Aaron Norris is Vice President of The Norris Group. His role at The Norris Group includes loan officer, investor relations, business development, as well as marketing. Aaron has been in the real estate field for over a decade having worked in the construction and design industry before joining The Norris Group in 2005. You’ll catch his speaking nationally on topics like real estate technology and innovative real estate marketing (artificial intelligence, robotics, shared economy, virtual & augmented reality, FinTech and iBuyers). Aaron is committed to keeping “Main Street” real estate investors relevant in the ever-changing real estate investing landscape.
He’s also the creator of The Norris Group’s series, “I Survived Real Estate,” which will cross the 1 million dollars raised threshold in 2020! In total, Aaron has been directly involved in raising over $2 million for charity since 2008
Aaron also works for PropertyRadar witting articles for national consumption, hosting and many other marketing responsibilities.
Episode Notes:
Narrator This is The Norris Group’s real estate investor radio show the award-winning show dedicated to thought leaders shaping the real estate industry and local experts revealing their insider tips to succeed in an ever -changing real estate market hosted by author, investor and hard money lender, Bruce Norris.
Joey Romero Welcome back. Happy New Year, everybody. Now, please enjoy part two of our interview with Aaron Norris of PropertyRadar / The Norris Group.
Aaron Norris I am very interested to see the trends, I think how we view our home because of the pandemic, you know, we’re going into a solid two years and now we’ve got Omicron variant. You’ve got people that are educating, working, living at home, they want more space, I think one of the things we’ll have to watch is the builder. They track the average of what’s being built. I would expect that to go up. Yeah, this year for the first time in many years, because people are wanting more space. And I think we’re, we’re gonna watch certain counties have different experiences, I think the coastal region is going to have a different experience and like the Inland Empire, the Bay Area versus Sacramento, when people can move wherever they want. I’ve had some realtors tell me down in San Diego and Palm Springs that they’ve got people from the Bay Area willing to fly back and forth because they can work remote and they might have to go to the office. Well, in the Bay Area where the median price is 1.71 point 8 million and you know, you can save a million dollars in your median price by moving down to San Diego that buys a lot of plane tickets.
Bruce Norris Yes it does.
Aaron Norris Yeah. So, you know whether they’re moving out of state, it’s gonna be really interesting to see.
Bruce Norris See what, what I’m fascinated to find out is the sustainability of Florida’s increase to this point, it’s still only half of California’s median price or less than that. But it’s having, it’s having serious migration of money. And you also have states that are being pretty aggressive like California. I’m having a lot of people move out from New York and New Jersey who have the same numbers.
Aaron Norris Correct.
Bruce Norris They show up to Florida, everything’s on sale?
Aaron Norris Well, yeah, they they’re looking at our prices and laughing they’re like, that’s nothing.
Bruce Norris Yeah. So, well, to what you just said, a friend of mine, Bob, who’s a builder, who’s moved his whole family to, you know, trying to get them to go to Cape Coral, and definitely friends. It just he’s very influential and well liked. So, he went to look at a series of lots that we had in Rotunda. And Melanie’s got a really good eye, Melanie’s Serato she’s the broker, Alex Serratos, the builder that I’ve, I’ve trusted for years in California, they moved out, anyway, he went to go see these lots. And they’re, they’re great lots, he said, he said, I gotta tell you, if you put a 3000 square foot house there, it’ll sell for a million dollars or more. And I told that to Melanie. You know, she was afraid to mention to me, because we had the biggest house we were building is 2170. And she said, I was afraid to mention that he said, I’ve already picked two plans. 29000 & 3,000. And she says, I think that’s what we should build there. I said, Let’s do it.
Aaron Norris Yeah, and we have to tell the audience, this particular area of Southwest Florida, the median age goes up like 15 to 20 years. By just crossing like, a street. It’s crazy. There’s like five golf courses. It’s a very interesting community. It’s not where I would ever want to live. But it’s, it’s a niche, and what we’re building there, man, it’s so it’s so great to have expertise in the area that knows what to build where. And it’s just such an it’s so interesting watching all the IRS data of who’s moving down there. It’s easy to see why people are, it’s just, you’re never fit more than 15 minutes away from the beach. Lots of recreation, great weather, I don’t know why we would ever see an issue with people moving out. And actually, that’s one of the data points when we updated the boot camp book, there’s actually been an increase of 2% of home ownership. So, home ownership in the areas that we’re building are around 72% now, compared to what it was just a few years ago, and that’s always a lagging data point. So, I would expect that to possibly even increase more. Next time the IRS releases that data.
Bruce Norris I would think so too, because of who’s migrating here. So, when you have I mean 85% And going up is our adults, either single adults or adults with families that migrate to Florida. Well, if they own home someplace, they’re definitely going to be homebuyers. But if they are, maybe they were a renter in like a California, but most people move to other states from California. But if you’re from New York and you were renting, you have the chance to buy something here. So, yeah, that’s definitely I, I view Texas and Florida, as recipient states for quite some time, I prefer Florida. But obviously, Texas attracting their share of big businesses.
Joey Romero Bruce, part of the reason you’ve been able to do these reports on California, because California is its own monster. Right?
Bruce Norris Absolutely.
Joey Romero And you’ve always talked about. Well, you know, I don’t know if Florida can, can we can do a report like that, because it doesn’t have the history like the California does. Do you think that Florida will start developing as its own monster now? Or will it still kind of mimic the trends of the national real estate?
Bruce Norris Well, it’s a great question. And the answer is to be determined. See, that’s what I like about, okay, I’m going to get to the bottom of Florida. But I need all these charts. And so that’s what we’ll do, we’ll pull up as many years history. I know, affordability doesn’t tell the story of Florida. In other words, there’s no repetitive number that you hit. Okay. That’s the end of that. So, that’s, that’s what’s fun about this challenge is that I have to clean the slate, everything that I thought mattered and was definitive. I know, I can’t count on. So, I have to look at all these charts. But at least I understand the charts and the sequence that can occur. So, and you know, what, if the end result is, here’s a lot of charts, and the story is yet to be repetitive. It’s okay, for with me. You know, that’s still a find, if you will, that this is what I think is going to occur. And here’s why I think it’s going to occur that way. But yeah, you’re absolutely right. When I looked at California, I had no idea what I was really trying to say. When I started doing the study in 95. I got to figure out how to understand the cycles to protect my own dough. And, and that’s, that’s Florida. I’m excited that I’m here. Do I expect this to continue like crazy? No, because the numbers are really aggressive. But because of the price point, I find it very unlikely you’re going to go backwards. I’ll give you another example about what’s different. So, in California, we can say pretty definitively over the cycles, the percentage of foreclosures that are participating in the marketplace, have a definite impact on a negative result. Well, Florida last time had a four year foreclosure process. So, I need to see the foreclosure data. But I have a feeling the anticipation of the foreclosures was almost as damaging as the numbers for Florida, that you say okay, the mood is terrible. The prices, I bet the prices declined in the first two years of let’s say 2008 910. But without the foreclosures being a participant because they couldn’t get there yet. But they were inevitable. So, that’s what’s fun, is that you have to look at this and go wow, that’s, that’s interesting. It’s different. How do I, how do I think about that going forward?
Joey Romero ….to apply your pedometer to Florida?
Bruce Norris Yeah, I mean, that’s, that’s the thing to the numbers are probably double in the affordability, if you will, and the pedometer would have, but they have their own history. So, you have to throw out California’s mood because that’s crazy. And way more than the national price and you have to go what what is the Floridian want to do, but the more people that show up from New York or New Jersey. It’ll just be really interesting to see. And I’m excited to learn about it myself. Because that’s what I do.
Aaron Norris Some opportunities for investors, next year in California, I would really be watching an update on SB 9. In particular SB 9 is where the state is tired of waiting for zoning changes in the cities to get their act together to build more housing. And so they basically done away with single family zoning. So, right now it only applies to homeowners, but this is how the ADU law started. So, you hopefully within the next year, investors will be able to do lot splits, turn a single family home into a duplex. I don’t like the law right now, mainly because you can’t be a real estate investor and take advantage of it. But it also doesn’t have the timeline. So, ADU laws right now the city has 60 days to hand you back a permit if you’ve got a complete application in I’ve been exploring some ways that maybe if you’re building an ADU might be able to take advantage of that. And the only thing that I can think of is if you install the utilities in such a way that it is indeed a separate unit, separate water meter, you know, all that kind of stuff instead of splitting it and sharing it. That’s the only thing I think of. SB 10 is another interesting opportunity where, what’s safer about this, as the cities are supposed to select zones where they want to increase density. So, you’ll be able to go from a single family R1 Lot and possibly end up building a 10 unit plus to a to use. So up to a 12 unit on what’s right now zone, maybe R1 to R4 or something.
Bruce Norris Wow.
Aaron Norris Yeah. So, for those of you who like construction, it could be an exciting year. In many ways, you know, if you’re not doing I have not done construction, it’s it’s the Wild West. Price increases, I would expect more wage increases this year, you know, looking at the newsletter that you just did, looking at what happened over a decade. And the fact that the all those numbers got sticky. Man, that data is so cool. I wish, I bet that, I bet anything they wish they would have kept doing that. But for those of you listening, it was basically charts of the house, a new construction house being built and all the different pieces and the price journey of all the pieces that make up a house, including the wages for things like bricklayers. And what happened over the 70s is really cool to see.
Bruce Norris Well, but you know what, if you had done it after that, it wouldn’t have told a very wonderful story. So, that was the decade to do it because you had inflation. And I think you’re saying that we might be in that decade. And so…
Aaron Norris To some extent.
Bruce Norris Yeah, I see. That’s what’s interesting. So, we’ve got this 6% plus inflation in the bond market is going on at 1.47 this morning on tenure. So, that’s a, that’s a head scratcher because if you went backwards, and you thought 6% was going to be the number that was going to stick around for next year. That number wouldn’t be 1. anything, it would be eight.
Aaron Norris Right.
Bruce Norris So, okay, so some really intelligent people are going still this is temporary. That’s , that’s what that tells me. They’re not expecting inflation to be a big problem. And part of it is the world that you’re familiar with, is tech advances that are deflationary. That’s their job. How do we do this for less?
Aaron Norris Yeah, and I think the next decade, we are going to see some interesting technology in the real estate space, especially in construction.
Bruce Norris Yeah.
Aaron Norris Robotics, manufacturing of homes inside plants. We’re already doing it with manufactured homes. I don’t know, specifically California, I’m surprised they haven’t pushed the envelope there because it’s greener. You get stuff stolen less often, if you can bring in the walls that are already basically done. And you’re just it’s, it’s flatpacked. It’s this is a known they already do this. I just don’t know why it’s not standard, especially here in California.
Bruce Norris I think some of it is the wait time from what I’ve understood. You know, it’s a, it’s a year out or more. So, you want to you want to order a home, you’re out both months plus?
Aaron Norris Well, if you’re building from scratch, isn’t that most of the time? Yeah, you’re out that long anyway. And you’re risking things getting stolen. That’s one of the things that the builder that we’re working with in Florida has had to navigate because people are so different, is in so desperate need of certain supplies. He’s having to do very strategic things to make sure that things don’t get stolen on site.
Bruce Norris Yeah.
Aaron Norris So…
Bruce Norris Well, you mentioned that there’s a 3D printed track going up in Texas.
Aaron Norris And Austin, ICON is out there building theirs, they have their own substrate that they build with that’s supposedly stronger than block or some and I forget what they said. And then Mighty Buildings is building one in Rancho Mirage. So, Mighty Building was the one that you and I work with. We almost got to buy one of their first 3D printed homes for a nonprofit in San Diego and unfortunately, it fell apart. But yeah, I mean, some of these, the ICON is saying that they can build their home for $10,000 in 24 hours, but that’s the walls. So, you still have all the finishing and whatnot. But the fact that, that can even be done by a machine is pretty spectacular.
Bruce Norris Well, Sean, Sean O’Toole. I, one thing I really miss is the journey from the hotel to the I Survived location, the Nixon library because I basically you’d have one on one conversation and he would fill me in what the future looks like. So, it’s from him I learned about 3D printing and was like what, and self driving cars and also the 3D printed homes he thinks that could be a game changer ultimately in the cost of real estate.
Aaron Norris Absolutely. I mean, in, it just so perfectly timed with ADU, ICON’s, core product is a 600 square foot, like one bedroom, and it looks pretty cool. So, being able to, we’re having to get creative here in California, because we basically took a decade off of new construction. And we’re just such a need of housing right now. And I think the conversation is just going to continue to be stressed. So, it’s clear the state is stepping in, did you know that the state could basically come down and kick local authority out, if they don’t play ball and get the housing mix that they need, the state can step in and kick out the locals.
Bruce Norris That makes sense.
Aaron Norris It hasn’t been done yet. But, you know, none of the cities or counties have been really meeting the goals that they’ve set for new construction. And I don’t think the vast majority are going without some major intervention. You know, I’ve sat on some of these housing coalition’s trying to create ideas, and they want to keep talking about the same project where they built for, I’m like, Guys, you have to build 28,000 In the next five years. Why are we hung up on four? Yes, it was a cool project. But how are we gonna get to 28,000?
Bruce Norris Yeah, that’s a lot of force.
Aaron Norris Yeah. And you need, you need investors, probably more than you need homeowners at this point. But it’s just been really interesting, the, the lagging, I don’t know how cities are going to do it, to be honest with you. So, they just got all their allocations within the last 12 months. And they’ve got to finish it in five to eight years, I believe. So, they really got to put a fire under it.
Bruce Norris Are you familiar, and I’m not asking somebody don’t know, are you familiar with the household formation numbers for California, because I just looked this morning at the number of labor that people in the labor force. And for 2021, it was exactly the same as it was in say, 2017, 2018, 2019, we’re not gaining lag like we used to. So, if you go back, say to 2005 to 2010, there was progression of a lot of people that were workers that showed up, we don’t have that now, we don’t have migration of adults.
Aaron Norris Hmm. Well, but at the same time, you had a lot of millennials wait very long time to get off the parents couch and form households, you have seniors aging in place, they don’t want to move, especially now because of COVID. So, how we approach housing and household formation has just been sort of screwy the last couple decades. So, it’ll be interesting to see how that happens. And I, I haven’t been tracking the divorce rate. I don’t know during COVID If we’ve seen more divorces, and so you’ve got household formation via split ups? I don’t know.
Bruce Norris Let’s see you get, you gain a household. For every divorce, you have one plus?
Aaron Norris Seriously, but I know there’s probably a fair amount of people that are having to combine households as well, because of affordability problems.
Bruce Norris Yeah, that’s, that’s interesting. Well, you know, the builders are profit seeker, if they thought it was profitable, collectively, you know, what are they doing building 60,000 houses, which is equivalent to 1981. If they thought oh, wow, there’s a boatload of money to be made making another 60,000 homes instead of just 60. Well, their answered in the last eight years has been ‘nah’.
Aaron Norris Yeah, it’s risky. There. Yeah. The National Association of Homebuilders released last week that one out of four new construction projects was infill or scraping.
Bruce Norris Yep.
Aaron Norris Interesting.
Bruce Norris Well, that’s what’s been interesting in Florida, you know, when you drive around, you go to Cape Coral, for instance, and you realize, okay, that body of water that’s behind, like three houses that I’m building, goes all the way out.
Aaron Norris To the ocean?
Bruce Norris Yeah. And then you realize that 80% of the lots are vacant. And you just wow, it’s sort of like being in Huntington Beach in 1960 or something.
Aaron Norris Yeah, and that’s sort of finally having its heyday. It is interesting. And I’m a nerd. So I love infrastructure development, urban development. And so I’m always looking at things like, you know, are trains coming what kind of infrastructure are they building? And yeah, Fort Myers is on some of the proposed lists for mass transit like trains and stuff. So, it’s, it feels like this area is getting its its moment in history.
Bruce Norris Yeah.
Aaron Norris And it’s beach living at a far more affordable price than the, the closest the closest big cities are Sarasota and and Naples. We’re sort of sandwiched between those and it very much feels to me like this area’s behaves a lot like a Sacramento or an inland empire. But you’re still on the beach. It’s, it’s very strange. Yeah, I’m Irish. I burn the sun is wasted on me but I don’t feel I don’t feel the need to live close to the beach, but some people do.
Bruce Norris Well usually treats real estate prices pretty well.
Aaron Norris I’m also interested in to see how Wall Street fairs, you’ve got some states that are looking in trying to stop Wall Street from buying houses. I think California is doing that right now. So, I was actually working with, last year before I went out for the heart surgery, I tipped Bloomberg News off to the fact that these iBuyers we’re moving more inventory off market to these institutional buyers that are holding these for rentals.
Bruce Norris Right.
Aaron Norris And the problem with that is that National News is reporting that oh, just on average, they only own this much. I’m Oh, guys, you’re you’re doing that such a disservice by looking at it like that, you’ve got to go down to the local market, because they’re not in every market. They’re in these primary and secondary markets taking these first time buyer homes off the market and builders aren’t building those. So, you have just taken the opportunity away from a single family home from a family that no longer is going to be able to do that because it’s going to be around.
Bruce Norris Well, we kind of experienced that a trustee sales.
Aaron Norris Yeah.
Bruce Norris So, as we were buying a trustee sales all sudden, when they entered the fray, they were overpaying, there was no way the you could have sold it in the next six months for a profit. But that wasn’t why they wanted the inventory. They wanted it as a rental. So it changed the game. And the same is true with, with a home buyer wants to just live in it. If the numbers still work for Wall Street, you’re not gonna compete well against them, because you have to make an intentional decision. So, like we were flipping a fair amount of homes a year like 80. We didn’t sell, we didn’t sell any of them to them intentionally.
Aaron Norris Yeah. And what’s funny is they they do a really good job trying to hide their entities, they, they’re constantly opening new entities and trying to hide. When I reported to Bloomberg News, they actually followed up with the iBuyers. And one of the ibuyers initially lied and said, No, we’re not doing that. We’re not forwarding and I forward them the exact addresses. And they’re like, oh, yeah, that’s us.
Joey Romero It didn’t work out for Zillow.
Aaron Norris Yeah, well, that’s a great example. They just, they’re like, Yeah, we’re giving 2000 houses to is it prettier, or I forget the name. It starts with a P. But yeah, these institutional Wall Street rental companies have raised billions and they’re going into these assets. They’re becoming builders, they’re building out tracts and renting them out just like we are. That was my one concern about the area we’re building in. I was looking at the data thinking that oh, what if this is going to become really dominated by real estate investors? So, I was really happy to see the data that that hasn’t been the case. And this is by and large, has been remaining an owner occupant dominant market?
Bruce Norris By a lot. I mean..
Aaron Norris Yeah.
Bruce Norris California. What is the California owner occupant?
Aaron Norris Oh, gosh. I want to say in LA It might even be under 50%.
Bruce Norris Yeah. So, it’s in the 50s. You talk about Florida’s 70 something.
Aaron Norris Yeah. And the crime is it’s far safer. It’s just, it’s just so different. I’m just really enjoy doing that. I haven’t sold everything in California. I think some people think that we’re Pooh poohing California, it’s a strategy.
Bruce Norris Well, you know, what, and so, you know, and how it started with me is I had those Marina Valley homes in an area that went from 35 grand to 275. And I the, the area hadn’t changed, I asked Michael Neal, what percentage of your rental base would go into this neighborhood and rent he said, 20%. So, I lost 80% of the world just because of where they were. And I thought, when I had a chance to 1031 exchange to new homes, and 2016. I just said, well, that’s an inventory that 100% of people will want. And I just thought over the long haul for the you know, for the rest of my life, I would like to start with a new house instead of a 60 year old house.
Aaron Norris Yeah, and building these things, the way that we’re building. I really like the concept of building with retail sales in mind. So, all the stuff that I’m building is, you know, nine foot ceilings tile throughout, so I don’t have to replace the carpet. The finishes are sturdy. So, hopefully turnover is also minimal when I do have turnover. So, so far, I’ve been really happy. I mean, the two rentals that I just had come out one of them the 1644 model that we built that we helped design based on Melanie’s, I thought it was going to get 1800 in it’s going to go for 24 to 2500 in rent.
Bruce Norris Wow.
Aaron Norris In just one year.
Bruce Norris I think I’m building three of those. Or am I building the bigger ones. I’m not sure.
Aaron Norris Well, make sure you do the three car garage.
Bruce Norris Too late. I took somebody, I took somebody’s position so it’s a two car. So, I’m going to be missing 100 bucks or so.
Aaron Norris It’s 100 bucks. But still, that’s a big increase from what we expected, which is really, really nice. Yeah. I think ADUs continue to be a really cool opportunity for investors, especially if you’ve got some rentals that you really liked. And it comes with some land. If one of the things I’m still surprised that investors do not know, is that ADU laws apply to multifamily. So. I’ve seen some really great projects, I had an investor call me and say, Yeah, I took a Fourplex. And it had a lot of land, but they didn’t have garages. So I built garages with ADUs on top for additional units. So, he went from a four to eight unit, for the sake of financing, it still qualifies for one to four. But also Yeah, that yeah, they’re not considered. Like it’s not considered an Eightplex. So, he was able to improve, you know, oh, and the garages are extra income as well. So, depending on which unit you have to pay extra for the garage, that’s fantastic. commercial properties where they have under parking, investors are turning the under parking because they the cities want to get rid of those specifically because they’re not good in earthquakes, turning those into ADU units. I interviewed a developer that’s doing that and helping convert a lot of that. So, it’s a very specific hyperlocal opportunity that only local investors will understand. And Wall Street won’t chase that kind of stuff. They’re not in the building.
Bruce Norris Too much work.
Aaron Norris Way too much work. So, I definitely think that’s where investors might want to focus some attention this year. Create some extra cash flow, and it’s amazing what a one unit can build for but you can build up to 1200 square feet. You can squeeze a couple bedrooms, two or three and 1200 square feet, so.
Bruce Norris Yeah, we I lived in a brand new house. That was 13. So, yeah.
Aaron Norris Yeah.
Bruce Norris Nicely done.
Aaron Norris In New York City. I think I was living in a three bedroom that was 600 square feet. It is possible.
Bruce Norris Well, I think we’re almost out of time.
Aaron Norris I think so too. I went fast.
Bruce Norris Alright, well, thank you for joining me, Aaron, and thanks for all your, all your effort this year to stick around and participate and looking forward to a great 2022. Joey’s thanks so much for being supportive of my, my son.
Joey Romero
It’s, it’s not to be thanked. It’s what you do. And, you know, Aaron, I’m here by the way, people always asked me like, how did you end up at The Norris group? And you know, if people want to tell the story is like, well, Aaron and I were just doing everything in the community together, we will just end up at, you know, charity events or, you know, helping out nonprofits and we were just at the same spots. And, you know, we, we kind of develop that friendship for you know, better part of almost eight years before I came over here, you know, and so, so I was, I was a friend before I was an employee, and…
Bruce Norris Yeah, got some, got some deep roots.
Aaron Norris That’s right.
Narrator For more information on hard money, loans and upcoming events with The Norris Group, check out thenorrisgroup.com. For information on passive investing with trust deeds, visit tngtrustdeeds.com.
Aaron Norris The Norris Group originates and services loans in California and Florida under California DRE License 01219911, Florida Mortgage Lender License 1577, and NMLS License 1623669. For more information on hard money lending, go www.thenorrisgroup.com and click the Hard Money tab.