WSO Podcast | E236: Housing Not Affordable - Broke Analyst - Networking Referrals | Weekly Wrapup #5
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WSO Podcast Episode 236 Transcript:
Patrick (CEO of WSO): [00:00:04] Welcome to the WSO weekly wrap up where I talk with my team about the five most trending discussions in the Wall Street Oasis community. Enjoy. All right, everybody, welcome to the fourth weekly wrap-up pod. This week we got, I think, three top discussions we're going to cover. Matt, go ahead and kick it off.
Matthew: [00:00:22] Yeah, sure. So first one that we saw in the forums this week, not a surprise to anyone. Has anyone here noticed that nowhere in America is affordable anymore, You know, as a younger individual here, we all knew that LA, New York, Miami, typically the hotbeds. But what we've been seeing in some users in our community have been seen, as, you know, places that have typically been not as expensive to live in historically have also now have been jacking up prices in rent, but even just property costs. So, Pat, what's your $0.02 on this? What's going on here in the world for affordability?
Patrick (CEO of WSO): [00:00:56] I think, you know, as rates have gone skyrocketing, have skyrocketed, I think the fastest ever increase, the prices of real estate have come down, but nowhere near enough to offset the amount that rates have gone up. So like you look at like any sort of affordability index, it was at like average like in 2020. I'm looking at the National Association of Realtors. It was like a 170 back in 2020, it's down to 103. So it's like I'm from like 170 down to 100 on an index basis. It's crazy. It's almost double like the actual cost of housing in terms of buying in. So not a great time to buy a home if you need a lot of debt, if you need a lot of financing, it's going to be painful. Yeah, So…
Matthew: [00:01:40] So but then my question is, are people even paying in full? Is it the smart thing to allocate all your capital to real estate? Right? Like where's the best return going to come from now you start thinking, is it going to be stocked in the next ten years or is it going to be real estate again?
Patrick (CEO of WSO): [00:01:54] I think Real Estate is a terrible place to put your money right now. But it's my opinion, you know, I have I'm on a fixed rate mortgage, so I'm lucky enough that, you know, I don't have to worry about rising rates. People who took out variable loans, people who, you know, are adjustable rate mortgages, arms, they call them, I think in Canada. Isn't that more common? Mat? Or isn't it like all adjustable or in you…
Matthew: [00:02:16] No, We offer fixed but we don't have the same term lengths that you guys have…
Patrick (CEO of WSO): Like only five years.
Matthew: It's five years, five-year term. So…
Patrick (CEO of WSO): [00:02:23] How do you afford that? How do you afford the 10-year mortgage back in five years?
Matthew: [00:02:26] You don't, you don't. Well, sorry. Like it's renewing. So the payback period is still going to be 20, or 25 years, but your rate is only locked in for five years.
Patrick (CEO of WSO): Got it.
Matthew: Yeah. So you can have a variable rate for five years upon five years, they relook at everything and see if you have additional debt on the property, etc. but it's not like I know when we were talking about this, you've locked in your rate for 30 years, which is crazy because now I don't know how the banks making money off of you, that's like terrible.
Patrick (CEO of WSO): [00:02:57] They already split it up and sold it off just like back in 2007. Eight. Like the great financial crisis.
Matthew: [00:03:03] Yeah, exactly. Exactly. But it's definitely discouraging. I don't know how are things in UAE, I know, for myself, it's a bit discouraging.
Nabil: [00:03:12] Same. Yeah. Here, the prices haven't gone down either. So it's, I mean, there's interest rate hikes, but like there's more demand. So real estate prices are still where they are…
Patrick (CEO of WSO): They haven't gone down at all? They haven't gone down?
Nabil: No, no. Yeah.
Patrick (CEO of WSO): [00:03:24] 10 to 20%. But that doesn't, again, when you have when financing costs have tripled, it's like not triple but close to tripled.
Matthew: [00:03:34] I also find that for us, at least here, there are pockets that have decreased, but there's still some, you know, areas that have maybe only gone down like five, six, seven percent. But that's where everyone wants to do
Patrick (CEO of WSO): Like Toronto…
Matthew: Yeah, you know, you'll see headlines of, you know, prices have decreased 15% to date or whatever or whatever it is. But that's not like maybe overall, but there are still a lot of hot pockets that haven't really decreased, right? Where are the better schools, where there's maybe, you know, a little bit of a safer, safer area? Um, so yeah, I think, you know…
Patrick (CEO of WSO): [00:04:10] I think, you know, you're putting all your money, putting all your money in Tesla stocks are much better.
Nabil: [00:04:13] Now after it went off like double.
Patrick (CEO of WSO): [00:04:16] Oh, Not now. I was pounding the table though back at like 120 a share. 100. You know even I put my money where my mouth was, bought some it bought some in the low one hundred.
Matthew: Yeah.
Nabil: Lovely, Yeah.
Patrick (CEO of WSO): [00:04:26] I wish that.
Nabil: Double That.
Patrick (CEO of WSO): [00:04:27] I would have thought triple if it had hit in the 90s. I was ready. I had all these limit orders in.
Matthew: [00:04:33] Well, aside from that… but I know obviously you're a little bit older than Nabil and I, would you do anything different like for, you know, a young 25-year-old, 26-year-old hustling, but, you know, finding it a little bit discouraging, like what would be your, um, you know, recommendation? And obviously, it was a little bit different when you were our age. But what would you suggest?
Patrick (CEO of WSO): [00:04:52] I mean, now that like you, a lot of people I think can get like remote flex jobs. I think finding smaller towns that are cool, that are fun for younger folk I think it is an option. What I would say is let's say prices of real estate keep coming down and rates can kind of, you know, rates ease a little bit, maybe like later end of this year, it might be a little bit a better time. But you got to see another like 10 to 20% drop in real estate prices. Realistically to get anywhere near reasonable. And then, you know, in terms of like you want to get in and start building that, but you definitely don't want to be like handicapping yourself in terms of flexibility and locking yourself in, especially since the decision to buy versus rent. It doesn't make financial sense in most large cities. It just, you know, your price-to-rent ratio or whatever they call it. It's like 30-plus years. Like you'd have to be renting for 30 years for it to like for it to when they're that high versus like a Detroit. If you're in like a Detroit or let's say like a place that's more depressed where there's like migration out there, the price to rent ratio. Like, why are you renting? Like, just buy the place because it's like you're gonna, you know, you're paying 1500 bucks a month. You could own a house, like, for that payment.
Matthew: Yeah.
Patrick (CEO of WSO): You know what I mean? So, like…
Matthew: [00:06:09] At least you building some equity at that point.
Patrick (CEO of WSO): [00:06:12] Yeah, It just depends on the market. Like it just depends on where you are. Like I think you don't want to be, like, it's very hard in California, it's very hard in New York or any of these like inflated areas to…
Matthew: Miami.
Patrick (CEO of WSO): Yeah, to do real estate as an, as a financial investment, especially now with like rates where they are if you're doing flips, okay, and you know what you're doing and you're building the homes, that's one thing. But if you're like just buying homes that are already in place…
Matthew: Speculators…
Patrick (CEO of WSO): No. And speculating, trying to rent them out like your rent isn't even going to cover your mortgage. It's not even come close to cover your mortgage,
Nabil: Yeah.
Patrick (CEO of WSO): Even with rents kind of having been jacked up.
Matthew: [00:06:45] Yeah. And then a lot of sleepless nights as well.
Patrick (CEO of WSO): [00:06:49] Yeah. I just don't. Yeah. I'd say for the young, for the young folk like put your money elsewhere right now and try to get it in the market gradually, slowly, look at, you know investing back in yourself like skills like so you can get paid more so…
Matthew: Yeah.
Patrick (CEO of WSO): There's like the saving and the investing side, but there's also taking you up your pay.
Matthew: [00:07:08] Control, which you can control…
Patrick (CEO of WSO): Yep.
Nabil: Yeah.
Matthew: I think that's the best way to sit there. But this is a perfect segue into the second topic. Don't want to spend too much time.
Patrick (CEO of WSO): Yeah.
Matthew: Just on the first one alone, but up the same alleyway talking about the cost of being a young professional. So again, a similar line of thought here. How do entry-level salaries stack up? And let's choose here a specific location like in Against the cost of living in New York, not just the finance. A lot of Wall Street jobs are going to be in New York City. They're no Pat, you lived in New York for some time when you were in investment banking. Um, you know, what are you seeing now specifically around like the entry-level, let's call it like an analyst first year? Um.
Patrick (CEO of WSO): [00:07:47] Rents have just skyrocketed back in New York since COVID kind of became.
Matthew: [00:07:52] And they were saying New York's dead…
Patrick (CEO of WSO): New York was dead. Yeah.
Patrick (CEO of WSO): [00:07:56] I didn't believe it. I bought some of the REITs in New York when it was depressed down. I'm like, this is coming back. This city is coming back. Um, although like commercial is scary, like commercial I don't think will ever like it's going to take a long time if ever be back to what kind of where it was but the rest…
Matthew: [00:08:13] I don't think it ever gets back. I just can't see it. I think what we're seeing now is like this, especially from the commercial side, is a push from a lot of companies to really start utilizing the office space. And it makes sense. Naturally, it fits if they own the office space, it's different if they're renting it because they know they could roll that off. They just won't renew their lease and either downgrade or maybe move fully, fully remote. But the individuals that own this real estate and you know, it's on your balance sheet as a company, you want to make sure that it's getting used, um, here there you could be looking at a little bit of a hurt there.
Patrick (CEO of WSO): [00:08:49] Yeah. I think in terms of affordability, like for the analysts, you know, if you're making 100K base, I think you're fine as long as, like, you're not overextending, like trying to get a one bedroom. Like if you just live in a studio or you get a one-bedroom flex and you have a wall and you're not even at the apartment anyway, So like you just need a place to sleep then. And I think at least in my analyst days, I think they still do this. They do like one-bedroom flex, two bedroom flex. You live with a roommate or two other roommates. It's a pretty good arrangement.
Matthew: [00:09:18] I would say this some cool responses we saw that were around like, you know, even just talking about that 100K mark because that's typically, you know, people always idolize that. You know, a 100K though back in the day is not what it was today. So specifically…
Patrick (CEO of WSO): [00:09:33] How do you get paid 100K? I was 55K base.
Matthew: [00:09:35] But then do you remember what your rent was when you were what you were paying in the city?
Patrick (CEO of WSO): That's a good question.
Matthew: So there was one person that form who was mentioning one rent was only 1700 per month. You know, having that extra couple thousand bucks in your pocket even after you're maxing out your 401K and you're, you know, you have your food, food costs, and just some other basic necessities. You at least have got the, you all like you were you've been a bit more successful. You know, you have a couple thousand in your pocket at the end of the month after you, you know, taken care of what you have to take care of. And it's a good reward for, you know, almost like putting in the sweat for being an investment banker. Right? Like you want to like if you're…
Patrick (CEO of WSO): People are working for the bonus…
Matthew: You're like you're successful.
Patrick (CEO of WSO): [00:10:15] People are all like, hey, live off your base bank, your bonus. That's like kind of what everyone says. I think my rent was like 1800 or 1900 or something like that. My second year when I had like a third or fourth floor walk up or something like on 55th and eighth, I lived in 38th and Park. I lived with my girlfriend. At that point, she was at Goldman, and I was at NPE. So like that was a good setup because, you know, split the rent there. That was more expensive. That was like 3800 a month. But it was a pretty awesome apartment with views of like Chrysler Building and the Empire State Building, like on each side. So it's a pretty sweet apartment, not like super nice or anything inside, but just say a nice amount of space for New York. And that was a 3800. Um, you couldn't get that. My guess is that one's like 6500 now like, or something. You know what I mean?
Matthew: Yeah. Yeah.
Patrick (CEO of WSO): Um, but yeah, if you split it. Yeah, if you split it and, you know, you kind of go to the approach of like, Hey, I'm not going to save that much on my base. I think that's fine. You know, do try to max out the 401K where you can, especially if there's any matching. Just maybe you might not be able to max it out in January and February. You might need to kind of blend it in over the first nine months to make sure you're not cash crunched.
Matthew: Yeah.
Patrick (CEO of WSO): Yeah, that's what I would say. You can always save money making mean eating at the office, you know, every night, but seamless and whatnot, staying late. You save a lot of money that way, so. I don't know.
Matthew: [00:11:46] Yeah. Yeah. Nabil, what are your thoughts, though? How does this compare, with being in UAE? Do you know young professionals kind of feel the same way? I know you're saying…
Nabil: Oh, yeah. I mean, yeah,
Matthew: There as well, but…
Nabil: It's very expensive. Yeah.
Matthew: Um, you know, different expectations of what a starting salary is. Would love to kind of get your color on that as well.
Nabil: [00:12:04] Yeah, I mean, it's the same thing pretty much where you don't save, especially on the entry-level roles. But again, you can save if you're outside the city and all, but if you're in like proper finance, you probably can't afford to stay like too far away because you still have to come into the city. So it is expensive. It's more about like how do you how you budget and, and like…
Matthew: I will say though…
Nabil: The first few years I was just like not saving anything pretty much.
Matthew: Yeah…
Nabil: Well, it just goes, yeah.
Matthew: [00:12:29] Correct me if I'm wrong, but you guys aren't paying income tax there, right?
Nabil: [00:12:32] Nothing. Yeah.
Matthew: [00:12:33] So that's right off the bat you're already, what, roughly 45% better off than a lot of the people you know in NYC, right?
Nabil: [00:12:41] Yeah, yeah, for sure. But then, like…
Patrick (CEO of WSO): [00:12:44] Not 45% not. That's the effect that the effective tax rate…
Matthew: That's your marginal.
Nabil: [00:12:48] Yeah.
Matthew: Yeah. Marginal. Right. Your average is probably what 35%.
Nabil: [00:12:52] Yeah, 3035. Yeah. Percentage. But then like the place where these, I mean banks are like financial hubs are like everything's expensive around there. So regardless, you'll end up like spending quite a bit. So it depends like where you're saying, Yeah, yeah, you don't end up…
Matthew: [00:13:08] The system will get its money somehow, whether it's through rent…
Nabil: Exactly. Yeah.
Matthew: Somehow it's not in our pockets, but it's in everyone else's, Right?
Nabil: [00:13:15] Yeah. Yeah. Like Boston and have its back then. So just you spend everything. Yeah.
Patrick (CEO of WSO): [00:13:21] Now you're looking at um, you're looking at potentially buying. Right. But you just can't justify it, right?
Matthew: [00:13:28] No, just for, I mean, we've had those conversations, right? About trying to even maybe have a little bit more long-term mindset on if you're going to buy a place like a factor in, you know, maybe future family one kid at least. And yeah, it just doesn't make sense. I think what it's come down to, unfortunately, I don't agree with but this is just what it is. Um, you probably need another partner to get it done. Like whether you know what I mean. Significant other or you need to two contributions to the mortgage just because then you also want to have a lifestyle, right? You don't want to be house poor. That was one thing someone mentioned to me. The last thing you want is, you know, you have a home but no vacations, no, you know, even just going out for dinner. Like what type of life is that then at the end of the day, right?
Patrick (CEO of WSO): [00:14:05] So like, I have a house, but I have to use my kitchen every night.
Matthew: [00:14:09] Yeah. Or you want to go out eating dinner with your with your girlfriend. Can't do that. Or even just basically not even living an extravagant lifestyle. Right. It's just that if you're putting in work and trying to be successful, you want to obviously have a little taste of that. Yeah. Not still have to live paycheck to paycheck. So yeah, um, that's unfortunately where it's at. But enough of the depressing talk there. We got, we got a third and last topic for the week here around networking. So specifically about referrals. You know, Pat, I'll let you handle this one as well. Just kind of given your expertise in the field, how should candidates approach networking as well as asking for referrals? Is that a common practice in the recruitment process? Do you follow up if you're not getting the referrals, how annoying do you be? How annoying should you not be? Um. Take it away.
Patrick (CEO of WSO): [00:14:55] Yeah, I think this is a skill that's totally undervalued and something that's really something you need to practice to get good at. And having emotional, you know, emotional intelligence is really important here to be able to kind of sense what's going on, on the phone, the style and whatnot. So I think you can absolutely at the end of a call ask, you know, there's anyone else you think I should be speaking with or, you know, do you mind introducing me to anyone else? And da da da if you think it went well. Um, that being said, you know, being like, can you refer me? You say, can you give me a referral? It's a little bit awkward, um, if you ask that way. So like there's, there are ways you can go about it. And the call is kind of more important that you like show genuine interest in that person. And it's not like you're just reading questions off of a list that you read online of like, Hey, here are the right questions to ask. I know in our networking course we have very specific questions as examples, but you'll notice every single one of those questions that we give in the networking course are very specific to like that person's industry. So it's not like you're asking generic questions like tell me the culture of your, you know, tell me about the culture of this person is going to be like, what are you talking about? Like, do you actually want to ask a real question? Like somebody might actually come back If they're really kind of pissed off, they might be like, You want to ask me like, a question you're actually interested in?
Matthew: [00:16:15] Yeah, I think that's the most like, standard question. You possibly think like it should be.
Patrick (CEO of WSO): [00:16:20] It is more specific about like the group, the deal structure, like what the deal flow.
Matthew: [00:16:25] I heard even referencing the past deal right. Like specifically like but obviously like don't make it too cheesy. But if it is something you are interested in, like you thought a deal was unique maybe. Yeah. Asking them a little question there because one, it shows you kind of did your research, um, you know, understanding the firm, but it's also a…
Patrick (CEO of WSO): [00:16:41] Little more effort and showed a little more like you've done your homework and you're not just like getting on the phone to, to get on the phone. That's really networking for the sake of networking because they think, Oh, I'm supposed to be doing this. It's like, No, it's for your benefit, man. Like it's your benefit. You should be the one asking like good questions that you want to learn it so you can learn more
Matthew: [00:17:00] And I think we could both attest, even just from sales calls, we know when someone's on the line that doesn't want to be on the line, Right? So as someone listening to this, they could maybe be thinking, you know, I'm I could pretend or, you know, I won't make it that obvious. But at the end of the day, like genuine human interaction, you'll pick up on that. And then if it's not genuine, you know, anyone with like a decent EQ, like you're going to, you're going to figure that out. And more than not, people that are leading these, or at least especially in the banking realm, there's a lot of these networking calls. People understand what's going on there. So I wouldn't suggest just hopping on to hop on. You got to be genuine in your approach or you're probably doing more harm than good. It's actually funny. One of the people in the forums mentioned around, is it common for people that say they're going to refer you then to not actually do the referral? Um, I think that's around like I would handle that as not being too annoying, right? Like it's at the end of the day, people are just going to say things because they're not comfortable with any sort of altercation. So just say what you want to hear and then kind of go on with their day. And I think that's probably just, yeah, a part of the game. It's all numbers based. It's how I see it, right? It's all like, you know, you'll reach out to 100 people. 20% will take the time to call or take a call with you. You know, you're down to now 20 people there. Just, you know, keep breaking it down in like a funnel system. There's going to be people that say to you, Yeah, we’re, or for you, and then just not do it. I think it’s, you not to tarnish yourself by.
Patrick (CEO of WSO): [00:18:25] Yeah. The fact that the person was so wrapped up in that it just makes me feel like they're so worried about one referral like they're not at the top of their funnel is probably too narrow. You know what I mean? It's like you shouldn't be getting so wrapped up over one call and not get the person said they were going to refer me like, Well, haven't you had like five other calls since then? And you know what I mean? Like it should just be about like getting better at that skill, making a genuine connection, building a relationship and adding value anyway you can in terms of like, Hey, I've found this interesting. Staying in touch every six months. You know, kind of staying top of mind so that you can get those opportunities because I know there's a lot of people who already have jobs are looking to make the transition. Like in the live chat we did, they're like, Hey, how do I go from middle office to front office? I'm like, you know, internally it's super tough, but externally you can, you know, you should be building that network and actually improving how you speak and how you interview and all that good stuff. So yeah.
Matthew: [00:19:23] Is it a similar concept of yours out in UAE around networking? A lot of coffee chats but…
Nabil: [00:19:29] Yeah, yeah. Same thing like networking is the same. Yeah, pretty much. I think networking like most people treat it like networking, but I just think of it as like making friends. Like you don't want to, like you're just making friends. Pretty much. So even if you don't get like what you want out of it, you just make a good friend. And, and usually, if you want to ask for a referral, like you could ask them advice like, you know, like once they get to know you a little more, like let's say you talk maybe once, maybe you follow up catch on. I mean. Meet them and then they like you. You can ask them, Hey, what do you think? Like, Uh, like if I had to work at a place like yours, like one of the things I'd have to work on something like that. And then generally, the conversation, if they're into you, it'll automatically go towards that. Like, Hey, you know what? Yeah, you seem like a good fit. I could refer you to someone or something or whatever like, or adding, like treating it more like, Oh, I need to ask these questions. I need to, you know, comes off like, really fake-ish. Like, especially when some people treat it like completely professionally. Just I like to think of it like just making friends. Just be super like, don't be inappropriate, but, like, uh, make friends. Yeah, pretty much. You never know. Like. Oh yeah. I mean I was saying like you never know, right? There are people who have like contact me like two, three years after I first reached out to them who've been like, hey, you know, there's a there's an opening. Do you want to join? Or something like that? So like, you just keep them warm, just be friends and you never know when the opportunity is gone, right?
Matthew: [00:20:54] Yeah. I was going to mention, I think it's all about or a big factor of networking is patience, right? It takes time to form these relationships. And I think if you are going in with the idea that you're looking to get something out of the relationship, you know, within a month or so, like it's probably destined to fail. Um, I find the best things where I've gotten something out of my network has been from the relationships that have been long-standing multi-year, and it never stemmed from a place of, you know, I want something from you in a short period of time. It's always been, yeah, that's, that's like, let's build a genuine relationship with each other. I know what field you're in, you know what field diamond. You know my skills. I know your skills. We know how we can learn from each other. But, um, you know, eventually our paths are going to cross. Whether that be in one year, five years, ten years. And that's where you reap the benefits of a successful networking relationship.
Patrick (CEO of WSO): [00:21:45] Yeah. Look at Grace. Grace, one of my mentees. She started freshman year, and like, by the time she was a junior, she had, like, offers everywhere. Because she was just like on top of it, building those networks, you know, building those friendships, those relationships early. So by the time she was like interviewing end of sophomore year, junior year, people were like, they knew her already.
Matthew: [00:22:03] I think even like, I saw something, you tell me if this is wrong. I thought it was a cool idea, but it was around. I saw someone networking and they actually just created like themselves, a little spreadsheet, just keeping track of, you know, when they would have meeting or met that person last where it was then even just like a few notes from that meeting there. And it could be personal things like this person expected.
Patrick (CEO of WSO): Oh, We have a…
Matthew: A child or, right
Nabil: Yeah, We have a template, Yeah.
Matthew: I didn't even realize and I saw that I'm like, you know, that's just great, I think because again, if you're able to reference things like if you're going to go on like your second coffee chat with someone that, you know, maybe met with a couple of months ago and you maybe asked them, well, how was that, you know, wedding? You mentioned a few months ago that you were going for your buddies or whatever it was. It just puts you in a better position versus everyone else. It's, you know, personalized and makes them feel good that you've actually listened to them and you actually are, you know, interested in learning more about their experiences. So I think that could be.
Patrick (CEO of WSO): [00:22:57] Conditional formatting can help you here. If you put in the date of when you actually first met them and you have a conditional format where if it's past six months, it kind of turns red or whatever like and you know.
Matthew: [00:23:07] It gets you to want to reach out to them again? I guess.
Patrick (CEO of WSO): [00:23:09] Yeah, like I should, I should be paying them and stuff like that. Like it's a good way to, to stay on top of the, you know… and that's in.
Matthew: [00:23:16] And that's in our Networking Guide.
Patrick (CEO of WSO): Yeah…
Matthew: Alright, Wall Street Oasis Networking Guide. Check it out guys. That's huge.
Patrick (CEO of WSO): [00:23:22] Well we don't sell it standalone it's on any of the interview courses you get the networking course included. So private investment banking consulting or hedge fund it's included as part of the package. So, anyways…
Matthew: Very useful.
Patrick (CEO of WSO): All of it? Yeah?
Matthew: [00:23:36] Yep, I think that's we'll call it this week guys thanks to everyone for listening. We'll be back next Thursday with another great pod.
Patrick (CEO of WSO): [00:23:43] And thanks to you my listeners at Wall Street Oasis. If you have any suggestions, whatsoever, please don't hesitate to send them my way, [email protected], and till next time.
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