The Housing Market Freeze: Who’s Buying and Why?

[00:00:01] Kick. Mehr sparen, als du denkst. Wir haben in allen Filialen reduziert. Jetzt bis zu 50% bei unserem Supersparen zum Jahresstart. Zum Beispiel Jacken ab 6,99 Euro. Ab dem 6.1. in allen Filialen. Kick. Mehr, als du denkst.

[00:00:23] Hallo meine lieben Dschungelfreunde. Hier ist euer Ross Anthony. Kommt jetzt in abenteuer Stimmung mit Kick und der brandneuen Dschungelkern-Kollektion. Zum Beispiel mit T-Shirts für Damen und Herren ab 7,99 Euro.

[00:00:34] Jetzt bei Kick. Mehr, als du denkst. Auch in Online-Shop auf kick.de.

[00:00:40] We moved into our new home this week. I moved in and then left. Yeah, Ken, we moved on Friday and then Ken left me to unpack the whole house that weekend. Well, I had a meeting on Saturday. A meeting with your eight closest friends. My YPO group. But thank you for unpacking the whole house. I haven't seen it yet. I just got back. Yeah, no, it was fun. Well, I got to put everything right.

[00:01:10] Where I wanted it. Yes, which is always good. That was my benefit. I'm good with that. Whatever you did, I'm fine with it. All right, it's on the record.

[00:01:19] So why don't you explain to everybody what YPO is? Sure. Yeah, YPO is Young Presidents Organization. It's been around for a long time. Just type it in, ypo.org.

[00:01:29] And it's a peer-to-peer network. So these are all business owners. They all have the same struggles that we all have in running companies.

[00:01:37] And so we get together often and we bring our business issues, whatever that might be. They could be mergers. They could be sales.

[00:01:46] They could be bringing on new partners, new debt, new, you know, could be 2025 growth plans. It could be whatever.

[00:01:52] And so, yeah, it's fun. I've been in this group for, gosh, well, I first was an EO or YEO, Young Entrepreneurs Organization.

[00:02:00] Now I'm in YPO. But we had our forum retreat, which means that all the folks in the forum get together and we meet.

[00:02:12] But you guys act like teenagers when you're together. It's so funny because these are all like major business owners.

[00:02:17] But honestly, the wives always laugh because you guys need babysitters.

[00:02:21] I have no comment.

[00:02:24] Well, let's put it this way. Last time you had one of these and the wives went, somebody threw a lime at somebody else and it hit your wine glass, shattering it.

[00:02:32] In my face.

[00:02:33] In your face.

[00:02:34] Danielle had one rule for me. She told me the rule.

[00:02:38] So Ken likes to jump on things because it's actually quite impressive because he used to be a wrestler and a gymnast.

[00:02:44] So he can literally be standing next to like a countertop and he can just vertically jump on top of it.

[00:02:49] But my rule for him.

[00:02:52] I'm getting a little older.

[00:02:52] He's not allowed to do that anymore.

[00:02:54] So one foot must always stay on the ground.

[00:02:57] That is his rule.

[00:02:58] As I'm leaving with my bag, she goes, please just do one thing.

[00:03:02] I go, what's that?

[00:03:02] She goes, one foot on the floor at all times.

[00:03:05] I go, okay.

[00:03:07] Exactly.

[00:03:07] And I did.

[00:03:08] No, I hope you did.

[00:03:10] I took a photo with both feet on floor just for you.

[00:03:12] Just for me.

[00:03:14] So anyway, so before we jump into our topic for today, I did want to discuss kind of what we discussed on YouTube today on our live because we do a live every Monday on there.

[00:03:24] And, you know, the question people are asking is if no one can afford a home, then who's buying them?

[00:03:30] Because right now the housing market is pretty frozen.

[00:03:33] Yeah, it is.

[00:03:34] It's actually there's a couple of articles about this.

[00:03:36] And, you know, who's buying are affluent people that have cash, people that have disposable income, you know, certainly no starters.

[00:03:45] And anybody that, you know, is in a financial position to do it is just doing whatever they want.

[00:03:53] Well, it's interesting, right?

[00:03:55] Because, you know, I bought a home for $600,000 a couple years ago in a neighborhood, two bed, two bath.

[00:04:01] And my payment, because I think my interest rate was like right around 6%.

[00:04:06] And, you know, I'm paying about $2,700, $2,800 for my mortgage.

[00:04:11] Well, so the one across the street just listed for $750,000.

[00:04:15] And it's basically the same size.

[00:04:17] It's slightly bigger.

[00:04:18] Two bed, two bath.

[00:04:19] But now with the new interest rates, you know, I was looking at the Zillow, you know, approximation payment.

[00:04:25] And it was like $4,700.

[00:04:26] Yeah, that's $2,000 more per month, right?

[00:04:29] Yeah.

[00:04:29] And so what that does, it completely prices out any investors.

[00:04:34] Because when you bought yours, I remember you were right.

[00:04:37] I was tight.

[00:04:37] You were skinny right then on cash flow.

[00:04:40] Yeah, it's actually my only property right now that is cash flow negative, actually, by a couple hundred a month.

[00:04:44] And that's not good.

[00:04:45] No.

[00:04:46] You should listen to this channel.

[00:04:47] I know.

[00:04:47] Well, it wasn't, and then the rent's dropped.

[00:04:49] So I cut my cash flow too tight, and then the rent's dropped.

[00:04:53] Yeah.

[00:04:53] And rents can drop.

[00:04:54] And they do.

[00:04:55] I know.

[00:04:55] I'm learning that.

[00:04:56] This is lesson number 93 for Daniel.

[00:04:58] Wow.

[00:04:59] But yes, and that is kind of the point.

[00:05:01] So you certainly aren't going to cash flow that property anytime soon.

[00:05:06] No.

[00:05:06] And that was also before all the other things have gone up.

[00:05:10] Insurance has gone up.

[00:05:11] Property taxes have gone up.

[00:05:13] You know, maintenance has gone up.

[00:05:14] All those things have also gone up.

[00:05:16] So, you know, whoever's going to buy that, you know, they're probably close to $6,000 a month.

[00:05:23] Mm-hmm.

[00:05:24] All in.

[00:05:25] Yeah.

[00:05:26] Right?

[00:05:26] And so a two-bedroom, two-bath, somebody paying $6,000 a month, there's no renter that's going to do that.

[00:05:32] So it has to be a special buyer.

[00:05:34] But there's also no homeowner that's going to, you know, no traditional homeowner that's going to put 20% down and pay $6,000 a month.

[00:05:40] Right?

[00:05:41] So you're basically looking at somebody that's rolling out of a more expensive place and downsizing.

[00:05:46] Yeah, they could.

[00:05:47] You know?

[00:05:47] Yeah.

[00:05:47] And there's something about that.

[00:05:49] Right?

[00:05:49] Right.

[00:05:49] Because why would you buy that place and have a $6,000 payment when you could rent it for $3,000?

[00:05:54] We still have the California effect, don't forget.

[00:05:57] Yeah.

[00:05:57] Like, there's still these very expensive areas that people are moving from.

[00:06:02] And in some circumstances, $700,000 is super affordable.

[00:06:08] Obviously, if you're moving from the Midwest, it's not.

[00:06:11] But if you're moving from the coasts, it might be.

[00:06:14] And so it is an incredible neighborhood.

[00:06:17] Two-bedroom, two-bath, two-car garage, little yards in front and back, right in the smack middle of Scottsdale.

[00:06:24] And, you know, and I think for...

[00:06:28] Kick.

[00:06:29] Mehr sparen, als du denkst.

[00:06:31] Wir haben in allen Filialen reduziert.

[00:06:33] Jetzt bis zu 50% bei unserem Supersparen zum Jahresstart.

[00:06:38] Zum Beispiel Jacken ab 6,99 Euro.

[00:06:41] Ab dem 6.1.

[00:06:42] In allen Filialen.

[00:06:44] Kick.

[00:06:45] Mehr, als du denkst.

[00:06:50] Hello, meine lieben Dschungelfreunde.

[00:06:53] Hier ist euer Ross Anthony.

[00:06:54] Kommt jetzt in Abenteuerstimmung.

[00:06:56] Mit Kick und der brandneuen Kip.

[00:06:57] In Dschungelcamp-Kollektion.

[00:06:58] Zum Beispiel mit T-Shirts für Damen und Herren.

[00:07:01] Ab 7,99 Euro.

[00:07:02] Jetzt bei...

[00:07:03] Kick.

[00:07:04] Mehr, als du denkst.

[00:07:05] Auch in Online-Shop auf kick.de.

[00:07:08] For a downsize, it could be a lock and leave.

[00:07:11] It could be really, really good.

[00:07:12] But again, to your point, they're going to be paying a lot downed.

[00:07:15] Because 6,000 a month is a lot.

[00:07:19] Yeah, it's a lot of money.

[00:07:20] And, you know, real estate transactions right now are like a 30-year low.

[00:07:24] So, you know, most people just can't afford to buy.

[00:07:26] So the question always becomes, so either rates go down and then the market picks back up.

[00:07:31] But if rates don't go down, I mean, do housing prices go down?

[00:07:35] Do people just start staying where they are?

[00:07:37] One of the bright spots of single-family is the home building.

[00:07:42] You know, home building permits are up.

[00:07:44] New construction's up.

[00:07:46] And there's a couple reasons why.

[00:07:48] First of all, if, you know, you've got to think of how different.

[00:07:52] One's a full business, right?

[00:07:53] Like somebody's building houses for a business.

[00:07:56] That's their company.

[00:07:57] They want to stay in business.

[00:07:58] They're going to build.

[00:08:00] They're going to try to build affordably, too.

[00:08:01] The other, of course, would be if somebody owns a home in there, they may or may not list it, right?

[00:08:07] So what we're really starting to see is we're starting to see these new homes hit the market, which is extremely good.

[00:08:13] Because what the consumer needs is more options and more supply.

[00:08:18] And that is precisely what will lower the payments down.

[00:08:22] But the other cool part about this is the builders, if you think about it, they can actually work with the buyers on their loans.

[00:08:31] They have in-house mortgage companies, some of them.

[00:08:34] Or if they don't, they can buy down these loans and give people, you know, they can pay for closing costs.

[00:08:40] And so they can make the new homes a little bit easier to get into, which is also competing against existing inventory.

[00:08:48] So if there's a bright spot in this area, and I think it's going to continue, it's going to be if you can build affordable homes and deliver them, you could actually do pretty well during this little cycle as a home builder.

[00:09:02] Do you think people can build affordable homes, though, with all the cost of building right now?

[00:09:06] Yeah.

[00:09:07] I read, and I got to dig into this more, but I read something about this, what they're calling the Trump bump, which is this tax policy and, you know, these economic things that he's planning on doing to try to, you know, breathe some life back into the residential and the commercial real estate markets.

[00:09:28] And what it said was, if he releases this federal farmland and all these other things and makes it easier, it could be up to $90,000 per home.

[00:09:40] Really?

[00:09:41] Relief.

[00:09:41] That's what it said.

[00:09:42] So $90,000 relief.

[00:09:44] Correct.

[00:09:44] Now, what does that mean?

[00:09:47] I don't know.

[00:09:47] Does that mean that you're buying a house on leased land because it's federal?

[00:09:51] Don't know.

[00:09:51] But if you don't have the land cost and you maybe have a lease payment, it might work because all of a sudden, if that's the right number, you know, a $600,000 or $700,000 home, lowering it almost to $100,000 is significant.

[00:10:09] Well, and I think it'll be interesting because people are putting a lot on Trump.

[00:10:13] Yeah, they are.

[00:10:13] Like, there's a lot of expectations.

[00:10:15] I mean, the man only has four years.

[00:10:17] I know he's going to hit the ground running, but, you know, there's just a lot.

[00:10:20] But there's going to be a lag, guys.

[00:10:22] Trust me.

[00:10:23] Like, he's got a lot going on.

[00:10:25] He's got wars going on.

[00:10:26] He's got unemployment.

[00:10:28] He's got immigration, you know, all that stuff.

[00:10:31] He's got all kinds of things.

[00:10:33] I think I'm not saying that he can't focus on real estate, but it's not really broken.

[00:10:40] Well, and it's not really something that he didn't really pump real estate too much for a real estate guy in his election, generally.

[00:10:48] Like, neither candidate really spoke on it.

[00:10:50] He did talk about affordability, though.

[00:10:52] And there's some really good talks that he did.

[00:10:55] One was at the New York Economic Club, I think it was.

[00:10:59] Just Google that.

[00:11:00] You'll see there's a whole speech that I read.

[00:11:02] It's very, very, very good.

[00:11:04] And it really articulated some of the things that he wants to do.

[00:11:07] And he's talked about it since.

[00:11:10] So that could be interesting.

[00:11:12] But like anything, like these opportunity zones that he rolled out, you know, maybe he could extend those.

[00:11:19] And if you guys don't know what those are, just Google it.

[00:11:22] They're excellent.

[00:11:23] Ross and I are doing one.

[00:11:24] And it's a great way to roll capital gains into areas that need redevelopment.

[00:11:31] So hopefully that gets extended because I think that ends in a year.

[00:11:36] So there's all kinds of things on the table.

[00:11:38] I would expect rates would come down a little bit.

[00:11:41] I would expect he's going to have some kind of structure or some kind of proposal around this increasing development on these federal lands.

[00:11:49] And I would hope that he would bring back bonus depreciation, which would be great.

[00:11:54] Or I guess I said 40% now, but back up to 100.

[00:11:58] And I would also hope that he would extend the opportunity zones.

[00:12:01] But who knows?

[00:12:03] Yeah.

[00:12:03] I mean, he just has a lot.

[00:12:04] This man has a lot of things on his plate that, you know, he wanted to get done and he said he was going to get done.

[00:12:09] And honestly, everything renter wise is becoming more affordable because, you know, rents are starting to soften and everything else.

[00:12:17] It's actually more expensive now to own a home.

[00:12:19] Way more.

[00:12:19] Than to rent if you're buying in today's prices.

[00:12:22] It'll be interesting if he touches on this insurance issue.

[00:12:25] You know, this insurance issue is a big issue.

[00:12:27] It's a huge issue.

[00:12:28] It's in Florida, but now it's also in California, Texas.

[00:12:31] A little bit of our viewers have thrown out a few other states that are seeing it in as well.

[00:12:35] It's a big problem.

[00:12:36] It's a huge problem.

[00:12:37] And I think that, you know, in California and Florida specifically, there is a state program.

[00:12:46] Right.

[00:12:46] So because if you guys are getting mortgages, the lender requires insurance because, you know, think about your the collateral that they're putting a loan on is the actual physical home.

[00:12:57] Right.

[00:12:58] And so they wanted insurance.

[00:12:59] Yeah.

[00:13:00] Right.

[00:13:00] So and they have requirements.

[00:13:03] The lenders have requirements on coverages and all that kind of stuff.

[00:13:06] So this is not a small issue.

[00:13:08] So if you have a mortgage, you are required to have insurance.

[00:13:14] But the issue is, is in Florida, everyone started doing the state run insurance, just shopping around.

[00:13:20] And the state run insurance was a lot less expensive because they don't need to turn a profit.

[00:13:26] And DeSantis wanted people off of it.

[00:13:28] So now basically he brought in an insurer.

[00:13:31] I forget the name, but it's really sketchy.

[00:13:33] Yeah.

[00:13:33] We did a program on this.

[00:13:34] We did it for it.

[00:13:35] We did a YouTube on it.

[00:13:36] But but anyways, so now people since this insurer is a little sketchy and it'll take anybody, not anybody, almost anybody.

[00:13:46] But the rates are really high.

[00:13:47] Anyway, so people are moving over to that insurance because they have to.

[00:13:51] But it's much, much, much more expensive.

[00:13:53] And now the state insurance is only having to cover a small portion of people that are maybe right on the coast.

[00:13:59] But the point of that is, is that if you make it a government issue, then it has to be funded by the government.

[00:14:05] You know, so it's just this whole like can the government industries compete with private industries fairly?

[00:14:11] No.

[00:14:12] Yeah.

[00:14:12] Yeah.

[00:14:13] And obviously, so this is one issue.

[00:14:15] Also, property taxes is another.

[00:14:17] Utilities, energy is another.

[00:14:20] But also the components, just the actual prices, the labor, the cost of fixings.

[00:14:26] Like we were talking this morning, I was completely wrong on.

[00:14:30] I thought that is you told me it's fifteen hundred dollars to replace a water heater.

[00:14:34] I thought that was ridiculous.

[00:14:36] But I had a bunch of the listeners corrected me and said, that's a good price.

[00:14:40] Yeah, I got a good deal.

[00:14:42] I know.

[00:14:42] At first I thought I got screwed over, but then.

[00:14:44] Yeah.

[00:14:45] But we know like we had to do an air conditioner for our house.

[00:14:48] It was and I got a deal.

[00:14:49] It was nine thousand dollars.

[00:14:50] Yeah.

[00:14:51] For for one of them.

[00:14:52] And I have two of a split system in my house.

[00:14:55] But so, you know, things are so much more.

[00:14:59] Yeah.

[00:14:59] You just don't even account for it because, you know, it's like a water heater or something.

[00:15:03] I haven't had to buy one since before 2020.

[00:15:04] So, you know, you think they're like seven, eight hundred dollars, nine hundred dollars.

[00:15:08] And then you get the bill and you're like, wow, it was expensive.

[00:15:11] Yeah.

[00:15:11] So so that's another factor.

[00:15:14] Right.

[00:15:15] For for I call it unaffordability.

[00:15:18] Right.

[00:15:18] OK.

[00:15:19] Like I talked about this, but Bankrate had a really, really good study about what we

[00:15:25] call other costs.

[00:15:26] We're not.

[00:15:27] Now, we're not talking about mortgage.

[00:15:28] We're not talking about the interest or anything like that.

[00:15:31] We're not talking about the price of the house or interest rate.

[00:15:33] We're talking about if you had no mortgage, what would it cost?

[00:15:36] Right.

[00:15:37] And they said it's right around eighteen thousand dollars a year.

[00:15:40] So you think about that.

[00:15:42] That is fifteen hundred dollars a month.

[00:15:45] Right.

[00:15:46] Right.

[00:15:46] Just to live in a place.

[00:15:48] Yeah.

[00:15:48] Now, that's everything.

[00:15:50] OK, that's the landscaping and the maintenance and the utilities and the capital, any CapEx

[00:15:57] or any capital expense that you might have.

[00:15:59] You know, you're caught your anything you go to Home Depot or Lowe's for, let's say, you

[00:16:03] know, all that stuff's wrapped up into there, including property taxes.

[00:16:08] Well, I was going to say that the East Coast and the Midwest get really hammered on property

[00:16:11] taxes.

[00:16:11] And that's something we don't get hammered on too badly in Arizona.

[00:16:14] Not in Arizona.

[00:16:15] Right.

[00:16:15] Right.

[00:16:15] But you do in Texas and you do in some of the other markets.

[00:16:18] And Florida is just out of control.

[00:16:21] Yeah.

[00:16:21] Right.

[00:16:22] Like if you own something there, we have friends that own property there and they have no mortgage

[00:16:28] and they've decided not to get insurance.

[00:16:32] Yeah.

[00:16:32] Because it's so expensive.

[00:16:34] Right.

[00:16:34] And that's not a good position to be in.

[00:16:36] Well, it kind of, you know, we looked at getting a secondary place in California and

[00:16:40] we decided against it because honestly, when you look at what you're paying and you look

[00:16:44] at what you can rent it for, it's pretty like close, you know, to just rent instead of owning

[00:16:49] because of all these taxes and things in California.

[00:16:52] Yeah.

[00:16:52] And Florida could start to be the same way where it might just make more sense to just

[00:16:56] rent a place than to own a place.

[00:16:58] Guys, listen to this because I remember the numbers.

[00:17:00] We were looking at a house in California.

[00:17:03] Now, it's nice and had a view and all that.

[00:17:05] But the property tax was $12,000 a month.

[00:17:10] Right.

[00:17:11] The property tax.

[00:17:13] Yeah.

[00:17:14] That was nuts.

[00:17:15] And that's not insurance.

[00:17:17] That's not mortgage or anything.

[00:17:18] So I was like, man, I mean, you know, that's a lot.

[00:17:22] Yeah.

[00:17:23] It's a lot of money.

[00:17:24] And I mean, so for us, I mean, we were renting that same house for, you know, $30.

[00:17:28] So really it would have been cheaper to rent than to buy.

[00:17:32] Right.

[00:17:32] You know?

[00:17:33] I mean, this is a beautiful home.

[00:17:34] Don't get me lost.

[00:17:35] You know, it was right off the beach and in Manhattan Beach area, right off the piers.

[00:17:40] It was gorgeous.

[00:17:41] But the end of the day, I was like, man, this would be a cool area to be in.

[00:17:46] Like, you know, you start to look at these prices.

[00:17:50] Yeah.

[00:17:50] Well, you have to take all that into consideration.

[00:17:53] And right now, just in general, it's 30% cheaper to rent than if somebody bought today.

[00:17:59] Right.

[00:17:59] Which makes about right sense, because if that place was going to be $5,500, you know, that

[00:18:07] I was just talking about in my neighborhood and that person could rent it for $3,000, that's

[00:18:11] about so much.

[00:18:11] Well, here's the thing.

[00:18:12] You're at $2,800 a month and you're negative cash flow.

[00:18:16] Right.

[00:18:16] I'll just think about that.

[00:18:18] By the way, this is...

[00:18:22] Hello, my dear Dschungelfreunde.

[00:18:24] Here is your Ross Anthony.

[00:18:26] Come now in a great mood.

[00:18:27] With KICK and the brand new Dschungelcamp Collection.

[00:18:30] For example with T-Shirts for Damen and Herren.

[00:18:32] Ab 7,99 Euro.

[00:18:34] Now at KICK.

[00:18:35] More as you think.

[00:18:36] Auch in Online-Shop.

[00:18:38] Auf kick.de.

[00:18:39] In The Place am Potsdamer Platz findest du einfach alles.

[00:18:43] Von spannender Interhaltung über erstklassige Einkaufsmöglichkeiten bis hin zu einzigartiger Gastronomie.

[00:18:48] Komm vorbei und genieße besondere Momente.

[00:18:51] In The Place am Potsdamer Platz Berlin.

[00:18:53] Alles an einem Platz.

[00:18:54] Across the street, like same vintage, same, basically same home, right?

[00:19:00] Built around the same time.

[00:19:02] Almost identical square footage on the same kind of a lot, right?

[00:19:05] In a neighborhood that they all look kind of the same.

[00:19:08] So this is not like dramatically different.

[00:19:11] But anyways, did you see that Joe Biden just signed something today to eliminate any additional offshore drilling?

[00:19:18] I did.

[00:19:19] Yeah.

[00:19:19] That's going to be interesting for Trump, too, to try to get over that hurdle.

[00:19:23] Now, it doesn't impact things that are already in place.

[00:19:26] It's just anything additional.

[00:19:28] Yeah.

[00:19:28] Right.

[00:19:29] It's very interesting.

[00:19:31] I don't know what's going to happen.

[00:19:33] He also, remember, shut down the Keystone pipeline right when he got in.

[00:19:37] So there's been all kinds of stuff around oil, right?

[00:19:41] Mm-hmm.

[00:19:42] And obviously a big push toward green and energy and electric and all that kind of stuff.

[00:19:47] But at the end of the day, it does not look like that the batteries, you know, and the capability of EV over the long haul doesn't look good.

[00:19:58] Right.

[00:19:58] Well, you know what's something interesting with these Teslas now is people are saying, you know, it's really inexpensive to buy a used Tesla, apparently, because you don't know the life of the battery that's left.

[00:20:09] And if the battery is to die, it's almost the same price as replacing the car.

[00:20:13] Right.

[00:20:13] So, you know, so people aren't really wanting to buy used electric cars because there's a big risk to that.

[00:20:19] Right.

[00:20:20] Right.

[00:20:20] And by the way, that used car market is massive.

[00:20:23] It's way bigger than new cars.

[00:20:25] Yeah.

[00:20:25] Most people don't buy new cars.

[00:20:26] I mean, especially, I mean, more than half the country, I'm sure, doesn't own a new car.

[00:20:31] I'm sure.

[00:20:32] Yeah.

[00:20:32] So it's going to be interesting to watch.

[00:20:34] And of course, we're just talking about cars.

[00:20:36] But I think, you know, there's got to be a compromise here because the clean energy is important.

[00:20:43] Right.

[00:20:44] And but I don't see how we're going to get away from these these oil prices.

[00:20:51] Right.

[00:20:52] I mean, we do need we need reserves back.

[00:20:54] We need we need a low, low, low priced oil to be able to operate until we come up with a longer term program.

[00:21:01] Well, not just ease into those housing costs, too, because of all the energy, you know, everything.

[00:21:06] Everything that is in a home is as some kind of oil component to it.

[00:21:10] Yeah.

[00:21:10] Period.

[00:21:11] Right.

[00:21:11] Yeah.

[00:21:12] And inflation is a big thing he's going to have to tackle, you know, as well.

[00:21:16] Yeah.

[00:21:16] I don't know where that's going to head.

[00:21:18] That's going to be extremely interesting.

[00:21:19] The underemployment thing that we talked about earlier was.

[00:21:22] So.

[00:21:23] So in 20.

[00:21:25] Twenty three, we had a I think it was a 50 year low.

[00:21:30] Now we're up over four percent of unemployment.

[00:21:32] But there's this thing called underemployment that you kind of scooped out.

[00:21:37] Was it where there were 27 months looking for a job and it's never been higher?

[00:21:44] There's so there's think about that.

[00:21:46] There's two years ago.

[00:21:47] It was basically a million people that were looking actively.

[00:21:52] Now it's one point six million.

[00:21:54] So it's like a six hundred thousand person difference.

[00:21:58] And so what's what's what's getting clobbered?

[00:22:01] What's getting clobbered is anything that's A.I., anything that's automated.

[00:22:07] Right.

[00:22:07] Like those kinds of things that can be done.

[00:22:09] And we're seeing like financial activities.

[00:22:11] We're seeing a decrease in government, decrease in manufacturing, decrease in education and health.

[00:22:17] All that kind of stuff is actually contracting.

[00:22:21] And so it's it's almost like there was too many white collar jobs.

[00:22:24] Right.

[00:22:25] And now there's a cleansing.

[00:22:26] Right.

[00:22:27] And meanwhile, there's a massive opportunity in the blue collar.

[00:22:31] Well, but the problem for those white collar jobs is it's not as easy as just getting a blue collar job.

[00:22:36] You're not trained for it.

[00:22:37] Like it would be easier for a blue collar worker to kind of wing a white collar job than a white collar worker to wing a blue collar job.

[00:22:43] So these these educated, you know, these college educated people are now not being able to find jobs in their field.

[00:22:51] So they're, you know, doing waitressing or bartending or working a job that's maybe part time instead of full time.

[00:22:56] And that's where that underemployment component.

[00:22:59] The underemployment, I don't think, is hitting the blue collar worker as hard as it's hitting the white collar worker.

[00:23:04] In fact, in fact, part of the article that I read said skills over degrees.

[00:23:08] Yeah, that's it was a big, big piece of it.

[00:23:11] It said if you have skills, you're going to be fine.

[00:23:15] OK, but we talked about this over the dinner table and we thought this is interesting because it's like, you know, people for the last 20 years have bright.

[00:23:23] Oh, yeah.

[00:23:24] My daughter's in college.

[00:23:25] My son's in college.

[00:23:26] My son's an accountant.

[00:23:27] My daughter's in marketing, whatever.

[00:23:29] People don't like a lot of people.

[00:23:32] It's been kind of like taboo to be like my son's a plumber.

[00:23:35] You know what I mean?

[00:23:35] Like people always looked at like, oh, we didn't go to college.

[00:23:38] Oh, but then now he's making more money than their kids that did go to college.

[00:23:43] So our conversation over the dinner table is when are the stereotypes going to turn where people are proud that their daughter's going into HVAC school instead of, you know.

[00:23:54] So my dad, my dad was a sheet metal mechanical contractor in a trade, did extremely well.

[00:24:01] You know, he was a he was a pipe fitter.

[00:24:05] And and then he was also in the CBs in the Navy.

[00:24:08] And so he was in construction his whole life.

[00:24:10] And that's how I grew up.

[00:24:11] And so I was around trades people my whole life.

[00:24:15] And I tell you what, it's an extremely honorable, incredible thing to be around because these are hardworking people doing electrical, plumbing, mechanical, air conditioning, all that kind of stuff.

[00:24:28] Those trades are aging out.

[00:24:31] I've watched it.

[00:24:32] Yeah.

[00:24:33] You know, and and and colleges have kind of scooped this.

[00:24:37] I mean, if I owned a college, my customer would be anybody that's graduating high school.

[00:24:43] Right.

[00:24:43] And I would make it really cheap for them to go.

[00:24:45] And that's what happened.

[00:24:46] Right.

[00:24:47] And then slowly that's also gone up.

[00:24:49] But also, I think we have a lot of white collared, you know, I'm not saying that education pieces is bad.

[00:24:57] But I'm just saying that it's kind of like Airbnb.

[00:25:00] There's like a flood of people with degrees.

[00:25:04] And there's a lot of choices.

[00:25:06] Right.

[00:25:07] Yeah.

[00:25:07] It's way more people.

[00:25:08] And, you know, to your point, like my parents didn't go to college.

[00:25:11] My dad was a police officer and then started his own business.

[00:25:14] And my mom worked for the title bureau and neither of them had degrees.

[00:25:18] You know, it really wasn't a thing then.

[00:25:20] But then, you know, as I got older, most of my friends did go to college, you know,

[00:25:24] and it kind of dumped into into that.

[00:25:27] And now even colleges have degrees that aren't don't even mean anything like an English degree.

[00:25:31] Like that doesn't like what are you going to go do other than go teach English?

[00:25:34] You know, right.

[00:25:35] College.

[00:25:35] Could be.

[00:25:36] Yeah.

[00:25:36] Especially now.

[00:25:38] I would encourage people to go look at what's called U6 unemployment rate.

[00:25:43] So U6 means that people who want to work but have given up searching for those working part time

[00:25:50] because they're not they cannot find full time.

[00:25:52] It increased a lot.

[00:25:54] It's jumped a lot.

[00:25:56] But that doesn't even count people that are working full time for a job that's less than their quality.

[00:26:00] That is exactly right.

[00:26:02] And the other thing that I found and I won't name names, but one of my friends called me

[00:26:07] and sold his law practice to his partner.

[00:26:12] I'm like, what are you doing?

[00:26:14] He's like he texts me.

[00:26:15] He's like, why don't you know, I just exited my law practice.

[00:26:18] And so I called him.

[00:26:19] I said, what's going on?

[00:26:21] He said two things.

[00:26:22] One, you can't really sell a law practice to somebody who's not an attorney, right?

[00:26:28] So his partner bought him out, which he was super happy with the price and all that stuff.

[00:26:33] And I said, well, why?

[00:26:34] What was the point?

[00:26:35] Because he's still young.

[00:26:36] He said, all of what I'm doing, a large percentage is going to be AI.

[00:26:44] And he goes, a lot of the legal industry is changing.

[00:26:48] And so this is part of, you know, I know it's a little bit of a side story, but I had

[00:26:55] a conversation with somebody.

[00:26:56] I said, so you think about, think of wills, think of estate planning, think of trust,

[00:27:01] think of PPMs, think of real estate contracts, think of NDA and non-disclosure agreements,

[00:27:08] all that kind of stuff I can personally do right now just by asking, right?

[00:27:13] Yeah.

[00:27:13] And getting one printed.

[00:27:15] Right.

[00:27:15] Now, do I want to have somebody to review it?

[00:27:19] That's an attorney.

[00:27:20] Of course.

[00:27:21] But do I want, do I need them to produce, you know?

[00:27:26] I don't.

[00:27:27] Right.

[00:27:27] Right.

[00:27:28] So, so he's like, I'm just trying to get ahead of this in five years is going to be.

[00:27:32] And the point is, we are going to start to see this with insurance, you know, term insurance,

[00:27:40] whole life insurance.

[00:27:41] You're going to, we're starting to see on real estate.

[00:27:43] Yeah.

[00:27:43] Yeah.

[00:27:44] You're starting to see with mortgages.

[00:27:45] Correct.

[00:27:45] I mean, now, I mean, you really, to your point, you need someone to still look it over, but you

[00:27:50] can kind of wing some stuff on your own.

[00:27:53] And as AI gets better, it's going to be more dialed in.

[00:27:57] Right.

[00:27:57] Right.

[00:27:57] So I just want everybody to realize, like when, when you start to see these real things

[00:28:02] now, you still need people to review them.

[00:28:06] Right.

[00:28:06] You still need representation.

[00:28:08] I'm not saying you don't, but for a lot of things that are admin, like, like even accounting,

[00:28:15] accounting is really under fire right now, in my opinion, because there's a lot of things

[00:28:21] that can be outsourced.

[00:28:23] And, and so as employers are strapped with higher labor costs and higher costs in general,

[00:28:30] they're going to start to look at more efficiencies.

[00:28:33] And I'm telling you, it's coming.

[00:28:35] And I'm telling you, it's coming.

[00:28:35] So if like somebody is listening and maybe they're thinking about going to college or parents

[00:28:40] listening and their kids are thinking about going to college, I mean, would you like,

[00:28:45] would you say that they should maybe consider the trades or consider pushing their kids into

[00:28:50] the trades?

[00:28:51] Well, I, again, I always kind of boil it down to the kid.

[00:28:55] So I was just having a conversation with a friend of mine and I said, he has two sons.

[00:28:59] And I said, tell me what's going on with your boys.

[00:29:02] He said, well, one wants to be a firefighter.

[00:29:04] And, and, and this is a very hardcore entrepreneur, right?

[00:29:08] He's, I go, how do you feel about this?

[00:29:09] He was awesome.

[00:29:11] Right.

[00:29:11] The other one wants to go through college and, you know, wants to start a business.

[00:29:15] And he's completely fine with that.

[00:29:18] So I, and which he should be, but the point is, I do believe that it needs to be the

[00:29:24] kid's choice and they have to kind of do what they want to do.

[00:29:27] So you gotta, but I think the, the, the days of a parent pushing a kid into college to be

[00:29:33] what they were, you know, need to probably be looked at because the degrees generally

[00:29:40] are not delivering the jobs that, that were once there when I was going through college.

[00:29:47] And I, I, when I went to college for me, it was a massive step from a blue collar to

[00:29:54] a white collar in income.

[00:29:55] I'm telling you, that's where I came up.

[00:29:59] Is these kids are taking on so much debt to go to college.

[00:30:02] And I think that that was never really presented or discussed even when I was younger.

[00:30:08] Although the amount of debt was a lot less when both of us were younger than it is now.

[00:30:12] But you know, you're like a lot of kids when they graduate college, if they don't get that

[00:30:17] really good job, they're, they're behind because their debt to income makes them not qualify for

[00:30:23] a home because they have this big college, you know, debt payment.

[00:30:27] Right.

[00:30:27] And some of those payments are fixed.

[00:30:28] Some of them aren't.

[00:30:29] And I think that it's a real conversation to have with yourself or your kid as do you really

[00:30:35] want to take on all this debt?

[00:30:36] Is that really going to be worth it?

[00:30:37] If you want to go be a teacher, you want to go be, you know, a job that doesn't pay that

[00:30:42] great.

[00:30:42] Right.

[00:30:43] And this, this also boils down to financial education, right?

[00:30:47] Like it's easy for us to say this.

[00:30:50] When I was in college, I didn't know any better, right?

[00:30:53] Like I was getting flooded with credit cards and, you know, and, and all this stuff.

[00:30:58] And it doesn't seem real.

[00:31:00] It's like, oh, I can, I can kick the can down the road on my student loan.

[00:31:04] Cause I had student loans and it was like awesome.

[00:31:07] But I also knew there was a payoff.

[00:31:09] Then that's what, that's kind of the point I was trying to make.

[00:31:12] I came from extremely blue collar, Boeing, Scott paper, Weyerhaeuser.

[00:31:17] That's where the kids from my high school went.

[00:31:19] Like in the little town of Everett, Washington, where I grew up.

[00:31:22] And the, you know, a percentage of the people from my high school went into college.

[00:31:29] And that was a big step to be able to go.

[00:31:33] And, and there was a big difference between that.

[00:31:35] Now I think it's changing where to your point, there are absolutely, you know, what's going

[00:31:42] to kill it in the next 10 years are these trade schools.

[00:31:45] They're going to crush it.

[00:31:46] I think so.

[00:31:47] Yeah, it's so exciting because one, we need it and they're great professions.

[00:31:53] It's the profession my dad was in.

[00:31:55] I watched.

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[00:32:47] You know, I was in it.

[00:32:48] This is where I worked in high school and in college summers.

[00:32:52] You know, I actually literally worked in these.

[00:32:54] And it's going to be a lot longer before AI takes over being a plumber and fixing all your

[00:32:59] appliances.

[00:32:59] How is that going to happen?

[00:33:01] Right.

[00:33:01] I mean, maybe never say never because we'd have robots or whatever.

[00:33:05] But like.

[00:33:05] How's a robot going to replace your $1,500 water unit?

[00:33:08] It's just not.

[00:33:09] Well, you're on record now.

[00:33:10] So when Elon Musk comes out with something in 10 years, but it's going to be.

[00:33:15] Way more for the robot.

[00:33:16] It's going to be harder than trying to replace some of these jobs that, you know, you can

[00:33:20] either ship overseas or that you can have AI do.

[00:33:24] I saw a photo this actually weekend of a robot harvesting wheat on a farm.

[00:33:34] So it's interesting.

[00:33:36] But, you know, then we got into this fun discussion.

[00:33:38] I was like, well, I wonder if they bought it.

[00:33:40] Did they lease it?

[00:33:41] How are they paying for that?

[00:33:42] Yeah.

[00:33:43] You know, you start to look at.

[00:33:44] Well, remember when we were in, was it Singapore?

[00:33:47] And we had those.

[00:33:48] Or no, it was Germany.

[00:33:49] And we had those robots that were coming out.

[00:33:51] We had serving trays.

[00:33:52] So basically your server would take your order.

[00:33:54] But then when the food came to your table, it was like on top of a robot.

[00:33:58] Yeah.

[00:33:58] So you're just definitely going to see a lot more AI technology and there's going to be

[00:34:02] jobs running that as well, you know, but it's.

[00:34:05] You have to really take a look at why.

[00:34:08] Like, I think that's the most important thing.

[00:34:10] So like a lot of you guys probably don't remember, but there used to be travel agents.

[00:34:16] Well, there are still.

[00:34:18] Way back in the day.

[00:34:18] I know there are.

[00:34:19] And I still use one Jetmarry.

[00:34:21] I love Jetmarry.

[00:34:22] But the point is this.

[00:34:25] You didn't used to be able to book a flight online.

[00:34:28] How goofy is that?

[00:34:30] And you didn't used to be able to book a hotel online.

[00:34:33] Like, I know for a lot of you guys are like, what?

[00:34:36] I'm telling you that wasn't very long ago.

[00:34:39] So will there be a time where you can get a will, get an estate plan, get a trust,

[00:34:44] get a life insurance, get term insurance, get whole life insurance, buy a home, get

[00:34:48] your taxes done?

[00:34:49] Well, that's already if you're doing 1040, it's really simple now.

[00:34:52] Well, right, right.

[00:34:53] Even you're complicated.

[00:34:54] Correct.

[00:34:55] No.

[00:34:55] And how about mortgages?

[00:34:56] Like my Coeur d'Alene house, I actually got a mortgage from a company called Bank of

[00:35:01] the Internet.

[00:35:03] And they actually got me a mortgage.

[00:35:06] I never met the person.

[00:35:07] Right.

[00:35:08] You know, I had to get them everything.

[00:35:09] Easy.

[00:35:09] Scan it.

[00:35:10] Send it over.

[00:35:11] Talk to a live person.

[00:35:12] But guess what?

[00:35:13] No corner office.

[00:35:14] Don't bring in a bunch of documents down somewhere.

[00:35:16] No driving anywhere.

[00:35:17] So this is happening.

[00:35:20] You know, talk about most things are admin based.

[00:35:25] And now at the end of the day, do I still want counseling around lawyer?

[00:35:30] Of course.

[00:35:31] Right.

[00:35:31] Anything lawyer based.

[00:35:32] Do I want counseling around life insurance policies?

[00:35:35] Of course.

[00:35:36] Like all that kind of stuff.

[00:35:37] But a lot of this is really super admin based.

[00:35:41] Yeah.

[00:35:42] It's just something interesting to think of.

[00:35:44] You know, if you're just starting your career, their kids or your kids are just starting their

[00:35:47] careers.

[00:35:48] Like what's going to make most sense?

[00:35:49] You want to be relevant.

[00:35:50] Yeah.

[00:35:51] Right.

[00:35:51] Yeah.

[00:35:52] That is the biggest thing.

[00:35:53] What jobs are going to be relevant?

[00:35:54] Even health care is under attack in a lot of areas.

[00:35:59] Right.

[00:36:01] So, you know.

[00:36:02] Well, with health care, what they're doing is they're kind of training and giving more

[00:36:05] permissions to these nurse practitioners and PAs because they don't want to pay the doctor's

[00:36:11] salaries.

[00:36:12] Right.

[00:36:12] Because our health care is getting so expensive.

[00:36:14] Yeah.

[00:36:14] But there's also care that's getting to be more automated.

[00:36:18] Right.

[00:36:19] Yeah.

[00:36:19] You know, if you're in, you're in some kind of a care.

[00:36:22] Right.

[00:36:22] So a lot of it's more automated than it was before.

[00:36:25] Yeah.

[00:36:25] Yeah.

[00:36:26] I mean, it's all moving that way.

[00:36:27] I mean, for sure in the next five or 10 years.

[00:36:29] Yeah.

[00:36:29] I'm certainly not going to let a robot touch my mom.

[00:36:33] Like there's no.

[00:36:34] Wait, they might be.

[00:36:34] No.

[00:36:34] They might be better caregivers.

[00:36:36] Are you kidding me?

[00:36:37] Right.

[00:36:38] So that would be funny.

[00:36:46] So we want to touch on extend and pretend because this has kind of been the strategy

[00:36:51] of the banks for commercial real estate over the past four years.

[00:36:55] I can't blame them.

[00:36:56] Like, seriously, like if I lend you money and the value's down, unforeseen, the last thing

[00:37:03] I want is for you to fail and I don't want that asset back.

[00:37:06] Like, period.

[00:37:07] I just don't want it.

[00:37:08] Like, I'm not in the business of managing real estate or owning real estate.

[00:37:12] I'm in the business of loaning against it.

[00:37:14] Well, let's explain it a little more further right now, though, is that most of the commercial

[00:37:20] loans are not like traditional residential loans that are good for 15 or 30 years.

[00:37:24] Most commercial loans are like five or 10 year loans, right?

[00:37:28] There are a lot of them.

[00:37:29] Yeah.

[00:37:29] So but the reality, though, the extent.

[00:37:32] Yeah.

[00:37:32] There's obviously a term and all that.

[00:37:35] But what's happening is you've got when values go down to let's call it below or at the loan

[00:37:43] balance.

[00:37:44] The question is, what's the lender going to do with that if it matures?

[00:37:51] Right.

[00:37:51] Right.

[00:37:52] So that's really the issue.

[00:37:53] So if the loan's maturing, let's say it's three year, five year, 10 year, 15 year, whatever.

[00:38:00] If it's maturing and the value's below the loan amount, then two people have a problem.

[00:38:07] Yeah.

[00:38:07] The person that actually has the loan and owes it, but also the one that's owed or the bank

[00:38:13] or the lender or whoever.

[00:38:15] And so the question is on the extend and pretend, what they would probably do is going back to my

[00:38:21] other example is I would go to you and say, I'm going to extend this a year and I'm going

[00:38:27] to see where the market goes.

[00:38:29] Extend it, keep in the same terms, not revaluing it.

[00:38:32] Maybe, maybe not.

[00:38:33] Like it depends on the lender, right?

[00:38:34] They're probably, it's probably going to come with a little bit of pain, right?

[00:38:38] So they're going to want some more cash collateral if you have it.

[00:38:41] It's a negotiation.

[00:38:42] But at the end of the day, well, it's called mark to market.

[00:38:46] So what does that mean?

[00:38:47] What that means is the last thing the lender wants to do is sell an asset that is worth less

[00:38:55] than a loan because then the lender has to take a write-off and that's bad for the lender.

[00:39:02] So they would rather work with the borrower and have the borrower keep the asset, keep the,

[00:39:09] if they have the financial capability.

[00:39:11] And so that's where, you know, call it another due diligence or a full examination of, you

[00:39:18] know, like the borrower, right?

[00:39:19] Or the asset itself.

[00:39:20] Well, plus, you know, if the banks are going to take a loss on it, I mean, if the person's

[00:39:24] paying, I mean, they just keep things as is and the person keeps paying, then that's

[00:39:30] beneficial to them.

[00:39:32] Thus the word extend.

[00:39:33] Right.

[00:39:33] Right.

[00:39:34] And now nobody's pretending, but they're definitely extending.

[00:39:39] Well, they are pretending because they're not re-looking at the value of the asset.

[00:39:43] Well, they are actually looking at the value of the asset and they know that it's not worth

[00:39:46] it.

[00:39:46] Maybe behind the books, but they're not.

[00:39:48] Which is why they're extending.

[00:39:50] But the reality is, is hopefully next year will be better than this year.

[00:39:56] Right.

[00:39:56] And then at some point the rubber hits the road.

[00:39:59] Well, in 2025 could be that year because the issue with extend and pretend is that the banks

[00:40:06] are not putting money into other deals because they have so much money in these extend and

[00:40:11] pretend loans.

[00:40:12] And I know MC companies is doing a lot of buying this year in, you know, loans from other

[00:40:17] people that are in trouble.

[00:40:19] We are.

[00:40:19] Well, the banks want to lend on that stuff.

[00:40:21] But if a lot of their money is tied up in this extend and pretend, they have to really

[00:40:24] weigh where their best interest is.

[00:40:26] Well, right.

[00:40:27] So let's take a look at that real quick.

[00:40:28] Now, not every lender is the same.

[00:40:30] But what you need to look at is if you're a big name on some bank and you're driving

[00:40:36] downtown and you see somebody's name off the top of a bank, you know that they've got

[00:40:41] all kinds of assets.

[00:40:42] So they have retail, they have industrial, they have office, they have multifamily, they

[00:40:46] have single family, they have lines of credit, they have all kinds of stuff.

[00:40:49] That's what they do.

[00:40:51] So one of the things, they have risk managers that take a look at your exposure, the bank's

[00:40:56] exposure to a certain asset class.

[00:40:59] So that's actually the big kind of under the hood stuff to take a look at.

[00:41:04] Which banks, for example, have the most exposure for real estate commercial office buildings?

[00:41:10] Because the commercial office buildings, for example, are the big ones, right?

[00:41:14] Those are ones that are not coming back anytime soon.

[00:41:19] The genie's out of the bottle on that one, right?

[00:41:23] So if you're severely exposed on those, you're actually going to take a hit.

[00:41:30] Your bank's going to take a hit.

[00:41:31] The interesting thing is the bank already knows.

[00:41:34] They know next year, the year after, the year after when these are maturing.

[00:41:39] And they know generally what the values are at the time.

[00:41:42] What they don't know is if the buyer can still keep it, whether they want to keep it.

[00:41:47] But you can't, you know, if you take an asset back that's worth less than the loan, you

[00:41:54] have to take a write-off.

[00:41:55] If you take it back and it's the same price of the loan, what you're going to do is you

[00:42:00] could be holding on to that real estate for a while.

[00:42:03] There might not be any buyers.

[00:42:05] Right.

[00:42:05] And it might not even be worth, you know, it might be worse.

[00:42:09] It might be a scrape.

[00:42:10] It might be a redevelopment.

[00:42:11] Who knows?

[00:42:12] Well, that's a good point because if the bank takes it back and it's worth the value of

[00:42:15] the loan, they didn't lose any money on the deal right up front.

[00:42:18] But then they have to hold on to this thing and then they have to.

[00:42:21] Then they risked it.

[00:42:22] Yeah.

[00:42:22] Because what they do is they go out and they get BOVs or brokers' opinions of values.

[00:42:26] They go out and they do their due diligence.

[00:42:29] And, you know, they have a fiduciary obligation to the shareholders and everything to go out

[00:42:33] and try to get the maximized value that they can.

[00:42:36] And the point is, but if that office building, for example, sitting on the books for a year

[00:42:41] or two years, that's not good because now it's bank owned.

[00:42:46] And we've seen this in the past.

[00:42:48] Yeah, 2008.

[00:42:49] I bought plenty of stuff that says bank owned.

[00:42:51] When you see something that says bank owned, that's not, trust me, there's some stress behind

[00:42:58] that.

[00:43:00] Banks are not supposed to own real estate.

[00:43:02] They're supposed to lend against them.

[00:43:04] Right.

[00:43:04] And they don't want to.

[00:43:06] Well, it looks like, you know, this whole extended for 2025, it's going to peak in October at

[00:43:12] 5.4 billion for the year.

[00:43:15] And then.

[00:43:16] Those are low in maturity.

[00:43:17] And then the numbers will fully peak in 2026.

[00:43:20] Yeah.

[00:43:20] Yeah.

[00:43:21] It's going to be an interesting year.

[00:43:22] Right.

[00:43:22] And so, again, we'll see how far can they kick this can down the road.

[00:43:27] And there's a lot of other things.

[00:43:28] Let's just let's just focus on that real quick.

[00:43:30] There could be, like if you own a building in San Francisco that's 30% occupied.

[00:43:38] We're the one.

[00:43:38] We're the one.

[00:43:39] We're the one.

[00:43:39] We're the one.

[00:43:39] We're the one.

[00:43:40] We're the one.

[00:43:40] And so we're to Shopify.

[00:43:41] We moved to Shopify.

[00:43:41] The platform, the before Shopify used, has used daily updates, which sometimes led to

[00:43:47] the shop that didn't work.

[00:43:49] Endlich macht unser Nemo Boards Shop dadurch auch auf den Mobilgeräten eine gute Figur.

[00:43:53] Und die Illustrationen auf den Boards kommen jetzt viel, viel klarer rüber, was uns ja

[00:43:57] auch wichtig ist und was unsere Marke auch ausmacht.

[00:44:00] Starte deinen Test nur heute für 1 Euro pro Monat auf shopify.de slash radio.

[00:44:08] Wir sind Teresa und Nemo.

[00:44:10] Und deshalb sind wir zu Shopify gewechselt.

[00:44:12] Die Plattform, die wir vor Shopify verwendet haben, hat regelmäßig Updates gebraucht, die

[00:44:16] teilweise dazu geführt haben, dass der Shop nicht funktioniert hat.

[00:44:19] Endlich macht unser Nemo Boards Shop dadurch auch auf den Mobilgeräten eine gute Figur.

[00:44:23] Und die Illustrationen auf den Boards kommen jetzt viel, viel klarer rüber, was uns ja

[00:44:27] auch wichtig ist und was unsere Marke auch ausmacht.

[00:44:30] Starte deinen Test nur heute für 1 Euro pro Monat auf shopify.de slash radio.

[00:44:39] There is no extent because the buyer or the, I'm sorry, the owner of that property is

[00:44:48] going to say, I'm on a walk.

[00:44:50] Right.

[00:44:50] Because they don't want to, right, because if they're shelling out money every month,

[00:44:53] they don't really do that.

[00:44:54] Why would they recapitalize and give more money to a lender?

[00:44:58] They're going to walk.

[00:45:00] So it's kind of a two-way street, right?

[00:45:02] So not every asset is going to be extendable.

[00:45:07] Right.

[00:45:08] Because both parties have to want to extend that.

[00:45:10] Correct, right?

[00:45:11] So are you throwing good money after bad?

[00:45:14] You know, right?

[00:45:15] There's all kinds of decisions there.

[00:45:17] It's not just the bank's decision.

[00:45:18] Right.

[00:45:19] But generally, if you think next year is going to be better than this year and you're being

[00:45:25] factual and not judgmental, you're actually going based on real math, then I think you might

[00:45:34] want to extend and pretend.

[00:45:35] But if the office market in San Francisco, for example, has been annihilated and nobody's coming

[00:45:43] to work there and the occupancy for the city is 50 percent and you're sitting at 30 percent,

[00:45:49] you're probably not going to want to extend.

[00:45:52] That's going to go back to the bank.

[00:45:54] And then you'll have a vacant office building that will be bank run, bank managed, and they'll

[00:45:58] bring in their asset management and all that.

[00:45:59] So it's going to be a case by case basis on that debt maturities.

[00:46:04] Now, do you think that this is going to roll over into residential as well?

[00:46:09] Or do you think this is mainly a commercial real estate issue?

[00:46:12] I do think it's mostly commercial.

[00:46:16] And now I'll just use Bank of America as an example.

[00:46:23] Bank of America has a massive, massive footprint with residential.

[00:46:28] They also have a massive footprint in commercial, right?

[00:46:32] So if you're Bank of America, you're looking at the whole pie, right?

[00:46:37] If you're Bank of America, right?

[00:46:39] So it's possible that there could be some disruption there.

[00:46:43] But more than likely, they're pretty smart people there.

[00:46:48] They've probably mitigated their risk generally.

[00:46:53] But it could, obviously, affect lending in other areas, obviously, because you've got to look

[00:46:59] at the entity.

[00:47:00] Right.

[00:47:01] Because that money is going to be allocated somewhere.

[00:47:04] Potentially, yeah.

[00:47:05] Yeah.

[00:47:06] Again, it's not just a residential problem.

[00:47:10] It's a lending.

[00:47:11] It's a debt problem.

[00:47:13] And so you've got to go to the people that are actually issuing the debt.

[00:47:18] So because a lot of this extend and pretend is kind of going to be on the downslope this

[00:47:22] year, that's why you're kind of looking with MC companies to acquire some of these loans

[00:47:29] that are in trouble.

[00:47:29] Right.

[00:47:30] OK.

[00:47:30] So yeah, great example.

[00:47:32] So if, let's say, you're a lender and I'm a borrower and I'm in trouble, I would love

[00:47:40] to come in and solve the lender's problem, right?

[00:47:43] And that's really what the lender needs is they're looking for somebody to solve the problem.

[00:47:51] And so while there's crisis on the debt side of things and while there's extend and pretend

[00:47:58] going on and while the rates are higher and while all that stuff, don't forget we have

[00:48:02] the operational costs are up and rents are flat.

[00:48:05] So cap rates are up, expenses are up, cap rates are up and incomes flat or negative.

[00:48:13] OK.

[00:48:14] All bad.

[00:48:14] Right.

[00:48:15] But if you can, if you have cash, you can make it through.

[00:48:19] But it's also a phenomenal time to buy.

[00:48:22] It's a phenomenal time to look because when's the best time to look?

[00:48:27] When there's distress.

[00:48:29] Right.

[00:48:30] When all those things are humming along.

[00:48:32] Right.

[00:48:32] That's what you want.

[00:48:33] Like if I want to buy something from somebody that's struggling with occupancy, I want to

[00:48:39] buy something from somebody that's got a debt problem.

[00:48:43] I do.

[00:48:44] Now, I might not.

[00:48:46] You know, it's my job to go in and buy correctly.

[00:48:49] But, you know, I want to buy from somebody who's who's not running a property well and has

[00:48:55] is suffering from really high operating expenses.

[00:48:59] Those are that's how you make money.

[00:49:01] That's how you create value for your investors is you go find those.

[00:49:05] You know, we have lots of assets we're looking at that, you know, are 50, 60, 70 percent occupied.

[00:49:15] Right.

[00:49:15] Right.

[00:49:16] And, you know, you can increase that occupancy.

[00:49:18] Sometimes.

[00:49:19] Not always.

[00:49:20] But you always got to go in with, OK, how can we take this thing from 50, 60, 70 percent?

[00:49:25] Right.

[00:49:26] I was looking at a Holiday Inn Express recently.

[00:49:32] It was 136 units.

[00:49:34] And it was in a really small market.

[00:49:36] And you got to wonder, like, how does a Holiday Inn Express not do well?

[00:49:40] Right.

[00:49:40] And they were trying to convert it into, like, affordable housing studios.

[00:49:44] Right.

[00:49:45] And they were in trouble.

[00:49:46] Right.

[00:49:47] Bank owned.

[00:49:48] Big brand.

[00:49:49] And they were trying to sell it.

[00:49:51] And I got this package.

[00:49:52] And I passed because the market didn't really support the Holiday Inn Express.

[00:49:57] But somebody somewhere built it and had it.

[00:50:01] But it also didn't afford, it also didn't pencil from a math standpoint to be an affordable housing plate.

[00:50:10] Even though that's why I looked.

[00:50:12] Because I was like, OK, we need more affordable housing.

[00:50:15] But in that area, in that market, it did not make sense.

[00:50:18] You know why?

[00:50:19] No employment.

[00:50:21] So it was kind of a retirement area.

[00:50:23] Right.

[00:50:23] And so, you know, it was like a destination.

[00:50:26] And so I was like, no, this is probably not.

[00:50:28] Now, had you put that in some area, you know, next to, like, some Silicon Valley or semiconductor area or something like that, maybe.

[00:50:39] But probably wouldn't have been on the market very long.

[00:50:42] Now, and the reason that you're getting these numbers to work when somebody else couldn't is because you're getting that loan for a discount.

[00:50:48] Right.

[00:50:48] Like, the person selling it is just trying to sell it for the loan amount to get out from under the loan.

[00:50:53] And that might not even be worth it.

[00:50:55] In fact, we looked at six deals from a big group that I'm not going to mention here.

[00:51:00] Six from an attorney.

[00:51:02] It was an interesting email.

[00:51:03] I got an attorney with six Excel spreadsheets.

[00:51:07] They specifically sent it to us because they know that we're in the market and we're buying.

[00:51:12] And we looked at all six.

[00:51:14] Our analyst, Charlie, looked at it.

[00:51:16] James looked at it.

[00:51:17] Kyle looked at it.

[00:51:17] I looked at it.

[00:51:18] Ross looked at it.

[00:51:19] And all six were worth less than the loan.

[00:51:23] We got it from an attorney, which is really interesting.

[00:51:26] So, in other words, again, not even on the market.

[00:51:32] So, they're not listed.

[00:51:33] Right.

[00:51:34] And so, but when we ran the numbers, we're like, okay, the debt is more than the value.

[00:51:40] Now, can you negotiate something like that to your pricing?

[00:51:43] Probably.

[00:51:44] You're better off.

[00:51:45] Well, first of all, who wants to talk to an attorney?

[00:51:48] Not me.

[00:51:49] So, you're better off letting them go back to the bank.

[00:51:53] Okay.

[00:51:54] And then working with the bank.

[00:51:56] Because now, who am I?

[00:51:57] I'm dealing with the borrower.

[00:51:59] I'm dealing with the attorney.

[00:52:00] I'm dealing with who knows who else, right?

[00:52:03] And so, you're better off.

[00:52:05] What they're trying to do, and I get it.

[00:52:07] They're trying to find a buyer before you get to that point.

[00:52:11] And that's what they should do.

[00:52:12] Right.

[00:52:12] And they should do that.

[00:52:13] That's exactly right.

[00:52:14] But in these particular cases, and by the way, these are all really good-sized multifamily deals.

[00:52:19] And some of them were in Phoenix, and some were in Texas.

[00:52:23] So, you know, these are all 200-plus unit properties built in the 90s.

[00:52:29] All in trouble.

[00:52:31] And so, we're starting to see that.

[00:52:33] So, I can tell you for sure, something's going to happen with those.

[00:52:37] Right.

[00:52:38] Right?

[00:52:38] Yeah.

[00:52:39] We looked under the hood, said pass.

[00:52:42] But they're on our radar.

[00:52:43] We'll watch them.

[00:52:44] So, if interest rates were to go down this year, we're not anticipating that.

[00:52:49] But maybe even in 2026, could these kind of problems be solved?

[00:52:53] I mean, could somebody like that hold on to these properties for another year or two?

[00:52:56] Interest rates go down?

[00:52:58] Yeah, it's possible.

[00:52:58] Rents maybe go up a little bit?

[00:53:00] It's 100%.

[00:53:01] All of that's possible.

[00:53:02] Yes.

[00:53:02] Okay.

[00:53:02] Of course.

[00:53:03] But as of today, I never bank on those kinds of possibilities.

[00:53:09] The math has to work today.

[00:53:11] But if somebody's in that situation, I mean, do you think the bank is patient?

[00:53:14] That's the extended pretend part.

[00:53:16] Right.

[00:53:16] But do you think the bank's patient enough to wait?

[00:53:19] Or do you think that they're...

[00:53:20] Depends on the bank.

[00:53:21] Yeah.

[00:53:21] You know, I mean, if I'm the bank, I'm going to say to those people, you got to put up 10

[00:53:27] million bucks in some kind of escrow account, in some kind of interest reserve to cover

[00:53:32] the interest payments during that period of time.

[00:53:34] That puts me in a position to where I've got a little bit of comfort.

[00:53:37] And as the borrower is going to say, no, I'm not going to do that.

[00:53:41] So there's going to be all this push and pull and all this stuff.

[00:53:45] There's a zillion things that's going on there.

[00:53:49] Right.

[00:53:49] So you don't want to try to get in the middle of that and try to unwind that.

[00:53:57] You know, so that's what's happened.

[00:54:00] That's precisely the extended pretend piece.

[00:54:02] But you said something interesting.

[00:54:04] You said when we were on our show a few weeks ago, you said that it would be better the

[00:54:10] more negative you are to an extent.

[00:54:12] Because if you're at the loan line or you're just a little below it, the bank might take

[00:54:17] that loss.

[00:54:18] They might.

[00:54:18] Where if you're extremely off from the loan line, that hurts them more and they might

[00:54:24] want to keep you on until you get closer.

[00:54:26] Let me explain what that means.

[00:54:28] If you own a home, the value of the home is 500 grand and your loan is 500 grand.

[00:54:37] You know, that's one position.

[00:54:39] If you value the home, it's 500 grand and the loan is 700 grand.

[00:54:48] That's quite another position.

[00:54:49] Right.

[00:54:50] So that means that the lender's actually in a worse position.

[00:54:55] Right.

[00:54:56] If they're equal, that means that you're both in kind of a percureous decision.

[00:55:03] If it's just a little bit above the loan, then the homeowner has to decide, I got a little

[00:55:07] bit of equity.

[00:55:09] Do I really want to keep this?

[00:55:11] Right.

[00:55:11] So it's the same thing on a commercial office, a commercial multifamily, whatever it is.

[00:55:15] So you always have to look at the scenario because you've got them a little bit against

[00:55:20] the barrel.

[00:55:20] They don't want that house.

[00:55:22] They don't want a home that's worth 500 grand and their loan is 700.

[00:55:27] Right.

[00:55:28] They don't want that because they have a $200,000 problem right out of the gate.

[00:55:32] They would rather have the homeowner in that house.

[00:55:34] They're going to work with the homeowner more.

[00:55:36] Right.

[00:55:37] If it's 500, 500, they might go, you know, we could sell this for 500 and our net is zero

[00:55:45] and we don't have to deal with that borrower anymore.

[00:55:48] We can find a more qualified one.

[00:55:50] Yeah.

[00:55:50] Or there's a little bit of equity there.

[00:55:52] They're probably not going to work with you as much, right?

[00:55:54] Because now you're walking away from a little bit of equity.

[00:55:57] So the irony is that the more the bank's in trouble or the lender, the better you're going

[00:56:05] to actually be able to negotiate with them.

[00:56:07] Right.

[00:56:07] And if you guys are interested in investing with us, we do only take accredited investors

[00:56:12] at this time, but you can just go to investwithmc.com forward slash podcast to learn about our deals.

[00:56:19] We got three in the bag right now and we got a whole bunch in store for next year.

[00:56:24] Well, and that is a thing.

[00:56:25] MC is going to be hopefully buying a lot next year.

[00:56:27] I mean, that is the plan because as these kind of deals start to go bad, they're buying

[00:56:33] opportunities.

[00:56:34] They're already going bad.

[00:56:35] We're already seeing them.

[00:56:36] They're already coming to us.

[00:56:37] They're off market at the moment.

[00:56:40] And so, you know, our bucket is filling up.

[00:56:44] Almost all of them are bad deals.

[00:56:46] What do you look for in like a bad deal?

[00:56:49] Like what are you looking for?

[00:56:51] Location, you know, a market that's not great.

[00:56:56] That's another one.

[00:56:58] You know, it's maybe a lot of capital work.

[00:57:01] So these are things you look for where you say no?

[00:57:04] I would say no.

[00:57:04] Yeah.

[00:57:05] Okay.

[00:57:05] Yeah.

[00:57:06] Yeah.

[00:57:06] So there's one I'm looking at right now that's on a major freeway that's on an off ramp.

[00:57:13] And I know it's got parking with, it's called podium construction where you actually have

[00:57:21] parking and elevator.

[00:57:23] It's absolutely beautiful, gorgeous project that I would, that is, we're looking at right

[00:57:28] now that would be way below replacement costs.

[00:57:31] That's the kind of deal I like.

[00:57:32] Brand, you know, it's brand new.

[00:57:34] Now you could also, you know, go to the edge of town and find somebody, somebody that, you

[00:57:41] know, paid way too much money and it's 60, 70% occupancy.

[00:57:46] And there's, you know, it's tough to get people out there.

[00:57:50] Nobody wants to move there.

[00:57:52] There's so many factors.

[00:57:54] Plus that drive by traffic is so important.

[00:57:56] It's really important.

[00:57:57] Yeah.

[00:57:57] So there's, there's a bunch of things.

[00:57:59] Typically what happens when something's not running well, they start spending on it.

[00:58:06] Right.

[00:58:07] So you might find the roofs need done.

[00:58:09] You might find that the paint job needs done.

[00:58:11] There might be some landscape problems.

[00:58:13] You know, if you, if you don't have the money to pay for the mortgage, you probably don't

[00:58:19] have money to upgrade and to maintain a property.

[00:58:22] So, so you, so sometimes you find these projects that are in big capital needs.

[00:58:29] And that's a big red flag for you.

[00:58:31] Yeah.

[00:58:31] And sometimes it's a real management problem, which is a fixable thing.

[00:58:37] Those are, those are not bad.

[00:58:38] If you find a property that's in pretty good shape, has really, really poor management and

[00:58:43] a great location, those are the ones you want.

[00:58:46] Yeah.

[00:58:47] Cause you know, you can kind of turn it around.

[00:58:48] You can fix it with, with better management.

[00:58:52] Right.

[00:58:52] Right.

[00:58:52] And, and it's in a good market.

[00:58:54] Better management and better processes.

[00:58:56] Correct.

[00:58:57] Well, thank you guys for joining and we will see you next week.

[00:59:01] Alright guys, see ya.

[00:59:04] We are Teresa and Nemo.

[00:59:07] And that's why we switched to Shopify.

[00:59:09] The platform, the before Shopify used, has used to have regular updates, which sometimes

[00:59:13] have led to the point that the shop didn't work.

[00:59:16] Our Nemo Boards shop makes a good figure on mobile devices.

[00:59:20] And the illustrations on the boards come now much clearer, what is important to us and

[00:59:24] what our brand does.

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