where there’s already so many declines that got measured in, that maybe were some carried over from the end of last year, but they hit the indexes this year, that there’s some markets that are already like … any way they could get out of being down for the year.
I don’t know how Austin could not be down for the year just based on the three, four months of declines that got carried over. And maybe that’s going to age really bad and the market’s going to take an upswing or something, but I think right now, and the word that I introduced a few months ago and it’s kind of caught on a little bit, is the bifurcation of the market. But then again now there’s even a little less bifurcation because more the markets that were trending down have started to trend up mildly. So any number that you throw at me from minus five to plus like 12, 13, 14%, I could probably find a market that I think would fall into that bucket for the year. And that saying that real estate is local, it really is true, and you’ve got to know your local market that you’re buying in and selling.

Dave:
Yeah, I mean, I’m not some old hand here, I’ve been investing for 12, 13 years though, enough, but this is by far the most differentiated market, I would say, that at least I’ve seen. It used to be some were going up slowly, maybe they’re up, down one or 2%, but you’re talking about potentially spreads of 20, 25 percentage points, anywhere from down five 10% to up 15, 20%. It’s an enormous spread. And I don’t know if those are the exact numbers, but it’s just wild to see how differently different parts of the country are. And even, I think you’ve reported on this as well, even places that are geographically relatively close to each other are having really different outcomes. You see places in Texas, for example, or Florida where the outcomes are just really different even though some of the more macro factors seem to be similar.

Lance:
Well, yeah. Right now on a year-over-year basis, there’s no major market in the country among the 100 largest, that has more appreciation than Miami. But then you go over to the other side, where they just had that hurricane in September and some of those markets didn’t even see a seasonal decline in inventory heading into this year. No seasonal decline, they just kept going up and that’s within few hour drives of each other. So it does feel like that. And that’s why on my Twitter feed, I’m going to continue to post more of these zip code level maps. I kind of wish I did more of it last year because I think it helps to kind of tell the story right now.

Henry:
Yeah. Could I get you to add a few more states to your article on things are getting weird, because looking at this, this is good stuff, man. Rural Tennessee’s crazy, Ohio looks like their values are increasing all across.

Lance:
And that’s where I am. I’m in Cincinnati.

Henry:
I’ve always been a fan, we’ve had these arguments, I like these unsexy markets, man, it’s pretty cool. But yeah, man, like to see a whole … I could send you a few more states off the record.

Lance:
Yeah. And hit me with them and I’ll do them.

Dave:
Are there any markets, Lance, that were down, you said Austin, you think that can’t avoid a downturn, but some of the other ones that were leading the way in terms of decline, Seattle, Boise, San Jose, San Francisco, are any of those starting to show signs of recovery?

Lance:
Yeah. They are, more of those. And I’ve never really grouped Seattle, San Francisco, LA, those very west coast markets, with the markets like Phoenix or Boise or Las Vegas. And so here’s why, the markets like Seattle and San Francisco and LA, the affordability there or the prices at least were all the way maxed out to what people could afford. And this has been this way for years. Those prices are so far extended from incomes and people have been pushing them up for so long that anytime mortgage rates move up, they’re just more mortgage rate sensitive.
And so you can see this in the data in 2018, 2019, actually San Jose was one of the few markets in the country that went down year over year after mortgage rates moved up from what, four to five and a half very briefly in 2018. And the reason is it’s just very rate sensitive out there because there’s no supply and there’s been no supply for so long that they’ve just kind of overheated themselves to the max, that anytime affordability changes very quickly by mortgage rates, it becomes over extended, it goes over the top essentially. It kind of goes over the top. But what they don’t have is a lot of supply. So while the market briefly corrects, it then has to deal with that, the fact that there’s just no supply in the market. So it kind of meets back to equilibrium faster is the theory.
Austin is different. Austin has a real supply, it’s a boom town with a lot of building and anytime the music stops in a market where you’re having a boom, boom, boom and then the market changes, if there’s a lot of supply that can roll on and create a temporary supply glut on the market. And so I think that’s why we’ve seen a market like Austin move up so much faster for inventory. And I think that will also potentially make it to where a market like Austin takes longer to work out of it than say LA or Seattle, it’s more of a typical boom bust type scenario. Whereas it’s kind of hard to say, boom bust just doesn’t sound right for an LA, Seattle.

Dave:
They’re all used to being crazy expensive, it’s been like that for years.

Lance:
Yeah. And to me, the word bust kind of implies construction in my mind. I don’t know, that’s kind of how I see it, and maybe I’m naive with it and maybe they’re all way more similar than I think, but I’ve been looking at them as different types of markets for a while. And also if you look at a market like Austin, something that’s interesting is the top of the market has actually been a little more stable than the bottom. But then if you look at those West Coast markets, the entry level is way hotter than the top. And so I kind of think that’s because the people coming into the market have detached a market like Austin from the local fundamentals. I don’t know, that’s kind of my hot take on it.

Henry:
All right, well speaking of hot takes, you know we got to put you in the official On The Market hot seat, and it’s really nothing that official.

Dave:
He just made that up.

Henry:
Yeah, I totally made that. I feel like we need one of those fire sounds or bombs going off. But yeah, so I think everybody wants to know where you think interest rates are going to land by the end of this year?

Lance:
Yeah. So I kind of made a bet last year, so I don’t make predictions publicly with stuff, but I think if you could see where I put my time last year, I very much made a bet with my time that mortgage rates were going to go up a lot quicker than the industry thought. The industry came into 2022 thinking the mortgage rates were going to be three seven, three six four, and I [inaudible 00:38:02] called BS on that because if you looked at November, 2021, Powell said that inflation was not transitory. And if you looked at the numbers, unemployment was down to … the unemployment rate was mid threes and inflation was six, and it was still moving up and it’s like, and housing’s booming. Everything there was signaling the Fed was going to move from focusing on unemployment to inflation and very quickly and that they were kind of behind on the eightball.
And then mortgage rates did move out very fast. And that of course had a very acute effect on the housing market, and I was kind of well positioned to recover it and write about it. I don’t necessarily have a big bet like that, where I feel like everybody’s so wrong and it’s so obvious. That, in hindsight, was super obvious. Inflation is running, the housing market is really booming and the economy is so strong that the Fed can jack things up fairly quickly, like that, I think in hindsight, is pretty straightforward. Right now, it’s trickier because it’s like even a lot of these macroeconomists, you talk to them and everyone will tell you a different story in terms of how they think the overall economy is going to respond to the rate hikes and there is a lag in terms of transmission from rate hikes going into effect and then the impact on the economy.
So we haven’t necessarily seen it all yet, but I think where the overall economy goes is the biggest question to being able to figure out, okay, where do mortgage rates go from here? I think if we go into a recession, I think history kind of tells us that the 10-year mortgage rates come down, but if the economy continues to prove resilient or maybe inflation starts to kind of show it’s a little sticker than people thought, then the rates could maybe stay up higher than longer. One interesting thing that Zandi told me recently, Mark Zandi, Chief Economist at Moody’s Analytics, is that there’s a huge spread right now in terms of the 10-year mortgage rates, it’s like three percentage points, and it’s normally 1.75, two percentage points.
So if things normalized, mortgage rates today would be like five five instead of six five. And he says one thing that’s keeping that from normalizing right now is the turmoil in the banking sector, because they’re not getting the deposits and normally the group of buyers that competes with the Fed for buying those MBS securities are the banks, but they don’t have the deposits right now and they’re not buying as much. So moving into this year, into 2023, the thought was that that spread would start to normalize as these other buyers like banks kind of picked up the slack. Well then you had the bank failures earlier in 2023 and the spreads had made progress before the bank failures, in terms of coming down a bit. And that’s why mortgage rates actually hit 5.99 for that one rating in February. And since then the spread has just went right back to where it was last year, at three percentage points, a full three percentage points. So I’m just saying very uncertain is the call.

Dave:
Unfortunately we can’t pin you down. But I just want to explain a little bit to everyone listening what the spread means. Basically if you look at the correlation between mortgage rates and bond yields, they are very closely correlated, the yield on a 10-year treasury and mortgage rates move very closely together. When one goes up, the other goes up, when one goes down, the other goes down. Normally the difference between them is, as Lance said, about 175 basis points to 200 basis points. So if the yield on a 10-year is at 3%, you would expect mortgage rates to be somewhere around 4.7 to 5%. Right now, they are really elevated. The spread between bond yield and mortgage rates are up at around 300 basis points or 3%. And that is due to a lot of different factors, but basically the market sees risk in buying mortgage yields as opposed to bonds. And so it’s higher right now than it has.
And the reason that this is so important is that that can come down without the Fed lowering interest rates. So there is a path for mortgage rates to come down before the Fed starts lowering the federal funds rate. And so I just want to make sure everyone understands how that is technically possible.

Lance:
Yeah. And really the market that we’ve seen over the past 12 months would’ve been very different had we not had that huge spread. Had we had a normalized spread, the market wouldn’t have seen a steep up of a correction last year. And then this spring if the spread was normalized and we were at a five and a half percent mortgage rate, it would be a very different, much warmer market, much more activity, much more the move up buyers and sellers than we’ve seen so far. So yeah, while it’s one of those kind of nerdier topics, it has a huge impact on the real market.

Dave:
The more you learn about economics, you realize that bonds just rule the world. It’s sad, but it’s true.

Lance:
I mean, I spent a lot of my day just looking at the 10-year.

Dave:
I think, yeah, that’s the course of anyone who studies macroeconomics, you look at all this different stuff and at the end you’re just looking at bond yields. All right, Lance, well thank you so much. This has been super helpful and insightful. I really appreciate your opinions here and all of your great research. Is there anything else you think our audience should know about the housing market in 2023?

Lance:
No, I think we’ve covered the really big stuff. I think one lesson here is that we’ve heard a lot of opinions of people saying where the market’s going to go over the past three years, and the market has just done its own thing. It really has. And so I would say even take the things that I’ve said with the grain of salt and take a lot of these forecasts with the grain of salt. And while I do share all the forecast and as they get revised, I would still say take things with a grain of salt and try to look at the fundamentals in your market.

Dave:
Awesome. Well thank you, Lance. If people want to follow your work, I know you’re very active on Twitter, can you share your Twitter account and anywhere else that people should follow your work?

Lance:
Yeah, they can find me @NewsLambert on Twitter. And that’s Lambert, L-A-M-B-E-R-T or you can Google Lance Lambert Fortune and you’ll find my author page at Fortune Magazine.

Dave:
Awesome. Great. Well, thank you so much for joining us, Lance. We appreciate it.

Lance:
Yeah, thanks for having me.

Dave:
So what’d you think of Lance?

Henry:
I think he was great. I mean, talk about a wealth of knowledge and not just a lot of knowledge, but he did a great job explaining some pretty complex topics and summarizing it in a way that I think will make sense for a lot of people. I told him off camera that I thought his explanation of kind of what’s happened in the market over the last three years was a great one. And so I think people should rewind this and listen to that first answer again if you really want to get a sense of kind of what’s been going on in the market.

Dave:
Yeah, I loved what he said about how much extra demand there was in the market, that is just truly impossible to measure. You don’t know how many people are still trying to get a house after a year or two and are still willing, and as he said, accepting new mortgage rates because they’ve been at this for years and there still is just this excess demand that is working through the market and combining that with low supply, it’s just wild. I mean, I don’t know how you feel about this, I try and be sort of objective about the market and just give my opinion on whether it’s going up or down based on no emotion, but part of me feels like the correction is not big enough. I own property, I don’t want it to go down, but the lack of affordability does worry me long term, even if right now it’s enough to sustain the housing market. It just doesn’t seem good to me that housing is, as he said, one of the three least affordable times in recent history, last 50 years in the housing market.

Henry:
Real estate has always gone up over time, but it’s just that people have been able to keep up with it as wages have increased and things of that nature. And so, I don’t know, man, it is kind of scary. I think that affordability will continue to be a problem. I mean, I personally don’t think we’re going to see too much more of prices dropping. I mean, when you looked at the heat maps he had on his article about the housing markets getting weird, just seeing just how many markets are seeing prices still go up, even if it’s single digits. I mean, we’re still seeing that prices are increasing in a lot of the country and here in my local market, it seems like the market’s healthy, because if a property is priced right and it’s done right, it sells so fast. And if it’s priced poorly and it’s done poorly, then it sits and isn’t that what’s supposed to happen?

Dave:
Yes, that’s exactly what’s supposed to happen. Yeah, it’s just a strange situation. So I’m curious to see what’s going to happen. I think the trajectory we’re on right now, we’re recording this sort of the beginning of May, middle of May, is I agree, I think prices are going to start coming back slowly in the majority of markets, unless something big changes. There always could be some geopolitical shock or natural disaster, whatever, but just the way the reliable indicators are pointing is the correction may be bottoming out a little bit. Not in every market, of course, but on a national level.

Henry:
All the more reason you guys that you’ve got to be … it’s so much more important now than it’s ever been for you to be educated in what you’re about to take on from an investment perspective, and also educated in your local market, because this time, this is the poster child for real estate, is local. Every market seems to be a little bit different. And so please, please educate yourselves on your local market before you dive into something and realize you made a mistake.

Dave:
Yeah, absolutely. Well, thank you all so much for listening. If you like this episode, please, we would love a review on either Spotify or Apple. We always really appreciate that. It really helps us grow and it does help us land really good guests. They definitely look at our reviews and so when we have all these nice reviews, we get great guests like Lance. So if you haven’t yet, we would really appreciate it. Either way, we will see you next time for On The Market.
On The Market is created by me, Dave Meyer, and Kailyn Bennett, produced by Kailyn Bennett, editing by Joel Esparza and Onyx Media, researched by Pooja Jindal, copywriting by Nate Weintraub, and a very special thanks to the entire BiggerPockets team. The content on the show On The Market are opinions only. All listeners should independently verify data points, opinions, and investment strategies.

Watch the Podcast Here

https://youtube.com/watch?v=5ZPq11IliHY123

In This Episode We Cover

  • The “polarized” housing market and which areas are staying red hot while others freeze
  • The post-pandemic property market effects and how the housing market hurt inflation efforts from the Fed
  • Mortgage rate predictions and what could cause rates to rise or fall this year
  • East vs. West Coast and why cities like Seattle, San Francisco, and Los Angeles cooled off so quickly
  • Affordability updates and why builders have the upper hand on the Fed
  • The “Two C’s” that are controlling home prices and the housing market in 2023
  • And So Much More!

Links from the Show

Connect with Lance:

Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Email [email protected].

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.

How To Calculate Debt-To-Income Ratio

Codie Sanchez: These “Boring Businesses” Will Make You Rich

by | May 29, 2023 | Investing, News Feed

Want to replace your nine-to-five? You’ll need to know how to buy a business. And while you may think that you need to be some high-level executive or business-building savant, the reality is that TONS of profitable businesses are selling for pennies on the dollar, just waiting for you to come in, scoop them up, and start making six (or even seven) figures without doing all the work. This is the EXACT strategy that Codie Sanchez used to leave her high-paid banking career to make millions running so-called “boring” businesses.

Whether it’s a laundromat, landscaping service, or law firm, businesses are up for sale without you even knowing it. You DON’T need to be an industry expert to get in on any of these deals. Many of the businesses that Codie has bought have been outside of her core competency. She’s gotten so good at business-buying that Codie now helps other want-to-be entrepreneurs get out of their jobs and into businesses that’ll help them build wealth. Codie’s ten simple steps to business buying can help ANYONE buy, build, and profit from a “boring” business.

Codie breaks down exactly why she left the big paychecks behind to start buying businesses, the repeatable steps to acquiring and growing a business, which business you should be looking for, and five to NEVER buy. You’ll also hear how she funds these business purchases and what to do AFTER buying a business that massively multiplies revenue and makes you millions!

Click here to listen on Apple Podcasts.

Listen to the Podcast Here

Read the Transcript Here

Mindy:
Welcome to the BiggerPockets Money podcast where we interview Codie Sanchez and talk about the asset class of boring businesses. Hello, hello, hello. My name is Mindy Jensen and with me as always is my future boring business buying co-host Scott Trench.

Scott:
Thanks, Mindy. I’m going to try to do that while being the world’s greatest EBITDA.

Mindy:
You’re going to have to clarify what EBITDA is. I still don’t know, and I hear you say that all the time. Scott and I are here to make financial independence less scary, even though he uses weird words like EBITDA. We’re here to make financial independence less just for somebody else, to introduce you to every money story because we truly believe financial freedom is attainable for everyone no matter where or when you are starting.

Scott:
That’s right. Whether you want to retire early and travel the world, go on to make big time investments and assets like real estate, start your own business or simply improve your EBITDA. We’ll help you reach your financial goals and get money out of the way so you can launch yourself towards those dreams.

Mindy:
Okay, Scott, first of all, spell out EBITDA and then tell us what this is, because I don’t know what this is, even though I hear you say it every single month.

Scott:
EBITDA or EBITDA pronounced both ways I’ve heard, is earnings before interest, taxes, depreciation, and amortization. It’s a way of factoring out all the noise in a business’s profit and loss statement to get at an approximation of cash flow. And it’s useful most of the time in valuing businesses. It’s imperfect, like any approximation of profitability is imperfect, but it’s how many businesses are valued, is based on a multiple of EBITDAs, consistent with how we’d value a commercial property. We’d say we’d take the net operating income, NOI, and apply a cap rate to it or multiple to it, and you do the same thing in businesses to value them. And another common term that you’ll hear to describe this when you’re looking at businesses is SDE, which stands for seller’s discretionary earnings.
And it’s another way of describing the profitability of a business. So if a business brings in $600,000 in profit, the owner pays themselves a salary of 200,000 and there’s 400,000 in EBITDA. We would call that business as having an SDE of $600,000. Again, a simplistic example, but the businesses we’re going to talk to Codie Sanchez today who is one of my favorite influencers investors on the internet. I love everything she puts out and think she has a fantastic thesis. She will buy businesses that are valued on a multiples of either EBITDA or SDE.

Mindy:
Scott, I learned so much talking with, I can’t even say talking with, listening to Codie give a really great overview of how she values businesses, how she looks for businesses, how she finds businesses, and how she buys these businesses, how she funds them. This is just a super awesome episode. If you listened to episode 325 with Tim Delaney where he bought a liquor store, and you’re like, that sounds interesting. This one is going to make you want to start looking for businesses.

Scott:
Absolutely. She’s so inspiring. What a treat to listen to her today.

Mindy:
She’s fantastic. We have a new segment on the show called money moments where we share a money hack tip or trick to help you on your financial journey. Today’s money moment is, if you want to spend less money at the grocery store, use self-checkout. Studies have shown that shoppers who use self-checkout save more money because they are more conscious of what they are scanning and spending.

Scott:
One of the reasons why I’m so excited to talk to Codie is because of the thesis in the asset class of small businesses, right? It’s 2023, where do you put your money? Do you put it in real estate? Do you put it in stocks? Do you put it in bonds? Do you put it in cash? Do you put it in private businesses? What are we looking at here? One of the things that’s attractive to me, thinking about asset classes in a general sense, is this market for small privately held businesses that are often owned by baby boomers. So a couple of fun facts. I think it’s like 58% of small businesses are owned by baby boomers, and as many as two thirds of them have no formal succession plan. There are 10,000 baby boomers retiring per day, and that should continue for several years.
There’s nobody to buy these things. These businesses, if they’re not sold, will just crumble or potentially cease to exist over a period of time. And that’s why you can buy these things at one, two, three times cash flow. It’s like buying a $300,000 house that produces $100,000 in annual cash flow. The challenge is, who’s going to operate this? How are you going to actually know how to run the business? How are you going to know which people to place? How are you going to be able to stabilize it? How are you going to be able to grow it? And how are you going to be able to finance it? And this is a complex problem, but for those that are willing to go and dive into this area, self-educate, perhaps even more than you would self-educate to get involved in real estate investing, for example, there can be phenomenal opportunities for returns here.
If you can grow that cash flow and get it to beyond a million or $2 million a year, all of a sudden, not only are you making a million to $2 million a year, but your business becomes worth more because it’s automated and stabilized, and a private equity firm or another buyer can buy it for a bigger multiple than you bought it for. So there’s a very powerful multiplier and expansion effect in this category that should be very, very interesting to our truly entrepreneurial listeners. It’s not for everyone, it’s probably for a tiny minority, but it’s a powerful asset class for those who are willing to invest the time and energy into pursuing it.

Mindy:
Scott, do you have plans when you buy your businesses to hold them forever or to build them up and then sell?

Scott:
I am a student in this space. I hope I would aspire to buying a business like this over the next couple of years, maybe a couple of them, and repeating a small piece of the success that Codie has had with her program. But again, I’m just learning about this for now and maybe in a few years I’ll enter this market, but I’m very excited about this. And if I wasn’t CEO of BiggerPockets today, this would be one of the first places I’d be looking personally to build wealth.

Mindy:
Codie Sanchez is a reformed journalist, turned institutional investor to cannabis investor and advisor to now founder at Contrarian Thinking and co-founder of Unconventional Acquisitions. She thrives on helping people think critically and cash flow unconventionally while allocating to what we call sweaty and boring small businesses. Codie, welcome to the BiggerPockets Money podcast. I am so excited to talk to you today.

Codie:
Well, thanks for having me. I’m thrilled to talk to you too.

Mindy:
Well, let’s dive into your backstory. What does your journey with money look like?

Codie:
Long. I was a child of immigrants who came to the US and felt that money was something that would always be scarce, that money would never really be abundant, that we could never count on it all around us. And in fact, if we ever got it, we should really make sure we hold onto it because the most dangerous thing we could do would be to spend too much and not save enough. And so I had a lot of stories about money that were about, hey, careful that you spent that here. Are you sure that you returned that there? It was all this scarcity and constraint. And the only really benefit to that I think, was that I hate rules and being told what to do.
And because of that story that I was told to not do X and not do Y, led me to focus pretty aggressively on the fact that I never wanted anybody to ever control my finances or to have to worry day-to-day about them ever again. And so I said, what if I just make so much money that I never have to count it and I don’t have to budget and I don’t have to watch my checking account every single day, because in fact, I am going to roll around in money all day. And that eventually became my mindset, and then it became a little bit of an actuality.

Mindy:
So Codie Sanchez is a little bit like Scrooge McDuck.

Codie:
In my mind, I wish it was actually, that would be fun. A little barn full of cash.

Mindy:
Swimming in the gold coins.

Scott:
Well, would you mind giving us a little bit of detail into how your career got started and how you transitioned to what you currently do?

Codie:
I started out in finance. I for a long time did the traditional route of Goldman Sachs, Vanguard, State Street, all these really big companies, and did well in the traditional finance route and then eventually didn’t want to work for the man anymore. I wanted to work for myself. I wanted to be the one who made the rules as opposed to following them. And so that eventually led to me buying my own businesses, doing my own deals as opposed to doing them for a big financial firm.

Scott:
When you think about this asset class and what we’re so excited to talk to you about is this concept of boring businesses. Did you start there with a specific acquisition or did you start from a top level down? No, I think that I want put my money into this type of asset class because of these long term trends, and then from there I’m going to go and move in, or how did you come about this? Was it an intentional approach or serendipitous to get you going throughout that you’ve gone?

Codie:
I started buying businesses because I didn’t want to be worried about working for somebody else and having to collect a paycheck. And so the business was a means to an end. It was, I will buy this cash flowing asset because I want it to replace my salary, and I no longer want to work in a nine to five for 60, 70, 80 hours a week like I was at the time. I didn’t care if that business was a sculpture factory, if it was a landscaping business or if it was a cleaning company, as long as the dollars were there. It was really just an exit path. And then as I got a little bit of freedom and a little bit of room to breathe, what normally happens is you can think. It’s hard to think when you can’t breathe and when you’re suffocated in work. And that changed for me.
And when that changed, I finally realized, oh wait, there’s a thesis here that’s bigger. There’s a thesis that these small businesses all over the country are available for purchasing, that people just like you and I can do it, that you don’t have to have a million dollars in order to buy a business that produces millions of dollars in revenue, that in fact there’s a whole lever that nobody is using and a fulcrum on which to place it that nobody has even considered. And that took many years for me to get to.

Mindy:
First of all, kudos for using the word fulcrum on our show. I don’t think anybody in 400 and so many episodes has ever used that word. I love that. You mentioned you don’t have to have a million dollars to buy these businesses. What kind of businesses are you buying for less than a million dollars, and what do you consider to be a boring business?

Codie:
I consider a boring business to be any business that is a mom and pop store typically, it’s a business that has very little of things like proprietary information, patented technology, really sophisticated businesses or products. These are businesses that don’t have a moat around them. They’re in every single community, and they are things like doctor’s offices, accounting practices, cleaning companies, landscapings, roofing, trucking. These are everyday usually brick and mortar or main street businesses. And the reason that you can buy them for that lower dollar amount is typically because these businesses don’t have a marketplace for purchasers. It’s not like real estate where everybody has normalized purchasing real estate continuously as an investment. People don’t think about businesses that way, at least yet.

Mindy:
You just went against Warren, my best friend Buffet, and said, you’re looking for businesses that have no moat. He’s looking for businesses that have a huge moat like your railroads. But also those businesses are slightly more than a million dollars. No moat. That’s very interesting. So these are going to be less expensive businesses. What purchase prices are you looking at?

Codie:
Totally depends. These businesses go all the way from, I’ve bought a business that was a newsletter for $8,000, to I’ve done multi hundred million dollar transactions and been part of billion dollar transactions, although never led one of those. So they could totally vary in size, just like there’s every size piece of real estate from a house you buy it for $50,000 in the middle of nowhere to a multi-billion dollar, let’s say industrial complex or large tower in New York. They completely vary. And the reason that I don’t care about a moat is because I think that’s a fallacy that a lot of people say in modern day society that you want to start a startup and nobody can come in and steal your market share and grow your market share. Well, most small businesses in your community have zero market share. Nobody’s trying to be, you couldn’t name a nationwide landscaping service.
You couldn’t name a nationwide roofing service. You probably couldn’t even name one in your community or in your city, probably not even the one that you use. And so I think it’s a bit of a fallacy to think that we’d need to have businesses that have these fancy things that protect us from other people, when in fact what protects businesses from competition in this space is baseline execution. Do you follow up with your leads quickly? Do you do the things that you say you’re going to do? Do you actually hire people that are competent, incapable? Do you have any marketing at all? Do you have a website? Those very small things equal, I think businesses that at least can get up to a couple millions of dollars if not actually we’ve seen quite a few tens of millions of dollars in revenue.

Scott:
Here’s the problem that I would love to know how you’ve solved in this space. These businesses, let’s call them 350 to $750,000 in EBITDA or SDE. If you hire a competent CEO who’s experienced and knows what they’re doing, that’s going to eat up such a huge percentage of the profitability of that business if you’re trying to invest in it and not operate it yourself. And it’s going to be very hard to entice somebody who maybe has those qualifications and is making 150 to $200,000 a year who has experience running large teams and can reasonably pull this off, to quit their cushy job and take on a business challenge like this while assuming a pile of debt and putting down a payment. How do you solve this fundamental execution problem?

Codie:
To summarize succinctly, don’t buy a job, buy a business. The answer’s really simple. Make sure you’re not buying too small of a company or that you already have a company that has operators in place at the level that you need to operate them for the amount of money that you have in the business. If you don’t have that, it’s a job, it’s not a business and it’s either not sellable or you should sell it for a very low multiple effect. But most people, if there’s a company that’s making $350,000 to $750,000 SDE, which is just salary for the owner, the average worker in the US makes somewhere between $65,000 and $80,000 to run a business, whether you’re an entrepreneur or a small business owner. So we’re talking about 10X that salary for you to purchase a business and run the business. So if it’s truly a business that has 350 to $750,000 in SDE, that’s actually a pretty good gig for most people.
I think what we have to be really careful doing that a lot of us on the internet I think can fall into, is because we have massive amount of optionality and we maybe have do deals. Some of my deals are no longer of course near that size. But when I first started out, my first laundromat business did like $100,000 in revenue and $67,000 in profit. And I was like in there coordinating with people trying to fix stuff. But I got that business for basically nothing. And that business then was sellable for 3X and it taught me the game of acquisition and then of divestiture or selling a business. I think to your point, buy a business, don’t buy a job. Also make sure your first deal doesn’t bankrupt you. So maybe go a little bit smaller than you assume. And for the average plumber that’s working inside of a business and then buys the plumbing company to run 350K to 750K sounds pretty good to me.

Scott:
Absolutely. I guess I’ve been looking at this kind of stuff, and I’ve been so excited to talk to you because this is something that I want to get into as an investor. I think that I’ve been approaching it from the, well, if I want to actually buy it and not have to operate it, then you have to look at these, this is a really large bet, in order to place management that can actually run something and still have a reasonable return on investment. Well, it seems to me very difficult in practice to go and buy that laundromat, for example. And do so in a way that’s profitable without actually operating a thing myself at first. What would you say to that observation?

Codie:
Well, I think a lot of people, if we remove you from it, so I think people need to earn, learn, then they start to invest and then they master. Most people want to go from earning to mastering, so they want to go, I make some money right now. How about I apply my 250K I have and I go out and build an empire of holding company of small businesses. The truth of it is you just don’t know enough. You don’t know how to hire an operator yet, you don’t know where to find them, you don’t know what the right pricing is for them. So what I would say to most people is get your hands dirty on the first acquisition. Just like I’m sure you did with your first real estate deal. You probably got your hands dirty, you probably did a little bit of the rehab yourself. You probably spent more time than you wanted to on that first deal.
But those reps allow you to scale up really quickly, a lot more quickly than if you had outsourced that first deal completely operationally to somebody else. So typically, unless people are comfortable with risk and have a lot of cash, they say get your hands dirty on your first deal. Yes, the hourly wage that I paid myself when I was in high finance making maybe a million bucks a year, if not high, six figures to run a laundromat, made no fucking sense. That made no sense. But that first laundromat transaction allowed me to scale up to a bunch of other of them, and without it I wouldn’t have been able to be where I am today. And so I think everybody’s got that moment where they have to sleep on the floor for a second in a new business.
And if you love the game, then you almost can’t help but get involved in it. Now, for you, probably a business that only does $67,000 in profit is maybe a little bit too small. And so what you basically want to do is buy a little bit bigger of a business and you want to spend a lot of time with your operator thinking about how you’re going to run it in tandem with them. But I wouldn’t tell you for your first transaction to go buy a business, put an operator in place and then say, hey, it’d be awesome if you could semi quarterly distributions. It’s probably a little bit unreasonable.

Scott:
Absolutely. I think what you’re saying here, what I’m hearing is, you’re making 600,000, a million dollars a year, you’re thinking about getting into the laundromat business here. The answer is you’ve got to work that, it’s basically you’re going to pile this on top of your day job if you’re trying to transition into this world and you’re going to go from 40 hours a week or 50 hours a week at your day job to 80 or 90 for a period of time in order to make this transition. And you’re going to reap that benefit for the rest of your career, because you’re going to go on the owner side of the equation. Is that what I’m hearing?

Codie:
I don’t think there’s more than one path, right? Sure, yes. Option A, you could do that. Option B, you could buy a bigger business, one that does 350 or 750K a year and you leave your job because, I don’t know, maybe you’re not making that in your W2 or if you are making it, that can replace a pretty comfortable lifestyle. So then you just go and put your 40, 60 hours in the business. Option three, you do a smaller deal and you do it with another operator on the side and you spend 10 or 20 hours a week. That’s one thing that’s different I think about real estate than small businesses, is I think in buying small businesses, everybody wants like, there’s like, what’s the one path? What’s the one way to do it? And the reason why there’s so much money to be made in buying small businesses is because there’s not just one path.
The path is how creative can you be in your structuring? You guys know all about that in real estate. How creative can you be in your structuring with your operator? How creative can you be in aligning a business that you might already have an unfair advantage with? For instance, you guys are podcasters. Perhaps you buy a podcast production company which already aligns with the company that you own and you have some unfair knowledge in, and you could immediately bring in new clients, but you actually buy a business that is uncorrelated to whether your podcast goes up or down with sponsorships, right? This is just a reoccurring service business. And so I think there’s so many ways to skin a cat when it comes to buying a business. The real question to ask yourself is all about deal clarity. What does a good deal look like for me?
How much money do I want to make in a business? How much time do I want to spend at it? Where do I want it to be located at? What kind of industry do I want it to be in? And once you have what I call your deal box or your thesis behind, I want to buy X, Y, Z type of business, then your search gets a lot easier. It’s very easy in real estate to say, I buy single family homes inside of the Austin Metroplex area that are less than $500,000, but allow for seller financing at a rate below 3%. That would be one deal blocks, really straightforward. When you come to buying businesses, you have so many more options than single family, multifamily and varying types of commercial, that you can get a little overwhelmed in the beginning trying to figure out what your deal box is. But the most important thing is figuring out what a good business looks like for you. And that is not a one size fits all.

Mindy:
You just said, don’t buy a job, buy a business. And I think that’s fabulous advice. I can hear a lot of people, oh man, I bought this business because I listened to Codie, and then all I do is work at this job. How do you differentiate what’s going to be a job and what’s going to be a business before you actually own it and now have to work three, two jobs full-time to try and make your investment not crash?

Codie:
Well, a lot of this comes down to, so there’s 10 steps to buying a business. Let’s answer it this way. There’s 10 steps to buying a business. First step to buying a business is understanding that the opportunity is out there and that it’s possible to do with not a lot of cash if you want to. And that that business could potentially replace your nine to five, totally doable. Second is deal clarity, which means, hey, I know exactly what type of business would be good for me. I have asked myself, we have 25 questions we ask you, but I’ve asked myself these 25 questions. Third is origination. How do I find a business? Where are they located? Fourth is due diligence. This would be this section. So how do I know if this is a good business that really does what it says it does, where the owner actually only works 20 hours a week and it makes this much amount of money that they say it does so I know what I’m getting myself into?
Fourth is negotiating. How do I negotiate well with the seller in order to get what I want? Six is selling you. So how do I convince the seller that I am the person to take over their little baby that they’ve built their whole lives or that they’ve spent their whole lives building? Seven is going to be financing. So how do I get the money to actually do this deal? Eight is closing. So how do I take this business with my attorney and my accountant and actually close the deal overall. Nine is the first 90 days. And then 10 is growth. And so if you think about buying a business that way, you have, I don’t think you can just listen to a podcast like this, go out and buy a business. I don’t think that’s a good idea for anybody listening today.
I think in fact, you have 30 to 60, 90 days of learning. If you spent 20 to 30 minutes in let’s say something like our course or reading a book or whatever you want to do, you could learn at 30 to 60, 90 days what your deal box is, how to do underwriting, what a good deal looks like for you, et cetera. And by the end of 30 to 90 days, you could move forward on executing a small business transaction. Now, do I think that you would be a pro at it? No. But I think you would have enough understanding to where you’re not going to bankrupt yourself if you follow the steps. It’s not easy, but it’s simple.

Mindy:
Thank you for that honesty, because I don’t want my listeners to be like, oh, I can go do this. No, you need to educate yourself first. And I like these 10 steps. I was furiously typing as you were saying them, so thank you very much.

Scott:
We have a parallel thought process here at BiggerPockets around real estate investing. Where if you’re going to invest in real estate, you should spend dozens or hundreds of hours self educating. Most of our members say that they’ve educated themselves for months or years prior to make making their first transaction. And it seems like it’s even more so the case when you’re buying a business because there’s this general framework of buying a business. And then there’s the industry specific expertise that you’ll need to acquire as rapidly as you can after you do identify a deal in order to be able to competently work in it. Codie, what is your buy box and process and what are you doing currently right now to invest in this asset class?

Codie:
When I buy small businesses, we own 26 right now. When I buy small businesses, today it looks very different than even two years ago before my media company. These days I buy businesses where I have an unfair advantage, that can accelerate my media company or can be accelerated by my media company. And so that might look like I just bought a property management business, for instance, a portion of a property management business because I think that will really help offset my real estate. And so as real estate transactions start to slow down, as Airbnb bookings start to slow down, as we come into a recession overall, as I stop buying real estate as I have over the last two years because I haven’t liked the prices, property management continues to stabilize, because everybody has to have their properties managed. And so I bought a property management company for that reason.
And I talk about it a lot because we have a property management business that we help other people scale up their property management businesses. So it’s like, all right, I make money on the property management business. I make money on the business that searches for best in class property management companies and adds them into ours, and it offsets my real estate portfolio. That’s a good buy for me. The second part of my buy box would be, last week I bought a video production company. And so we do a lot of video, Contrarian Thinking on all my socials. And I was struggling because I knew at media and I was finding it was really hard to have leaders in that space. I was overseeing a lot of editing and way more involved in a business than I ever typically would be because my face was all over it.
And so I was really particular about how we were doing things. And it was taken up way too much of my time, and I was super overwhelmed by it actually. And so I went out and started looking for who are the best in class people in video production. And what I found is the best in class people are largely located at our scale in LA, New York, a lot of the big markets. So I either have to give them a giant salary and convince them to come down here, or I have to go to an ancillary industry. And so what I did instead is I knew brand deals are going down, ads and sponsorships are going down right now as the market starts to downturn. And so I thought, well, why don’t I buy a video production company that typically works with brands? They have a high attention to detail. They’re production values really good. They’re super organized, they have to hit deadlines. All the things we’re struggling with.
I’ll buy one of them, they’ll be worth less right now because the market’s in trouble and I’ll plug them into my company and they’re going to take over all my operations. And so that’s what I did. So right now, my deal box is very strategic. There’s a lot of people on the internet that go out and they’re like buying 372 single family homes right now with their network, or they’re buying every single laundromat or car wash they can find. At a certain point I think you have to ask yourself the question of, is this deal part of my unfair advantage once you’ve done a lot of transactions? And can I scale it to a level that’s meaningful for me? Which is I want to make my businesses make me at least a million dollars a year. And if they can’t do that, they’re probably not in my deal box right now.
Now, 10 years ago that was like 50 bucks is 50 bucks. If it makes me 50 bucks, great deal. But that’s changed today and now the numbers are just bigger.

Mindy:
Okay. I love that. Is there anything that you would not invest in?

Codie:
Oh, tons. There are five businesses I never like to invest in, but there are probably also 50. The five businesses I would never invest in are retail stores. So think boutiques, you just look at the trend lines of what’s happening in retail stores right now, both from a foot traffic perspective and the cost of rent and the competition with e-commerce. I don’t do retail stores. Second is restaurants. Restaurants have one of the highest failure rates of any businesses. Restaurants typically also are very complex to run. So you have to deal with inventory, you have to deal with really migrant workforces, you have to deal with consumer trends, you have to deal with seasonality. It’s just too confusing even for somebody like me.
Third is hotels, that’s just real estate masquerading as a business. Fourth is Amazon FBA. Anything where a single platform can control my ability to reach my end clients, I’m uninterested. I want to control the end experience with the client and be able to communicate with them directly. And the last one would probably be anything related to consulting. Consulting has a lot of key man risk, AKA one person being the point of purchase, why somebody does business with you. And so I don’t like to buy consulting businesses because I feel like that’s buying a job and when the other person leaves I just replace them.

Scott:
Amen. I think that’s awesome. I agree with everything you just said, and I think that’s a fantastic way to approach it, with the exception of I do like underlying real estate in a couple of cases, and I think that if you’re going into retail, and I’ve heard a couple of investors being like, I’ll basically buy this store for inventory and I get the real estate as a bonus on top of it. So there’s sometimes stuff like that you can find in this space. But yeah, it’s not as good as scaling something to a million dollars in profit on a continuous recurring basis, which is your thesis.

Codie:
Well, and you’re right. I own the real estate my car washes are on, for instance. I own some of the real estate that our laundromats are on. But the thing about those two things is they don’t have an expectation of service 24 hours a day. A hotel, they expect 24 hour service. This hospitality game that I think is one of the higher levels of entrepreneurship. And so in tandem with it masquerading as a business and really be in real estate, it’s a heavily service oriented and high expectation business. And so typically when people buy a business, I’m like, let’s start you off. If you’re going to start driving, let’s not learn on a Ferrari. Let’s learn on a Honda. And once you can handle the Honda, then you’re allowed to upgrade to the Ferrari, the Lamborghini.
Maybe you could fly a plane one day, but like day one of driving, you get the tricycle. And so I try to talk at that level for most on the internet. And then in some of our bigger groups, we have guys that have done eight, 10, $50 million transactions. And that’s a totally different ballgame. It’s also when it really gets fun. But that wasn’t that relatable to me 10 years ago, and I don’t think it’s that relatable to most people listening on the internet.

Scott:
All right. I have a complex question here. You started opportunistically with a laundromat. I imagine at this point in time this was not part of a grander strategy to get to where you are now, and you built it bit by bit to this, and at some point it’s shifted into a platform first strategy for your acquisition and your core business. Do you recommend that people start with that platform and strategy first or they just dive in and figure it out and let it evolve later? And the second part of that question, which I think is closely related, is what’s the exit plan here? Is it one giant conglomerate? Is it a private equity type holding company that’s going to invest in large amounts of properties or something else?

Codie:
Let’s start with the second question. The end goal to me in life, most people try to have this five, 10, 20 year plan. And I’ve looked back on my life, none of it basically shook out that way. If you were going to tell me when I was getting my licensing at Goldman and State Street to go into investment banking and asset management, if you said, hey Codie, guess what? In 10 years you’re going to be doing TikToks on the internet, I would’ve thought you out of fucking your mind. I would’ve thought there was no way. And yet we have done more transactions and made more money than just about anybody I ever worked with back in the day. And so thankfully I didn’t stick to my 10-year plan.
My 10 year plan written in my little journal that I write in every single quarter about where I want to go, said that I wanted to head an asset management business for a large firm internationally in multiple locations. Right about now that sounds like fingers against a chalkboard. I couldn’t think of something. I want to do less than go back to suits and Wall Street. And so I don’t have a 10 or 20 year plan. My only 10 or 20 year plan looks something like this, I want to be able to have freedom of optionality to do the things that interest me at that moment with the team that’s super high performing, that allows me to not have to work 80 hours a week if I don’t want to, and yet gives me the option to work 80 hours a week on the things that I want to.

Scott:
The strategy is flexibility, which is really, the word that we use when we talk about planning your personal finances. It’s all about flexibility and having it as soon as possible and sustaining a flexible position, a financially free position for the duration of your life. You’re just take playing on a much larger scale than what we typically see with personal finances here in the BiggerPockets Money podcast. Going back to the beginning, that’s great, the goal is flexibility, but there is a strategy behind what you’re doing, there’s a core strategy. You talked about it earlier with Bolton acquisitions. When did it evolve from opportunistic cash flow investing in this asset class to more of the clear cut strategy that you have today?

Codie:
I started investing with an eye towards this one word of audience in 2020 when I realized after watching Giants like the Rock, George Clooney, Kylie Jenner, Ryan Reynolds make billions of dollars for things that had nothing to do with their core competency, AKA acting or being known on the internet as a personality. I watched them and I thought, what looks like more fun, running a private equity company, which I know a lot of guys that run private equity companies that make hundreds of millions if not billions of dollars a year, or having this giant audience that becomes like a perpetual investor base for you to tap into and you get to launch things to them with basically zero risk to you as long as you understand your audience. And it was that moment that I realized I need to change my entire acquisition strategy. No longer can I just buy just car washes, laundromats, landscaping companies, I now need to buy companies that can be accelerated by my audience.
And if you’re listening to this, you’re always looking for your unfair advantage. So your first deal that you do might be because your dad owns a paint company and because he’s painted homes for 30 years you have an opportunity to buy him out or take over his painting company. So you do that. And you run the painting company for a while and then you realize you could put in an operator and you want to look for your next deal. And the smart thing to do might be that you realize your painting company’s not really a painting company, it’s a marketing firm. You’re actually really good at marketing and sales. And so instead of buying another painting company, you might buy a solar company because you know that the client acquisition cost for solar is some of the highest out there. And so if you have painting clients that you can simultaneously cross sell solar, you’re sitting pretty.
And so how I thought about it was just, where’s my unfair advantage where my dollar can go much further than anybody else? It’s a little bit more strategic than a lot of people online think about things. They want to teach. Here’s X, you pay Y, rinse and repeat every single human. And I think that’s a huge disservice to you, the listener, because I think as the listener you should be asking yourself, I’m a graphic designer who turns out is amazing at doing animations. So because of that, I want to buy a company that can be accelerated by the thing that I’m uniquely good at. And that change was in 2020 for me, and I don’t think I’ve looked back.

Mindy:
How are you funding these deals?

Codie:
Well, let’s talk about how I funded them at first. I’ve done like 80% of my deals up until the last couple of years, seller financing. So pretty much all of my deals were, hey, you have a business, you want to exit, you’re getting divorced, it’s the five D’s. You have death, you have divorce, you have disease, you have something about decisions, but basically where you get into conflict for somebody else in your business or you have distribution, AKA you’re moving, you go to a different location or whatever. So one of these five reasons is usually the reason why these people sell. And because of that you need to sell a business or you want to exit a business. I try to find people at their trigger points. At that trigger point you have a lot of leverage. And so what somebody has divorce happen and they have to sell in their business, I want to be the one to pick it up for pennies on the dollar and be the one that cleanly distributes assets to both parties.
And so most of my deals have been done with OPM, other people’s money, seller financing. 60% of all businesses in small business land gets sold with seller financing. So it’s very normalized, not entirely seller financing, but some portion seller financing. And then I would say I’ve probably done about another 10% of my deals with banks, whether that was an SBA loan, whether that was just a loan from my local bank. And then the last 10% have been deals where I’ve gone out and raised capital for them. So in a traditional way, I’ve raised either equity or debt from friends and family in order to buy a small business. I think most people should try to start with a heavy bias to seller financing and a lower percentage down payment.
We just had a guy in our Unconventional Acquisitions group, which is where we talk about buying businesses. His name’s Renaun, and he just bought a business for $8 million, 100% seller financing, $0 down. The business is located in his geographical area, and the seller of that business is going to stay on for a year to help him transition. It’s an incredible transaction. Renaun was a pretty high paid executive making six figures in a sales capacity previous to that, had nothing to do with this sector type of business, but got really good at negotiating deal sourcing and then trying to find a way for both people to win in structuring a deal.

Scott:
And I think the advantage of seller financing in a lot of these transactions is it keeps the seller with a lot of skin in the game so that they’re there to teach you and be a consultant or give you the answers to questions that certainly you’re not going to get every answer in a due diligence session. I think that that’s a really powerful tool in particular in this space.

Codie:
Agree.

Scott:
Let me ask you a hard question here. What percentage of the time would you estimate when a transaction like this takes place in a company of couple dozen employees, maybe three or four leadership team members, where there’s not a change to the leadership team in the first year following acquisition? Is it more common or less common for there to be substantial changes?

Codie:
Very common, I would say. Typically though, you as the owner are the one that’s going to want to make some of the changes. So if you think about it, the seller has probably been checked out for a bit if they’re selling a business. It takes a while to get to that point of really deciding now I’m going to execute on a sale. And during that poet, oftentimes the team takes their foot slightly off the gas. And so what I would say is I’ve seen less people leave because of management change, that’s a big fear that people have, that seems to be, I would say it’d be interesting to go back and actually see if I could figure out what our real percentage is, but less than 10% of the time do I lose a senior leader that I wanted to keep because I bought the business. Pretty rare for me.
The more common thing is that those leaders inside of the company just aren’t good enough. And so you want to find your operator who can also recruit leaders. That’s a really key component of finding an operator, is they can’t just be an executor. They have to also be a leader. And leaders mean that at prior firms they had other people that followed along with them, that would want to come to the company alongside them. So a really good way to check and see if your operator is going to be good, going to be able to lead, going to be able to retain and recruit talent, is to ask them, hey, man, love to have you run this million-dollar. Business that I just bought. You seem to have parallel skill sets. If I was to bring you over, who else would you want to bring? And how big of a team would you want to have at this company?
And if they were like, I might need this type of person and this type of person, you go, awesome. Who is that? Who do you know? And immediately you’re going to be able to tell how connected they are and are they actually a leader or were they just a manager of people?

Scott:
Awesome. I have a question on this front. As a first time CEO, I found the challenge of identifying poor performers and then removing them quickly and professionally to be very overwhelming for the first little bit. I imagine the culture in investment banking is a little different and there’s no issue with that. And so it’s just a commonplace whenever there’s a poor performer, we move out because there’s a hundred people in line past that and we’re all used to going at a million miles an hour. But I do want to call out that what you’re saying here, and people need to hear this, is when you buy a business, you will fire multiple of the leaders, almost certainly, especially if you’re doing more than once. You’ll need to do it quickly. You’ll need to do it professionally, and you’ll need to have a very clear understanding of what good looks like in each one of those management positions.
And so this is not a role, if you’ve never had to terminate someone or if you’ve never had to terminate someone for poor performance as opposed to they just obviously behave badly or you had a clear thing, this is going to be a new and very, very difficult experience for you at first. Would you agree with that, Codie? And do you have any remarks on that?

Codie:
It’s never fun firing somebody, ever. I don’t think it ever gets better. I’ve actually never met a leader that goes, just fired somebody today. It was awesome. I just don’t think that those people really exist, even in finance, it just doesn’t feel nice. You don’t like to do it to humans, even if you think that they, quote unquote, deserve it. That being said, I’m not sure you deserve the right to be an owner if you can’t have difficult conversations. And so I think a little bit of this is having a conversation with yourself and saying, am I the type of human who wants to lead people? Who wants to be an owner? Who wants to leave a mark on this world? And if so, there are a few things that I have to add to my tool belt through life, and one of them is that I have to release people when they are not a fit for my company and when I am not a fit for them.
And the second that you realize that, one, it’s always better than you think it’s going to be. Very seldom have I ever fired somebody where they’ve, one, been surprised or two, it’s gone badly. And that’s because it’s really important to your point about managing them out. And this stuff is tactical and people who don’t lead teams or run businesses don’t love talking about this actually at all. But it’s really important that you have check-ins early and you get comfortable with friction. I’m always telling my managers like, stop giving compliments to people on your team that are underperforming just because it makes you feel better. You have to have the tough conversation. How terrible would it be if you were learning to ride a bike and every time you fell over, your parents were just like, yeah, just keep doing that. Didn’t work. But you should keep doing exactly that way where you keep leaning all the way over to the left. They’re never going to learn to ride the bike.
And so as a good leader, you have to be able to say, hey, man, your sales numbers are down, you’re not making enough phone calls. Do you want me to listen in to what’s going on there? And to actually give people feedback, and then people won’t be surprised what something happens because you will have been coaching them in and up or out for a period of time already.

Scott:
So again, I think this is going to happen, right? That’s the reason why you’re getting a good deal on the business, is because in many cases it’s poorly run and you have to recycle the management team in many of these cases, or at least some of the management team in some of these deals. I think that’s something for folks to be aware of and think through. The second question I have is first time CEO, which is going to be almost everyone buying one of these types of businesses, they’re going to be first time CEO. How do you know what good looks like from these people? That was, again, the biggest challenge for me coming in as I had never hired a CFO. I’d never hired one of these roles. How do you shortcut that and have better odds, at least in your first business?

Codie:
These are really the secrets. I do three things. I have a 30, 60, 90 day plan for every new hire that I bring onboard. It looks the same across every single business. It’s part of our onboarding documentation. You can Google onboarding plans for Google, Amazon, et cetera. You can Google 30, 60, 90 day plans. You can steal other people’s homework, which is what I would recommend you do. And then just implant the stuff about your company. And inside of that 30, 60, 90 day plan, I have them and or I write out what does success look like inside of that 30, 60, 90 day window? So inside the first 30 days, you will have done X, Y, and Z, 15 or 30 things. Inside of the first 60 days you’ll have done these things. Inside of the first 90 days, you’ll have done these things. The beautiful part about that is at each period, so after 30 days, I say, okay, have you met everybody on the team?
Okay, copy. Yes. Have you created a new roles and responsibilities for your underlying team members? Okay, you haven’t. Why? And so I’m basically going through a checking off every one of those things, and then it’s very easy to see whether they are having success or not. The other thing that’ll keep you sane as a business owner always is a scorecard. And so every single business should have a scorecard or some very simple Excel spreadsheet where it’s like, here is our goal, here is how each person contributes to the goal in some way. If this person does not have numbers that they’re directly aligned with, you’re probably doing it wrong. And I say all this with the idea that, this sort of stuff is stuff that I do 60% of the time every time.
There is always, even after 15 years of me being in business, where I’m like, I don’t have the KPIs and the scorecard exactly right here, so I’m just going to let this person run with it. And then of course something goes sideways. And so give yourself also a little love and grace as a business owner that everybody talks about how perfect they are on the internet and realize that the truth of the matter is that that’s very rare. If you do 60 or 70% of this stuff, you’re going to be a top performing owner. I can’t tell you the amount of owners that never do 30, 60, 90 day plans, that never have underlying scorecards, it doesn’t mean your business is going to be a failure, just means you might have to work harder than you need to. And I don’t really like to work harder than I need to.

Scott:
I’ll chime in there and say that I think there’s an operating system that if you’re a business owner, you should go borrow one. I would recommend EOS, 4 Disciplines of Execution. There is a book on EOS Traction. I would hire the coach to implement it or I’d go with 40, but just borrow an operating system. Invent your own after you’ve used one of these ones that are widely talked about for a few years, because why reinvent the wheel and reinvent every part of running a business? Just put in place a playbook that’s already in place. Do you have anything like that or do you find that operators who do that are more successful?

Codie:
I think having a system is crucial. A lot of my businesses do run on either EOS or Rockefeller, and certainly I’ve read Traction, I like a lot of it. The only thing that I don’t love about it is I don’t love the level 10 meetings, how they run those at EOS. I think that it can be a little too constrained in some of my companies. I also think it doesn’t lead to a great culture fit. It leads to a culture that focuses on very specific tactics and execution every single week, as opposed to, I’ve always abided by the quote of, if you want to teach a man to build a boat, you don’t teach him to find and lay the planks and to screw them in. You teach them to yearn for the open sea. And so I think the real hack in running a business is can you inspire people with the cult-like set of mission and values to want to do the things that you would never have to explain to them and micromanage over them.
And my least favorite businesses are the ones where I am checking off 472 to-do list items because I have to red, yellow, and green every member of the team. And my favorite businesses are the ones where I focus on creating a culture that puts first personal responsibility and personal excellence as a key to personal success and thus business success. And so if you can, wherever you can, focus on the soft things actually. Most people will tell you to focus on the tactics, I’m a big believer in focusing on the story.

Scott:
Codie, do you have any final advice for someone who’s listening, who wants to get into the business of boring businesses?

Codie:
Twofold. One, I think you guys did a really good job of not making it sound too simplistic and easy. You too can buy a business with $0, spend zero time on it, become a millionaire, have a Lambo and a yacht. That’s not what we’re talking about here. And on the flip side of that, also assume that you as a human are much more capable than you’re giving yourself credit for. And assume that you’ve met a lot of business owners. How smart did you think all of them were? Have you been impressed by every business owner that you’ve engaged with? The answer is no. I’ve met a bunch of the big time business owners, and I can tell you what, 10% of the time I’m blown away. And 90% of the time I think, I’m common for you.
And so for those listening, if it does sound like you are the type of human that wants to own a business, that wants to make the impact, that I think is the most powerful impact any human can have, which is to build something, to employ others and to create so other people can consume. I think there’s no higher calling. And I think that buying businesses allows you to do it when you don’t have that startup seed inside of you that you would die if you didn’t build it, but instead just want to get in the game. And I think getting in the game is half the battle, and then you can figure out what game you want to play once you get there.

Mindy:
Codie, this was so eye-opening and so helpful. I really love that you didn’t come in with, oh, anybody can do this. All you have to do is this one thing, and then you can be a millionaire too. It does take work, but it doesn’t have to be this 150 hour a week grind. I love how you presented the unfair advantage idea or suggestion. That’s great. Everybody has an unfair advantage. What is it that you do that you can take advantage of, that you can do better than anybody else? And I had a great time with you, Codie. Thank you so much. Where can people find more about you?

Codie:
Well, if you want to learn more about buying boring businesses, which I think is maybe even more interesting than me, I would go to contrarianthinking.co. That’s our free newsletter. It comes out weekly. There’s a ton of great ideas in there for how to make money unconventionally. We also have a secondary newsletter at unconventionalacquisitions.com, called The Boring Business Brief, and that one is all about acquisitions each week for you super nerds. I would check out either one of those. And then I’m Codie Sanchez and all the interwebs. I think YouTube is a fun way to get a high level view of buying a bunch of businesses. We’re spending a ton of time on YouTube, so maybe I would start there.
Plant inside of yourself that seed of belief. Get a couple ideas rolling around in your head by watching videos that’ll only take 10 minutes of your time and then dive deep into the newsletters and learnings. That’s probably where I’d start.

Mindy:
Thank you, Codie.

Codie:
Thank you.

Scott:
Codie is a wealth of information. You got to go check her out on those resources. And then Instagram you post awesome stuff every day almost. So really appreciate it and learn a lot from you.

Codie:
Well, thank you both. Great questions. I enjoyed the time here.

Mindy:
Thank you, Codie. We’ll talk to you soon.

Codie:
Bye guys.

Mindy:
All right, that was Codie Sanchez, and that was amazing. Scott, I’m so excited that we got to talk to Codie today. Listening to her was just, I want to go buy businesses, I want to start learning more about this, and I want to write down my unfair advantages so that I can start figuring out what I can do better than other people.

Scott:
I am so inspired by her. Again, like I said, I follow her content and think that she does a fantastic job of framing the opportunity and is very real about the puts and takes with this. I do think, again, that she’s so driven and so direct and so blunt and so forceful and passionate about what she talks about, that don’t be fooled. If you don’t have that personality and you’re not willing to go there and be direct. And again, she didn’t say this out loud, but I think that 90% of the time when a company is sold in this setting, there’s going to be changes and terminations or people resigning from the leadership team and perhaps other parts of the businesses in this asset class. And if you don’t have the stomach for that, this is not going to be for you.
So again, a small percentage of folks will thrive in this environment, but those who do will I think find the best returns of any asset class in the United States of America, maybe the world over the next 10 to 20 years here because of the low purchase prices and the incredible opportunity to streamline efficiencies in many of these businesses.

Mindy:
What you’re saying, and I can see based on what Codie was saying, I can see how these are, I’m listening to my furnace guy, Bob, from Circulating Air. If you’re ever in need of a furnace in Longmont, you go to Bob. Everybody knows that you go to Bob. Everybody that I talk to, who is your furnace guy? It’s Bob from Circulating Air. Everybody talks about Bob from Circulating Air. But you start talking to Bob and he doesn’t have a succession plan. I think now one of his children is working with him, but for a while he wasn’t. And what are you going to do with your business when, he’s not getting up there in age, but everybody ages every single day, so what are you going to do when you don’t want to work here anymore?

Scott:
That’s one example of a business that could be cooling off until someone brings a plan to heat it up.

Mindy:
All right, Scott, I think that is going to wrap up this episode of the BiggerPockets Money podcast because Rich is not ever going to do better than that. He is Scott Trench, and I am Mindy Jensen saying, take care teddy bear.

Scott:
If you enjoyed today’s episode, please give us a five star review on Spotify or Apple. And if you’re looking for even more money content, feel free to visit our YouTube channel at youtube.com/biggerpocketsmoney.

Mindy:
BiggerPockets Money was created by Mindy Jensen and Scott Trench. Produced by Kailyn Bennett, editing by Exodus Media, copywriting by Nate Weintraub. Lastly, a big thank you to the BiggerPockets team for making this show possible.

Watch the Podcast Here

Help us reach new listeners on iTunes by leaving us a rating and review! It takes just 30 seconds. Thanks! We really appreciate it!

In This Episode We Cover

  • The “boring” businesses that can replace your salary and make you a millionaire
  • How to buy a business from start to finish and five business types you MUST avoid 
  • Jobs vs. businesses and how to ensure you buy cash flow, not another nine-to-five
  • Codie’s buy box and EXACTLY what she looks for when acquiring a business
  • Where to find funding for business purchases (and which sellers will offer you financing)
  • Hiring, firing, and becoming the CEO of your first business
  • And So Much More!

Links from the Show

Connect with Codie

Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Let us know!

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.