#315 Impact of Mass Exodus from Big Cities

COVID-19 and protests have created a shelter in place and curfews in huge cities. With the sudden ability to work remotely many employees are skipping town…


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Show Transcription:

Eric Worral: (00:00)
Hey everybody! Welcome back to another episode of RentPrep for Landlords, this is episode #315, and I am your host Eric Worral. So in today’s episode, we’re gonna be talking about the migration from cities to rural areas and in some places or some cases, even international locations, that’s happening right now. So we are seeing a mass migration that is starting to happen and will continue to happen because people are finding cities less and less attractive due to COVID-19 and also rioting, and what the impact of that will be, and the fact that they can work remotely, as we’ve seen the number of remote employees skyrocket in recent months, we’re gonna be talking about all of that right after this.

Voice Over: (00:41)
Welcome to the RentPrep for Landlords podcast. And now your host, Eric Worral.

Eric Worral: (00:46)
So the first article I wanted to read here and kind of summarize it from forbes.com. The author’s name is Jack Kelly, a senior contributor and the title here. And this is from June 2nd, 2020. So, Cities Will See Citizens Flee, Fearing Continued Riots and The Reemergence Of COVID-19.

Eric Worral: (01:05)
So Manhattan, Los Angeles, San Francisco, Chicago, Philadelphia, and other large cities in the United States have become meccas for people looking to accelerate their careers and cultivate an active social life. The big cities offered an abundance of employment opportunities and vibrant nightlife. People paid exorbitant prices for homes and apartments, and they viewed this as the cost of entry into having a better life and job seemingly almost overnight. The mood drastically changed those living in places like New York City found themselves stuck in small crowded apartments, as they were ordered to stay home.

Eric Worral: (01:35)
The restaurants, clubs, gyms, hair salons, museums, concerts, and sporting events abruptly closed down, which is important to mention because that’s half the reason, you know, some of the people are moving there. And then it’s a saying that residents started questioning why they’re paying so much money for rent when they can avail themselves to all the offerings of Manhattan is 40 million Americans lost their jobs. City dwellers had to wrestle with paying a large amount of their salaries and housing costs and taxes while either not having a job or holding onto their positions for dear life. If that’s not enough to make someone want to move out of the, for greener pastures, the peaceful protest against the killing of George Floyd turned into something more sinister people aren’t related to the protest, use this as an opportunity to riot loot, vandalize, and run rampant causing chaos and mayhem.

Eric Worral: (02:21)
So, you know, not really telling you guys anything you don’t know at this point, but the interesting thing is what’s happening right now as far as remote work, right? So if you combine those two factors of being stuck in a little box in the sky that you’re paying, you know, $3,000 a month for New York City, you don’t have all the amenities that you’re used to having the social life. And then now your job has said that you can work remotely well in New York City. Obviously the salaries are pretty high. So let’s say you’re making a hundred thousand dollars, but if your cost of living in New York is, you know, going to cost you five grand a month and you can move to beach town for half the cost. Like why not? You know, that’s one of the things that we’re seeing right now is that people are starting to flee the cities.

Eric Worral: (03:04)
And I apologize. I think I got like an almond shell of my throat here. I need to drink a little sparkling water. It feels like a really poor product placement. Like today’s RentPrep podcast is brought to you by sparkling ginger water, but you guys get it. So what I was reading on this, and actually I was having a conversation with somebody who is a specialist of remote work. He actually runs a remote conference specifically for remote employees. And he’s said there’s been a huge accident already from San Francisco LA and New York city. And especially in San Francisco where it’s a lot of tech-based industry. We’re seeing that Twitter, Facebook and Google are saying that you don’t have to return to the office this year. And I think Twitter said that actually ever if you want to stay a remote employee, you can stay a remote employee forever.

Eric Worral: (03:51)
So if you’ve got $150,000 a year job out in San Francisco, but your apartment is eating up $50,000 of it a year. I mean, it doesn’t actually sound that great after that, right? Cause you still got taxes and whatnot, but now that same employee is going to Mexico. They’re going to Texas. They’re going to Florida. What a lot of them are doing due to relocating, to areas that have a lot of sunshine because why not everybody loves sunshine, but they’re also relocating to areas where there is no state sales tax. So a lot of the pundits are claiming and saying that you will see an accident, a mass exodus from these big cities with high rents that are going to places like Florida and Texas, where there is no state sales tax. So you figure if you know, you’re saving that, you know, whatever, it might be five, 10% range on $150,000 salary, if your significant other has a salary like that too.

Eric Worral: (04:45)
And you’re both able to work remotely, that is some serious income where you might be adding $30,000 to your bottom line just by relocating. So there’s a lot of incentive to do that. And somebody who I’ve mentioned a lot in the podcast who I follow quite a bit, Scott Galloway, who’s a marketing professor from NYU. He was saying that this may actually have repercussions to on swinging certain States politically. So the, one of the things he had mentioned was nearly 40% of Manhattanites are talking about relocating. And if they relocated to Florida, it would actually swing that state to a democratic state, not a lot to do with real estate, but I thought was pretty interesting in the fact that New York City having such a high population density, if it was to disperse in a Texas and Florida it would actually change the political lines there, which is pretty interesting.

Eric Worral: (05:33)
Another article I read here, this one comes from the San Francisco Chronicle. This is from JK Dineen on June 1st, 20 20th said SF, Silicon Valley rents plunge amid downturn: ‘Never seen anything like it’. So the cost of running an apartment in the Bay Area plummeted in May as layoffs and the increased flexibility of working from home drove a double digit drop in some of the nation’s most housing markets, a double-digit drop. The drop has been reported 14.3% up to 14.3% drops in rent in one month. And then, you know, this is kind of one of those cases of like, you know, the fattest pigs get slaughtered while I don’t think there’s a fatter pig when it comes to the cost of rent than San Francisco right now you know, San Francisco, New York, Seattle, Los Angeles, all of ’em.

Eric Worral: (06:24)
But when you have such a high rent, it’s like, there’s not a lot of room for growth and you’re already leading the pack. And then all of a sudden, overnight, everybody can work remotely in this city. And then on top of that you know, there’s riots or whatever may be happening. And then the fear of high population density areas being more impacted by COVID-19 and just like that, you know, if somebody had all their investments wrapped up in Silicon Valley, like that is painful. So it’s pretty, it’s pretty incredible and amazing. Just to see this kind of quick impact on the rental market and real estate markets and it’s you know, not one that anybody would have predicted. So when I was talking to that one guy who runs a remote conference, he was saying that this is the time if you were to invest internationally, where you’re going to get high C level or high paying individuals who are going to want to live in Bali or are going to want to live in this, you know a community in Mexico, that’s going to have, you know, all these amenities and it’s going to cost them half of what their tiny apartment in New York or San Francisco cost them.

Eric Worral: (07:29)
So he said that this is where you’re going to see a kind of that Tim Ferris, The 4-Hour Workweek. You know, if you’re familiar with that reference, basically, you know being able to live in Thailand and live like a king on a good salary back home kind of thing. So really interesting stuff. I’m going to be watching this for sure over the coming six months, just to see what happens. And I actually landed on a blog post too. It was like Top 10 Reasons to Move to Mexico. And you know, it lays out some pretty interesting stuff. As far as like healthcare affordable housing, low cost of living, you can actually drive to the US depending on, you know, where Mexico, you are, beautiful beaches, rich fiber, and expat havens or strongholds can be found in several areas of the country.

Eric Worral: (08:13)
So if you were thinking about investing internationally probably where those ex-pat havens are, might be kind of colonies where you might see more Americans moving to, you know, I, I just, I think it’s really interesting. You’re going to see some, all of a sudden big time money moving into Mexico or different areas for people that are, you know, working for Google and Twitter, Facebook, what have you. So it’ll be fascinating to see how this all plays out. I will link to all of the mentioned articles that I’ve mentioned here. I will let you know that the one does have a paywall on it. Which one was it here at? The San Francisco Chronicle? Yeah, that’s what it was. So if you’re looking for the, on San Francisco, it might be a little gated, but yeah, super interesting stuff.

Eric Worral: (09:01)
I’ll definitely be keeping an eye on it and yeah, let me know what you guys think in the comments on the actual blog post. So we always send those out with the newsletter. If you’re wanting to check out where this is on our blog and yeah, we always look forward to hearing your guys’ feedback and seeing what you think as well. All right. Well, hopefully, hopefully if you’re listening to this, you don’t own a lot of real estate in those cities. Cause I know this is a really big buzz kill episode. But of course, anytime there’s, you know, the tides go in and out, there’s always changes and opportunities and there might be some future opportunities for you to reinvest in areas that are going to become more popular as well. Talking to you, Texas and Florida. You heard it here. Probably not first, but you heard it here. All right, guys, I look forward to catching up with you next week. I hope you have a great week and take care.