so hey it's Ken McElroy here and so what
I'm gonna talk to you a little bit of
about is kind of a bell curve to
determine you know how to look at a
market so you know a lot of people ask
me you know how do you determine you
know where we are in a certain market
and this is a you know kind of the
million dollar question a lot of people
ask and so you know the traditional bell
curve that you a lot of you have seen
and maybe seen in school is basically
looks like this and so when I look at
any kind of real estate I look at it in
you know three different sections in the
beginning and then one at the end so for
total and the different sections that I
take a look at are right here so this is
what what I would call recovery and then
you know this is an area that you know
like right after we just went through
that big housing boom and the banks
owned a lot of the properties and
everybody's kind of licking their wounds
you know this is basically recovery then
the next piece that I look at is what I
would call expansion and expansion
happens when you know there we've kind
of recovered and there's people going
hey you know let's let's buy some of
these bank owned properties and let's
you know and let's see where this things
going and what you want to do is you
want to try to catch it as you're moving
up into this expansion phase the next
phase which is probably where we are now
is what we call hyper supply so
so this is very very important because
the hyper supply stage is when you see a
lot of new construction and you start to
see tipping in kind of the demand and
the supply piece and then the last piece
of course which puts us right back into
whatever he's talking about right now
which is recession now so generally
there's a lot of components inside of
here and I would encourage you to take a
look at each one of these individually
essentially there are markets that are
still in recovery believe it or not for
for example I believe that Las Vegas is
probably somewhere in here on the
recovery phase for example however if
you go over to say Dallas Texas I think
that it's probably somewhere in here
more on the hyper supply because Dallas
Texas has a lot going on there's a lot
of homebuilding a lot of multifamily a
lot of retail a lot of that stuff and so
you can see that a lot of different
markets can be in different spots now
I don't know whether or not San
Francisco or Seattle is in a recession
stage but what I can tell you is that
during recessions you start to see flat
or declining rent growth you start to
see properties that have being built in
the hyper supply stage struggling and
you start to see lenders a little more
worried about this and so you know what
people like to do is they like to
generalize real estate into one big
category and say we're in a recession
and I understand that it makes it really
easy especially from a talking point but
the truth is that these markets can be
very very very different and so that's
why when people ask me are there still
good deals out there I always say of
course there are but there are certain
markets that use one
be super careful about and and so right
now my partner and I Ross we're exiting
some of these markets that we feel like
are in the hyper supply stage and may be
moving toward the recession stage but we
want to keep the ones that are still in
the expansion stage and maybe still have
a lot of life in them and so as you
start to take a look at whatever asset
class you're in whether it's industrial
or whether it's retail or whether it's
office because they're all very very
very different they all have different
cycles and every city has a different
cycle and what's interesting is even
inside of a city you're gonna have a
different cycle so for example in Dallas
Texas
you have uptown which is basically
downtown and you might be in a hyper
supply spot but as you move further out
into the rural areas like in Frisco or
Plano which is still considered part of
Dallas you might be in this area
but and then in other areas where
there's lots and lots and lots of growth
and maybe some over building and over
supply you might be over here and so you
know you can't just say hey Dallas is
over supplied because that's not true
because there are pockets of Dallas
that's still need housing and still need
multifamily and still need retail and
still need office but there are also
other areas that are really really in
trouble and so same thing in Portland
same thing in Phoenix it doesn't really
matter but as you start to look at where
you are you want to make sure what you
want to do when you're investing is you
want to start looking here probably
riding around here is where you want to
be you want to be let the recovery
happen and try to hit the expansion
phase so that you're capitalizing here
in your rent growth because what what is
this right here this is market stability
here at the top right here that's
considered market stability and so you
want to try to buy in this spot so that
you're making your investors lot
lots and lots of money and then you want
to consider exiting out in here and so
as you start to take a look at your own
investments and specifically in real
estate whether it's housing or
multifamily or retail or whatever you're
gonna want to try to figure out where
your city is right now where your market
is right now and and and don't pay
attention to Dallas is done or Portland
is done or Phoenix is done because there
are spots and Phoenix and there are
spots in Dallas and there are spots in
Portland that are still in the expansion
phase but be very very careful that
you're not placing your dollars out in
here and that you're gonna ramp it all
the way down and you'll go through a
recession because in a recession that's
when stuff goes back to the bank prices
go down rents go down and occupancy goes
down so it's just the opposite and so
hopefully you learned a little bit here
and as you start to take a look at where
your real estate investments might land
try to put them into one of these four
different categories and I think you'll
find that you'll have a very good case
to be made in your business plans and
your pitches to your investors and your
lenders etc so hopefully you learned a
little bit about market stability and
how it works and make sure that you're
buying on the left side of this quadrant
thanks for listening so be sure to leave
your comments below as I would love to
hear from you