Why I Just Sold EVERY Property I Own. And What Comes Next

I'm in real estate and I am selling everything. Every piece of real estate that I've acquired since 2015. I have sold and I'm moving away from real estate and into other asset classes because the game has completely changed and the rate of return that you get versus other asset classes no longer makes sense. Hedge funds understand this.

That's why they're actually net sellers of real estate right now. So hang tight. I'm going to explain to you exactly why and go into the numbers why I sold everything that I own and what it means for the future and my next steps of what I'm going to do to ride the wave and get to the next level. Now, I owned a lot of real estate in the past.

I owned single family rentals. I owned multif family C-class rentals. Overall, 200 plus units plus I flip properties. I'd buy from foreclosure auction and I would go through that process and make hundreds of thousands of dollars flipping properties and not only selling properties.

So, right, that was my original job. I sold properties. I got that cash. I used that cash to buy real estate to start flipping it, renting uh the properties out, and then eventually I moved up to multif family properties, which honestly was a big mistake for me because the timing was bad.

And if you know anything about real estate, timing is extremely important. Now, it may have looked like a sexy asset class for the last 40 years because interest rates have been coming down for 40 years, but the truth is when you buy and where you buy is super important. And right now, the timing is bad and the location is bad for various reasons that I'll get into, but I got out of absolutely everything. And I had made this prediction in 2021 because things got out of control in 2021.

So what happened was during 2020 we had net migration that was absolutely insane. We had all these people relocating from the northeast and they were just buying up everything that they could possibly find and it drove prices up so high to the fact that builders were just going to buy as much land as possible and start building. And that is exactly what happened. And now we're at a point where the construction is absolutely absurd, but the relocations have just dropped off the the map.

And this is causing an exact opposite of what had happened previously. We basically moved forward 5 years of sales within 2 years. And then we saw prices skyrocket more than 50%. And this caused inflation that priced out the locals.

And it's causing people because they're not staying here anymore for prices to come down. And now we actually have an over supply. So where did people come from? This is the 5-year net migration to Florida by state.

They came from New York, New Jersey. Where did we lose people to? Other Sunb Belt areas, North Carolina, Texas, Georgia. But we are mostly gaining people from high cost areas.

They're relocating here. They're saying, "Hey, I have no state income tax. I'm selling my house for $2 million over here. I'm coming to Florida and I'll buy a house for a million dollars and I'll pocket the other million." Well, things are very different now from that circumstance because we no longer have as many of these buyers relocating that have tons of money and have this, you know, multiplier effect come in.

So, the other thing is that we had these hedge funds come in and just gobble up all of the starter homes as much as they possibly could in a short period of time. This drove those starter home prices up to now where you'd have a house at 180 $180,000 for a starter home is now 400,000. So, we have a massive bubble and I called it out in 2021 for the exact reasons that it's playing out today. Let's take a look at what I was saying in 2021.

There's a lot of investors that are also making cash offers on the majority of properties that are $10 to $20,000 over the list price still, even in today's market. And the numbers don't make sense, which is why we're on the cusp of a potential bubble coming up over the next 18 months. After gaining 26% in home values in a very very short period, we basically got five years of price appreciation within 18 months, which is unheard of. While the Federal Reserve continues to buy mortgage back securities and treasuries to keep interest rates low.

And what will happen next is if they if anything changes with those purchases and affordability just goes out the window, then the market can change pretty dramatically and very quickly as we've seen has happened in the past. Cuz if you remember before hit, things were already starting to slow down. It's a blip that made people have a huge population influx and wealth come to our area, which is great and has a multiplier effect. And now what we're going to see is possibly a shift back now that all of that activity has occurred where people are going to say, "Well, I don't want to pay $400,000 for a really crappy house in an area that I don't want to live in." Also, wages have to come up.

So, there's a lot of different factors at play. It's hard to predict what will happen next, but I can tell you that in my experience with finance and economics is that when people start to feel that they're overpaying and they don't and they have fatigue and they just they get remorse, that's when things actually start to change and it has to do less with data and analytics and trying to prove when it will happen and more have to do with people just how people feel about it because people make decisions based on emotion. So you know as I was saying the net migration has downshifted and that is creating a drastic impact on the market. As you can see from this chart 2021 2022 we had massive number of migration to Florida and then it started to slow down once the Fed started raising interest rate and that issue started to you know kind of be mitigated away and now all of a sudden we're back down to the levels that we were at previously.

But the builders continued to build at the rate of demand that we saw in 21 and 22. This is just where we get speculators that just over speculated of of what happened to the marketplace. Here's another chart that we saw from Reventure that shows the same thing. It's domestic migration to Florida.

We see this come again right off the top. It's so unsustainable and we're pricing out the locals from being able to purchase. Well, if the locals can't purchase and we have more deaths in the state than births, then what'll eventually happen is like if we don't have the migration pattern to Florida, who is going to be the next wave of buyers. And the issue is they can't afford to purchase at the prices that they have today.

So, we have to see prices come down regardless of what the Fed does, regardless of what Congress does, regardless of what any anybody says. We have to see prices come down for the numbers to make sense. I intuitively knew this because we were seeing this. We're doing about 1,800 transactions per year.

You know, with our company that we own and we were seeing this across the board. We're buying a lot of people are buying cash. There was multiple offers. The bidding of the prices made no sense.

You couldn't buy from foreclosure auction anymore because there are people all around the country who were just trying to gobble everything up that they could in Florida. We knew it was a bubble. It was completely unsustainable. And we knew it would correct at some point in time.

And that is part of the reason why I sold my rental properties. The number one thing that I mentioned in the video is that consumer sentiment is the number one factor to drive real estate. So when the consumer is not feeling good, they're not going to go out there and make the largest purchase of their life. This is the index of consumer sentiment that's put out by the University of Michigan.

You can go back all the way in time. This is the worst consumer sentiment we've ever had in history. Yet, I know people are saying, "Well, Black Friday sales are up 11.1%." Well, that's because of the tariff impact and the cost of those goods are actually higher, not because they're selling more units. Number of units sold was actually down 1%.

So, it's not And by the way, 95% of those purchases were based were borrowed. And you see the Clara buy now pay later situation. They're putting this on credit and it's they might never pay it back. So, this is an issue.

You know, again, consumers are totally maxed out. If you're not in the top 10% of income earners, you are falling behind really rapidly at more rapid rate than we've ever seen in history. Well, if this is the case in a boom bust market like Florida, of course, real estate is not going to be one of those asset classes that's going to do very well. Another reason why I decided to start getting out of real estate.

And of course, because we saw the inventory change pretty quickly, you know, right after the Fed started raising their interest rates, we saw inventory drop all the way from 2000 and go all the way to 12,000 active listings in a very short period of time. This data is a little bit, you know, out of date. And now we're seeing people rage quit, which they get, sellers are getting upset. They can't get the price that they want, so they rip the property off the market and say, "Hey, I'm going to relist it next year." Well, now we have pent up supply in the system that'll just continue to come to the market for the for the next few years because we've had so much demand.

Now we're swinging to have so much supply and it's changing really quickly. So, I'm going to go over with with you what I do on the Excel for my underwriting of my properties and I'm going to show you mathematically why it makes more sense for me to sell than to hold these assets long-term even though I had good debt financing. So, okay. So this is my investment model and I used to be a real estate investment banker at one of the large banks on 60 Wall and and basically I would underwrite tons of properties for build to rent over $2 billion in underwriting.

Now this underwriting is not perfect. This is a very, very, very basic model, but I want you to understand that if you have a 6.5% interest rate on a 30-year term for, let's say, a $400,000 house, which is what you're getting here in Jacksonville, and I have houses like this, and let's say you have to put 25% down because it is an investment property, and you obviously have closing costs, and you have your total acquisition costs, right? So based on that in a $2,200 rent amount, this is the amortization schedule here, your cash flow, assuming an 8% property management and 5% vacancy in your just your general taxes and insurance, your cash flow would be, you know, negative7,700. Well, of course, nobody's going to buy an asset that loses money every single month, especially not a single family rental because it's, you know, that doesn't even make sense to do a cost seg on one single family property.

You know, you would want to do that on commercial property or something like that. You have obviously principal payown. You have your 27.5ear tax depreciation. You might have some appreciation.

I actually would put this at zero. And then you would have your total return here. But no one's going to come out of pocket just for the tax benefits. And uh it's just like the risk is just way too high for this type of asset.

And your annual return on investment for this asset is 5%. Well, why would I buy a physical asset where I have to manage tenants? I could be sued. I'm going to have maintenance and repair.

I'm going to have all of these issues across the board when I could just buy a treasury that would just pay me out. And that's the risk-free rate, right? Because you have to get a much higher rate of return to own real estate because it's an illquid asset. It has risk.

It has liability associated with it. I would need to see this in like 15, 16, 17% for my return for it to make sense. Now, my underwriting for cash flow for a real estate asset is $300 per month is the basic I need to see for me to even consider purchasing this asset. And 2,200 is being generous, by the way.

And a 5% vacancy is is being generous, okay? Because we're seeing houses sit in, you know, Jacksonville for 60 days, 90 days sometimes, and people are negotiating on rents. This is like best case scenario. So my question is, what would the price need to be?

And again, this is assuming I can actually get a rate of 6.5%. What would the price need to be for me to be comfortable purchasing this asset according to my own criteria? If it dropped from 400,000 to let's say 350,000, if I was able to purchase there, what would it do? Not much to the cash flow.

What about 300,000? Right? Because you're looking at the cash flow right here. I'm still losing money.

What about 250? Let's see if it makes sense at 250,000. Right. Okay, now we're starting to get close to where the numbers actually make sense to own this as a rental property.

Let's do 225. Right. So, let's look at 225. Now, we're starting to get to Okay, this could be a nice cash flowing asset.

So, let's look at what that would be. So, I mean, it would have to drop from 400,000 to 225,000, right? Which is a let's see what percentage drop 44% drop in the price of the home. Now when I run the models and I do an analysis I projecting a 31 to 42% decline from the peak in October of 2022 because of the numbers that I'm seeing across the board.

I've made a lot of adjustments to my model to be able to determine this type of range. Of course, every area is micro and it's it's very different. However, for investors to step in at this rate, obviously if rates come lower for investment properties, then that'll change. But just for investors to be able to purchase at the rate that they were previously to be comfortable even just getting a simple rate of return is 31 to 42% of a decline from the current prices of what we're seeing on real estate.

So, of course, this is extremely concerning and has a lot of other variables that you need to take into account. However, at the end of the day, it didn't make sense for me. I would prefer to just do private lending, which is what I which I switched into. And I did private lending and now I'm making 15 to 18% lending to people to do fix and flips versus owning real estate.

So when the market gets a little shaky instead of owning the actual asset, it's in my opinion, it's preferable to be a private lender and make money that way. I'm actually making way more money being a private lender than actually owning the asset myself. And it's way more fun and interesting of a business model. And the people I'm lending to are making millions of dollars, which is fantastic.

So, you know, again, I only do this for in inside my company for agents doing fix and flips. However, I look at these numbers and it makes me shocked that we got this far away from reality because Jacksonville just a decade ago used to be an affordable place to live and now it's completely unrecognizable and the locals are completely priced out due to the number of lo relocations and we're probably going to see that change in the next year or two with prices coming down quite substantially. Prices in some areas have already come down 10 to 15% across the board because the numbers make no sense on paper. In fact, when we look at this charts, we find that Jacksonville in most cases, it's better to rent than to buy, your payment to buy is going to be$100, $200, $300 more per month than it is to to purchase.

And by the way, when you purchase, you have the repair costs, all that. So, if you don't have to buy in today's market, there really is no sense of urgency to do so. And that's exactly why we see buyers starting to back off. Well, I don't want to be a part of that market.

My job is to buy low and sell high. That is exactly what I did. And I unloaded my last rental property in 2024. I'm very glad that I did because if I had held on to it, it would be about $40,000 less than it was today.

So, that is why I sold all of my properties. I'd love to hear from you. Are you selling your properties? What does it look like for you and your business?

And are you thinking about buying an investment property? Where are you finding the opportunity? Because there's always opportunity in every market. So, I'd love to hear from you what you have going on.

Reach out. As always, if you want to get my investment model, you can also send me a message and I'll send it to you. Um, appreciate you guys. You can follow me on X as well.

It's I am John Brooks. Uh, and you can subscribe to my Substack below. I can talk about things on there that I can't talk about here on YouTube. I'd love to see you subscribe to that.

Thanks so much for following and I look forward to seeing you