What Smart Investors Are Buying in a “Bad” Market

[00:00:00] Real estate supply is rising in surprising ways and it's creating new opportunities for real estate investors. Here's what you need to know. So a lot's changing in the multifamily market right now. Yeah, finally. I know. It's so good. Yeah, you know, I see that the completions are down 28% year over year, which is kind of what you said because there's not a lot of new construction going on right now. The cool thing about it is you don't really have to go very far. It's like permits, pulled, you know, new construction. You either put a shovel in the dirt or you don't.

[00:00:30] There's either a construction loan or there isn't. And so the cool thing about real estate is it takes a while, right? Like so the minute you break ground on something, it could be a good year before it even opens. And so that's easy to track. It's really easy to track to see what supplies being added, what's been permitted and actually hasn't started. Kind of like our house, you know, like we got it already. We got it permitted, but we never actually pulled the trigger and broke ground on it.

[00:00:59] Well, so you got to be able to distinguish the difference of the two. And, you know, what happened was interest rates went up a lot. Yeah. Like, you know, I think it was 21 and 22. They started to go up and they peaked. Right. And gosh, when inflation hit those high numbers at 9.1%, the Fed reacted and started jacking rates. Well, construction was the same. And so people pulled back because like anything, higher mortgage costs means that you might want to take a pause.

[00:01:28] So especially when you have land, like what's the risk, right? Oh, I'm just going to wait. Right. Yeah. Absolutely. That's the cool part. Yeah. And, you know, it was interesting because we saw such a boom of those class A units from 21 to 23. That was also interest rates, right? Yeah. I mean, when rates are low, people are going crazy. Just like, you know, we talk about it. It's the asset bubble.

[00:01:50] Right. People buy stuff when rates are low. That's cars. You know, they build real estate. They buy electronics. You know, they finance stuff. Right. When rates are low. Same thing with real estate. Yeah. And, you know, it's interesting because most of those were class A because that's really the only thing that made sense construction wise. Yeah. You can't build, unfortunately, affordably anymore. I mean, that's the other piece. Right.

[00:02:13] We're kind of focused on interest rates, but at the end of the day, dishwashers, appliances, flooring, drywall, you know, concrete, roof tile, that stuff's all more paint. It's all more. So all that goes into something new and that all has to be passed out of the consumer, either in the form of a home price or a rent.

[00:02:36] Right. And and so as land goes up and interest costs to build goes up and then the cost, actually, the components of whatever it is goes up. It's really, really difficult to build affordably. Yeah. I mean, you know, and then when everything happened in 24 and 25 with interest rates and everything else, I mean, that really has put a stop to building. I mean, people always tell us, oh, no, they're still building in my community. They're just finishing.

[00:03:04] They are. It's a fair point, you know, for the for the I guess the person who doesn't see it that way. I get it. I get the fact they're driving by and there's construction going on. What they don't realize is that, to your point, that stuff started years ago and not in every case, but in most cases, lenders are not necessarily lending on construction. You know, they are. But very, very, very hard.

[00:03:31] And the interest rates are high. I mean, in the nine percent range, if you can imagine that. That used to be like hard money. Yep. Absolutely. Yeah. I just think that it'll be interesting to see, you know, with all this supply we've had, which is why rents have been hard to fill the last few years is because, you know, there's just been so much supply that's come to the market. But now there's this, you know, rents are starting to stabilize a little bit in most areas because there is no new supply coming to the market.

[00:03:57] Well, if you're a landlord right now, I've been through way worse, like way worse. This is nothing. You know, you guys are freaking out like most people are freaking out because there's a vacancy a week. Right. I've had vacancies, you know, six, seven, eight months, you know, on a large scale. Obviously, we're talking about at the scale I'm running at, which is we have 10,000 apartments. So, you know, we're always tracking vacancies. Now, we don't want anything that vacant that long. But what what what creates a vacancy?

[00:04:26] Create a lot of customer choices. That's one. If there's a lot of supply to to pick from job loss, you know, income drops, you know, massive corrections of some sort. An employer leaves town where there's not a demand like there used to be. We've seen that a lot. So there's lots of things that create vacancy.

[00:04:49] What's created it today has been all the stuff that started breaking ground in 21 and 22 that's now hitting the market today. Don't forget, there's a lag. There's, you know, I think I told the story, but we're looking at real estate down in downtown Phoenix. And there are so many units that were added down there at one time, which gives the customers a lot of choices.

[00:05:16] And and so you start off with, you know, a month free, let's say on a 12 month lease. And then that didn't work. Then you go to two months free and then that didn't work. You know, not fast enough, at least. And then you go to three months free. And I know this sounds crazy, but in some cases you can do four months free on a 12 month lease. Now think about that just for a moment. If the rents are two grand and the owner thought they were going to get 24 grand for the year. Right. Yeah.

[00:05:45] They're only getting 16. Right. That's a huge difference. Yeah. And then you times that by however. Oh, yeah. Yeah. By all the units. And so basically what that tells me, if just that math, because I know it well enough, the debt plus the expenses don't cover that. Mm hmm. Because that what is that? About 60 percent of the rent. Mm hmm. That maybe maybe a little higher. 70. Yeah. OK.

[00:06:11] Well, the break even on most deals with when you add debt plus expenses is higher than that. So that basically tells me that if they rent it at four months free, they're not even covering their costs for interest on the debt. And of course, the expenses. So that place, those places are in big trouble. If you're a resident, it's a great time. Mm hmm. And by the way, they they deserve it.

[00:06:40] Wild Lords have been greedy. You know, they've been lucky. You know, they're pushing rents up and it hasn't followed wage growth. And of course, it's making the news and all that. But from a renter standpoint, this is a good time. This is precisely why all the politicians have backed off a little bit. Mm hmm. I don't know if you've noticed that. Yeah. Well, there's they're they're not running around going, we need rent control. We need this. We need that. They will. They'll be back. Trust me.

[00:07:08] And 27, they'll be back. And and, you know, it always happens when and I get it. If you're a renter, you just need to understand that rents ebb and flow based on supply and demand of people or of units. And so, you know, imagine if you're, you know, you can and you're a work from home and you want to move to a beautiful downtown high rise with an elevator in an apartment building

[00:07:37] and you get four months free on a 12 month lease. I mean, that's pretty darn good. Yeah. OK. So why wouldn't you do that? Right. If you can literally get a significant reduction. I mean, your rents are really what they're like twelve hundred a month as opposed to two thousand. Well, we have to look at gold is near all time highs. But appreciation isn't the only way to benefit monetary metals. You could potentially earn a yield on your gold paid in physical gold without selling it. Here's how it works.

[00:08:06] When you lease your gold through their platform, pre-qualified companies pay to use it under strict guidelines like renting out real estate, but with gold. Instead of paying to store your metal, you may earn up to four percent annually in gold. You stay in control and you can choose which leases to participate in. Monetary metals handles the due diligence, lease terms and all the administration. Thousands of investors use this approach to grow their gold, not just sit on it.

[00:08:33] Visit monetary-metals.com forward slash can to learn more. Leasing gold involves risk and returns are not guaranteed. This is not an offer to buy or sell securities. Please review all risk disclosures at monetary-metals.com. Visit monetary-metals.com forward slash can to learn more.

[00:08:54] But it's also hard for us small landlords to keep up with that because if you're getting three or four months free rent, we can't do that on our side. That's exactly right. So what's going to happen is as those units get in the real estate term is called absorbed. So absorption means that there's a lot of people moving to an area and they quickly fill the vacancies. And when they get absorbed, then you start to see rent growth again, right?

[00:09:23] And those areas like, let's say, Westside Phoenix or perhaps downtown Phoenix, they're going to be not absorbed for a long time, right? Yeah. And let's discuss how painful it's been for apartment syndicators since, you know, 2022 on. It's a little different. Yeah. So let's switch from construction because most apartment syndicators don't do construction. But, you know, a little bit different.

[00:09:46] So I think what happened was when rates went up, everybody used the available cash that they had. Their rate caps expired. They had to either buy new ones or raise more capital from their investors or they brought in new capital from other investors. So all that stuff's happened. And the lenders, meanwhile, have done, you know, what we all heard, which was called the extend and pretend, right? Like you and I've talked about this a lot.

[00:10:14] So extend and pretend was literally, I don't want to foreclose on you. Let's see what the market does. If you can come up with some more cash, we can band-aid this thing together and live another day, right? Yeah. And just see how far we can get. But here's the reality. Trump's upset at Powell. Powell's like, screw you. You know, rates don't seem to be coming down anytime soon. They're, you know, the tenure's sitting around four and a half.

[00:10:41] You know, single family home rates are in the low sixes right now, which is better than they have been. But still not enough to really move the needle, right? There's still a big, big difference between homeownership and rentals. And so what you have is this, you know, you're kind of at a crossroads a little bit where if you're a lender and you're an owner of a property, you're like, I don't see the end in sight. Right.

[00:11:07] Like, we're at the crossroads and I don't know if I want to put a million, two million bucks into this deal anymore. Like, maybe I just cut my losses. Right. You know, and that's starting to happen, right? And I got a call last week from a broker in San Antonio. He's got nine deals. You know, the words are, I got nine deals where the lender's giving me the keys and I got one of those nine that I think is a really good deal.

[00:11:35] And so, you know, so those are the kinds of things you're starting to see. You're starting to see them move forward. And these syndicators, if they were capitalized enough, they're going to be fine. But if they're not, they're not. Right. And so that's all starting to hit the market. Yeah, that's going to be super interesting how that kind of all pans out. I was reading, though, that and you're seeing this, I think, with MC2 is apartment fundamentals are past the peak of pain, though.

[00:12:05] Like a pain period is kind of. I think it's past, right? And not because of expenses. I think it's past because I do think that we're done seeing the interest rate increases. So now if it stays the same, that's good, right? If it goes down, that's obviously very good. But I don't think we're going to see higher interest rates. That's good, right?

[00:12:29] I also think that anything that's been built or broken ground or that's significantly disrupting a market is making its way through the market and it's getting absorbed. Okay. So you have occupancy for sure getting higher. You have concessions going down a little bit. You're not having rent growth, but you don't have the interest rate pain from the debt.

[00:12:53] And you don't have a lot more units being added, okay, which continues to higher marketing costs and higher occupancy or higher vacancy and all that kind of stuff. So all those things are over. Now, on the bad side, let's move to the bad side of the equation. You have higher expenses, higher property taxes, higher insurance, higher utilities, higher labor costs.

[00:13:16] And you also have, I would say, people are now moving into a little bit of a crisis mode on their personal savings and their own, you know, their ability to make money. You know, employment's kind of pulling back, retracting a little bit. And I think people are, I wouldn't call them in crisis mode yet. Maybe some people are for sure. But you have inflation starting to really show up, right?

[00:13:43] And you're not seeing it in the luxury purchases anymore, right? We're seeing it in our friends that are involved in luxury stores and things are getting marked down. You're starting to see a lot of what should be called impulsive spending, I guess is probably a good way to say it. Right. Everything in that category for impulsive spending is being affected right now. Yeah. So it really is squeezing the renter.

[00:14:07] But if you really look that rents are now, you know, cheaper than owning in most places, which is, as you know, millennials and Gen Z get their own places, it's going to push more people to the rental market. Right. Right. And that's all good. Right. So this is the time to buy. Right. You want to buy when rates are high and you fix them. Right. So then you hedge the up and you refinance it down. You want to buy when vacancy is high. You want to buy when concessions are high.

[00:14:35] And you want to buy when expenses are all over the map and you could try to manage that. Right. So you want to buy when there's a little disruption. When you're not seeing rent growth, you want to see when you see a higher vacancy. It's the opposite of what most people do. Right. Right. I want to buy when there's disruption and I want to buy when I can stabilize. So then the risk to me is how long does it take me to stabilize that? And do I know how?

[00:15:05] Right. Right. And so that could be a year. It could be two years. It could be a month. It just depends on the property. And so that's what I'm trying to do. I'm trying to buy other people's problems. Right. And I just looked at a deal in Dallas not long ago, maybe two weeks ago. It was 35 percent occupied. Mm-hmm. It was a 240 unit building listed, by the way, by a broker. The broker called me, sent it to me.

[00:15:35] The loan was $25 million, which means that the syndicator had to pay $35 to $40 million. Mm-hmm. And he said that the lender would take $14. Okay. So the lender would have taken a $10 or $11 million haircut on that one deal. Now, I took a look at it. 35 percent occupied with, you know, really, really bad tenant profile, you know?

[00:16:04] So 65 percent vacant. So you have all that money. Think about you got to pay all. You step into the shoes of whoever you're buying it from, right? Mm-hmm. So what do they have? They have, it's like catching a falling knife, right? You have all the, you step into paying all the expenses. Any issues for any work that needed to be done, right? Which you know if they're a 65 percent vacant, there's a lot of capex needed inside, outside, right?

[00:16:32] So there's millions of dollars needed just to fix it. Right. Then you got to carry it negatively, right? Because it doesn't cash flow at 35 percent occupied. And of that 35 percent occupied, you probably are collecting 25 percent. Mm-hmm. So, you know, so what you really have to do is you have evictions probably. You have to get some of the bad people out. You got to put some of the good people in. And it could take a year or more to turn that ship around. Now, the problem is, is when you start to add up the negative cash flow, the capital work,

[00:17:01] all the problems with the existing structures of the liens and all the stuff that's going on legally. Right. And you add all that up on top of the 14, it's actually not that great of a deal. Right. So we passed. So those are the kinds of deals that we're starting to see now. Right. Yep. Yeah, because you're seeing a lot of blood in the water and you're seeing a lot of syndicators struggle. And the banks were doing extend and pretend for a while, but that's kind of winding down

[00:17:30] now because they're realizing that rates aren't going down much anytime soon. Yeah. I would say the syndicators aren't struggling. They've given up. Oh, okay. You know, a lot of them are there. They've been struggling. Mm-hmm. And I've counseled a lot of people on this on the syndicator side because I don't want anybody to lose anybody's money. Mm-hmm. But it just is a fact that the market is corrected, values are way down, interest rates are up. And a lot of people don't know how to manage property.

[00:18:00] Mm-hmm. They don't know what to do. Right. They don't know the right things to ask. And so it's all starting to show up. Mm-hmm. So since we're going past that time of peak pain, do you think that some people that are barely squeaking by right now might actually make it? Barely squeaking by as a syndicator? Yeah. Depends on how much cash they have and what barely squeaking by means. Mm-hmm. You know. Well, do you think they'll be able to, you know, kind of ride it out until rates go down and they can, you know, rents go up? No.

[00:18:30] No. Okay. It's hard no. Well, let's put it this way. Tomorrow and the next day and the next day through the end of the year is not going to be any different than today. But you do think that those that are invested in deals that are performing right now, the performance should get better. Listen, if you're paying your mortgage and all your bills and you're barely making distributions

[00:18:58] or maybe even not, I think you're actually in a decent spot, you know, because you can ride that out. Okay. But if you have a little bit of cash... Now, is it great not to pay a dividend to an investor? Absolutely not. Mm-hmm. But what you're doing is you're preserving the equity that used to be there and you're just living to another day, right? And so if you can kick the can down the road a year and hopefully we see a compression of

[00:19:26] cap rates and we see this lack of supply on the apartment side, I do believe, I strongly believe that this time next year, we're going to start to see a tremendous amount of multifamily acquisitions. What do you think this means for, you know, single family investors and just investors in general? Like, do you see that rents are going to continue to go up now that no more supply is coming to the market as of right now?

[00:19:52] Or do you think that people will start to build because they know there's a lack of supply? I think all of that is on the table. It's not a singular issue. You know, like if you go to Florida, you've got pretty big price reductions on single family houses, right? And you've got also people kind of pulling back, you know, and there's some price reductions and, you know, I mean, I was just in South Beach recently and it was not rolling like it was back in the day, right?

[00:20:22] You know, starting, you're starting to see the bloom come off the rose there. Now that's a small little microcosm of a market, right? On a bigger market. But, and then you, you know, you might, you might shoot over to like Columbus, Ohio, which is actually doing pretty well. Or maybe Tucson, Arizona, which is doing pretty well, right? Or Scottsdale or Tempe, you know? So there's markets that are doing well, right? And, and I think that, but there's markets that are not doing well, right?

[00:20:50] And those are heavily supplied markets, number one. There are markets that have had serious price adjustments on the expense side and there, and or there are markets where employers have moved and shifted around and you, you know, you have vacancies and nobody wants to be there. So there's all those things. So, so each market's just a little bit different. I'm still seeing a lot of flips, you know, a lot of flippers, a lot of flipped houses.

[00:21:18] A lot of flippers are reaching out to me as a real estate agent, asking if I have any deals, you know, that can be made so they can flip it. Do you think that that's still a viable market right now? I think you gotta, you gotta look at why they would call you. Well, they can't find any, supposedly. Well, there's plenty of deals on the market. Yeah, they're just not priced. Correct. To meet their needs. But also, why would a flipper want to flip now? The reason is, is because that's all they know how to do to make money.

[00:21:49] Mm-hmm. So, you know, like they were on this gravy train forever. And so I get it. So when you start to see people reach out a lot more, they're, you know, it's just like anything, like a, you know, like a lender that's not lending or, you know, a title company that's not doing a lot of work or a realtor that's not selling anything. You know, everybody's pulled back. Right. So a flipper is no different, right?

[00:22:15] The flipper is an interesting one because they're the first ones that go, right? Like, you know what I mean? Right. And the reality is, it's not, can you buy something? Because a flipper typically buys something, renovates it, sells it for more, right? Okay. The question is, who's going to buy it? Right. Well, that's what I was wondering. I feel like it's a risky time to be doing that, but I'm still getting so many texts and emails and calls. Yeah. Yeah. You know, sell them. Sell them anything you can.

[00:22:45] Like, that's not your issue. Just be careful not to list it. You know, but I'm telling you, like, the issue is the exit. Mm-hmm. It's, you know, anybody can buy anything. Right. The question is the exit. Does somebody want it? Right. Right. Mm-hmm. Like, we bought a flip, right? We bought a rental that was filled with a great house. Yeah. Two bedroom, two bath, two car garage, a yard. Paid $480. Yeah, around that. Something like that. Mm-hmm. It's a heck of a deal. In Scottsdale? Right.

[00:23:15] The rents are three grand or something? Almost. Cash flows all day long. That was a good flip. Worked for everybody, right? Mm-hmm. They bought it from somebody before us. They put, I don't know, 30, 40 grand into it. We bought it. Fully done. We moved the tenant into it. They're happy. It's a win, win, win, win, win. That's not happening right now. Right. Yeah. Yeah, I'm not seeing that. And like I had said, the investors are kind of out of the market right now in a lot of ways.

[00:23:40] So that's why I was just surprised that flipping just seems to still be as popular as it is. I don't know that it is. I think you're just getting calls. I don't think it's popular. Yeah. So let's talk about evaluating properties as well right now in this kind of market. It's not, well, for you, it's never really about appreciation. It's all about cash flow, right? Yep. But a lot of people still base their valuations on appreciation, but that's really not the only thing you need to be looking at.

[00:24:09] Well, you have to look at that, obviously, right? You want some kind of a story. You want what we call forced equity or, you know, some kind of value add, right? You want that. But if your entire deal is based on that, you're in trouble, right? Yeah. You go first to cash flow, right? So what you want is you want something that's broken a little bit, maybe underpriced, maybe a realistic seller.

[00:24:40] You want something that maybe has high concessions and a little bit of vacancy. Maybe they're spending a lot of money on marketing and some of the other things, and they're just mismanaging a property. So you want all those things in a good market. And, you know, it's just like anything. Like, you know how sometimes when you go to a restaurant where you have an incredible experience and you go to another one and you don't? It's all management. Right.

[00:25:04] So it's the same thing with apartment building where you go in and you have really, really, really good caring people working there, collecting the rent, getting the right people in, the maintenance is done. Just like a hotel or a resort, you know, we've seen all that, right? Right. And so those are the kinds of, the ones that aren't, those are the ones you want, you know, because what is it really? It takes a little bit of, you know, I call it lipstick on a pig, right?

[00:25:31] You put some money in a deal and you put really good management in and it can soar from that point. And that's kind of the key. Yeah. It's really based on location and then price and management, right? Yes. Yes. Yeah. To name a few, right? And cashflow for sure. But the thing is, is like, let's say I brought you a deal today, you personally. And I said, hey, the, like, we can buy this.

[00:25:59] It's going to cashflow a couple hundred bucks. And the current rent is $200 or $300 under market. Take a look at the house next door or across the street or down the road. And that all makes sense to you, right? So you would buy something like that. So people try to make this more complicated than it really is, but it's not, right? It's really, really basic. Are there tenants? Is your market, you know, are you at market? Are your rents under market?

[00:26:29] Not above market. Not trying to hit something that hasn't happened yet. Are the expenses in line? What's the debt look like? Is there a lot of work on the property? How much is that going to cost? And do a lot of people want to live here or not? Is it on the edge of town or the middle of town? Is it, you know, is it walkable? Is it near an employer? Is it not? Is it next to a stadium? Is it, you know, near shopping? Is it blah, blah, blah, blah, blah? You know, all that stuff.

[00:26:58] Like, it's called walkability. But all those things matter when you're buying somewhere. So, and so all that stuff has to fit perfectly. So for those of us that have rentals or those people out there that are still tenants, you know, I know it's been kind of difficult to get renters. And I just had to get renters recently and it was difficult. Do you recommend still doing longer leases? And if you're a tenant, should you be asking for lease terms? A hundred percent. Like, we're going into, we're still in it.

[00:27:28] Like, we're still, it's still, it's a, you know, it's a renter market, right? There's lots of choices. There's more landlords than there are renters. And not in every case, but in most cases. And so the renter gets the deal right now. Nothing wrong with that, right? Because, but yes, so I highly recommend it. I also think that a lot of people that can't sell their home right now, and they also have an interest rate of like 4%, are listing their home for rent.

[00:27:57] So I think on the single family side, we're also dealing with those new time landlords too. I mean, that's precisely the point of this channel, right? Yeah. If you don't need the equity, rent it and cash flows. My mom did that, as you know. Like my mom, my mom, you know, broke her hip, fell, and moved into an assisted care. She likes it there. One, you know, it's a one bedroom. She gets three squares a day, you know, has, you know, all the stuff she can do and hang out.

[00:28:27] It's got a beauty shop, got a store. You know, she plays Wheel of Fortune and bingo and all this stuff, and she's got a community. Yeah. And so we're like, should we sell her house? And we said, no, let's rent it. And we rented it. And it covers where she is. Yeah, absolutely. So she has both options. She can move back home, which I don't think she's going to do. Yeah. But the reality is, is her home, that's hers, is paying her rent. Yeah. And that's empowering for her. Totally.

[00:28:57] You know, and so that's kind of the point. Like, isn't that what we're preaching here? Yeah. You know, and by the way, that house, she bought it for $10,800. Like, way back. I get that. But the reality is, is still the same house I grew up in. And, you know, it's paying for my mom. I mean, it's the best scenario you can imagine. Yeah, absolutely. And, you know, I just, it's very interesting to chat with you about the market. Everything just feels so in flux right now. Right. You know, it's the greatest thing.

[00:29:26] There's not, but multifamily is very different than single family. Like, single family, you know, there's not a ton of buyers right now. Things are kind of sitting, not seeing too many price reductions yet. You know, I see more delistings and then listed for rent than I do anything else if they're not selling. Then on multifamily, you have a lot of movement. You have a lot of sales. Like, we don't hear about that stuff because they're not necessarily, you know, public to us. Right.

[00:29:52] A lot of them are pocket listings that people tell you about and they're kind of privately shopping. And then you guys take a look at them. So it's very different. Yeah. Well, you know who doesn't like this market? The controlling and the logical. They hate it. Right. Yeah. Because it doesn't make sense. Like, you can go from sub market to sub market and you're like, what's happening? Now, if you back up to 30,000 feet, it does start to make sense. You start to realize, okay, things are unaffordable.

[00:30:22] That's good if you're a landlord. Things are hitting the market right now. There's lots of supply. That's good if you're a renter. Right. Right. Expenses are up. Bad if you're a landlord. Doesn't matter if you're a renter. Yeah. Right. Exactly. If you're a homeowner, that's bad. So, you know, you start to look at it differently. And to me, it's all very logical. Yeah. But. Well, it's just cyclical. It's a cycle.

[00:30:48] And people always, I feel like people always think it's either 2008 or 2020. And those are the only cycles you can get. And those are major downswings and upswings of the cycle. But we've had a lot of real estate cycles. Even in between 2008 and 2020, we had slowdowns. And I think it was 2015. I mean, there's definitely been cycles. They just haven't been dramatic since 2008 and since 2020. Yeah. And we're in a cycle, right? Like we always are, whether it's going up or going down.

[00:31:17] It just happens to be going down right now. If you're a homeowner and you own something and you have a mortgage below 3%, you're in an upcycle. You're in a down cycle. Yeah. So it's just, you know, which hat do you want to wear? Right. Absolutely. And if you're somebody that bought in 2023, 2024, and it's down a little bit, it's really nothing to freak out about. Unless you need to sell like right now. Especially if you cash flow. Who cares?

[00:31:47] Well, I mean, even if you own. Yeah. You know, people like have this weird thing where they're like, oh, I bought this house for 500 and now it's worth 480 and I should have waited. And, you know, they just have this like mental gymnastics they play. If they've ever bought a stock, they've already been through it. I mean, it's the same thing. It's just bigger. And it's nothing to worry about. Like I always tell the story like there's many people look up to me as real estate investing all these years. But I built the house I still own at the exact wrong time. 2008.

[00:32:17] Right. Yeah. I was under construction during 2008, you know, at the height. Right. And I bought the land, built the house. And for gosh, I don't even know how long. Probably 10 years. That house was right at the mortgage. But it didn't matter. Right. I raised my family there. And all those payments you made to the mortgage went to the house. My rate was 2.8, by the way. So, you know, like the thing is, it was a place to raise my family. Different.

[00:32:47] I didn't buy it. I bought it to live in. I wanted it, obviously, to be more, but it wasn't. So I didn't stress out. What am I going to do? But now, of course, it's millions higher than it was now. But it took a long time. I mean, you've been there. A long time. You know, almost 20 years. Yeah. So that's kind of the point. Like it depends on if you're cash flowing, who cares? Right.

[00:33:12] Like if I would have rented that house all through that period of time and cash flow, who cares what it's worth? What about the people that were cash flowing and now based on new rents? Because rents are down a decent amount. I mean, I'd say my rents are down. Yeah. You know, that's a great question. If you're funding something, you got to kind of decide how long you want to do it, how much cash you have. Right.

[00:33:38] If you're not making any money, it's kind of that imputed equity issue that you just went through on your condo. You know, how much your HOA went up, your rents kind of went down. And so your expenses were up and your income was down, period, on the same condo that you own. And you don't owe anything on it. Right. So you're like, OK, if I move that over here, can I make more? And you did. You did a 1031 exchange and you moved it into something different. So you have to look at all of that. So you have to look at equity that you have.

[00:34:08] And by the way, if it's just easy and, you know, like I have one of my houses, I think some of you might know, I bought a house. My son lives in it. Right. Well, his rent's $600. Right. Right. And his roommate's $600. So they pay $1,200 for a home in Scottsdale. Right. Now I do that. Why? Because I don't want him to go live in South Phoenix. I do want him to pay rent. Now, I should probably increase his rent now that I think about it.

[00:34:38] But the reality is, that's different. Do I need the cash flow? I do not. Right. I'm serving something different. Now, when he buys a home, I'll throw a $3,000, $4,000 renter in there probably. But the reality is, it's a different scenario. So if you have the scenario, you have family members or you have somebody you're taking care of or, you know, you're still cash flowing a little bit and it just doesn't bother you. It's not that big of a deal. Then whatever.

[00:35:08] Like, you know, but if you really need that extra few hundred dollars, then do it. You know, and that's what you did. Right. Yeah. You're in a different spot where, you know, your cash flow went down a fair amount because of those things. And you rolled it somewhere else where you're getting almost $1,000 more a month. But I also have one that's negative every month by a few hundred dollars. But I also have to think she's paying $2,700 a month. So that's going, you know, towards the loan but also towards the mortgage. Right. Yeah.

[00:35:37] So like the house. So. And in that case, by the way, because I know the place, it's a heck of a location. You didn't buy incorrectly. It's a really good price that you paid. You know, maybe you can get a little bit more out of it, but you got a long-term renter in there. She's a little bit older. She's never moving. Right. She loves the place. And then, but the reality is, is you just got to wait. Yeah. You know, eventually. But I can afford to fund it the few hundred a month. So it's really not.

[00:36:07] This part that sucks is when you need to, like I had to fix the roof and I had, you know, and then obviously you have to come out of pocket because that account doesn't make any money. But I do think though, at the same time, I'm like, she is paying that down because if I look at the guy that lived there before her and her, it's been three years of paying almost $3,000 a month. So like, even though part of that does go to the mortgage, part of that still goes towards the house. And that's kind of my point, right?

[00:36:34] Now that you, what you do want is it goes against all my principles, right? Cause you know me, I told you not to buy this. You did, but I do love this. Three years ago, I told her not to buy this house. She did it anyway. So those of you who are in relationships, you can completely understand where I'm coming from. She did it anyway. She, she asked the question. I told her the answer. And then she, as we all know that she did her own thing. So, which is completely fine, but now we're dealing with it.

[00:37:02] And by the way, I have to listen to it too. I have to listen to it. Well, I think, I think I'm going to use our friend Matt over at CrossFentry. And rates are down actually a little bit since I, since I got the loan and I have a little bit more money to put down on it. So I actually do think I can refinance and break even, which is something you could look at doing as well with, you know, yours if you're negative. But just, it would make me feel better to not be negative and just be breaking even.

[00:37:29] And I'll tell you what, the dinner conversation would be so different at my house if the, if she just got to break even, it would be so much better. Oh my gosh. Well, we have Limitless coming up. I know. I'm excited, man. Gosh, we, we have, I've been working my butt off on this. It's really, really a lot of work. Two months before. Actually, it goes on all year, really. We take a couple months off. Two months before. It's like a month and a half before. I know. I know. But listen, we got Jim Rickards.

[00:37:59] We got Lawrence Labard, who wrote the book, The Big Print. Jim Rickards wrote Currency Wars. We got Kiyosaki. We got Mike Maloney. We got George Gammon. We got Jeff Snyder. We got Brent Johnson. I mean, these are some of the smartest economic guys out there. And it's really going to be crazy because George is saying 10% unemployment. You know, I'm like, what?

[00:38:23] And by the way, a lot of people think chatty PT, AI, you know, unemployment rates going to go up. And they also say inflation is going to go up because of tariffs and stuff. So this is going to be a wild year. And none of us have the answers. But I am very much looking forward to having to see what these people are going to say. You know, I think a lot of people are like, what's everyone's crystal ball look like? Right.

[00:38:51] And so, yeah, it's turned out to be just an incredible networking event. There's a lot of people dealing with the same stuff that we all are. Right. Debt, equity, inflation, interest rates, you know, all the things that we're starting to see. And we're all going to be in one big room, 2000 of us again. So it's going to be a blast. Yeah, it's a great event. And to learn more, go to LimitlessExpo.com and you can use the code Ken10 to get 10% off. Thank you.