The Hidden Crisis in Real Estate Nobody’s Talking About (Until Now) with Robbie Hendricks

So today we're all with my good friend Robbie. We're in the collective together, but I also invested with you guys, so I wanted to chat with you, Robbie, because you guys are busy and a lot of people are talking about the Midwest, which is where you guys kind of live. And also invest. So let's talk about what's what's happening to the middle of the country, because a lot of people that listen to these oftentimes are kind of focused on the coasts. Yeah, it's funny because it's like the Midwest is the hot thing right now, right, because everyone was looking at the sun Belt and everyone was looking all over the country. So they're like, oh, it's the Midwest now. The Midwest is the new the new hotspot, as if it's as if it's going through some renaissance, you know. And uh, you know, the Midwest has just been consistently boring for a long time, and which is how long we've been here, right, We've been buying multifamily here for thirteen years, and it's just been a slow and steady, uh business for us that we understand. But we're local and that gives us a pretty significant competitive advantage. Right, But it's been it's been fun watching all the buzz now go to Ohio and Indianapolis and Columbus and Kansas City, like those are the markets now And oh no, not Phoenix, not Dallas, you know, not for Lauderdale, you know, you know, Dayton, Ohio. Well, it's funny because I look at some of the articles online like top ten cities to invest in, and you know, my hometown, like Akron, Ohio is like number two on the list, which blows my mind because to your point, it's always been there. It's not really changing that much. Oh completely, And it's and it's really not changing that much. The only thing that's really happening in the Midwest is you're seeing like positive migration in the cities because the people in the rural towns are slowly convalescing into the suburbs and in the big cities. So we don't have the same population growth in the Midwest like like obviously in Phoenix or in Dallas, not even close. But you are seeing little sub markets and little pockets in the Midwest that. Are seeing they're seeing great growth. Yeah, and I think that's what people are watching, you know, they're looking at this data and it's real data. But to your point, it's very different if if the needles moving in Phoenix versus Columbus, Ohio. Right, correct, Well, yeah, and it's they're just completely completely different ways of looking at the business. Right. So, if you're in Phoenix and you have this unbelievable net positive migration, which is obviously that your whole investment thesis, right, it's like, we have so many people coming here, they need somewhere to live. Our our markets in the Midwest are a lot more mature. They've been here a long time, they've been developed for a long time. We don't have the same population growth, but we have stability. Just very different markets to invest in. And if you can't just invest here, assuming it's going to be just like just like Atlanta, you know, the same thing, it's literally different. Well, and you know, it's interesting because I've I've talked to lots of different people in the space, and the ones that are getting killed in Phoenix are the outer staters. The ones that are getting killed in some of the markets that we really know are the people that have never been there before. And so let's touch on that a little bit because I know I've talked to you. I've invested in some of your guys' stuff personally, and you guys have also seen that it's not a local. It's not just in one or two markets, it's everywhere. You get these out of state folks in they're they're literally like, I'll just give you one example. We have a property in downtown Phoenix. Well, we have a bunch of them that got built recently. It's four months free out of twelve month least now. And you look at the buildings that are been built down there, they're all out of state companies. They don't understand because none of them there's no locals that are building in downtown Phoenix right zero. You know, it's nuts. And so that's what happens when new money comes into a market. Is that going on with you? Oh exactly. It's just funny when they think if it's Phoenix, it must be good, and they ignore the sub market and even of hot markets like Phoenix. But it's the same thing here. We actually have a joke here that we buy from locals and we sell to out of towners. I don't love that, yeah, I actually I actually, you know, we've sold about half our portfolio over our careers. Right, we've bought about three thousand units, but we've sold about fifteen hundred, and we sold them in the run up of twenty one and twenty two because out of towners were coming into our market and they were buying c plus property at six caps. If you talk cap, I mean they were overpaying for sea property to such a degree we couldn't even understand it. We would never. Buy a deal at that price. So we just took the chips off the table. And while it's hard to see your unit count go down, it's like, all right, if you guys from New York or New Jersey or Colorado, if you're gonna buy these deals at this price, you go right ahead. Yeah. So the exact same things happening here. And it's interesting because I always tell people it's a real it's a local business. So part of the reasons that I personally invested in your company was because you guys have been buying in that market for thirteen years. That is the reason. And what happens in all these markets. Is that people they go they go to some seminar, or they reach some magazine and they fly into town and they start convincing themselves and every once in a while they get it right, but most of the time, my experience has been that they're paying too much, and they're paying and they're buying in the wrong locations, and then of course they're using out of state management and all the other things that they're trying to figure out, and then of course the locals swoop in and fix their problems right after all that money's gone exactly right. We're looking at that exact situation right now at our firm where we're going back and forth on a deal right now. It's some people fromund of town. They came in to buy some some distressed product a couple. Of years ago. Now it's even more distressed, right because they're out of town manager. Managing sea property is hard en, not for managing even be minus property is hard enough. But if you're not local, you don't know the streets, you don't know the people, you don't know the rents. You know, it's it's highly local. So you know, so we're looking at a deal now to come in and save some people, right and rescue these deals that like they're getting pressure put on them by the city to to to move on. Like you guys got to get out of here. And that's what happens because people just they want to play real estate. You can find affordable product in the Midwest, so it's any anything is cheaper than buying in Phoenix. Let's try there. It's gonna work, right, But their price per unit looks good, so they go buy there, but they don't realize that they're overpaying. The other thing that I just. Before we wrap up on this one point is this is this is real money from real people. Like you know, these deals that you guys are buying now at deep discounts, somebody's losing on the other side of the equation. Right exactly. Yeah, that's that's unfortunately what's happening not just here but all over the place. You obviously I call them the spreadsheet warriors. You know, a lot of people got into syndication in the past five years, right, They raised a ton of capital, They got over their skis, most of them don't self manage, and you can have a lot of people that are losing their money as a result of just sort of the speculation of the past few years. It's a bummer because it's a black mark on the industry, Like it's a black mark on all of us. It is that they are trying to do it right. Exactly, because then when people lose money, they're not trying to invest in anyone else's steal either. And to your point, I never really thought of this, but because the Midwest is so inexpensive compared to the rest of the country, you probably do get a lot more newer investors investing there because to your point, it's so much more expensive and you have to raise so much more money to invest in Phoenix. Why don't we just invest in the Midwest where we can only have to raise a fraction of that. But then what they don't realize is it doesn't grow like the West coast. And also Ohio has a lot of weather. There's so much weather that people don't understand. Yeah, you probably can't tell behind me, but like it's just it's already dark, Like it's already dark here, there's no sun, you know, but the weather's the weather's less of a concern here. But you're right, it's just it's it's cheaper to invest here, and that makes the barrier to entry lower for new people to come into the market. Like I want to play real estate syndicator now, and unfortunately, and they're good at raising capital and all these other markets we're going to chase yield in the Midwest, and they don't realize it's a whole different animal. I mean, just like every market's its own market, much like downtown Phoenix. Like these people raise tens of millions of dollars building downtown Phoenix and no one's living there, regardless of how popular Phoenix is. Yeah, and I think what we probably need to pammer home there is you guys in the middle of all this are doing very good deals, and then there's people also doing very bad deals right alongside of you, same month, same year. And so it's not necessarily a Midwest thing or a Phoenix thing. It's an it's a how much you buying? How much buying the property for? Where is it? Is it in the right location? You know, how's your your equity and your capital stack, and and you know the numbers accurate? All there's a zillion things. Uh, it's not a Midwest thing, right, No. It's an operator thing. Yes, operator thing. Like a lot of a lot of investors just don't realize how important the operator is. They look at this, they look at the offering like, oh, the beautiful deal. It's oh, it's so shiny, you know. Look at the I R R. Look at it. It's just so beautiful. Look at the renovations. They don't realize that, you know, someone has to execute this. And if they're not and if they're not local, I just I wouldn't I wouldn't trust them. I mean, to your point investing in us, the reason why I invest in your deals is because you're you're right there, your your deals are down the street. You can go pound the pavement, you can. I mean, you Ken Maplori can run over there and you know, kick the tires, like there's something to that. You've been investing there for so long, you know, Like our office is mile down the street from my high school. Like we know this market, like we know this market anybody could ever know from New Jersey, like, and yet they still throw money out here, like it's like it's out of going down style. You know. I'll tell you a really funny story. Ross and I owned a building in Houston, Texas and it was smaller on the fall side, like one hundred and forty five units. And that's a tough size, right, you know, when you look at payroll and everything, and and we said, oh, let's spend a little bit of money and see if we can value add these. It wasn't it was like in the two thousand old. Uh built in the two thousands, so it wasn't that dated. But we said, let's let's spend a little bit of money. So we did four units and we spent about ten grand a unit, and we we tried to raise the rants. We couldn't raise the rants. And you know, we did everything we could. We looked at the expenses and we just couldn't move the needle right. So we said, you know, let's let's roll this into something else. So we listed it and it got under contract with a big brokerage, and somebody put it under under contracts from now we're the seller and I am on their list. I am on the people who's buying there. I'm on their actually all p list. So I get the business plan and what does it say? Bad operator, bad management, big value add the rents are really under market, all that stuff. And so the point is not the not to bash anyone. I just you know, you can put anything you want in a business plan, and you can you can send it out to hundreds of people. And now maybe they did fine on and I didn't. Track it after we sold it, but we sold it for a lot more than we probably should have. And they bought it, and they capitalize it and they raise it. But I know from my own experience that they're not gonna be able to raise rents like they said they were going to be doing the business plan. And they're certainly not gonna be able to cut expenses like they said they were going to do the business plan, because I already tried that with my thirty years of property managing experience, and so you know you're going to And so for the those of you out there, they're listening, they're investing in deals, you're investing in the operator. What Robbie said was right. You know, you know when when when things are too expensive, that's the time when we pushed pause, like you guys exited. We exited. We we pushed pause for a couple of years. We didn't buy anything, just like you right. That's right, yeah, we we we we sat on our hands. It's the hardest thing to do as an operator is to sit on your hands, especially when you have William Capitol and then that's the responsibility. You know, GPS like sponsors like us have right because people trust us. But when things are too hot, you have to sit there and just I. Know it drives to be nuts, Like I gotta be honest. So especially when you have the when you have the money on your wallet and you're sitting there and you know you can buy anything and you don't. That takes discipline. Yeah, when we just had that situation a little bit recently, we and we had we walked away from a project recently that we really really liked, absolutely stunning project. It just would have been something that had been so great for our company as we work to come up. It just it just got a little tight for us, you know. And that doesn't mean we couldn't have raised the capitol. We could have put it together, we could have closed it. We could have just thrown it into the portfolio and crossed our fingers. But you know, people trust that you're not going to do that. You know, that's level of responsibility to a lot of sponsors. The correction, right, and that's why the lpast keep coming back after thirteen years. You know, right, let's trust man, and you have to honor it. You're only as good as your last deal too, right, Like you have to keep that same level of precision going. So, Robbie, let's chadd more about like tariffs and everything. Is that affecting your business at all so far? Or are you concerned about that? Well, yeah, we're Yeah, we're definitely concerned about tariffs. If anything, we're concerned about the way the market's reacting to tariffs just as much as we're concerned about the tariffs themselves as it released to tariffs themselves. Yeah, I mean steel, lumber, aluminum come from China, Mexico, Canada, so clearly it's a concern. And whether it comes to capex for us when we're. Not doing new construction right now, but it would definitely impact that, right But then we're also like looking at our capex budgets when we're looking at acquisitions, yet we have to put a buffer on it. What's tough right now, it's that this might be staying the obvious. There's like a lot of cross currents right now, so it's really hard to get guidance on what's actually going on because the jury's out on whether tariffs are actually gonna happen like they're happening now they're not happening. Now it's China, but maybe not China, maybe not computers. There's so much going on. With it, it's really hard. You know, none of us banked on a trade war either, right, we weren't sitting there like, yeah, Trump's going to do a trade war and like, I'm not. It's not political to me at all. It's I'm sure everyone thinks it's for the best of the country, and that's fine, but it makes it hard for the rest of us to budget mechs right, you know, but not to labor it. But if if the tariffs are gonna are gonna, let's say, inflation and rates at the very least stay where they're at, that's just going to keep that's just going to keep housing and frozen, right, It's just going to keep everyone frozen, which is just going to make rents go up again, especially as the new supply shakes out over the course of the next twelve to eighteen months. So I feel like I'm in a bad relationship. Yeah, I mean, what is he going to say next? I don't know, I don't know, I don't know. I mean, what's funny is he's doing exactly what he said he was going to do. So I like the we're all surprised, right, because we thought it was probably posturing and not really like every country in the world's going to get terrifists off at us, right, and now everyone's furious at us. And again, I'm not a teriff expert, nor am I an international diplomacy experts. So maybe this is the right move. But as it stands today, for those of us in real estate, it's very hard to find stability. When we were chatting about the interest rates on our Live the other day, and you know, Robbie, do you see interest rates going up or down with these terrors? Oh, my goodness, Mike, my guess is gonna end up being as good as yours. Okay, So tariffs create inflation, which people people are suggesting might happen. While if we go back into inflation, then your only thought is they're gonna raise rates, which is doom, right, because so many people are banking on rates coming down. Uh. You know, the survive till twenty five thing in the multifamily space is becoming the what's the twenty twenty six saying that everyone has to survive until twenty twenty six that's gonna be twenty seven and maybe like how long are the banks going to pretend and extend for all these people. The biggest problem with the interest rates, obviously is the single family housing market, which puts stress on everything else. If we can't get some relaxation of mortgage rates, everyone's just gonna stay in their homes and so they're not. No one's building anything, So it's just gonna make the affordability issue consistently worse until this loosens up somehow. I mean, what, what do you I completely agree with that, and that's why I keep saying, you know, we need a balance housing. What that means to me is people should be able to afford a home and they should be able to afford rent right and then we should have some stop gaps for people that can't do both, and some policy around those. Kinds of things. Right now, home ownership is certainly there's there. People are just struggling with be able to own a home at all, and so it's pushing people into the rental market. So they can't see it right now because so much supply has hit the market that was started a couple of years ago, and so it's keeping rents kind of flat, We're starting to seek concessions, and this is just the pig moving through the python really. But then, as you know, Robbie, come twenty twenty six, towards the tail end of twenty twenty six, when this stuff's absorbed twenty seven, eight, twenty nine, you know, the gloves are going to be off again and these renters are going to be screaming. Yeah, it's it's it's going to be a mess. It's going to be a mess because then you're going to start to hear all the rhetoric about rank control because it's inevitable that there's a supply chain or i'm sorry, a supply issue for not for for single family homes right now, what the mortgage is double the average rent right now, it's not it's not even insane ballpark. And unless this gets unless there's some sort of like loosening of the housing market, it's just going to get it's gonna get worse before it gets better. And who knows what, who knows what the politicians are going to do. At that time. I have no idea. Well, and do you think that the Midwest being more affordable do you think that that's going to continue to make it a growing market. It's certainly going to make it appealing, right because at one point people are going to have to make financial decisions. You know you have there are there are too many markets now where rents are what above forty percent, some markets above fifty percent of household income. It's completely unsustainable, you know. So we're out here and we're still underwriting deals where our target rents, our target rents post renovation are under twenty four twenty two percent. Of household in come. So that gives us a lot of room to run here one as it relates to just as an investment thesis. It gives us a lot of room to run in terms of making money here as investors. But at one point people are going to look around and say, shoot, maybe I'll go to Ohio. Man, Like I can get a good job there, work for a big company like Procter and Gamble or Kroger. I can buy my starter home for three hundred and twenty five grand, or I can go rent a nice two bed apartment for fifteen fifty. It's going to look pretty appealing despite the snow. Yeah, you bring up a really good point. I think we all knew. There was a time when, like if you moved to Honolulu, your rent would be fifty percent if you were in New York, certainly in that ballpark, Seattle, LA. Those were always markets that people kind of knew what they got before they went there. Now to your point, Robbie, it's creeping up everywhere, right, Like the Phoenix is not supposed to be that, right, Like you know, Las Vegas is not supposed to be that, And so they're like, gosh, I'm going to do that. I want to be in some some special location, right like Hawaii as an example. So, and of course it is a supply and demand issue there too. Those are all supply constrained markets with high demand where. You know, there's people moving and which is why you see that kind of rent. But now it's creeping up in the burbs, right, I mean, you know, it blows my mind. And almost everywhere I look at for two bedroom to bath now is about two grand. Yeah, the right, go ahead. Remember when it was one thousand. Yeah, that was a very loyal No, it feels it feels like a lifetime ago, Like where was twenty twenty thirteen, twenty fourteen, twenty fifteen, and all of a sudden. I mean, I'm sure that's how it was in Phoenix two Around here, people were renting their two beds for six fifty. You're seven fifty and after fifteen hundred and uh at one point the income runs out, you know, and then what's next? Yeah, and then what's next? And uh yeah. We were looking this morning on our Live h I was comparing like inflation and trying to get prepared for Alive this morning, and I looked what was the value of the dollar in two thousand and eight compared to today? And they said one dollar in two thousand and eight is a dollar forty nine today, seventeen years later. And I thought, wow, like almost fifty percent now it's still a dollar. So if you if you had that dollar in your wallet in eight and you have that dollar in your wallet today, it's still the same one dollar, but it buys you fifty percent less. That crazy? Isn't that nuts crazy? It's just you feel so bad for the generation coming up. Yeah, you feel bad for them because you know a lot of people are asking the question like do you think the younger generation it wants to buy homes? Like is it's still a priority for the younger generation to have homes, And I don't even know if that's the correct question. The question is have they just given up, Like, have they just given up on home ownership because in their lifetime they've seen the cost of home ownership just absolutely explode. So when you guys are buying deals right now, I know you guys are looking at lots of different markets. What are some of the key factors that you look at. For a market. We talked about operators, so that's a given, but you know, what are the metrics that you guys like that are in your buybox. Yeah, well, in terms of what we're looking for, you know, we're just we're just value add guys, right, So for deals that are they're just stale, poorly managed, ideally a combination of both of them. Right. But you know, in our markets here in the mid West, we're looking for employment. So we're looking for stable employment. We want it's all about the employment the migration in that specific sub market. Like we said earlier, it's a lot different than a place like Phoenix, right where Phoenix just has boatloads of people coming into the entire metro. Ours little sub markets are different. Like we were looking at a deal the other week where that specific little little sub market three mile radius had eight percent population growth in that little sub market. So that's where we're looking for little pockets like that, where it's irreplaceable real estate. In these little pockets in the Midwest, there's no chance for a new supply. Like I said, there's a lot of cities here in the Midwest where they've it's been developed. It was developed one hundred years ago, it was developed back in the forties, fifties, and sixties. So much of our multifamily here was built in the sixties, you know, back after World War Two, everyone came home from the war and had babies and built apartment So it's just a very different market in that way. So we're just looking for value adding those little those little pockets. Yeah, that's that's very similar to what we look at. The other thing that you know we started looking at was we want a big You touched on this earlier, but we want a big, big gap between the whole mortgage and the rent. So as a landlord, that's what we want. So we want that we want the step in the neighborhood to be significant steps. So like the deal that I think you invested in in our Vegas deal. You know, that's in a market where the homes. Are two three four million dollars, right, So we have an apartment building there and so the step into that neighborhood is significant. But the neighborhood's gorgeous and beautiful. And the other one that we found that's a sleeper that a lot of people don't pay a lot of attention to is the school district. Yeah, what we found is a lot of our renters. And it makes sense. You know, you have kids. I see some there in your office and I'll tell you and you know you you've met mine. You know, when you're looking at relocating somewhere, one of the bigger issues even over where you're working is what schools, what districts are my kids going to be in, and are they going to get a good education. From on a public on the public side, Yeah, completely, that's that's in terms of if we're going to buy a deal to hold for the long term, it's it's got to have great schools, it's got to be have proximity to the like those higher household values that you were mentioning as well, because that's just where you want to be, and that's where the people want to be. You know. Now we're we have a little bit of a two tiered strategy, I suppose, because sometimes we will buy distressed deals in distressed areas and completely reposition those revitalize the whole community. But those might be shorter. Term holds, at least for us. Yeah, not in a market that we want to hold long term. You know, we might move. We might just fix it, you know, make it wonderful for the sub market it's in, and then move on to a greener pastures. I suppose. Yeah. And it's funny. We did that too for a long time, as you know, and I made one huge mistake once I'll never forget. We did all We bought this property at such a low basis and we put a bunch of money into it. It was absolutely positively gorgeous, but the stream of people coming in never changed, right, like you know what I mean. We tried, we had marketing, we had this, we had all this stuff going on. We spent all this money, tried to get a better quality tenant, and finally Ross and I just looked at each other. We said, you know, you can't change in neighborhood and no matter what you do, and you can overimprove. And so I know you guys have done this very successfully and so we generally, but I still go back. I still think of that one thing all the time. I'm like, you know, it was a big project. It was two hundred almost three hundred units, and they had garages and I mean it was you know, it was not that even old, but it was it was in a market that had turned and the crime and all the stuff and people the locals knew, like they were like, you know, we we do not want to live in this part. It was gated, like you know, I'm I'm trying to paint out. The property was nice, but we could not get good quality people in and eventually we just we we we cleaned it up. We made a little bit of money, but we moved on. Because we said, okay, this we're gonna be fighting for occupancy on this. And so so as you guys start to navigate these value adds in these in these you might buy a sea or se minus property, you just don't want it to be a c Ors location right completely. Now we've done the sea locations, that's that's for sure. But again those are not we never go into those with the intention of long term holes. Yes, yeah, so you can do you can do it, but you really have to know what you're doing right to be in. You have to be in and out. Yeah, well that's you know, that's how we cut our teeth. You know. We cut our teeth on the tough stuff, like the tough, tough stuff because we have no money, so you have to start somewhere. Yeah. Our first deal was an eleven unit, one hundred and ninety thousand dollars deal in just the worst part of the city. But that's but we made it the best, the best eleven unit in the worst part of the city. And then we moved on and we kept trying to grow, you know. Yeah, and I think it's important that we bring up those kinds of stories because everybody looks at, you know, the things we're doing today and they're like, oh my gosh, like you guys are always picking winners or whatever. It's just not the case like we you know, we've. Got some thick skin from the stuff that we've done and where we've been and mistakes we've made. Right exactly. You know. Sometimes you know, you'll have an investor ask you like, well, they'll ask us. They won't ask you you have the reputation, right, They'll ask me like, oh, are you sure you can manage this be property? Like are you sure you guys can handle those tenants? And I just show them pictures of our properties from ten years ago, like, I mean, we've seen dead bodies, man, Like, we can handle we can handle the moms, Like I assure you compared. To where we start, you know, yep, No, it's just it's part of the progress that we make, right. But it's also good that you started small, because I think sometimes people try to start too big, right, They try to start with one hundred unit building and they can raise money online, so they feel like they can do that, and then they get over their head. I think that happens. I think that happens a lot. I think it's sort of in vogue to tell new people to go just buy the biggest deal you can, which I just think is crazy. Like, start small so your mistakes are small. You go out there and you make a million dollar mistake, you know you can. You can bury yourself before you even start. Why not cut your teeth on a fourplex? You know, go start with start with a single family, figure out if you're good at managing tenants, you know, start with that. There's no rush. That's the whole reason why we're doing real estate because it's the long gang. So and you've seen all the people that tried to get rich in real estate over the last five years and they're in trouble. Now. When you do property management, you learn a lot too, right, because you can get the numbers correct all you want, but you still have to manage the tenants. So was there anything that specifically that you guys learn with property management from the beginning until now? I think the big thing about property management is it's. Its own business, right. You can't like moonlight as a property manager, especially if you're going to build an actual multi family portfolio. But even if you're doing single families and you're going to go out there and get ten twenty thirty single families, you can't just part time manage your real estate portfolio. And eventually you're going to have to build a company. If you're going to self manage, it's easy when you start. If you have a ten unit or twenty units, you can just kind of piece it together yourself. You can kind of lease yourself, maybe have a part time handyman, but eventually you're going to need systems. Eventually you're going to need to scale the company up. Too many people just see like I actually I want to if I call them gurus. I'm not trying to be disrespectful to anybody, but I feel like there's this now confluence of professional capital raisers and deal buyers rather than real estate operators. So and some of these people are so dependent upon a third party manager to manage their business plan for them. It's very scary and it's why a lot of them have struggled. That's that's I got my soapbox about that, Danille. A little bit. But but yeah, we've learned a lot from property management, and the biggest thing is that you have to take it seriously and treat it like it's a business, because it's its own business. And I've just add a couple of things. Uh, you know, what what we are seeing and what is factual is that people got online and they you know, they're big, big let's say, influencers online and they raised money, typically for someone else. And so the first mistake is raising money with your reputation and handing it over. To somebody that has a deal. That's a stake number one. My stake number two is they don't actually consider the property management until sometimes the end. In other words, they're they're like oh yeah, yeah, you know, like like Roberts. Said, they're they're a third party. Well, we all know that those are two huge risks because one, the deal might be a deal that no property manager could ever manage your way out of, like it could have just been boughting it incorrectly, maybe the bad debt, maybe they inherited debt, maybe it's just bad location. Whatever. So the actual deal is stuff. And we just kind of beat that topic up already. But the next piece is if you're if you hire a property manager, it's like it's like going to a doctor the first time and and you know for something that you know, it's new to you, and it's you don't even know what to ask them. And so that's the other thing. They what they do is they hire a third party, but they don't know what to look for. They pretend like they do, they walk the property, they do the thumbs up. At the end of the day, they actually don't know how to manage a building. They don't know what to ask. You know, they don't know how to manage the leasing. Or the or the manager or the or the maintenance staff or or you know, any of those things. They don't know, so they're completely in the dark. The only thing that they've. Done is raise money online and hand it over to somebody else who also doesn't know. And that's what's actually in my opinion, that's what's creating the opportunities right now. Property management is a pain in the butt, you know it is. It is a well Daniel, you know, it does not. Make me money like period, Like there's time and nine of my time. It's a net net business. But I like it because like today, I walk down the hall, I sit down with the director management with Shannon, and I have a direct conversation whether about a leasehop or something like that, and I can move the needle immediately for investment that I made and for all our investors. So that's why I like it. But otherwise you might as well just be raise a bunch of money and to turn it over to a financial planner. Because you're doing the same thing. You really don't know what you're going to get, and it's scary. It is scary. It's scary because you're you're you're trusting someone else to execute your business plan. So it's like it's really easy to sit on your computer and get out your Excel and underwrite this beautiful deal and like, oh they could probably get a little more rent, or oh they could probably do this, and then you hand it to this property management company, like, hey, these are the rents you need to get get out there, you know, And it's not that simple. Property management is hard. It is. Let's talk about for a minute, like during the run where you know, you know, we've known each other for a while and obviously you guys joined our collective mastermind and you know, so you know, we've gotten to know you guys. Really really well. During that period of time, we weren't really buying very much and so but we were seeing lots of deals, right, So we would come to those quarterly beatings and we'd be talking about what, let's say, something you passed on and somebody that somebody bought. We know that people bought stuff during a time where we passed. Okay, so that's knowledge. We both had the same rent role, we both had the same financials, we both had the same debt, quotes, so you're stick it in a spreadsheet and maybe there's some small differences, but at the end of the day, the rest is all assumptions. And so we passed. I'll bet you we passed on fifty or sixty deals during that couple of year period that people bought. And I think that, you know, there's. Not enough discussion around that because those are the ones that you guys. Are starting to circle back on today. Would you agree with that? Absolutely? Yeah. We keep a running list. We keep a running list of all the stuff that we underwrote, and then we were nowhere near the running not even close to best and final, and we're like, what on earth? What are you seeing that we are not? Right? Are we do? We forget how to do this? Like and uh, But so we just keep a running list and it's going to be an acquisitions opportunity for everyone in our space that played it safe and kept dry powder, because uh, opportunities are going to come uh from that. So so people that are listening just need to decide what side of the desk do you want to be on? You do you want to be on the side where Robbie's waiting to see what's going to happen because we already know that you overpaid, which by the way, everyone knows. Everyone knows, everyone knows. The question is is how long and can you hold on? And you know, and and if you can't, then we'll be there to solve that problem. Happy to help. Let's call me out, just call me. But you know, you combine that with the fact that a lot of these people took on too much debt. They they levered the heck out of these things. They obviously the short term debt thing happened. And then the rates. Everyone knows that whole story, what happened to everybody. But yeah, and if people don't get some relief relatively soon from rates, it could get it. Give a little dicey out there. It could be. And the other thing that nobody really talks about it And that's why I say twenty twenty five and twenty six is going to be the year of the short term property. Manager, because the GP is just going to continue. To fire property managers and point to them until they run out of that excuse. Right right now, you could point. The interest rates and some of the other things, but I know for sure that there's plenty of deals I've seen them seventy five eighty percent occupied in markets that are ninety ninety five percent very poorly run, high bad debt, which means that people are skipping out, they're not collecting a lot of rent, there's spending a lot of marketing costs because they can't run the buildings and they can't keep them occupied, you know, and and and so there's all that stuff started to show up now and what they do. The first thing that they do is they fire the property manager. They send a letter to the LPs and they say, okay, we have a new manager in town. And you know, they they did this, They did that when at the end of the day that that could be true, by the way, it could be that they that they did not do a good job. But the problem is that they don't how to manage them. Yeah, it's funny. That was one of the biggest things. Not to plug you, but that's one of the biggest things I took away from your property management book. Not to sound like a fanboy, but when I read your ABC is a Property management It's one of the first things I actually took away was one, property management is hard, but two if you don't know how to do it, and you trust a third party to do it, you. Better learn how to manage them. You have, you're gonna fail either way, correct, You know, there's a lot of ways to fail when you're trusting someone else to execute your business plan. And that's what we're starting to see now. That's what we're starting to see emerge now, is that. And by the way, I know a lot of syndicators that started their own because they thought that was a good idea. And I was like, you guys are out of your minds like this. There's so much work and so much overhead needed to be able to run this correctly. That that three percent management fee or whatever you're getting on these are some larger projects. You know, it's it maybe breaks even, right, It's it's hard. At best, it breaks even. It's it's inglorious. But like we always tell, we tell our investors, as I'm sure your investors will be the same thing. It's just mean, I would love to have a third party do this for me. It'd be great. You just run my property, send us all checks. I'll live on the beach. It would be great. Why around the world raising cap all But in all reality, not through party manager is going to manage my property the same way I am. No, they're pair as much. They're not going to recruit as well. There's just no chance. And then it makes underwriting for me when we're looking at new deals so much easier that we manage in house because I can actually give accurate expenses, the fact is right straight fitting the people down your hall exactly. So it gives me so much more confidence as an investor myself do we self manage? And I can come across obviously more confident to our investors because I'm like, look, if I have to lease it, I'll go lease it. I'd rather not look it out there. I'll get out there. Well, that's actually another really good point. Like my employees know that we're going to be owning and managing this and so so when I send them out to do due diligence and I say, you know, did you verify the rent role? Did you go through all the leases? Did you walk all the units? Is as accurate? What is the market? Did you hit five or six or seven buildings in the area? Are these rents? Is this the right number for a one and a two in a three bedroom? And are there sessions and all those things, and if they look me in the eye and say yes, then I remember that conversation. You know, then when I walk out there and you know where ninety percent occupied, and I'm like, what the heck? And you know, and then I go back to that and I said, you verified all this stuff, and you know, and and that's how you manage. I'm not saying that was right or wrong. I'm just saying, but that's that is the power of having it in house, because they're also doing our due diligence. And that's what a lot of people made big mistakes on. Yeah, I agree, it's just people romanticize real estate investing. They want to feel like it's a free lunch. Like all this by is property. It goes up in value. The last five years or six years of really warped people's understanding of real estate. Like you know, of course, like twenty twenty one properties just believe themselves, you could be the worst property manager, and there was such a shortage everything we were like ninety eight percent keep raising rents. We must be really good. At this, like you exactly right, oh, good at property management. And of course the last two years, as things have tightened up, it's been really good for us because it shows us where our weaknesses are. So we've been doing huge intern operations, audits and adjustments here to tighten up because we even I don't want to say we drink our own kool aid, but a little bit. I mean, when you're you're blowing out your rent projections, you kind of start to feel like you're really good at this business, when in reality it's a very unique market. Yep, it was the market, not the not us, You're right. And then so they're like, oh, we'll read to repeat. Next year is going to be this better than last year, right, because that's the way it was for a long time. But boy, you know, I've been through the lows of the lows, but right now it's tough, and I'm actually grateful that the cracks are starting to show up, that the lenders are starting to deal with these kinds of things, and and the LPs are starting to take notice. They're asking really good questions or better questions, and. They're and and all that stuff is floating to the surface now, which presents really, really, really good opportunities for this next buying window. And that's what I'm most excited about. Because when to your point, during the time when it's running and you got rent rent growth and all that stuff, it's covering up expense growth, like it's covering up all these goofy things. And and now you you're you know, you got to look at both sides. You got to look at what's what's going on with my with my revenue, what's going on with my expenses? And and there's a thousand levers to pull on both sides to try to maximize that n A Y and and uh, just so many people don't know how to do it. Yeah, well, I'll I'll ask you a question too, just since we're on here. You know, do you, knowing that you can't. Predict the market, do you think the bottom is in? I know it's sub market dependent, but what do you see I mean, do you feel like like we've gotten there? No one can call the bottom. But do you think we've seen correction in multi family? We've seen it in especially the hot markets have gone through their correction. I would say we even saw a small correction. Here. Are we done or is there is there more to come? I I think there's more And I'll tell you why. Well, Well, there was a bit of a pause before Trump got into office, right, we know that, right, and now we're seeing you know, you know, it's it's been a very interesting Q one, right to see as we kind of start off this, but when I don't see big money come into the market, So so the beginning of that, that's when I'm like, okay, you maybe we are at the bottom. But you know when when huge money and I'm talking about you know, all the big boys, they're still on the sidelines, you know. So and so when that's still here, I still think that there. I still think we're going to see some fallow from some of these debt funds, uh, some of these loan maturities, some of these operations issues, and I think people have tried. To patch these together the best that they can. And a lot of the debt that's sitting out there, especially on some of these debt funds, they're not even marked down. So like let's say they take a building back from somebody and they walk away, they give them the keys, I guess all the equity's gone, and so now the debt is actually having like a third party manager, right, and it's sitting there, and you know, and so we all know that they would sell it and get that off the books if they could, because if it was worth more than. The debt, they would sell it. But they aren't. They're waiting. And I think everybody's waiting for these cap rates to you know, go down and these interest rates go down. Expenses are not going down for sure. So those are the two things everybody's waiting for. And so I still think that that's kind of you know, behind the curtain, right Uh, and uh, each market's a little bit different, but we're not saying a lot of defaults. And there's a lot of big, big patient money out there ready to snap into those, as you know, but we're not seeing those yet. Uh. And I I cannot wait for that. So if you think, see, if you think all for these debt, these debt funds or some of these people are they're holding the bag with losses, right yeah, oh yeah, there's market, they're not being marked to market because they're not realizing them. Right. So you think Trump, and I mean Trump is a real estate guy. Do you think he's aware of this, that there's this. I mean, he's aware of it, But do you think it's a priority for Trump? Given he knows there's sort of a debt bomb that's waiting to go off unless what maybe the ten year comes down to three. That I for sure he knows, right, I don't think personally if I always thick guessed. You know, let let's take a look at what a debt fund is. It's not really regulated. People can do whatever they want. It's all private money. That's being raised. I don't think he cares, you know what I mean. But now when it comes to you know, let's say Fanny or Freddie or you know some of these others probably you know some of the banks probably, but you know a lot of the retail and office and stuff like that that's sitting in people's, for one case, their pensions, retirement stuff like that. So you're not going to really see them. I don't think you're gonna see the shakeout. And basically they're like, oh, who cares if the one percent loses you know, some some money, right like if you're credited and and you take a hit, Like. I don't think that. I don't think anybody cares about that, pretty honest. So you know, I think that's gonna make its way out. I think the bigger issue is going to be on the consumer side, right like you know, call it the single family home side, which I don't see any issues. You know, we're still undersupplied. You know, the prices at homes are still going up, not a lot, but still going up, even though the number of listings is going up, the days on markets going up. You know, we're still seeing price creep up. And so I don't see a real housing issue, to be honest much. I mean, I see these small old groups like ours that have been severely impacted all over the place. But I think you know, you and I are in the greatest positions because you guys have been doing this for thirteen fourteen years, and you know we've been doing it for twenty five years, and so you know we're gonna be the recipient of. Those that would be my guess, Yeah and disagree. Yeah, So do you see any difference with institutional investors is how they're investing right now? And what does that mean for mom and pop investors? Well, I think they're mostly on the sidelines, right I mean, as based upon what I've seen there, you don't see them as active right now. And I'm not an expert. On the institutional investment side, of things obviously, but I'm not sure if they're just sitting there with dry powder waiting to act, or if they're licking their wounds, like, I'm not really sure what they're doing, but I do know that if they're on the sideline and that there is going to be a little window here for moms and pops, people like honestly, people like our firm, to go out there and find either, you know, whether it's institutions buying psycho family homes or institutions buying big multi family deals. They're they're slowing down, and it's going to provide an opportunity, especially for people that really understand their market. Understanding your local market is the greatest competitive advantage you can have, because there's just there's just no one from Manhattan that's going to know your little your little pocket like you will. So I think that's opportunity. We were just looking at a deal here recently that I think, in any other universe would have been just scooped up, scooped right up by an institution. They would just shove it in their portfolio and just never think about it again. But it actually like kind of trickled down to regular people like us, you know, because they're they're still on the sidelines right now, so I think. And then there's going to be an opportunity here. And then I think one way to look at this too, deal is what does the debt market you look like? And so. Right now I think you're going to find not much more than sixty percent loan to value maybe sixty five, right And that's a really good barometer on the equity markets. And so the the what that signals to me is that the the big. Guys, because that's where they're playing right now is on the loan side. They're being super conservative. There's still they still have money out there. But when you start to see that get up in the seventies, even past the age on the debt, that's when actually, you know, we start to see more issues, I think. So that's another good way to look at it. It's not just the equity, but also on the debt. Speaking of LTVs, I'll just ask your questions to you because I'm sure you've heard about this discussion of taking the agency's private Yeah, I'm not sure how many times you've talked about it on here yet, but i'd really love to hear your thoughts, because if if that happened, there would the escape hatch for all these people to get cheaper agency debt would go away. And you just wonder, is that even is that real? And Okay, I don't I was actually having this conversation with Charlie today, you know, so that's definitely being discussed. You know, we just did a deal that as you know, thirty five year amenization. We got our we locked our tenure at four and you know, so we we you know, a week later, we look like a bad move, and we week after that it looked like a great move. You know. So I mean you can, you can, you could take a look at these things all you want. But our you know, our our active rate is still in the low fives, you know, five years, I owe. So I don't know how a private group can compete with that kind of those kinds of terms. Maybe they can, but gosh, the only thing better than thirty five year am is HUT, which is also government and that's forty which you know, we're doing a HUT deal right now to twenty four and so those longer terms are good and and so that was interesting. You know, the guy that used to run Poulty is in is uh uh. That's who Trump appointed to take a look at this, So he's a real estate guy. I think that's good. But you know, I think that is an excellent discussion for later. But I I don't know yet what that would mean. And it just can you imagine how hard that would be to unline. That is the amount of people that were banking on a you know, five five point five percent REFI and now it's seven. It's gonna it would blow up half the deals that have happened the past couple of years, right, And we we just we just got some quotes on a Fanny deal and it was you know, five and a quarter. Yeah, you know, and then we're and now we're looking at a distressed seed deal. Obviously the agencies won't touch it, so we're looking at bank debt and that's up at like six and three quarters and seven. I mean it's nine day difference. So that's actually what I'm talking about, you know, like exactly right. I mean, we're we're doing deals in the low fives. A lot of people don't realize that, especially if you're in a single family space. You know, we're in the mid to low fives all day long right now on but now low loan to value, Like what are you getting on that? Are you're under sixty or right around sixty five? Was sixty five? Yeah? Sixty five? Yeah, so you know, as you know, that's about as high as you're going to get. Yeah, and and uh, you know when it moves an extra you know, up to seventy five, then then you but as low as your cost of capital going in. But it also you should start taking a look. That means that the banks are economy is probably a little better, and the banks are loosening up you know some of the requirements. Yeah, yeah, the local lenders, the local banks, they'll go a little higher, at least around here. They'll they'll give us a seventy five loan to cost. That's excellent. Yeah, we're not saying anything like that. Well, we have a pretty good track record here, you know. Yeah you do. Yeah, no, I'm telling you that. You know, you bring up another really good point, like those local relationships and a track record are the reason. You know, So we do have a couple of local banks. That you know, we could probably get loan to cost and get that up a little bit. But one more and to know, uh, to know local people when you're doing local deals is on the financing side without a doubt. Yeah, it's it's a big competitive advantage for sure. Ye. Well, thanks Robbie for joining us today. Where can people get ahold of you? We just you know, our website is vreck dot com. That's v R e C dot com. Or I just I tweet, I do like I get on Twitter, so mo. Yeah, if you want to say hi on there, it's actually Robert Hendricks is my uh my user name A T N d R I c K S. Got it? Say hi, talk say hi. That's a good way. If you guys are interested in getting on his dls for the Midwest, they're they're your group, trust me. So, Robbie, I appreciate your time, man, thank you so much. Rough talking shop. Can I appreciate Good to see you Danil Yeah, but the best of the family. We'll do thanks man. Tens