Episode Transcript
[00:00:02] Speaker A: Welcome to SF Commercial Property Conversations with Bruce Bean, where Bay Area investments meet Expert insights. Get ready to unlock the strategies of commercial real estate success.
[00:00:17] Speaker B: So today we have Michael Hatfield with us, and he is out in the East Bay and Alamo and so forth, working with ReMax and he has or did have a dual career. So, Michael, it's great to have you if you can go through a little history of how you were an airline pilot for Delta and also working real estate.
[00:00:39] Speaker C: Well, first of all, I want to say thanks for having me on your show, Bruce. It's very much appreciated and I sure enjoy working with professionals such as yourself.
So you want to know how I got into real estate and what does the airline thing have to do with it?
Well, it was. The two careers were quite accidental. I was a kid, I was the one that loved baseball and I'd get out and play baseball and I'd lay on the grass and have a piece of grass in my mouth and I'd look up and I'd see some of these airplanes flying over. And I said, wow, I think that's what I want to do.
And then it became more and more an objective because I thought, well, you know, you get paid decently and you do a job that is. Has got a good lifestyle to it. And so I said, well, you know, I'll do that. But my mother, who was a broker herself, had a different idea. She kept saying, get your license, get your license.
So you know how moms can be. And she stayed on me. And what's ironic is, down the road, after retiring early from Delta, I took and built more on the real estate aspect of my career. But there was a period of time in there that I spent with supermarkets. I had a string of supermarkets that I owned and operated in the East Bay. So there's that second career because primarily that the airlines were not really reliable for a steady income, especially when you first start out with them.
The times were good, would keep you on the payroll, and then when times were kind of bad, they'd lay you off. And I knew I needed two careers. So that's how the real estate came together with the airline business.
Wow.
[00:02:32] Speaker B: So supermarkets, that's a whole different complete world from real estate or flying planes.
[00:02:39] Speaker C: Yeah, absolutely is.
It was very, very challenging. Was in almost 10 years in the East Bay. And they were very interesting. There were large scale supermarkets.
You know, you take Lucky's or Safeway. They. They weren't really set up for the marketing for certain demographics. So they would leave certain areas and I would Take over their stores and operate their stores, providing product to the customers that they enjoyed.
[00:03:11] Speaker D: Bay Area housing markets are always changing. What should we think of that, Michael?
[00:03:15] Speaker E: You know, Mark Twain said, I seldom saw an opportunity until it ceased to be one. We live in the housing market in the nation. But careful thought should be given each time one buys or sells a home. A good agent can help you grasp a great opportunity.
[00:03:30] Speaker D: Tell us about discount agents, Michael.
[00:03:32] Speaker E: Discount agents can list your home, but without telling my secrets, they're unlikely to do all we do for clients. It's an unnecessary risk to save a few thousand by hiring a junior agent and lose tens of thousands through a poorly done transaction. You don't know what you don't know. It's wise to hire someone who does.
[00:03:50] Speaker D: If you or someone you know is interested, interested in buying or selling a home, call the Michael Hadfield ReMax team.
[00:03:58] Speaker C: Wow. Okay.
[00:04:00] Speaker B: Yeah. So then did you sell off that business at one point?
[00:04:04] Speaker C: Yeah, I went through a really rough divorce, and that took almost eight years and still was involved with it. And then, of course, went back to flying. I'd been laid off, or furloughed, as we use the term, from flight, from Delta, and then went back with Delta, and Delta invited me into the flight standards department, which is a really great honor.
So I really wanted to do well with that, plus raising a couple kids and so forth. And it didn't look like I was going to be furloughed after that initial furlough of a couple years. So it worked out real well for us. And the family moved on and. And did two different things. And I think I got out of the supermarkets about 1988, 1990, and then it was buy and sell, you know, residential income properties, as well as do a few deals wherever I could find them.
[00:05:02] Speaker B: So you learned about human factors and the whole airline world, and you've now applied that to real estate. So can you kind of give us a little clue how that goes together?
[00:05:13] Speaker C: Oh, yes, absolutely. Well, the real estate professional all day long, whether or not he. She realizes it or not, it's human factors all day long. And so going back to where I learned a little bit about him, it's in the airline business. And it basically stemmed from an accident that another airline had in 1978. There were three crew members in the flight deck monitoring a mechanical, a minor mechanical issue, and nobody was mining the store.
And the airplane ran out of fuel and actually had an accident up in Portland.
And, you know, it was a DC8 accident up there. And the FAA and the flight standards departments of all of the airlines got together and say, you know what? Too many accidents due to human factors. So let's develop something that will result in a better positive outcome than what we're receiving now.
So from that they developed a program called CRM. And it's not the same CRM that, that you may use, that I may use in this business. The CRM is crew resource management.
And essentially what it does is it takes and divides up the duties which each seat in the flight deck as well as in the back of the airplane, the people, all those flight attendants working back there to serve the customers. It takes and divides those duties up. Who's doing, who's reporting to what, how decision, who's making decisions and how decisions are made, the teamwork, communications, and how it all works together.
And then they started training these in recurrent training, this, this program, they started training these scenarios, and from that they dramatically improve the positive outcome of flight in the airline industry in the United States. Quite frankly, you know, it was like 45,000 flights per day.
And at the time, it was a significant improvement in, in results. So taking those factors and applying them to our customers that are really, that's our, our mission is taking care of our customers, whether it be a seller or a buyer. That's number one in our book. And that's how I look at it. Some teams, maybe they look at it as, as their own pay, but we don't look at it that way. We, we look at it to take care of the buyer and the seller first. And to do that, you need to have a good team working together.
[00:07:40] Speaker B: Well, that's an interesting analogy. I mean, buying or selling real estate is sort of a, a takeoff and landing occurrence. So I'm sure they're the human factors. The CRM, as it were, could be very well applied to that particular scenario. So I assume you have certain people taking care of certain responsibilities, and then there's sort of overlap and cross checking to make sure everything lands properly.
[00:08:09] Speaker C: Yeah, for sure. You know, Bruce, I could not, I could not do it without my, my primary team member, Nancy. She's, she's amazing. You know, she says things to people and they may understand her much better than me. And then when I say something to, you know, we pick out who we can communicate best and make sure that the client, if it's a man and a woman or if it's two men or it doesn't matter, they're that whoever can communicate with each other the best. And then we go about the process of taking care of it because everybody's life is different. Everyone has life situations and being what we call situationally aware of our clients helps us to better serve them and result in a more positive outcome in the transaction.
[00:08:54] Speaker B: So are you still doing any commercial work these days?
[00:08:58] Speaker C: Do a little bit here and there. Not a lot. I enjoy it a lot. We've, we've done some, we've done some great. We've done a couple buildings, we've done residential income properties. We do those off and on whenever we can get the, the, the deals.
We've, we just did a 1200 acre ranch consisting of nine parcels. They're all different parcels and they, you know, envelop the Williams act and all of that stuff too. So we'll take and service whatever we can.
I would say we're more of a broken boutique type real estate team than, than a big team that does the same thing, you know, to the same type of customer. We, we like to take on interesting projects and work with interesting people.
[00:09:46] Speaker B: So I'm not familiar with the Williams Act. What. Can you explain that a little bit?
[00:09:51] Speaker C: Yeah, some properties are zoned under the Williams act, especially agricultural land. And what it allows is the home owner, well, the, the property owner to pay a considerable amount less in property taxes, annual taxes than they would if it was just a straight zone, residential or income property or commercial. So if it's a ranch, you want that ranch to have agricultural zoning under the elements of the Williams act. And therefore you pay a lot less for property taxes because you know you're growing something, either livestock or, or agriculture and it works out pretty well.
[00:10:38] Speaker B: Oh, wow, that's interesting. I was not familiar with that. So I'm sure out where you are there's probably a lot more ranches and so forth available for sale or, or for. To purchase.
[00:10:51] Speaker C: Yeah, yeah. A lot of people want the ranches a place that they can go and kick their feet up and have their glass of wine or they want to grow.
I was friendly with Kerner Rombauer, if you remember Rombauer wines.
They're still around Gallobonham. But I knew the, the patriarch Kerner and I know he had a lot of property that, where he grew agriculture. They'd have to be on the type of zoning that would allow lower property taxes in order for, you know, him to take it on as, as grape growing properties.
[00:11:27] Speaker B: And well, that was actually my next question was do you end up buying and selling or properties up in the Sonoma area? And it sounds like you do.
[00:11:37] Speaker C: Well, we can we can.
[00:11:41] Speaker B: It's available if you're. If you're up there. Yeah. That's very interesting. So what's happening out there right now in the real estate world? The interest rates have kind of ratcheted down a little bit.
Are you in the. Is it still a seller's market? Buyer's market? What's happening out there?
[00:12:01] Speaker C: You know, it's an interesting, Interesting thought. I'm sure you know the answer to this question before you ask me. You know, you're a very sharp guy.
I think that. I think that with. During COVID we saw our values in the San Francisco Bay area. We're talking residential values in this case.
We've seen them ratchet up 25 to 30% in the San Francisco Bay Area. And wow, you know, they. They just.
[00:12:23] Speaker B: Boom.
[00:12:23] Speaker C: There they were. And now the people that own them, the pros properties have done very well and have made a lot of money while they sleep. And I have to say, well, that's been really great. But then along came higher interest rates. And the buyer said, you know, the interest rates are high. Right now. I don't want to buy because the interest rates are high and the property values are high. So we'll just kind of wait until the mortgage rates come down for affordability, and then we'll make our decision.
And quite frankly, I've done a bit of this myself, made the wrong decisions. I think that's an incorrect decision in the San Francisco Bay area, and I'll tell you why.
If you take three to five or six years, over that course of time, you're going to see values grow. You're going to see home values grow over time. And that equity appreciation is like money while you sleep. And I have to say I'd much rather have that than to pay a little bit more for the first year or two until I could refinance at a lower rate. I'd rather have that equity in it. Then I would rather than just pay a little bit extra. So I think if I was a buyer, I would go and really be serious about buying right now. I really would.
[00:13:38] Speaker B: So you're still seeing high prices. Are there any good values out there happening?
[00:13:45] Speaker C: If they do, they're right off the market. We've seen.
We've seen quite a bit of influx of inventory in the last year, but we haven't seen a lot of change in the mortgage rates. So people are just kind of sitting there being a little hesitant. We've had an administration change, and they're just a little hesitant. And the values have come back a little bit in this area.
When I say a little bit, I would say it's almost a cyclical amount, say 8 to 10%.
And you think, well okay, but the values are still up there. They haven't come flying off the board.
So I'm still thinking, you know, the person that buys right now could do very well by buying, you know, buying the home and then dating the rate.
When the rates come down, go ahead and you know, pick up a nice lower interest rate mortgage. That's what I would do. And then, you know, they've been talking about the 50 year mortgage term. And if that happens now, what is gonna happen is you're gonna have a bunch of buyers but flood into the market and they're going to be competing for the same number of homes as what could be bought now for a more reasonable price.
So that's what I'm seeing.
[00:15:00] Speaker B: That's new news to me. I was not aware of the 50 year mortgage. Is this standard banks, B of A Wells Fargo, where might this come?
[00:15:09] Speaker C: This came out just recently that the consideration through Fannie Mae and Freddie Mac would be helpful and they're considering it. So that would definitely help because it would drop down the value of not the value but the cost of each monthly mortgage and affordability would become more appealing to the buyers. And then you're going to, when that happens, it's like drop in mortgage rates is because now more buyers are coming in the market to chase each other around the block for the same property.
[00:15:43] Speaker B: So I didn't. Okay, I see what you're saying now.
So would those 50 year amortization schedules, would there be a call on them? Would they be a 10 year term or a 5 year term? Any idea?
[00:15:58] Speaker C: Well, I'm not, I'm not the expert in mortgage loans. I only work hand in hand with really good mortgage experts.
But there could be any different type of scenario of that loan. But the way that they were talking about it would be 50 year amortized, fully amortized, like a 30 year amortized, 50 year amortized. But you'll know that there'll be secondary type products come into the market because it just does happen usually to where they'll say, you know, call in 10 or call in 20. But if they come out with a 50 year term that is going to add some buyers into the market.
[00:16:41] Speaker B: So if my brain math is halfway correct, it sounds like it would reduce the monthly interest payment by maybe 2/5 or something. Who knows exactly what that number would be. But it essentially would lower the monthly cost.
[00:16:58] Speaker C: Exactly. Making qualifying for the loan easier and giving people a little bit of relief monthly.
Because, you know, cash flow is usually what most people will make decisions on is can I afford the payments. And if they can afford the payments, you know, it might be a little more depth for a while, but then, you know, so be it. You know, they'll, they'll do it. I mean, when I bought my first house, I hate to tell you, but I paid 12 and a half percent interest. Oh, yeah, yeah, Back, back in the day, you know.
[00:17:28] Speaker B: Yeah, the Carter years, yeah, the stagflation years were quite amazing.
But overall, I mean, people may not realize this. One, one person said that over the years the average interest rate has been 8%, so we're now at 6%, which in, in hindsight is actually pretty low. But unfortunately, Everybody saw these 3% numbers and they think we're going back there someday, which I'm not sure we're ever going to get that low again.
[00:17:57] Speaker C: I'm a little skeptical on that one myself.
I think if, if you see 4%, 4 and a half percent, I think that people are going to go absolutely nuts to jump into the real estate market. You know, the other thing, too is that a lot of, of tech people are looking at their portfolios now, and the market has been really sailing, so they don't want to take it out of the market in order to place the down payment to buy homes the way that it was. So now if you see some affordability changes by way of either reduced interest rate or a longer amortization schedule, you're going to see more people come in. And if the market comes back just a little bit, people are going to go into more of a safe haven, which is real estate all the way.
And, you know, there's a lot of great benefits from real estate, including, you know, tax benefits. And if you're buying residential income properties, you know, you can get, do that as a business and make money with that as well. So there's a lot of opportunity going forward. And I know a lot of people are hesitant and a lot of things going on in the world that we live in and we know about them instantaneously now as opposed to, you know, 30 years ago, you didn't find out about something till a week down the road, but now you can just watch Bruce's program and find out about him.
[00:19:21] Speaker B: The instant news right here.
[00:19:23] Speaker C: Here we go. Exactly.
[00:19:24] Speaker B: Yeah, exactly. Well, this has been very intriguing. So it sounds like, if I'm hearing you correctly, that maybe we're in a uptick here that we've kind of hit the bottom, so to speak. And hopefully things are going to be coming, coming back up the other side. Interest rates are going to go down a little bit and that will hopefully drive more buyers into the market.
[00:19:51] Speaker C: Absolutely, absolutely. And you know, the good thing about it is the housing market drives so much of our economy. You know, you have, you know, the supply stores, the material stores, you have contractors, you have so much that that is attached to the home industry and the residential industry, especially commercial as well.
[00:20:14] Speaker B: Well, I mean, just for a minute we should talk about, I mean, when selling a house 20 or 30 years ago I very few people thought about staging and now everything's staged, everything's fluffed up and made beautiful. And so that's a kind of a whole new approach to selling houses these days.
[00:20:36] Speaker C: Absolutely, absolutely. There's a lot to selling homes today that wasn't before.
We have our brokerage under ReMax Accord and it has like 10 or 11 offices. And I was talking with the owner, Jerry Stadler, a great guy, great guy. And I've known him for a long time and there's a whole story in that one too. But he was talking about at the beginning when he got into real estate. The, the contract was a one page, legally legal contract called a deposit receipt. And I actually remember those.
And you know, now it's 17 pages and it has interacting disclosures and advisories and acknowledgments and advice. You know, it has a lot attached to it. And the average, you know, deal is going to have more than 500 pages of legal, legal documents when you get done with it. It's got a lot in there.
So, you know, your real estate professional is not only a psychiatrist, I think of jokingly, but also a lawyer, I think of jokingly. You know, you have these factors involved in the work. So it's good to really think about them as you go through these situations because everybody's situation is different. And I don't know how much time we have left, but I was thinking about situation awareness of situational awareness of this one young family. They weren't too, you know, they weren't too ready to buy a home. And kind of slow, you know, we've got a couple months and this and that and it was real slow. And then all of a sudden the tempo picked up. Boom, boom, boom. They really had to get some. They became almost feverish and we didn't understand why. And my partner Nancy and I talk about it and after we went to dinner and it had been raining and the lady walks in and she pulls her chair back and her raincoat kind of opened and there was a baby bump.
And so that was the reason to change their entire situation in life. And it was just amusing. So everybody's situation is different. And having a real estate professional to help you there is, is absolutely essential to having a real positive outcome.
[00:22:47] Speaker B: No, I think that's so true that, that previously it was a one page transaction. Pretty much anybody could get through it. But now we're up to 500 pages. And obviously most people aren't going to be reading every, every word of that 500 pages. So you've got to have a real estate professional help you through it to make sure the transaction goes smoothly.
[00:23:09] Speaker C: Smoothly, Absolutely. Totally agree with that one, sir.
[00:23:13] Speaker B: So Jerry, where can. Jerry, where. Michael, where can people get a hold of you?
[00:23:18] Speaker C: We're reachable at Michael at Michael Hatfield Homes plural.com Michael@Michael hatfieldhomes.com or our business line is 925322 7775.
And I got to tell you, I really appreciate you having me on your show. It's very well done show. I looked at some of your episodes and man, they're really top notch.
[00:23:43] Speaker B: Thank you so much. I appreciate that. And if you're thinking of buying or selling a home, particularly out in the East Bay, give Michael a holler.
[00:23:52] Speaker C: Sure appreciate it and love to guide.
[00:23:54] Speaker B: You through that 500 pages. No problem.
[00:23:58] Speaker C: You bet.
[00:23:59] Speaker B: All right, well, very good to talk to you. I think we'll have to talk again in the near future.
[00:24:04] Speaker C: Thank you for having me on your show, Booze. It's really, really been fun.
[00:24:11] Speaker A: That's a wrap on today's journey through the SF commercial real estate scene. Ready to share your story? Visit sfcommercialconversations.com guest. Your insights could lead the next conversation.
