Transcript
So the biggest evolution to my process has been on the expense side. Today because of what has happened in the last four years, property taxes have gone insane. Like in Texas, property taxes are 40% higher than they were four years ago. 40% just for property taxes because of climate change, which is real, by the way. The data indicates climate change is real.
Um, insurance in the United States increased 27% in the last 12 months, 51% in Florida, about 40% in Texas. So, insurance and property taxes are now two of my biggest indicators because like any business, you have income and you have expenses. And if your expenses shoot up, you're going to make less money. But what if your expenses shoot up less in Idaho or Arkansas than they do in Texas or Florida? What if property taxes are much much lower in certain states in the US like Utah, but much much higher in other states like Texas?
Wouldn't it make sense for a quant to figure out which states and which cities in the United States have the lowest property taxes and the lowest insurance? So, I had to then go back and start studying these sorts of things. Then I realized construction costs were not the same. I'd always imagined that whether I was building a single family home in Texas or I was building a single family home in Wyoming, my per square foot construction cost would be the same. And that turned out to be completely wrong.
It actually cost me 50% more on a per square foot basis to build in Texas. And if my mission is to take care of the people that make 60 to 85K, shouldn't I be building in places where construction costs are lower? So, I've had to add in construction cost, insurance, property taxes to my previous numbers. And by doing that, it's actually driven me away from some of the best markets in the United States or what other people call the best markets, Texas, Florida, um all of the um eastern, western, uh seabboard markets towards the middle of the country where insurance and property taxes are low. The last piece that I've added is land cost.
Once interest rates started rising, I learned something new about land. Land is extremely good to hold on to when interest rates are low. Land becomes illquid when interest rates are high. So, I can shamelessly lowball people. So, I have a team of five people whose only job is to make a massive number of offers on pieces of land.
And all of the offers are shamelessly 50 or 60% lower than the listing price. 24 months ago, nobody nobody would have agreed. Now, if you make a 100 offers, two people, three people agree because land is illquid because interest rates are high. So, less people are building stuff. And so, land is the last component that I've added to my equation.
Mission 10K only builds town homes in markets with low property taxes, low insurance, low construction cost, and low land cost. of 1,000 markets in the US, I've only been able to find 12, a total of 12 with meet all of these criteria. So, I can build beautiful, brand new town homes and middle Americans can live in them, 60 to 85k income, and not be rent burdened. Out of a,000 cities, only 12 work. I I wish I knew that data is not an all endall solution.
When you are a data guy, you tend to think data is the end all of everything. You tend to think that other factors don't exist. You become religious about data in other ways, right? It becomes your god. And um I think what I've learned is that data simply points you in the right direction.
All the other things that I'm mentioning, they may seem like they're data things, but many of them are actually local factors that I've learned from local markets. I've learned about how you need to know whether your city is friendly to you or not. And cities always seem to be friendly at first glance, but they don't. And there's no data around that. So, I've learned to be humble.
I've learned that data will often point me in the wrong direction unless I also do all of my other homework. And I wish I knew that 10 years ago. Want to keep more of your money? The next video shows you the smart and legal ways to do just that with a tiny bit of mad scientist flare.