HGTV stars Jonathan and Drew Scott, also known as the Property Brothers, recently offered some advice about real estate investing in the era of high interest rates, especially what not to do.
In a wide-ranging interview with CNBC on Wednesday, they gave their thoughts on real estate flipping, high borrowing costs, the worst mistakes aspiring investors make, TikTok's housing content, and where the next big market will be.
Drew said he is looking at long-term investments and doesn't typically convert rental properties. He explained that if he were to build his own rental portfolio, he might only replace one or two properties for every 10 homes he added.
“It doesn't look like the market is reversing at this point,” he said. “We just need to adapt to what makes sense for the current market.”
Jonathan said that even with high interest rates, investors should judge each property on its own merits. In fact, he says he and his brother just bought 20 apartments because the details of the deal worked out.
Their focus is on rentals because high home prices and mortgage rates are keeping many Americans away from ownership. Redfin recently said the cost of home ownership is officially at an all-time high.
When asked about all the real estate advice that pops up on social media apps like TikTok, Jonathan doesn't hesitate. “Ninety-nine percent of the get-rich-quick people you see online are totally 'beep'.” If everyone could do this, everyone would do this. ”
Drew said HGTV's upcoming series “Backed by the Bros” will help clear up confusion for new real estate investors and those who have turned some properties but are not yet seasoned investors. I pointed out that the purpose was
“They're going crazy because they're watching TikTok videos,” he warned. “They're looking at content that says, 'You can do this.' And they spend their money in the worst ways. They're not organized.”
Indeed, being unorganized is one of the biggest mistakes new real estate investors make, Jonathan said, noting that they often try to become their own general contractors and run their own projects. He pointed out that there are many.
But they don't understand that if subcontractors don't show up, it can snowball into every other part of the project, he added. And the longer a rental property is left vacant, the more “you'll fall into a hole you can't get out of.''
Another big mistake investors make is blindly following the advice of friends, Drew says. Usually the loudest person in the group makes the biggest mistakes. ”
Property Brothers also provided predictions for the next hottest housing market.
“Honestly, I think Detroit is great,” Jonathan said.
The Motor City was one of the hardest-hit markets during the last housing crash, as the Great Financial Crisis and recession forced auto giants General Motors and Chrysler to seek government bailouts.
But Midwestern cities are becoming more attractive as a post-pandemic housing boom sends prices soaring in places like Florida. And in November, Detroit surpassed Miami in annual home price growth for the first time.
Meanwhile, the Biden administration has provided billions of dollars in aid to the auto industry to encourage the development of electric vehicles, even as consumers have recently shifted away from EVs in favor of hybrids.
“If you look within a city, there are usually certain areas of the city where redevelopment is starting in earnest, where there is so much potential and ultimately a lot of money will be invested. , that area becomes a very valuable part of the city,” Jonathan told CNBC. “That's what Detroit is like on a national level. There's a lot of money coming in and redevelopment going on. In 20 years, we'll be one of the most technologically advanced cities.”
