Jason Hartman shares some facts and figures as a prelude to his philosophy on Pandemic investing and shares his website, pandemicinvesting.com. He looks at the number of existing homes for sale and discusses inventory issues and migration trends. In the interview section of the show, he hosts Ari Rastegar, the founder of Rastegar Property Company. Ari shares his insights into the different sectors of real estate and then they narrow the conversation down to multifamily housing. They discuss the different parts of commercial real estate and make predictions on which will survive. Both of them encourage investors, giving light into various investment opportunities in 2020 in spite of the pandemic.
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multimillionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day, you really can do it on Now, here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 0:53
Welcome to Episode 1563 1563, I hope the sound quality is decent, I do not have the ideal setup right here. And and my technology is letting me down again, imagine that technology problems. I gotta tell you, Apple is going downhill. They are really not the company they used to be. But Oh, well. Oh, well, it is what it is, we will make do the best we can. So today we have got an interview from a young real estate entrepreneur, I think you’ll find it to be inspiring, and give you some insights on the marketplace as well. But if I shared this with you before, I don’t think I did share this one. But it’s another. It’s another mind boggling statistic. And that is 1.3 million. This comes to us from the Wall Street Journal. And it says the number of single family existing homes for sale at the end of July 1.3 million, making the lowest count for any July in data going back to 1980 to the pandemic has aggravated the housing markets long standing lack of supply in other words, making it even lower, creating a historic shortage of homes for sale. That In other words, part was me creating a historic shortage of homes for sale. That’s the Wall Street Journal. It is truly amazing what is going on, we are working hard to get more inventory for you so that you can find good properties. Now, you may have heard that the hotel industry, of course, is having lots and lots of trouble. We reported on an earlier show with Evan, who lives in Chicago, we reported about the famous Palmer hotel, and 500 and $60 million. This also from the Wall Street Journal. This is the estimated value of Chicago’s Palmer House Hotel in 2018. But it’s now worth 45% less 45% less. That is the volatility you see in the hotel industry, of course, but many parts of the commercial real estate industry in general suffering greatly suffering greatly no question about it. But at the same time, our customers having excellent experiences. Here’s one from our empowered investor inner circle, David posted and he said, Hey, Eric, we have five doors in Ocala. All are doing great. For example, our latest release of one duplex unit went from $850 per month, up to $975 per month. Wow. That’s a $125 per month increase in rent price. Also one single family residence in Jacksonville. And about that’s a typo and about to close in Palm Coast. Okay. I’m trying to be area agnostic, but loving Florida. And that’s what David says. And Eric replies back and this is a social network. So it’s like reading a Facebook thread. Basically the same idea. Very cool. Love your success. Get us excited to move forward. Palm Coast is a second area we are interested in our concern is what the industry is doing in that area. Is it just retirees Jacksonville, we will definitely look at blah, blah, blah. And he’s going on and talking about Atlanta and so forth, too. But I gotta tell you, folks, I did an interview again on RT television today with Rick Sanchez, and he was interviewing me about the bubbles and what’s going on in these different markets around the country and really around the world and well in North America, at least I did a presentation here, I’m at this conference in Tampa, and I did a presentation on the housing bubble. And adjusted, I did a whole bunch of work to adjust to look at interest rates, median housing prices, and median mortgage payments. I did the math on all of that for several periods over the last several decades. And what I found is that housing is really quite cheap today. Now, that doesn’t mean there is not a bubble or there won’t be that there won’t be serious problems ahead for the market. Why? Because of course, there are many other factors. But this is a very, very important one. Look, housing is cheap, thanks to our rich uncle Jerome Powell, right Federal Reserve Chair, our rich uncle. But we definitely are seeing some of the problems really start of course, the airlines just had a big layoff, affecting maybe 50,000 people from pilots, to flight attendants to gate agents. So all of this stuff will work its way through the economy. But on the other side of it, the business startup rate is really, really high. I mean, I was just looking at a chart yesterday about how there are so many new companies forming right now. And I met this conference with a bunch of real estate investors, and podcasters. And people that are, you know, helping people do home based businesses and stuff like this right. And their business is better than ever. One of them who’s here who spoke this afternoon, was an infomercial guru that you’ve probably heard of Ron Legrand. And he said that this year, their business is up, up by 68%. Now, why is that? Because many, many people are using this time, during a time of crisis, a time of lockdown is a time of quarantines to gain new skills to start new businesses to become real estate investors to get off the fence and realize this is the time to implement Plan B. My cousin is a pilot for American Airlines. And I was talking to his wife the other day. And I said, you know, if he gets a layoff, what is he going to do? And you know, we talked about that. And I said this is a great time to start that business you’ve always wanted to start. And that’s why we see this during every time of economic upset. We see great new businesses start the world’s first billionaire Jay Paul Getty became a billionaire during the Great Depression in the 30s. Right? How did he do that? Well, many ways, but largely he bought up stock in oil companies that is super cheap prices as the economy was depressed. And what do you know, it always turns around, it always comes back humans are just too motivated. And that’s what happens. So, again, huge opportunities. I know this is a very uneven time I get it, I get it, I get it. But incredible opportunities happening at the same time. And housing is cheap. In fact, this is going to absolutely blow your mind. I might as well share one of the numbers with you. And I’m gonna go way back to 1976 1976 when my mother bought her first home, guess what? The median price now don’t quote me on this because I don’t have it in front of me. Okay, I really Jason do not say stuff unless you have the data in front of you. Okay, let me get the data Hang on a minute. So in 1976, the median home price the Bicentennial year, the 200th birthday of America, the median home price was $44,200. And the interest rate was 9.1%. That was on its way up, okay, because it got much higher A few years later. You all know that, of course. And so that made the median price house mortgage payment $354 and 37 cents per month. Well guess what? If you know how to do math, and you follow Jason Hartman’s work, you are going to understand the real value of money versus the nominal the name of money. In other words, the amount of dollars that is not adjusted for inflation, median price and interest rates. I’m adjusting for three things here. Inflation, interest rates, and median home price. Okay, well, guess what? Guess what you’re going to realize? You think in 1976? Gosh, I wish I would have bought every piece of property back then I’d be so rich now. And you’re right you would, because the economy and the IRS, and really everything doesn’t understand how to adjust for inflation. And of course, when you leverage your real estate’s you make inflation leverage returns. It’s an absolutely beautiful, beautiful thing. We’ve talked about it many times on prior episodes. But that home price today in 2020, your monthly payment, principal and interest only I’m not counting property taxes or insurance or anything like that, just principal and interest, your monthly payment is $299 and 97 cents cheaper today, for the median price home than it was in 1976. Wow. That’s amazing. Isn’t that amazing? Yes. It’s totally amazing. So what do you do with all this great information? Well, you go to pandemic investing calm and you sign up for our upcoming event, where I will show you some stats, some charts, some tables, that will absolutely blow your mind, so that you understand what is really going on in the market. Like the information I just shared with you. pandemic investing calm. Join us in just a couple of weeks for our online summit. It’s easy in the comfort of your own home. This is the first time we’ve presented our pandemic investing content. You know, that’s what the whole event is about pandemic investing. So go to pandemic investing, calm and get your tickets for this conference. It’ll all be online. So real easy to do it from home, and make sure you join us. And without further ado, let’s get to our guest today and get his take on the market. It’s my pleasure to welcome Ari Rasta Gar, he’s the founder of Rasta Gar property company. And they do a lot of stuff, a lot of different investing a lot of different sectors, but focus a lot on multifamily investing. So we’ll talk about that today. Ari, welcome from I know you’re coming from Austin. So welcome. How are you?
Ari Rastegar 12:23
Thank you so much. I appreciate you having me.
Jason Hartman 12:25
Good to have you. So what is going on with you know, we’ve heard a lot about rent collection issues and eviction moratoriums. And you know, we have had a lot of people concerned about that. But since we play mostly in the single family home space, it’s like a non issue. But I know it’s more of an issue in the apartment space definitely was just reading an article this morning in globe street about that, and how, you know, collections were declining. One of the things that I don’t think a lot of people realize that worry is that, you know, collections are always an issue. That’s just a normal course of business. Right? So you never have 100% collections. Nobody has that.
Ari Rastegar 13:05
Oh, you call it? Yeah, you have a vacancy rate you factor in your underwriting always?
Jason Hartman 13:08
Yeah. So So what is it looking like now? And you know, what are you guys doing? Are you working out deals with your tenants and so forth? promise to pay deals, etc? Tell us about that?
Ari Rastegar 13:19
Sure. I think there’s, we kind of got to bifurcate that conversation a little bit, as you said. So if you look at in a macro level, the United States at the height of COVID, you know, still about 90% of rents were being collected in multifamily across the entire United States. 90% is a huge number. When you’re talking about a pandemic in Austin. For us, in particular, we collected 99% of our reds. In fact, we collected more of our rents at the same time during COVID than we did the previous year. And that had a lot to do with, you know, people were staying home and they didn’t know they had their jobs. And we’ll make sure they have a roof over their head. And we collected that data through a series of surveys talking to them, but Austin’s a unicorn, right. So Austin is not, you know, indicative of the rest of the United States or some other types of cities. And once you start digging into class A versus vintage, and it starts to get a little bit a little bit more difficult. But in Texas as a whole rents were collected in the mid 90s. And as you mentioned, you know, most months, even the mid 90%, in the mid 90% of collections are being paid, are paid. Absolutely. So when you start to see those numbers come down on an average basis. You’re watching on the East Coast, the West Coast New York City as an example this time last year had 5600 vacant apartments right now they have 25,000 vacant apartments. So that number that’s being pulled down is really in these larger primary markets like your San Francisco’s your Los Angeles is and the New York’s but overall multifamily, certainly in the class B class C space and the value add space that we play in mostly collections have been really strong, you know, and so compared to retail, or some of these other apps or hospitality, that have dropped completely off a cliff, you know they’re really have seen multifamily be a flight to security and it’s why you haven’t seen cap rates expand as much as people thought they were going to or see these, you know blood in the street type deals and markets. And certainly in the Sunbelt, like in the Nashville’s in Texas, the Florida the Phoenix, it’s fared really, really well. And, you know,
Jason Hartman 15:23
in this, this is the problem, you know, I’m battling this all the time, like every time I post a video or do an interview on someone else’s YouTube channel, he gets these comments from these people that just No, they just don’t know what they’re talking. It’s just not
Ari Rastegar 15:36
that these are this is the data, the data is that overall 90% of the collections in the entire United States were multifamily.
Jason Hartman 15:42
That’s an extraordinary number. So everybody says, though, you know, well, not everybody, but you know, these uninformed people are just talking about like how they’re going to pick up deals at 50% of the price throughout today. Now, I’m not seeing them. I mean, they’re out of their minds, they’re just out of there. By the way, I’m
Ari Rastegar 15:58
funny in your space, in the single family space, we’re actually seeing a surging of home prices. So people in the urban core, Austin, the median housing price just broke $375,000. And so it’s certainly in markets, like like we mentioned, like the the Nashville’s the Raleigh, Charlotte, Florida, Phoenix, these growing,
Jason Hartman 16:18
just say, the Sunbelt and the southeast.
Ari Rastegar 16:21
Sure, I mean, housing prices are going up. And rents are still increasing cap rates, if anything, are staying stable, and rents are coming down, which that by itself is a little bit of an anomaly. For rates to be this low, you know, we should see cap rates compress a little bit, and they’re staying a little bit stable. In some instances, they are compressing, but you have to look at things more than ever on a case by case basis on a quarter by quarter basis. You know, when you when you do when you do your underwriting, but I’ll tell you from a financing standpoint, there has never been more creative financing on the agency side than there is today. I mean, I just got a quote for 2.6% 12 years with Fannie Mae with five years of i O. I mean, that’s, I mean, I don’t know how, you know, it’s, you know, pretty unbelievable,
Jason Hartman 17:09
below the rate of real inflation. And
Ari Rastegar 17:13
I mean, it’s effectively free money. I mean, and you’re
Jason Hartman 17:15
not, it’s not free, they’re paying you to take it,
Ari Rastegar 17:18
literally. Yeah, I couldn’t agree with you more. So we’re seeing great opportunities, but what I’ve told them, they’re like, Oh, so you’re getting this, you know, huge discount, like, No, I’m actually just buying deals from guys that I thought would never sell, you know, so this, there’s a gentleman in town, you know, pretty famous guys in the 70s owed a bunch of stuff. And, you know, it was always like, oh, I’ll just pass it on to my kids. And so we’re paying market, but the fact that he’s like, you know what, I’m tired of this. I don’t know if I want to deal with this. I want to go to my house this month, Martha’s Vineyard. Here’s what it’s worth Arielle sell it to you. And so the fact that you’re getting it is the deal. But you know, I’m not seeing this distress in the multifamily sector. I mean, hospitality, retail, we don’t play in that space as much. And I read the news, but, you know, I’m sure you’re
Jason Hartman 18:02
stressing. So there’s distress in urban core markets in you know, that sort of the former and I think it’s former trophy cities, San Francisco, LA, New York, Seattle, even San Diego, I think the cago. Downtown, definitely Chicago downtown, you know, Boston, any of any of this downtown stuff anywhere, right? People don’t want to be in high density, they don’t want to live in a riot zone, you know, and that’s there’s this flight to the suburbs, right? These suburban markets are really strong. So that’s interesting. Now, I want to ask you about, you know, some predictions of what you think’s going to happen next year, the year after. But before we do that, let me just show you something. I’m going to share my screen here. And I want to show you something because I think Ari, this might represent shadow demand, which is sort of an interesting concept of these sort of unseen shadow demands. Can you see this chart? I can, Okay, wow. And this, this is shocking. And what this if you’re only listening on audio and not seeing this on video, which, you know, it’ll be on our YouTube channel to the majority of us young adults now live with their parents. This is the highest point ever recorded, and we’re going back 120 years, okay. When, in the old days, you know, people did live with their parents. I mean, even in the Great Depression in the 30s. There were fewer people living at home between 18 and 29 years old than there are today. That’s absolutely amazing. During the Great Depression in the 30s, it was only 43%. Now, it’s 52%. During the Great Recession 1012 years ago, it was 44% is where the top number was. So you know, eventually, these kids are going to move out. Yeah, they’re going to need a place to live. So you know, this is a shadow demand. You know, a lot more demand for houses and apartments, right? I
Ari Rastegar 20:03
love I love the way I love the way you explain that. And this, this is fantastic. This is fantastic data. And you know another thing to kind of dovetail into it and emphasize the point is that millennials and I kind of joke that I’m like the I’m the oldest millennial, I’m 38 years old. So I’m like, kind of the old and young guy, both right? millennials rent as a general rule, and it’s not that they don’t have money, necessarily. It’s that the cult, the core values are different, right? You, you know, you want to be out more you, you know, you change jobs more frequently than any, you know, demographic in history. And so to further that point, you know, when this demographic goes back into the workforce, once the fear factor is common, mom says, Hey, you want honey come home, you know, stay here, you know, do the college, maybe virtually, or I’ll come to you back to your bedroom, when that goes back into the market. I think it’s going to create a massive demand for rental, more than any more than anything else, whether that’s single family rental, you know, few folks living together, whether or apartments, but I think this is, you know, a tremendous shadow demand. I haven’t heard that term before, but I love it, you know, for apartment rentals in general. Yeah.
Jason Hartman 21:07
And just to give credit, this chart is based on Pew Research Center data. So that that’s quite it’s really depressing. You know? Yeah. What are these kids going home for? You know, this is just a sign of the times, you know, but we are where we are. Right, so, so interesting. So what do you think about that we talked about now and we see prices increasing, we see huge shortages of housing of all the commodities while maybe not all, but a lot of them core commodities to build housing and apartments, lumber, huge shortages, with lumber, causing the price of the average single family homes were like 14 to $16,000 already, just because of the lumber shortage components randomly absent, I think that will settle down a little bit. It’s it’s kind of bad right now. I think it’ll improve a little bit. But still, I think the shortage exists for sure. You know, but what’s what’s gonna happen next year? What’s gonna happen the year after that?
Ari Rastegar 22:04
You know, I think I think it’s a great way to look at it. And I always look at things as you know, you want the right answer, ask the right question. Right. And I think in the short term, there’s a lot of uncertainty, I get it. But you know, this is not the Spanish flu. This is not, you know, there’s the numbers are and what we’re dealing with from a COVID standpoint, and my heart obviously goes out to, you know, the people that have lost family members and the suffering that we’ve seen no question I’m very sensitive to, we know several people that have lost their parents. And, you know, but at the end of the day, in Austin, Texas, Austin just became the 10th largest city in the US and I speak from that vantage point. That’s where I am, right.
Jason Hartman 22:40
So it passed. Ironically, you do business in many markets, we do. So we’ve
Ari Rastegar 22:43
we’ve done business in 38 cities, 12 states, seven different asset classes, you know, so we’ve run the gamut. We own property, currently in Phoenix and Dallas off, you know, we’re around, you know, but the net net is, on a long term basis. This is all a blip. This is a complete Blip. Right, and so we already we’re coming out of the longest bull market in history, you’re already asking for a major correction in the stock market, irrespective of COVID irrespective of the elections, P e multiples are trading at almost, you know, crisis levels, regardless of anything, and even these trends that you’re looking at this exits that we talked about, and I was joking the other day on Yahoo Finance, that, you know, California, New York, or the land of the flee in Texas is the land of the free, you know, and just but but the point was that that exits have already started a million people left California last year, hundred 50,000 of them came to Texas. So COVID is throwing gasoline on, on a lot of
Jason Hartman 23:39
reading the trend,
Ari Rastegar 23:40
accelerating, it’s already happening. So when you look at a chart or you’re a value investor, right, you know, it’s different if you’re a flipper market timer, and that’s just not my business, I don’t understand it. I’m not a trader, or you know, or a magician, right? Like, you know, if we’re buying something, we’re renovating it, we’re creating value, we’re holding it, you know, we have organic rank growth, we, you know, we’re creating value, right, just like you are. So when you look at a five year, a seven year a 10 year trend, most of these things are effectively negligible. In the grand scheme of things I think you’re gonna watch, you know, you’re gonna watch the markets, you know, probably come down in a lot of ways you seen the tech sector, you know, really surge, very similar to 1999 in a lot of ways. So there’s asking for a correction there, it’s going to pull back a little bit. The Fed came out recently and said they’re gonna keep rates down. So 2023, but what you said earlier, I really agree with is these former trophy cities, you know, the San Francisco’s the New York, the Chicago residents are starting to think like, why am I here? Like, why am I in this, like, I lived in Manhattan for many, many years. Our daughter was born at Lenox Hill, our oldest daughter, and so I have a great love for New York City and great memories of being there in Wall Street, but you’re there and paying the premium. My dad called it elevation training, you’re meeting the people, there’s proximity, the banks are there the money, you’re getting all these connections. But when that ceases to exist, you have to say, Do I want to pay state income taxes? federal income taxes, city income taxes paid this much for my part? I mean, why am I doing that? Like when I can have Google Fiber in Austin or Kansas City? Like it doesn’t make sense. It’s just totally overrated. Yeah. You know that in in the chart on the screen. Now, I hope you can see that looks at Manhattan apartment, something that you mentioned earlier, Manhattan apartments, see record loss in sales, quick facts from the second quarter. So this is totally the most current data, right? Because that is going to keep dropping. I mean, this these numbers don’t surprise me. But this is going to keep I mean, these numbers, I believe, that New York has seen its last day in that regard. I mean, I don’t believe it’ll ever go back to what it once was at its peak, I think there will certainly be corrections, I don’t think it’s going to be, you know, disappear and turn into a zombie land by any stretch of the imagination. But people people don’t see
Jason Hartman 26:02
value in our what we’ve got to remember is when and by the way, this chart on the screen is from CNBC. And I’ll just let me just say it for the people only listening on audio. Okay. So second quarter sales of Manhattan apartments down by you ready for this, folks? 54%.
Ari Rastegar 26:20
That’s a crazy number. By the way, that’s a crazy number.
Jason Hartman 26:23
That’s shocking. Like, that’s shocking. It’s not 20% it’s not, you know, 30%, it’s 54%. Total Sales, the lowest number on record of only 1100 and 47. sales. Now, this is the biggest city in America, okay, where you’ve got a population density of 27,000 people per square mile. So only 1100 deals happened, right? median sales price down 18%. That’s the number that is going to just dramatically compress if you’re asked me. And this is just a proxy for any other city. Okay. Like it’s, you know, we’re talking about Manhattan because it’s famous, but San Francisco, la where I grew up, Portland, downtown, downtown areas, anywhere, Portland, Seattle, downtown San Diego, all of this stuff, you know, Boston, I’m sort of wondering about Miami, I’m in Palm Beach, Florida. And I got to think it’s going to happen they’re definitely in the high rise world, Amy’s a
Ari Rastegar 27:26
different animal. Miami is a different animal. It’s a different animals because it’s used mostly as a currency hedge from foreign investors. So it’s you can’t look at Miami as a typical American city. It’s different rules. And there’s, you know, it’s, you know, you watch it through different cultures different, you know, demographics have gone in there and bought it for different reasons and typical investing. And I got to believe that in New York, too, you have a lot of Russian and Ukrainian money you do you do? Well, the old joke used to be on Wall Street, if you invest in Manhattan from overseas, you don’t get fired if it doesn’t work, right. Like you can kind of still like, you know, you bet on Manhattan. It’s like you’re not gonna get fired. But if you pick like, you know, Houston and you and you were wrong, like your first you’re gone, you know, which is that that’s all changing and Florida, I’m so bullish on Florida long term in general, for a lot of the same reasons as Texas. exodus of the East Coast is gonna come to Florida. The East Coast has always had a friendly relationship with Florida. We know that but look at your Naples, your Boca, Palm Beach. I mean, Fort Myers Forget about it. I mean, these cities are exploding. And for the right reasons, same as Texas, because there’s jobs and there’s Fairweather climate, and there’s lowest cost of living, you know, and there’s that actual like, Oh, it’s booming. I’m like booming insinuates a bus. This is because the frickin job is there. This is because there’s actual, you know, sustainable infrastructure that allows a better standard of living. And I think it’s important to make that dichotomy,
Jason Hartman 28:54
right. Yeah, no, I agree with you and you didn’t mention but you, you’re you were mentioning and in what you were saying anyway, business friendly and also landlord friendly. So good places to invest. This chart is from Miller, Samuel and Douglas, Elliman, I have the CEO of Douglas Elliman on the show before and she was talking all about how people are fleeing New York City. And you know, that’s really against her own self interest. I was pretty amazed to hear that from her. But you know, this is new leases plummet in the Big Apple percent of year over year change in New York leases for May 2020. In New York City, shows you Manhattan, Queens and Brooklyn, Manhattan down 62% queens down 61% Brooklyn down 54%. So it’s absolutely shocking what’s going on. Now. Let’s go to that other topic of what’s gonna happen next year, the year after. I mean, look, no one can deny that this is certainly a very uneven situation. Some people are doing fine. Some people are really suffering Offering, there’s I don’t know much about this. But all of these commercial properties are that are in so much trouble, the retail, the office space, those are backed by mortgage backed securities, thrive finance those deals, and those are going to default those bonds are going to default the securities are going to default. And that’s a domino the residential market. I don’t think he has that problem to any great degree. Now, they corrected
Ari Rastegar 30:23
a lot, they put a lot of risk controls. And after the sub subprime debacle, there was a lot more risk controls that were there with the residential side on the residential side, and you know, because that’s what pulled it down last year, like, Oh, is it gonna be real estate last time was because there was risk controls in the subprime market, that was a different animal, right? At the end of the day, it’s a game of musical chairs, somebody’s gonna have to end up kind of, you know, Miss missing a chair. And when you look at the cmbs markets, you know, they still are highly inefficient right now. And there’s a lot of uncertainty. But to your point back to the question of one year years,
Jason Hartman 30:54
mortgage backed securities I just
Ari Rastegar 30:57
Correct, yeah. So the bondholders So effectively, what that is, for people that you know, are listening is the bank goes and makes a series of loans, they’ll make 1000 loans at X amount, and they pooled them together and what are called tranches. And then in those trenches, rating agencies will rate certain pieces of them and then they sell them in pieces as bonds, and they collect, you know, an interest rate effectively. So that’s in a nutshell what CMS is, right? I think retail, hospitality and commercial is going to suffer longer. Okay, because even with that it’s going to be when the vaccine comes, not necessarily because it’s solving the problems systemically, but just psychologically, it’s going to give a lot of comfort, because there’s a lot of mental health issues, quite frankly, of people just having fear, irrespective of the date and the CDC has been pretty, pretty clear that the numbers around Coronavirus are similar to the flu. Is the flu safe. No, the flu is nasty, it kills people. I mean, every year people die of the flu. So it’s going to take time, I think psychologically for that to happen. But I also think there’s a lot of pent up demand of people need wanting to travel people are craving human connection. You know, this thing of working from home, jamie diamond the other day said it very openly, productivity has plummeted from people working from home. And so I believe in the office sector in general, this whole work from home forever thing is just completely unsustainable. Is there certainly absolutely absolutely. No question, no question. And it’s because as humans, we’re tribal beings, okay, we work together, we there’s a human connectivity, we have we whiteboard, we talk we have this thing, we go to lunch together, you know, you grab a soda, grab a beer, what, you know, whatever, you know, there’s something that happens, you know, when you’re together that creates productivity. But with that said, if you’re a coder for Google, and you don’t require, you know, if you’re not on the sales side of the business, yes, get that part of the business, certain sectors begin working from home, yes, but something that’s very important to remember is the largest, the largest tenant and the office business in the office sector back in the 80s. And 90s. Were law firms. Okay. And law firms once became digitized. And the reason they were the largest cuz they had libraries, so they took all these different floors for the books, you know, for research. But once that became digitized, there was a massive vacancy that happened, and it only took about two and a half years for those vacancies to be filled back up. So I think you’re gonna see innovation, you’re going to watch vacant office buildings converted some floors into multifamily. Just like we saw when Sears started to go bankrupt, folks came in and converted that into Self Storage, like you’re gonna watch innovation happen, which I’m excited to see, but longer term, I believe all of these sectors will be in it’s like retail. He said all the retail apocalypse. Well, you look at Amazon, the largest e commerce company in the world, the largest acquisition, they made a 13 point 2 billion was Amazon was a brick and mortar location, which I find to be a little wholefoods. Yes, wholefoods was their largest acquisition, which is you know, obviously founded and headquartered here. So the retail was this overcorrection and now you’re starting to see you know, before COVID retail start to make a resurgence because people want an experience they want to go out like my kids are still sad about Toys R Us it wasn’t that you can’t buy the toy on Amazon but we like to go to Toys R Us like we enjoyed walking down the aisles and having this experiential kind of thing.
Jason Hartman 34:36
So yeah. Back to like what’s coming?
Ari Rastegar 34:39
What’s coming is it is going to be long term. This is all fine. Is the short answer. I don’t believe any of this is cataclysmic. At a macro level. I think rents are going to grow home prices are going to go up people are going to travel again hotels are going to start to see occupancy again and Overnight, a
Jason Hartman 35:02
lot of small businesses, a lot of
Ari Rastegar 35:04
restaurants closed. But then there also was too many restaurants. And I think that a lot of people, a lot of people then are going to others. So a lot of the restaurants here that we see in Austin, as an example, are doing phenomenal, because they have great food. And a lot of this is capitalism. A lot of this is survival of the fittest. So some of these businesses that weren’t run as efficiently should have been closed. Anyway, back to that kind of COVID accelerating something that should have happened. I just want to make sure we’re not mixing a business closing that should have closed 10 years ago anyway. And now they just got a kick in the teeth and it’s gone. So we’re making those things together.
Jason Hartman 35:39
Yeah. Joseph Schumpeter’s creative destruction. That’s what that is. And this has accelerated that. And that’s ultimately a good thing. It’s a great thing. But it’s a good thing. All right thing. Yeah. It makes the economy adjust faster. But it’s really hard to care. How will you know what the conversions of say shopping malls will be? That’s not easy to turn into much of anything else? Yeah, you could take the series and make it an Amazon distribution center. But what do you do with the rest of them all? It is a
Ari Rastegar 36:08
factor in popular Leto population are growing in these areas. There’s mixed use developments. There’s there’s a lot of things that can happen on it doesn’t what year, we’re talking about, you say one or two years, I agree with you, I don’t know what to do with that shopping mall, over 20 years, and you look at the population growth of the cities in the Sunbelt, there’s certainly going to be used for that for some of that space. You know, for for something of some sort. Maybe it’s a rezoning. Maybe it’s you know, housing, but population growing at the rate that that it is within those cities. And if you have a city like New York, have everybody leaving, you’re arguably talking about, you know, 20 million people, you know, in the outer New York area leaving that’s a lot of people that need houses and places to be in cities that didn’t have that type of population. So I believe else.
Jason Hartman 36:53
No, no, I know, it’s, it’s pretty amazing. Well wrap it up for us with just anything you want to say, maybe something I didn’t ask you, whatever you want to tell the listeners. And you know, I
Ari Rastegar 37:03
think I think we’re all kind of news fatigued. And we’re you know, seeing all this bad news constantly. This is bad, this is bad. And I’ll be honest with for us, this has been an incredible buying opportunity. We’ve expanded, we’ve grown, the firm, we’re buying properties, things are, are going great in a lot of ways. Meaning that you know, Edison would say, you know, people missed opportunity, because opportunity shows up in overalls. So it’s more work. You’re slugging through mud. But those that are going to go put in the work right now, I assure you, there’s a tremendous amount of opportunity to be had in a lot of these things. But you have to be a little bit long sighted, you have to have some vision, you have to have some resilience. And you know, if you want to take the lazy, entitled approach, pretty tough time, but I’ve actually seen it to be a tremendous opportunity, because most of the competition is asleep. I agree. And they’re going to miss the market. All these people saying that, you know, I’m waiting, I’m gonna keep my powder dry until everything’s 50% off, then that’s just not gonna happen.
Jason Hartman 37:58
That’s just very unlikely. Yeah, and if it does happen, if stuff gets that cheap, it will be loyalty bigger
Ari Rastegar 38:07
Jason Hartman 38:08
Well, hang on, it’ll be because interest rates went way up. So people always they’re looking at the price and not the payment. People buy properties based on payments, not prices. And that’s why you know, housing is actually cheaper now than it was in 2006. And on a monthly payment basis, so yeah, you know, don’t don’t miss the opportunity, folks. I totally agree with your RV. give out your website or Twitter handle or whatever you want.
Ari Rastegar 38:35
Oh, yeah, sure. It’s it’s Rasta Gar property, it’s dot com or on Instagram. It’s just at Rasta Gar, which is just ra s t Jr. Good stuff already. Thanks for joining us safer
Jason Hartman 38:46
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