109-TNG Radio - Mike Cantu 2-14-09
Bruce asks about how Mike feels about the use of leverage in this market. Mike says leverage when buying at the right price is fine. Finding the long term leverage is the issue. It’s a challenge because banks want fully qualified and documented loans and stated income is out for investors. Bruce thinks this will change because they’ll have no choice but to open up to investors. It getting over the issue of investors being considered the “speculator†and everyone realizes we’re part of the solution.
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Mike talks about his long-term plan. He’s really built as a buy and hold guy. Mike talks about his overall strategies and his mentors.
Bruce asks about the difference between a “B†and “C†neighborhoods and how Mike chooses which properties he’s interested in holding. Bruce and Mike talks about how important being able to purchase below market was to his business.
Bruce asks Mike if he thinks 2009 will be the best buy and hold opportunity we’ve ever seen. Mike thinks that this year will be a great year. Prices for houses are very low in some areas and rents are still relatively high.
Bruce asks Mike where he’s buying his properties and how long it’s taken for some of the properties he’s buying to close. They discuss the extraordinary price declines. Mike says he’s still contacting people directly but not as much. He says 2/3 of sellers are still in denial of what’s happened in the market.
Mike and Bruce discuss about carrying paper to have deals make sense. Mike says he did that he did that in the 80s and 90s but not as much recently.
Bruce asks Mike if he had to do something over in 2006 what would it be. Mike says take a two year vacation! It was a lot of work for sometimes little results.
Bruce and Mike talk about different strategies and how it changes the outlook on what real estate is going to be for different investors. Mike has a large portfolio of rentals and he knew prices were going to fall. Mike has a different philosophy. He wasn’t too interested in leveraging them all to the hilt. Mike says he saw leveraging work for some and others it was their downfall.
Mike talks about each of his houses and having a job description for each one. Mike doesn’t plan to touch any of these. Sometimes people feel it’s sometimes unsophisticated but “unlocking equity†has its own risks and Mike says he’s very clear on what his portfolio does. He heard horrible stories of people’s lifetime of work being wiped out by being too risky.
Mike discusses his two piles of houses and his goal for each pile. Bruce asks how he thinks people can get back on their feet if they have lost everything. He says go back to the basics.
Bruce asks about his calmness level over the past few years as the market has tanked. Mike says he planned for this and knew it was coming. He went through it before and was determined not to make the same mistakes. Bruce said he was glad to go through the 90s. Going through the pain makes you learn some important lessons. Going through the 90s for both Mike and Bruce gave them a very different outlook and respect for down markets and they’ve done things very different this year.
Mike is teaching his Rental and Property Management Seminar for the first time in conjunction with The Norris Group coming up February 21st. More information available at thenorrisgroup.com.
Mike Cantu is undoubtedly one of Southern California's best real estate investors and a long-time friend of The Norris Group.
Mike Cantu has been a full time real estate investor for over 25 years. This is round three of a down market for Mike. He runs a buy/sell operation, wholesales, and manages a rental property portfolio.
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