Market Update Oct 30, 2023 - Is Now a good time to buy? Accessory Dwelling Units and Getting More Deals

Mike Mills (00:00:08) - Greetings, earthlings. So you ever found yourself scratching your head wondering why the government and mainstream media are painting a picture of a booming economy that doesn't quite align with your financial reality? Well, even with the economic uncertainty facing the country right now, today, I'm going to provide you with data backed reasoning as to why this is still the best time for your clients to dive into the real estate market over the next five years. But hang on, there's even more. Today, we're also going to explore an innovative solution for affordable housing that's making waves in Texas real estate transactions. And if you stick around until the end, I'll reveal a secret tool that every realtor has access to. But only a few select have mastered a tool that can easily boost your monthly transactions today and for the rest of your career. Welcome to the Texas Real Estate and Finance Podcast. I'm your host, Mike Mills, a mortgage banker in the Dallas-Fort Worth Metroplex with over 13 years of experience in banking and finance. Today, I'm excited to bring you the latest installment of my real Estate market update for the week of October the 30th.

Mike Mills (00:01:00) - Hope you can make an appointment to join me here every Monday morning to learn about the big news stories affecting the Texas housing market. So this concise, 20 to 30 minute episode is designed to complement my Friday interviews with top professionals in and around the real estate industry. Like last week, I had the privilege of chatting with Nicole Christofferson. She's a highly successful agent from Austin, Texas, who's leveraged a strong sense of community to grow a successful team spanning two states and hundreds of transactions a year. Her positive mindset and never quit work ethic is an inspiration for anyone looking to find their footing and this highly competitive market. So if you're looking for a little inspiration, I recommend you check that one out. And later this week I'll be talking with Ruth Brooks, a seasoned real estate CPA. We're going to do a deep dive on how to set up your real estate business to maximize all the tax advantages that come with making a living in real estate, and Ruth is going to share her playbook on how to properly set up your business for 2024 and beyond.

Mike Mills (00:01:49) - Look, taxes are not a sexy topic, but they can make or break your ability to have success in the real estate industry. And of course, if you find the information in this episode valuable, please consider hitting the subscribe button and sharing it with a friend. I appreciate each and every listener, and the more interaction these episodes get, the more listeners continue to join our growing real estate community. Thanks for tuning in, being here each week, and let's get on with the show. Before we get started, I want to give a quick shout out to my Texas Rangers for making the World Series for the third time in franchise history. It's been a crazy, extraordinary roller coaster of fun watching them throughout the playoffs. Right now, the series is tied 1 to 1 with Arizona going into game three on Monday. So here in Texas, we are fired up because we haven't had anything like this, especially for our Texas Rangers in a very long time. So I'm personally really excited about it. I can't wait to see what happens to the rest of the series, but I digress for just a second.

Mike Mills (00:02:41) - We'll get on to real estate. I'm just a huge baseball fan and can't believe you know my boys are in the playoffs, so I'm super excited. Let me ask you something. Have you ever turned into the latest economic news only to scratch your head, wondering why it feels like a world apart from your day to day reality? Trust me, you are not the only one. Sometimes it's like stepping into a party where the music's pumping and everyone's living their best life. Only to suddenly find yourself at a seventh grade dance where kids are nervously huddled on opposite sides of the room, 2 to 2 shy to strike up a conversation. Sometimes the meat just don't match the sizzle. So I'm going to dive into some numbers and insights that'll shed some light on why you're not alone. Thinking that things might not be as rosy as the media is portrayed. And while the government's economic data may present an image of prosperity, taking a closer look at the data and examining its components along with keeping an eye on investor behavior might just help you grasp why consumer sentiment has hit an all time low amidst this so-called economic boom.

Mike Mills (00:03:33) - Okay, so everybody remembers the great financial crisis where the housing market was on fire prior to 2008. Now, this isn't a story about the housing market, because I want to make sure that you guys understand that the current situation that we're in, in the economy has very little to do with housing, housing certainly being affected, but is not the culprit of why we're here. Okay. But the story of the housing crisis and the Great Recession in 2008 are a good example of what to pay attention to as we move forward into possibly getting into another recession. So during that time, the media talked about how housing was a no lose bet and that people were always going to pay their mortgages, which up until that point had been the case. There hadn't been a lot of situations where people were defaulting on mortgages at a high rate. But at that time, banks were giving out very risky loans because of some really messed up incentives that were created due to the fact that mortgages were in demand by investors in the secondary market.

Mike Mills (00:04:25) - Right. So these bad loans were then bundled up with good ones and sold to investors as part of a paper investments. Then you had ratings companies that were supposedly out there looking out for people's best interests that were rating these these packaged up mortgages that had been put together with good and kind of crap that had been bundled together, but still giving them higher ratings. So you even had the ratings companies that were kind of in on the game a little. So as we move closer to 2008, there were cracks that started to appear in the market that were being kept under wraps. If you've ever seen A Big Short, it's a great example of there were a lot of investors and a lot of. People with money that were asking questions as to how these particular investments made sense, but that none of the data was actually being paid attention to, even though it was clear that these investments were not in good, in good standing. And so all the big boys were able to get into the market ahead of time and start pulling their money out before the crash occurred.

Mike Mills (00:05:18) - Because when you get bad or slanted information from trusted sources, it causes consumers to feel like everything is fine until one day it isn't. Now, hindsight's 2020, but we have to learn from our mistakes. We cannot be doomed to repeat the same things that happened during the Great Recession. And again, I don't mean about how housing crash, because as you'll see as we get later into this, housing is not coming down, but the indicators that are there and available, if you just look to show you that the economy isn't quite as strong as it appears to be sometimes. So the economy's doing great, right? Well, here's some statistics for you. So the gross domestic product, which is a measure of all the goods and services produced in the US, rose at 4.9% annualized pace in the third quarter, which was ahead of estimates of 4.7% growth. Now, the increases were due to consumer spending. It was up 4%. So this is the strongest output that we've seen since the fourth quarter of 2021.

Mike Mills (00:06:11) - Now you have to remember, though, during that period, which is the third quarter of this year, this is including back to school. So people were going on vacation until right before school started. They were buying school supplies, school clothing. They were getting their whole life ready to adjust to going back to school with their families. And during that period of time, historically, there's always been a lot of spending. So in consumer spending during that period was up 4%. And all of that consumer spending made up 2.7% of the total number. Now, some other things that played a role in GDP increasing is you had increased inventories. What increased inventories means is that companies and small businesses were ordering stuff to be prepared for production. So they were holding more inventory on hand to be prepared to sell more in the future, essentially. So another thing that was way up in the GDP report were exports. Exports had hit a pretty high level. I don't know exactly what that number comprised of, but I'm sure we're exporting a lot of weapons these days because we're fighting a lot of wars overseas, and we're pretty good at producing weapons.

Mike Mills (00:07:07) - You also had residential investment up, so these are people that are buying things to improve their homes. So right now with people having interest rates really low and having a lot of equity in their house, you don't see a lot of people moving. But what you do see, a lot of people doing is improving their property. So they're buying things at Home Depot and Lowe's and kind of adding to what they already have because they're not willing to move. But the big one was government spending. Government spending was up 4.6% overall and makes up about half this number. So where's the government getting all this money to spend? We'll get into where our national debt is a little bit later, but sitting at $1.7 trillion in debt and not having money to spend, we sure are spending a lot of money. Now, if you were, you know, maybe edge towards the side of conspiracies a little bit, you might think that the government's ramping up spending in order to prop up the economy, because we're moving into an election cycle for next year, and the current power structure probably doesn't want the economy to be in bad shape when the election comes around.

Mike Mills (00:08:00) - So my guess is, is that, you know, they're trying to spend as much money to make the economy seem like it's doing a little bit better than maybe it is. Look, we're buying an airplane, jets on credit cards. We don't exactly have the budget to get it to fit in there, and we're overspending more than we make. At some point, that bill is going to come do. Also, in good economic news, the September jobs report showed payrolls soared by 336,000 new jobs and hourly earnings were up 4.6% from just a year ago. The unemployment rate is still well below 5% at 3.8%, and the added jobs came from leisure and hospitality. Those were the biggest drivers, followed by government again and health care. And apparently the economy is doing so great that Janet Yellen and President Biden both feel completely, completely and supremely confident that the US has enough money to continue to fight two wars, one in Ukraine and one in Israel. And oh, by the way, if you're not paying attention to what's happening in Israel and overseas in the Middle East right now, you really should be, because there are a lot of things and a lot of pieces that are moving in the wrong direction when it comes to us getting into a much, much bigger scale war.

Mike Mills (00:09:02) - Even right now, we're dropping bombs in Syria on sites that are controlled by Iran. And if Iran and Syria and Saudi Arabia and all of these countries in the Middle East, we all get into a conflict, it's not going to work out well for anybody. And the economy is doing so good that even Bitcoin is up 100% from where it started in 2023, where it was at a low of $15,000 per bitcoin and is now selling over $35,000 per. And that's the first time it's been that high since the summer of 2022, when we were at the height of our economic prosperity, supposedly. All right. So with all this economic prosperity, now we need to look at what kind of actions are occurring in the market by investors in the fed. That would lead us to even further believe that we're in this booming economy. Well, if you look at the fed, so the Fed's going to meet on November 1st and they're going to decide at that point if they're going to continue to raise rates, pause or even cut rates.

Mike Mills (00:09:53) - And there is a website called the CME Fed Watch tool that you can go check out that will let you know or give you an. What's going to happen? Well, you would think in today's market, if the economy is booming like it is, and the fed needs to curtail the growing economy in order to cut inflation back and control spending, that the next step would obviously be that they're going to continue to raise rates. But if you go check out the CME watch tool, it puts the odds of them doing them raising rates at less than 1%. So right now, the hard bet is that they're going to keep rates the same on November 1st. They're not going to raise they're going to pause, which seems odd if we're sitting in this incredibly prosperous economy right now. And in fact, Canada and Europe, central banks have also paused raising rates. The S&P 500 is down 10% from its July high. That's a 4 trillion loss in market cap since July. And speaking of big investors, Jamie Dimon, who's the CEO of the one of the largest banks in the world, sold $140 million in Chase Bank stocks last week in order to financially diversify and tax plan.

Mike Mills (00:10:58) - So he says that's the first time that he's ever done that in his 18 year career as the head of Chase Bank. Bill Ackman, one of the largest and most successful hedge fund managers in the world, closed out his short position on US treasuries, making a cool $200 million. And when asked why he did it, he stated that there was too much risk in the world to remain short on bonds at current long term rates. He said the economy is slowing down faster than recent data suggests. And finally, Cathie Wood, she's the head of Ark Investments, which is an innovative hedge fund that's grown dramatically over the last ten years. She stated that the government stats do not seem to be capturing how weak the economy actually is, because in reality, recent corporate filings show that the overall corporate profits are down for the third consecutive quarter. That's nine months straight, and the US deficit rose to $1.7 trillion, which is the highest on record. And as a matter of fact, right now the US is spending more on interest to pay its debt than we are on defense.

Mike Mills (00:11:54) - Let that sink in. We're spending more on interest on our debt than we are on our largest budget. Budget expenditure that the government has ever had, which is our national defense. And lastly, on this topic, if you want my Bitcoin prediction, Bitcoin's way up right now. And that's fantastic because everybody's excited about these filings for these ETFs, which are funds that are going to be backed by Bitcoin that investors can put their money into. And Blackrock and other large, large hedge funds like this are applying for these ETF licenses. So they can then sell it to their client base. I think we'll see what happens is just my guess is that they don't like the price point of buying in at $35,000 or more if this thing gets approved. So they're already buying a Bitcoin right now. And I think what they're going to most likely do is this first round of applications is probably going to get denied for one technicality, reason or another. Then as the recession kicks into place, the market's going to drive the price of Bitcoin way down.

Mike Mills (00:12:44) - And when that happens, they're going to all buy back in at a lower price, maybe somewhere between 10 and $15,000. Then reapply for these ETFs which will then get approved. And then you'll see the price of Bitcoin go through the roof. But that's just my guess. We'll see what happens. At least that's what I'm making. All that information is to just make you aware of where we currently are. Right now we are in month 20 of the Fed's rate hike cycle that started back in March of 2022, and history has shown that it takes about 24 months or so for a recession to fully take place, and for the fed to then reverse course and start to cut rates. But right now, the fed is saying that we're going to be in a high interest rate environment for much, much longer. Everything indicates that currently they don't have any intention to continue to raise rates, but they also have no intention to cut rates. The idea is that we're going to be in this pause for quite a long time, until they feel like they can get to that hard 2% inflation mark that there have been trying to hit since the start of this.

Mike Mills (00:13:38) - You see, regardless of what the government and the media are telling you right now, if you watch the big investors and you look at the numbers, no one sees that the economy is headed in a good place, even though the government keeps telling us that it is. So just pay attention because you don't want another economic crisis to creep up on you and not have your money in the safest place possible. And any time you're sitting in an inflationary economy, the best place to have your money is in assets. And if you look across the board, real estate is an asset that continues to stand the test of time. All right. So speaking of real estate right now, housing data suggests that it's one of the least affordable times to buy a home in the history of our country. And many think that we're on the brink of the biggest reset for housing prices that we've ever seen. But the big crash we all keep hearing about all over the internet still hasn't hit yet, but many are still predicting that it's on the way.

Mike Mills (00:14:26) - And while the numbers do suggest that now is not a great time to buy a house, I will argue that it is the best time to buy a house that you're going to see over the next five years. So let's start with some data showing why people think that prices are more than likely about to come down. Now, according to the Mortgage Bankers Association, rates increased last week from seven and three quarters to 8%, and that's up over a year ago when they were at 7.125%. So we've been in the sevens now for over a year. Purchases in the market are down 22% year over year. Refinances are down eight. Year over year, but a third of all mortgage transactions right now. Are still refinances. A lot of these are made up of cash out refinances and second liens or helocs. These are the vast majority of those transactions that are happening because people are having any financial difficulty or taking the equity out of their home to help themselves offset any difficulties that they're having. And if they're looking to not move anywhere because their interest rate is so low, they may be getting second mortgages to improve their home and add value there.

Mike Mills (00:15:23) - And overall, existing home sales are down almost 20% this year and expected to go down even further next year. And last week, Revenger Consulting did a study that shows that for the first time in history, in order to be able to afford to buy a house, you need to be making six figures $111,000. Right now, median household income is only $78,000, and in 2020, you only needed to make $60,000 a year to be able to buy an average home. In the United States, mortgage applications are now down 50% since the start of 2023, and at their lowest level since 1994. They're even 25% lower than what the lowest level was in 2008. So I was wondering, why are mortgages down 50%? But home purchases are only down 25%? Well, the reason for that is cash buyers. Cash is still buying up a lot of homes. The only the only other three times that homebuyer traffic was this low was in the 2020 lockdown. 2008 financial crisis in the 1980s housing crash. Look, rates are high, but they aren't the main reason why housing is so unaffordable.

Mike Mills (00:16:22) - They're just one part of a much bigger issue. All right, now, with even all of that bad information, here's some numbers to explain to you why home prices across the board are still up 3 to 5%, depending on which study you look at. First off, delinquencies on mortgages are near record lows 30 day delinquencies, which just means they haven't paid their mortgage in the last 30 days, are down to 2.6%, and delinquencies 90 plus days fell under 1% to 0.09%. That's the lowest level in almost 25 years. And those actually in foreclosures stayed at the lowest level on record at 0.3%. And just to give you a little perspective on those numbers, in 2010, delinquency were at 11.5%. This was right after the financial crisis when people were foreclosing at higher rates. So right now, overall, we're at less than 4% on foreclosures. And back in 2010, we were at an almost 12%. So the foreclosure avalanche isn't headed our way any time soon. And right now, signed contracts on new homes, not existing homes, but new builds are up 12% from last month and up 34% from last year.

Mike Mills (00:17:26) - But of those new homes, there's only 1.2 months of supply that you can actually move into right now. So what that means is that if I can't move into a property to live in it, that I can't list or sell my house. So that is another piece of inventory that's not available until my house is complete. And many of the sales that are being are being reported right now are on properties that aren't complete. So they're just under contract and they're going to be completed in the next 8 to 8 to 8 to 12 months. And Fannie Mae's statistics don't paint a pretty picture for inventory, either. Housing starts in 2022 were at 1.5 million. That's down 3% from where they were in 2021. Housing starts for 2023 through October are at 1.37 million. That's down 11% from where they were last year at the same time. And for 2024, the projections based on applications are to be 1.24 million. That's down 9% at the same time from this year. So what's that saying is that housing starts are going to be down 25% over a three year period during an already undersupplied market.

Mike Mills (00:18:24) - So this Undersupplied market is what is continuing to keep housing prices going up as opposed to headed down. And the fed is trying to raise rates to slow the market down and make things more expensive to try to demand down and therefore prices down. But the problem is, is that builders know this too. And so what they're doing is they're deciding to build less houses because they want to keep the demand high, so they don't lower the price of the homes that they're already selling. So therefore you have no more inventory because the incentive structure is all messed up. And if rates are going to stay high for the foreseeable future, like I mentioned previously, that people will be less likely to list their homes unless they absolutely have to. So fewer new builds, no foreclosures, and no preexisting inventory hitting the market anytime soon means that our inventory levels are going to continue to stay stagnant. So unless there's some other magic pill that's going to ease the supply limitations, the prices are not going to continue to go down and it'll become more and more unaffordable.

Mike Mills (00:19:15) - And all that means, unfortunately, is that right now is still the best time to buy a home that you're going to see over the next 5 to 10 years. So our job is real estate professionals is to give this information to our clients because based on what the fed is telling us right now and where prices are headed, and based on what Fannie Mae is telling us about inventory, we're going to be in this higher priced environment for quite a long time, and it just gets more and more expensive every day. They wait to pull the trigger. Yay! I'm a barrel of fun. Good news all the time, aren't I? Look, I'm just trying to give you examples of why you need to make sure that your clients understand the current market situation, because if there's a time to buy, it's right now. The best time to buy was yesterday. And the time to buy before. That was the day before that, because rates keep going up and they're not coming down anytime soon and prices keep going up.

Mike Mills (00:19:58) - Because we don't have enough inventory. So in order to make sure that your clients are aware, you have to share this kind of information with them because you don't want to look up in six months and see that house that they loved is up 25% above where it was before. And you never told them. All right, so let's move on to our mortgage tip for the day. So if you're a realtor, investor or mortgage professional, you probably need to get familiar with the term Adu accessory dwelling unit. So with housing affordability at all time, low potential home buyers are looking for out of the box more affordable options to have a home they can call their own that is also cost effective. And because of this, many are looking to add structures to properties that could support multigenerational families, especially in Texas. With so much land and many properties consisting of at least an acre or more. So right now, this is an option that a lot of people are considering, because what you can do is you can use your existing equity in the home that they currently have on the property.

Mike Mills (00:20:46) - You can add a separate dwelling unit for either an aging parent or a young adult looking to get started, that they can own their own property. You know, the kids that come back from college don't quite have their feet underneath them yet. Or maybe the ones that didn't go to college and are still working from home but want and need their own space. I mean, even as a parent, you probably would prefer that they had their own space and times, you know, so they don't make a mess of your place all the time. So this has been such a big trend that the Department of Housing and Urban Development, who's responsible for writing the rules for FHA, the governing body, that kind of gives us the rules of the road that we follow. So if they're writing rules on it, that means this is becoming a bigger and bigger trend that people need to pay attention to. So last week, two things happen is specific to this, though HUD announced the ability to use 75% of your estimated Adu rental income in evaluating your mortgage app.

Mike Mills (00:21:31) - So if you're applying for a mortgage or applying for refinance, and you have one of these ADUs on your property, and let's say in this case, you've established a rental agreement with your parents or your or your child. And I know that seems a little odd, but it's it's a way if you establish an agreement to show income from that property that can help you qualify for a mortgage, or if you're buying a house that has one of these properties and you want to rent it out, you can use the income generated from the rent of that property to qualify for the mortgage. Now, the way it works with any rental property is if there isn't a pre-established lease, then you have to establish a lease and the bank can use a 75% vacancy factor, which just basically means if you're getting rent for $1,000 upon your lease agreement, that we can count 75 or 750 of that as income for the property. Now, that doesn't mean we can give you income to help you qualify for more. It just means we can offset the debt of that property to add to what you're trying to qualify.

Mike Mills (00:22:27) - They've even gone as far as in California, which they're ridiculously strict about everything when it comes to properties. They remove the ban for these ADUs because housing affordability is such an issue for people right now that they want to give people as many options as possible to add additional structures to their land without being held back by regulations. Now, if you want to use rental income from one of these properties, the downside of this and until it grows a little bit, it's going to be a challenge, is you're going to have to get a comparable rent schedule. And it usually happens when appraisers go out and evaluate the property. And if there aren't a bunch of other, you know, ADUs on other properties or something similar that people are renting out, then it could be difficult to establish a rent schedule for that. And therefore you may not have a lot of income you can use. So the bottom line on this is it's a relatively new thing, but it's a trend that's developing. And you need to be aware of it because you need to be able to speak intelligent about this with your customers.

Mike Mills (00:23:15) - If they ask questions about these things. And then when it comes to a lending perspective, we can use income from these properties. It's just going to be on a case by case basis. So I would recommend that you reach out, talk to your lender, find out more about what these ADUs are and what their regulations are, so you can make sure that you have enough information to prepare your clients if they ask those questions. And by the way, this doesn't solve housing affordability on a grand scale by any means, but at least we're taking steps in the right direction, which is always a good thing to see. All right, ready to figure out how to make a little bit more money and get some more transactions? Well, do you know what the single most important tool to growing your business and staying successful as a realtor is? It's your database. So the key to databases is you have to look at it as a long term gain. It's not a short term fix, but if you haven't been mining your database, there's probably a lot of transactions that are sitting there.

Mike Mills (00:24:00) - If you will just reach out and contact your past clients or even people that haven't bought from you before but that are in your sphere, you'll be amazed at what transactions may actually come about. So if you haven't touched your database or managed it in a long time, you really need to listen to why this is so incredibly important. Because it could truly, it could lead to a contract for you next month. So what is a database exactly? Well, your real estate database is simply a list of those people that you've worked with in the past are currently working with, or you may be interested in working with you in the future. Your database can be kept in something as simple as an Excel spreadsheet, or it can be entered into a CRM, which is a customer relationship management software system to help facilitate all of your marketing campaign. And look, there's no hard and fast number on how many transactions that this can generate for you. But a lot of really in-depth data analysis studies have showed that if you have a minimum of a thousand high quality contacts in your database, that that number could reliably lead to an average of 100 transactions a year, regardless of what the market conditions are now a.

Mike Mills (00:24:58) - Zero people in your database is a lot to put together. It's names, addresses, phone numbers, etcetera. But 100 extra transactions a year just for managing a good, tight database seems like a lot. But even if it was half that number 50, that would make a massive difference in your business in a short amount of time. So a lot of real estate agents decide to split their databases into two distinct groups a lead generation group that includes only those who the realtor is attempting to gain as clients, and a sphere of influence group that includes past clients, networking, referral partners, and others who are likely to pass your name on to others who would be in need of a real estate agent. So, like your friends and family. While both types of databases are useful, most agents find they get more business from their sphere of influence rather than the ones that are simply lead. Especially if you're not using a professional lead generation system or paying for third party leads. So the question is, is why don't agents put a lot of emphasis on managing their database? Well, the first reason is something we call shiny object syndrome.

Mike Mills (00:25:52) - So you have good intentions, but you decide you're going to buy Zillow leads, or you're going to make videos for Facebook, or you're going to make Instagram Reels or whatever. There's some other lead generation software or some other lead generation gimmick that comes along that seems like it could solve your problems today. And if it doesn't, you move on to the next thing. And then you have others that build pretty good databases, but then don't effectively mine those databases for business. See, compiling names is only half the battle. You have to develop a system that consistently engages your database on a regular basis. A lot of the pushback when I bring this up from from agents is that, oh, well, you know, don't ever read any of those emails that come across. And my answer to that is, is you're right. You don't read them, but you do see them and you do just swipe left to delete them. So it's just a little drip every single time that somebody sees your name. And if you put really good content in those emails, when they do get opened occasionally and it's not just, hey, call me to buy or sell your house, but here's recipe tips, here's home improvement projects that you need to do for the winter, and all of these information that goes out that can really arm your clients and give them value for what you're providing, then that's going to put you in a better light, and therefore they're going to think of you when it's time to buy or sell a home, or if they have a friend or family that's trying to do that, you're going to be the first person that pops in their mind because they see you in their inbox consistently with good quality information, and there's a ton of software out there that will provide triggers and alerts for if something happens to a client in your database, it'll make you aware.

Mike Mills (00:27:14) - So their birthday, their anniversary, if they list their house, if they have their credit pulled, if they have a life changing event, like a kid goes off to college or a family member passes away or whatever, all of these situations that occur could potentially lead to a real estate transaction of some kind, and only that it's just good human behavior to reach out to someone and wish them happy birthday, or tell them about their kids, you know, wish them happy birthday for their kids or whatever the case may be. It's another point of contact that you have, and your database holds all of that information that gives you a reason to reach out to your past clients. And another great use of your database is surveys. Surveys, I feel like, are so underrepresented in the market right now as to the importance of them. When you go into Google and you type in anything, right, you're looking for an electrician or a plumber or something. The the reviews that pop up on the right right hand side of the screen that show you all the people that have posted Google reviews of that person, give it instant validation.

Mike Mills (00:28:08) - So if someone's looking for you or they're trying to find a realtor in your area, Arlington, Mansfield, you know, Houston, San Antonio or whatever, and they type in realtor in San Antonio and you have 50 Google reviews. I promise you, you will top you will pop up right at the top. But in order to get reviews, you got to ask for reviews and having emails, phone numbers and contacts of people in your database that you consistently reach out to and ask to give and submit reviews if they haven't in the past, that'll build your review database so robust that when people search for realtors in your part of town, you will be guaranteed to show up as one of the top fines on the list because you have such a robust amount of surveys. So how do you build a database? Well, you got to start first. If you don't have an Excel spreadsheet or you don't have a software system, you don't need to go out and pay a bunch of money for it. Just open an Excel worksheet and start putting in names.

Mike Mills (00:29:01) - There's software where you can download contacts from your phone. You can pull contacts from the from your social media websites, but you have to be consistent and you have to be diligent about it. My advice is take a portion of your day every single day, five minutes, 30 minutes, whatever you feel like the value is for it, which over time you'll start to see the value grow much greater. And schedule your calendar and make yourself sit down and put in five contacts, or update four contacts or ten contacts, or whatever the case may be, because if you go through a slow, methodical path path of growing your database and take steps every single day and prioritize it every single day, it will be the lifeblood of your business in the next 5 to 10 years, because all of your business will come from every client that you've worked with that you stayed in touch with, and everybody that touches their sphere as well. But you have to build a process and you have to follow it. Sit down, take 30 minutes and write out, what am I going to do? When am I going to do it? Schedule it on your calendar and come up with ways that you're going to.

Mike Mills (00:29:58) - Make sure that you stay on top of building out this database every day. Collect data from every event you can. When you host an open house, get data. When you host an event, you're providing food for your local church group or whatever. Collect data. Make QR codes so people can come in and scan. If you're doing an open house, they want to find out information on the house. Create a QR code they have to put in their email to give you the information on the property. If you're having a luncheon and you're providing food for everybody, give away a free home buyer's guide and have them click, you know, show the QR code and download it and put in their email. Because the more emails that you collect and that data belongs to you, the more people that will grow in your sphere. And if you really want to take your data collection to the next game, use those same QR codes and create fields where people have to put in their birthday or anniversary, or their kids birthdays or or just reach out, pick up the phone and call your friends and say, hey, I'm filling out my database.

Mike Mills (00:30:46) - I want to make sure I don't forget you every year, you know? When's your birthday? When's little Johnny's birthday? What's their address? What's their phone number? The more data you have, the more opportunity that you have to reach out to past clients and connect with them in ways that other people don't. And all it takes is a little bit of time out of your day every single day. And it makes a world of difference in your business. And if you work for a broker that provides a CRM for you, that's great, but I would still recommend that you either keep a separate database for yourself, or ensure and be absolutely certain that the data that you put into your company CRM is your data. If you decide to leave, look, agents move around all the time. They change brokerages on a regular basis, but the data that you build up and create needs to be yours. So if you go work for a particular brokerage and they're using a particular CRM, as long as you can put your data into it and pull it back out, then that's great.

Mike Mills (00:31:35) - But if there's some kind of stipulation and you need to find out from the broker if there is that once you put the data in there that it belongs to them, then I would definitely keep a separate database for yourself, because if for some reason it doesn't work out, which I'm sure it continue, it will continue to work out just fine. But if it doesn't, then you have that data that's yours, and then you can carry it with you over to the next brokerage. And if you're looking for some specific CRM software management tools that you can use for yourself, not tied to your brokerage, I recommend a company called HubSpot. They're great. They have a lot of reviews, and they have a free option, so you don't have to pay for it right out of the gate. There's a little more robust one called agile CRM, and it integrates Google really well. So if you use Gmail or Google Drive or have a lot of Google, Google tools that you use on a regular basis, they're great for that.

Mike Mills (00:32:19) - And then another company called Pipedrive, they also have a ton of great Google reviews and have a lot of integration. Costs are pretty similar across the board on these, but those are some options. If you can't think of any, but just look around. A lot of them have free trials. You can go in and play with the different tools they have available. But what I would tell you is you just have to start. Just start creating your database, start collecting the data and the the importance of it will then make you take the next step, which is finding an effective CRM tool that will help you reach your clients on a regular basis. Look, the most valuable companies in the world are Google and Facebook and Microsoft, and they all trade in data. So don't take my word for it. Follow the billionaires and see what they're doing. Because without data, you're basically blind and deaf in the middle of a freeway. Well that's it to all my good people of Earth. I appreciate each of you sticking around until the end.

Mike Mills (00:33:06) - We're all in a tough market right now, but I want to leave you with this. Helen Keller, who faced more challenges in life than almost anyone in history, famously said, A bend in the road is not the end of the road unless you fail to make a turn, and today is the day to start that turnaround. Have a great week. Be great humans.