Why It's A GOOD Time to Buy Real Estate in LA INSANELY CHEAP

For those seeking real estate exposure, investing in real estate-oriented ETFs is the simplest approach. However, directly owning property, especially in areas like Los Angeles with tenant restrictions, can be challenging. Despite this, the current market might present a favorable opportunity for buyers, particularly for multi-family properties.

The discussion delves into the complexities of the housing market and homelessness. Contrary to popular belief, there isn't a housing shortage, and housing affordability has remained relatively consistent over the past 95 years when considering wages against rental costs. The perceived unaffordability is often linked to fluctuating interest rates rather than a genuine increase in housing value or a lack of available housing.

A significant point raised is the lack of critical thinking in public discourse surrounding housing and homelessness. The speaker argues that government interventions, often involving large sums of money and union partnerships, are inefficient and costly compared to direct property acquisition for housing individuals. This inefficiency is attributed to a systemic inability to step back and consider alternative approaches.

• The simplest way to gain real estate exposure is through ETFs.
• Direct property ownership can be complex, especially with tenant restrictions in places like Los Angeles.
• Despite perceptions, there isn't a housing shortage; housing availability per capita is at an all-time high.
• Housing affordability, when comparing rent to wages, has remained consistent for the last 95 years.
• Government approaches to homelessness are criticized as inefficient and costly compared to direct property acquisition.

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Real Estate Investment Options [00:00]

• The most straightforward way to get exposure to real estate in a portfolio is through real estate-oriented ETFs.
• Direct property ownership, especially in areas like Los Angeles with tenant restrictions, is described as potentially nightmarish.
• Despite challenges, the current market is identified as potentially the best for buyers to enter and purchase multi-family properties.

The speaker suggests that while ETFs are the simplest route for real estate investment, direct ownership is more complex. However, they also note that now might be an opportune time for buyers in certain markets, like Los Angeles, to acquire multi-family properties.

"If someone wants to have some exposure to real estate in their portfolio, what is the best way of even going about that right now? If they like commercial, is it like single family home residential? Would it be like you know investing in real estate oriented ETFs? Those are the most simple."

A Large Multi-Family Deal in LA [00:35]

• A 20-unit, 11,000 square foot interior building in Hollywood was available for purchase.
• The initial asking price was $2.8 million, but it sold for $28 million.
• An offer of $25 million was made but not accepted.
• This deal translates to approximately $260,000 to $270,000 per unit.

This section highlights a specific example of a significant real estate transaction, showcasing the high value and scale of multi-family properties in the area.

"I saw a property on Lexington, which is in Hollywood, 20 unit building. This just shows you how big of a problem, you know, the uh tenant the tenant restrictions are in LA. 20UN building, 11,000 ft² interior uh square footage. Um, and I could have bought the building for 2.8 million. It sold for 28. I wrote an offer of 25. They didn't. They sold it. I mean, rightfully, good for them. They got 28 for it. That's insane."

Government Approaches to Homelessness and Housing [01:15]

• The speaker questions the effectiveness of government-funded housing for homeless people.
• It is argued that the homeless problem is more complex than simply a lack of housing, as the region has more housing per capita than ever before due to people leaving.
• The cost of building homeless housing through government contracts with unions is estimated to be around $1 million to $1.2 million per unit, which is significantly higher than market rates.
• A private organization that has been volunteering for 15 years is favored over government initiatives.

The current methods employed by the government to address homelessness and build housing are critiqued as being inefficient and excessively expensive. The speaker contrasts these with more direct and potentially cost-effective solutions.

"I mean, the government should be doing if we're trying to I don't think I think the homeless problem is a lot more complicated than housing. Truth is we have more housing now per capita than ever before because we had 600,000 people leave LA. So we have it's actually the equivalent of building 600,000 homes. But yet homeless is worse. So it's not a it's not a direct correlation to housing."

The "Homeless Industrial Complex" and Lack of Critical Thinking [02:32]

• The "homeless industrial complex" in Los Angeles is described as a large, often well-intentioned, but ultimately ineffective system.
• A core problem identified is the unwillingness of people within this system to step back, critically assess their methods, and explore new approaches.
• This resistance to critical thinking is presented as a major downfall, not just in this context but broadly across the United States and the world.

The speaker criticizes the inertia and lack of innovative thinking within the established systems dealing with homelessness, suggesting that a failure to engage in critical analysis perpetuates ineffective solutions.

"I think the problem is that they they won't they're not willing to stay take a step back and to try to figure out a new approach. People are just so stuck in their ways and they just double down and double down and just keep bulldozing through without pulling back and saying, 'Hey, maybe there's a another way to do this.' It's a lack of critical thinking. I think it's been a downfall of, you know, it's it's that that that sentence alone probably explains 90% of the problems in the United States and the world. It's just a lack of critical thinking."

Housing Affordability: Myths vs. Reality [03:10]

• The assertion of a housing shortage is challenged; there is at least as much housing per person now as there has ever been.
• Housing has not become more unaffordable than it was for the last 80 years, when comparing rental costs to wages.
• The cost to rent a 1,000 square foot, two-bedroom apartment has historically tracked wages closely for the last 95 years.
• Claims of increased housing unaffordability are often based on headlines and misinterpretations, particularly concerning interest rate fluctuations.

This section debunks the common narrative of a housing affordability crisis, arguing that historical data and a proper analysis of rent versus wages reveal a consistent pattern over many decades.

"There's not a housing shortage. If you and housing is not unaffordable anymore than it was for the last 80 years. If you look at the actual facts, there's actually at least as much housing now per person in America as there has ever been. So people don't usually know what they're talking about when they throw these things out. They just read like a CNN headline in terms of housing unaffordability."

Understanding Housing Affordability Metrics [04:22]

• The perception of housing unaffordability is often driven by clickbait headlines.
• When interest rates rise, buying a house becomes more expensive in terms of wages, but this doesn't mean the underlying value of the property has increased.
• The argument that housing costs have risen dramatically is fallacious if it doesn't account for wage inflation and interest rate impacts.
• A more accurate measure of affordability involves comparing rental costs to wages, as rents are less directly tied to interest rates.

The speaker emphasizes the need to differentiate between the cost of buying a house (influenced by interest rates) and the actual value of the house, and suggests that rental comparisons offer a clearer picture of sustained affordability.

"If people say housing has gone up six, you know, the cost of housing has gone up 60% in the last 5 years. No, it hasn't. The value of the, you know, a $500,000 condo 5 years ago in LA is worth 500,000 today. So it's gone up zero. The cost of buying it because interest rates are up means that it's going to cost more of your wages. That is a fake argument because if when interest rates go down, did we fix the affordability problem? No. That's just another way of saying interest rates are up. That's not fixing the problem."

The Myth of a Housing Affordability Crisis [05:34]

• An analysis using AI tools and direct research indicates that housing affordability today is comparable to that experienced by previous generations.
• Headlines often oversimplify or misrepresent the issue of housing affordability.
• A common metric used to claim unaffordability is the number of years of wages required to purchase an average house, which is heavily influenced by interest rates.
• The speaker argues that comparing rental costs to wages provides a more stable and accurate long-term measure of affordability.

The prevailing narrative of a severe housing affordability crisis is challenged, with the speaker asserting that historical trends show a consistent relationship between rent and wages over many decades.

"If you go on chat GPT and you spend 30 minutes asking it to analyze these facts, you'll actually learn that housing is as unaffordable today as it was. for your grandparents."

Entitlement vs. Opportunity [07:35]

• The concept of being "entitled" to the American dream is rejected.
• The American dream is presented as an opportunity to work hard and achieve success, not an inherent right.
• The speaker believes everyone is entitled to equal opportunity, which is distinct from being entitled to a specific outcome.

The speaker distinguishes between entitlement to a dream and entitlement to an opportunity, emphasizing that hard work and effort are key to achieving success.

"Don't even get me started on entitlement. I mean, everyone's entitled, everyone is thinks that they are entitled to the American dream when you're entitled to an opportunity to work hard and achieve the American dream. That's much different than just being entitled to the American dream."