Achi news desk-
Drew and Jonathan Scott of HGTV’s new series “Backed by the Bros” — also known as Property Brothers — spoke with Quartz about the latest installment of our “What’s Next for…?” video series.
Watch the interview above and check out the transcript below. The transcript of this conversation has been lightly edited for length and clarity.
ANDY MILLS (AM): Interest rates are now above 7%. What impact does this have on the work you do and what do you see next in the real estate industry?
DREW SCOTT (DS): Lots of crying. That’s what happens. Even the difficult thing is anyone looking to, you know, a refi or anyone looking to take equity out of their home, it’s a difficult time because you’re not getting what you wanted. want with the high rates. Granted, it looks like things are coming down a bit, but this has been forcing people to try and find other ways to create more opportunity to access money such as converting a garage into an ADU, getting renter in there. Many people are becoming landlords for the first time in their lives
JONATHAN SCOTT (JS): And actually there is still a huge opportunity for people if they are looking to invest. They are looking to extract a small amount of money. 7% is not bad. It’s not great, but it’s not bad. But it’s kind of at that tipping point where you want to be a little bit more careful with what you’re putting your money towards and how much money, how much leverage you’re doing. And so that’s what we say. There is an opportunity to do well. There is an opportunity to make money in real estate. You have to be careful.
NB: I just cry for those people who were locked in like 3% and now they come back out and they’re like, oh my God, it’s over doubling right now. But you know, c’est la vie, you have to be careful with real estate.
Read more: Mortgage rates rise again as inflation fears mount
AM: Yes. So for the people who bought at 3%, they say they are not selling. How will this or how does this affect them?
NB: Well, that’s it. The people who cannot afford an interest rate of seven or 8%, they will have to sell if they cannot afford it. Because you can’t be like, ‘No, my term is over and I refuse to get a higher interest rate loan.’ You have to fund it somehow, unless you have cash to-
JS: Or a money tree in your backyard.
NB: A money tree in your backyard. Yes.
JS: We saw that happen back in 2008. We saw that happen. There are some people who overleverage and don’t realize that this is when it becomes a problem when your mortgage is really over and your rate goes up. And so you always have to put that little bit of pad to make sure you’re covered.
NB: That’s what our whole new show is With the support of Bros, it’s all about this. It’s about people who have wanted to try to get into real estate a little bit more. They want to invest, they want to try to provide more for their family. And they get in over their heads because they think investing in real estate is pretty simple. ‘I watched it on HGTV, I can do it.’ And so they jump in and suddenly they’re overwhelmed and they need help getting out.
JS: One of the clients put a hundred grand on their credit card so they could pay off the debt they needed for this property. And we’re like, at what rate? And it was like crazy double digits. i guess you you will lose everything. And literally that it is one of the couples, that they have already spent their children’s college money their own personal savings. They were absolute beeps. Yes. And so we had to come in and we really, we put our reputation on the line. We are using all our resources and we are completing the project so they can start getting that money back in.
IN: Yes. With the support of Bros on HGTV June 5th.
JS: Oh, wow. Yes. You’ve done research.
NB: You know that off the top of your head. June 5th, 9:00 PM HGTV. But it’s fun for us to find different ways to inspire people. And I love that people want to get into real estate. I love that people want to try to create more opportunities for themselves. And I also like the idea that, you know, with the housing crisis, if you look, whatever city you’re in, there’s usually incentives that help people get additional revenue through an accessory dwelling unit through an assisted living unit. Having tenants is a great way to compensate for the crisis as well as helping people earn more money.
JS: And there’s a way to have a hell of a lot of fun while you’re doing it. We’re not in this business to use complicated design terms and just bore people that, look, we just want to have fun. We want to show people that you can find passion in real estate, but you also have to make sure you’re smart.
NB: Wait, is ADU a complicated design term?
JS: Yes. Marginal.
AM: What does that mean?
NB: It’s like a rental suite if you have it as an accessory dwelling unit.
IN: Oh yes.
NB: But it’s a fancy way of saying getting a renter to turn your garage into something you can rent.
AC: Gotcha. You see people turning their garages into flats?
JS: There is a huge housing crisis across the country, especially in the big metropolis cities. And so I think the solution is apart from finding ways to build new projects, multi-family projects and affordable housing, convert your ADUs, so that people are putting in basement rental units, people are converting garages, building above their garage for a rental unit. . All of these things are extremely helpful in solving the housing crisis. And you also like a lot of people, ’cause real estate is so expensive today, especially in places like New York and Los Angeles, imagine having that extra income coming in to you, how it can make up for your costs, your bills, your taxes, everything. It’s pretty amazing.
IN: In With the support of Bros, you guys are looking at a lot of troubled investments. So you mentioned that credit cards were one of the mistakes you can make. What’s another mistake you see over and over again?
NB: Well, we’re consistent, with a lot of the different chapters that we have from different families and investors that we’ve worked with, they jump in before they have any kind of plan. One homeowner bought all the tools and cabinets and everything she could use for a project before she even had the house and knew what she was doing with it. So in the end, she had things that weren’t ideal and she tried to make it work. Well, you won’t get your optimal rent if you have a sub-optimal place to rent.
JS: Also, whenever I hear someone say, I’m going to run my own build project, I immediately GC myself, I’m like, red flag. Yes. Because if you’ve never GC’d before, you have no idea what you’re doing. And as soon as one of your substitutes falls out, everything slows down, comes to a halt. And so you have to be realistic. Hire professionals to come in. You’ll pay a bit more for some of these things, but it’s worth it in the end because you’ll save money.
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