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Welcome to the money advantage,

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empowering business owners with the permission to thank

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differently about money so that you can

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choose to live in meaningful and fulfilled life

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down. Our passion is making money simple, fun

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and doable. Helping you feel great about your

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money. And getting your money working for you

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so you can thrive.

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Alright. Good morning, and welcome back to the

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money advantage podcast. This is Rachel Marshall and

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Bruce Wayne, and we have a repeat guest

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with us today. Anna Kelly. We're so excited

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to have you talk about real estate today.

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Thank you for joining us on this conversation.

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You're welcome. I'm so happy to be back

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with both of you. Yes. It's been a

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long time since you've been on this podcast,

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and I really am excited to talk with

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you today. I know you've done so much

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in the real estate space with s dedication,

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your coaching and helping other people to be

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able to invest in real estate, and you

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have a very keen pulse on exactly what's

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going on in the market and the economy

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and market cycles and you have a keen

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ability to really just know what is needed

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in the investing space. And so I think

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it was just so valuable. We were having

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a conversation earlier about what's going on and

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how to respond to that, and we wanted

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to have you just come and share

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your

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perspective, just a voice of reason and how

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to navigate the real estate investing

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world in today's economy. And so

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just thank you so much for being with

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us today.

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Yeah. It's it's my pleasure. It's something I'm

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really passionate about because

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you know, just with with my background, I've

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seen a lot of highs and lows, and

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I've been through cycle changes. I'll be turning

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50

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this year. And so I've, you know, seen

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the dot com crash, and I was pretty

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young through the savings and loan crisis, but,

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you know, obviously, lived through the G.

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And was in the institutional investing world, as

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well as real estate. And I learned that

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you really do have to understand at least

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at a high level what's happening in macroeconomic

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economics and really what's happening in in the

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economy as a whole, in order to be

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able to make any wise investments. And I

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think a lot of us,

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you know, we may have an expertise in

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a certain type of investment, You know, whether

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it's in insurance policies, whether it's the stock

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market whether it's real estate, They're all just

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an option of investing,

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but your

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performance really does change if there are big

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shifts, big secular shifts in

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an economic cycle or a real estate cycle

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that no matter how good you think you

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are at what you do in your particular

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niche, if you don't understand where the economy

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is heading and the risk that are continuing

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to rise, you can make some really poor

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timed investment decisions that can completely wipe you

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out if you're not very, very careful. And

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And I learned that primarily through the G

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and then, you know, a lot more learning

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through

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Covid and those things that nobody thought could

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ever really happen.

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So it's something I'm excited to share with

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people.

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That's awesome. I thank so much. God.

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I think there's 2 things that, always always

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always ent me about these kind of things.

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It's the human condition.

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That people

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they get they get them into a bandwagon

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and almost like a mob mentality, and it's

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very easy to do with social media now.

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And so when social media is telling you,

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I'll look what I have to offer you.

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What look, look what I have to offer

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you. And if you're just sitting on cash,

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That's the most ridiculous thing to do. You

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gotta get your money moving.

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And, you know, my response. Meaning that Bruce

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some people say that. We just wanna be

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clear that that's not our perspective. That's what

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you're saying some people in social media say.

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That's exactly right. And

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And what I find it interesting about that

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is, people

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before the last, I would say,

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12,

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years before the last 2 years where interest

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rates went up.

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You can make mistakes with your evaluation because

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your leverage was so low

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that you can you could you can get

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into a bad deal. And because your leverage

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was so low, you could still

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cash flow or maybe even just break. So

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then that that was fine. But, you know,

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I often say, you know, like a monkey

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could have made money in the last... Those

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last 12 years.

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But now,

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if if you don't have a a more

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astute eye on the investment,

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or if you don't have patience, you can

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make some really, really poor decisions.

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And the second thing that I wanted to

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bring out is, there there should be proof

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of concept on this

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when Warren Buffett

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and Berkshire hathaway is sitting on something like

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357000000000

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dollars of cash right now.

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And so people often consider him the the

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greatest investor of all time and yet he's

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pulling back and sand. I'm sitting in a

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cash position, and I'm gonna wake this out.

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And I think, Adam, we've talked about this

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before, you know, of the returns and some

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of these s indications. These real estate. These

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non traded reits, you know, have been really,

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really good.

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And people... They fall a false sense of

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security and don't realize yeah. Maybe you made

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25, 30 percent return on your investment all

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it takes is 1 bad deal to wipe

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out

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5 great deals that you've made because you've

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lost your capital in that situation. So

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I I wanted to get your perspective because

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I know, you know, you are a real

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estate professional, which is different than a real

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estate investor.

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And the problem is real estate investors think

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their real estate professionals, and they're and they

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really aren't.

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Yeah. Yeah. So so much good stuff there.

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And III think in general, you know, I

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I really think we

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you know, we've done ourselves a disservice in

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the last several years and especially, you know,

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social media when

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everybody just basically post their wins. Like, you

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know, we're a rock star. We made this

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return. We made that return. We do this

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and that.

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And everybody's just kind of listening to the

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the people that are you know, actively actively

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investing in trading and the people that they

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see, especially in the real estate,

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you know, space, and we have a lot

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of conferences

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teaching people how to do real estate. And

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and I do believe that real estate is

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is 1 of the most powerful investments on

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the face of the earth to to create

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wealth out of nothing and to be able

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to continue to grow that wealth in and

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sustain wealth, but what you invest in where

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you invest in how your your strategy for

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investing in real estate and where we are

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in the economy

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make a huge difference to people, and nobody

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really had to think too much about that.

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To your point over the last 12 years

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or so,

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anytime that you have an economic expansion, and

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maybe we'll do just like a high level

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overview of an economic level or real estate

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cycle. Yeah. So... But before you go into

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that, I'll kind of set us up. I

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wanna hear a little bit about your ground

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then, kinda where you see us right now

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in the cycle and then really where

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people should be thinking about being in real

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estate today. So go ahead and finish where

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you're at, but that's kind of the layout

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that I was thinking for this conversation. Perfect.

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Perfect. Yeah. So, I'll I'll do Do a

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quick just very high level of my background.

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So I did not start out investing in

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real estate. I started out with no money.

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I actually grew up in section 8 housing.

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My parents didn't know anything about money.

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I didn't know anybody that had money.

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I got my college degree, and then I

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got a job, offer with bank of America

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in their private banking department. And basically, they

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were gonna train us to be financial advisors.

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We were financial relationship manager so we got

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our 6 and our 63, so we could

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talk to people about mutual funds and,

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annuities and high level investments, and then we

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were the relationship manager. So we we had

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a team approach where we sat down with

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our clients, We, and and we were assigned

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the top 10 percent of the wealthiest clients

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of Bank of America. And I was in

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Texas, and I learned for the first time

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about investments. I mean, of course, we hear

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at a high level, you know,

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investing your 04:01 k and dollar cost average.

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And 1 day, you'll have a million dollars,

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and, you know, you'll you'll be wealthy at

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that point when you're 65.

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That's about all I knew about finances.

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But it was interesting. I learned about finances

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through my training at Bank of America. And

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we sit down with our wealthy clients and

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we said, what do you have? Where do

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you have it? What are your financial concerns?

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And then we had a team approach. So

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I would sit with my client, and we

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would meet with the stock k. We would

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meet with our insurance rep. We would meet

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with our trust department to talk about wills

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and estates. And so I started really learning

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about wealth and how wealthy people thought and

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where they put their money and what their

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concerns were, but I realized I didn't have

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any money of my own, and I wanted

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to become wealthy,

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But I realized something else. I had 1

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of my clients

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at me when I I told them we

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could offer them a Cd, I think at

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the time it was about 7 or 8

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percent. And he said, honey, I make way

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more than that in my real estate investments.

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And I realized as I was seeing people's

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financial pictures, a lot of wealthy people had

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real estate. So I thought I need to

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buy real estate. So I bought a condo

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instead of throwing away money for rent, and

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then I bought a house to speculate that

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I thought was gonna go up and then

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I flipped a house. And so I started

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kinda dabbling a real estate on the side

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because I really didn't have a whole lot

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of cash to just put it in the

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market. Well, during that time, at... Right after

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I left Bank of America, I went to

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work for Aig, then I was actually there

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for 20 years. And we worked in a

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life insurance division that did infinite banking policies

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and private placement variable universal life and we

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created products for the ultra, high net worth

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individuals,

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ultra, ultra high net worth. And so

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Again, I saw started I was in this

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world of understanding investments and understanding what people

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do with their money. But I realized

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I could only invest a per... Specific percentage

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of my, you know, paycheck into my 04:01

267
00:09:56,377 --> 00:09:57,733
k, and I didn't wanna wait till I

268
00:09:57,733 --> 00:10:00,365
was 65 to have wealth. So I decided

269
00:10:00,365 --> 00:10:03,677
to start investing small in real estate. And

270
00:10:04,136 --> 00:10:05,654
especially when I had my first child,

271
00:10:06,373 --> 00:10:07,732
I held him in my arms, and I

272
00:10:07,732 --> 00:10:09,625
was like, I've got this great corporate career

273
00:10:09,744 --> 00:10:11,251
I thought that's 1 what I wanted to

274
00:10:11,251 --> 00:10:12,441
do and then I had a baby, and

275
00:10:12,520 --> 00:10:13,790
I was like, all I wanna do is

276
00:10:13,790 --> 00:10:15,401
be home with them. So

277
00:10:15,853 --> 00:10:17,836
just quick story when I was on bed

278
00:10:17,836 --> 00:10:20,630
rest with him, and he's turning 21 this

279
00:10:20,630 --> 00:10:22,297
year. So this is how long ago this

280
00:10:22,297 --> 00:10:22,535
was,

281
00:10:23,488 --> 00:10:26,108
all the H hgtv shows started coming on

282
00:10:26,108 --> 00:10:28,188
about flip this house. And I thought, wow.

283
00:10:28,426 --> 00:10:29,936
I could flip 2 houses in a year

284
00:10:29,936 --> 00:10:32,161
and replace my 6 figure income at Aig.

285
00:10:32,320 --> 00:10:34,386
Let's try it. So I flipped a house

286
00:10:34,386 --> 00:10:35,896
and we had a 3 month old baby.

287
00:10:36,309 --> 00:10:37,982
And I lost a bunch of money, and

288
00:10:37,982 --> 00:10:39,894
my husband said we're never doing that again.

289
00:10:40,292 --> 00:10:40,792
So,

290
00:10:41,727 --> 00:10:43,400
you know, fast forward, we thought well the

291
00:10:43,400 --> 00:10:45,630
way to wealth faster is starting a business.

292
00:10:45,964 --> 00:10:48,359
So we moved from Texas to Pennsylvania. We

293
00:10:48,359 --> 00:10:52,131
started my husband's chiropractic business in 2007

294
00:10:52,509 --> 00:10:54,185
at the height of the economy,

295
00:10:54,759 --> 00:10:56,435
not knowing it was the height of the

296
00:10:56,435 --> 00:10:56,834
economy.

297
00:10:57,553 --> 00:10:59,708
Everybody telling us, it's just gonna keep booming.

298
00:11:00,187 --> 00:11:01,863
You gotta go into debt to start a

299
00:11:01,863 --> 00:11:03,874
business. You'll pay it all off. It's gonna

300
00:11:03,874 --> 00:11:04,671
be amazing,

301
00:11:05,070 --> 00:11:06,984
don't be afraid to do it, and we

302
00:11:06,984 --> 00:11:10,015
started a business with almost 700000

303
00:11:10,015 --> 00:11:13,206
dollars in business start up debt in 2007.

304
00:11:14,097 --> 00:11:15,849
Now part of that was a building, We

305
00:11:15,849 --> 00:11:17,521
bought a building that had his office, and

306
00:11:17,521 --> 00:11:19,990
it had 3 apartments and 4 garages we

307
00:11:19,990 --> 00:11:21,264
could rent out. So I knew it would

308
00:11:21,264 --> 00:11:23,750
kinda cover the most of the mortgage payment.

309
00:11:24,149 --> 00:11:25,664
But all this time, I was still working

310
00:11:25,664 --> 00:11:26,462
for Aig.

311
00:11:27,180 --> 00:11:29,573
And essentially, my husband's business did really well

312
00:11:29,573 --> 00:11:30,211
in o 7,

313
00:11:30,769 --> 00:11:32,777
and then oa 8 things seem to be

314
00:11:32,777 --> 00:11:35,107
doing a little bit better and then suddenly.

315
00:11:35,642 --> 00:11:38,030
I worked for Aig, and I saw on

316
00:11:38,030 --> 00:11:40,273
the news that Aig was going under. That

317
00:11:40,433 --> 00:11:42,424
Lay and brothers was going under that Bear

318
00:11:42,583 --> 00:11:46,167
Stern was going under Washington Mutual, country white

319
00:11:46,167 --> 00:11:47,919
mortgage. I mean, it was just this Domino.

320
00:11:48,397 --> 00:11:51,584
And We relied on my income in order

321
00:11:51,584 --> 00:11:53,565
to make ends meet while my husband was

322
00:11:53,565 --> 00:11:56,833
starting his business. My 04:01 k was almost

323
00:11:56,833 --> 00:11:59,148
decimated. It was about 2 thirds to 3

324
00:11:59,148 --> 00:12:00,904
quarter of a value that was gone and

325
00:12:00,904 --> 00:12:01,862
never coming back.

326
00:12:02,501 --> 00:12:04,576
And it was at that moment that I

327
00:12:04,576 --> 00:12:05,076
realized

328
00:12:05,787 --> 00:12:08,247
That couldn't rely on necessarily a big company

329
00:12:08,247 --> 00:12:10,310
to take care of me. Yeah, I couldn't

330
00:12:10,310 --> 00:12:11,420
rely on a small business.

331
00:12:11,976 --> 00:12:15,086
And my 04:01 k was basically gone and

332
00:12:15,086 --> 00:12:16,913
not coming back. And the only thing that

333
00:12:16,913 --> 00:12:18,264
was going well is I had a few

334
00:12:18,264 --> 00:12:20,408
tenants at that point. We had, at that

335
00:12:20,408 --> 00:12:21,441
0.3 buildings.

336
00:12:21,997 --> 00:12:23,799
We house hack. We lived in a little

337
00:12:23,919 --> 00:12:25,915
or unit apartment while we were building his

338
00:12:25,915 --> 00:12:26,415
business

339
00:12:26,872 --> 00:12:28,948
and had another 4 unit, and I thought,

340
00:12:29,347 --> 00:12:31,422
I did whatever adviser tells you never to

341
00:12:31,422 --> 00:12:33,909
do. I took money for my 04:01 k,

342
00:12:34,068 --> 00:12:36,379
The the 50000 I had left. I borrowed

343
00:12:36,379 --> 00:12:38,372
it. I didn't just withdraw it. I borrowed

344
00:12:38,372 --> 00:12:40,458
it. And I bought another 4 unit. And

345
00:12:40,538 --> 00:12:42,686
I realized that even in a deeper recession,

346
00:12:42,845 --> 00:12:44,993
people needed the place to live, and they

347
00:12:44,993 --> 00:12:47,274
were gonna pay rent. And I I found

348
00:12:47,474 --> 00:12:49,067
that same week I was pregnant with baby

349
00:12:49,067 --> 00:12:51,617
and number 3, and I thought, at least

350
00:12:51,617 --> 00:12:53,768
if I lose my job at Aig, and

351
00:12:53,768 --> 00:12:55,202
they told us we were gonna lose our

352
00:12:55,202 --> 00:12:56,876
jobs most likely to start looking.

353
00:12:57,369 --> 00:12:59,838
I could cover, you know, formula. And if

354
00:12:59,918 --> 00:13:01,750
I needed it, if I could nurse and

355
00:13:01,909 --> 00:13:03,901
I could I could handle, you know, diapers.

356
00:13:04,474 --> 00:13:06,808
And so that was my Aha moment in

357
00:13:06,867 --> 00:13:08,324
really early o 9

358
00:13:08,781 --> 00:13:11,754
when everything really started to, you know, Domino

359
00:13:11,812 --> 00:13:13,487
that real estate was the way that I

360
00:13:13,487 --> 00:13:16,000
was going to to protect our family

361
00:13:16,779 --> 00:13:19,100
until I got laid off from Aig. And

362
00:13:19,100 --> 00:13:20,940
over the next 5, 6 years,

363
00:13:22,059 --> 00:13:23,580
actually, it was 10 total,

364
00:13:24,313 --> 00:13:26,725
I just started buying 4 unit apartment buildings

365
00:13:26,783 --> 00:13:30,131
all over my area. And I slowly accumulated.

366
00:13:30,370 --> 00:13:32,935
It took a decade because Not only did

367
00:13:32,935 --> 00:13:34,688
we have to replace my income, but we

368
00:13:34,688 --> 00:13:35,962
had to pay off all the debt for

369
00:13:35,962 --> 00:13:38,193
my husband's business, pay his employees.

370
00:13:38,831 --> 00:13:41,402
His business was suffering in health care

371
00:13:41,794 --> 00:13:43,869
and it took a decade, but I was

372
00:13:43,869 --> 00:13:46,504
able to replace my 6 figure income, create

373
00:13:46,504 --> 00:13:49,617
a multi dollar network through, you know, small

374
00:13:49,617 --> 00:13:52,345
apartment buildings. And then I actually retired. I

375
00:13:52,345 --> 00:13:54,180
never got laid off because I had a

376
00:13:54,180 --> 00:13:56,095
pretty complex job that was... And it was

377
00:13:56,095 --> 00:13:58,304
in a division hard for Aig to sell

378
00:13:59,218 --> 00:14:01,363
and I walked away and retired, it's been

379
00:14:01,363 --> 00:14:03,428
5 years and 2 months today.

380
00:14:04,620 --> 00:14:06,447
But in that time, since I retired, I

381
00:14:06,447 --> 00:14:09,162
started s syndicated larger apartments. So I accumulated

382
00:14:09,162 --> 00:14:11,943
a hundred units of multi family housing,

383
00:14:12,658 --> 00:14:14,723
mostly in 4 unit build things in that

384
00:14:14,723 --> 00:14:16,312
10 year period post G.

385
00:14:16,804 --> 00:14:18,643
And then I've done about 300000000

386
00:14:18,643 --> 00:14:21,360
dollars in apartment s authentication since then.

387
00:14:22,319 --> 00:14:24,557
So that's kind of my background and how

388
00:14:24,716 --> 00:14:26,415
I... How I learned really

389
00:14:26,809 --> 00:14:27,709
in the G

390
00:14:28,490 --> 00:14:30,009
that you can do all the right things.

391
00:14:30,250 --> 00:14:32,250
You know, we did Dave Ramsey for years.

392
00:14:32,409 --> 00:14:34,649
We lived below our means. We... I I

393
00:14:34,649 --> 00:14:35,870
knew about investing

394
00:14:36,821 --> 00:14:39,207
my division was the ones that did credit

395
00:14:39,207 --> 00:14:41,673
default swaps, and I didn't understand them. But

396
00:14:41,753 --> 00:14:43,048
I learned that

397
00:14:43,759 --> 00:14:45,996
It doesn't matter how smart you are. Doesn't

398
00:14:45,996 --> 00:14:47,993
matter how good your job is, how much

399
00:14:47,993 --> 00:14:49,991
you know about investing, How much you know

400
00:14:49,991 --> 00:14:53,144
in real estate? If you're not really paying

401
00:14:53,284 --> 00:14:55,524
attention to the macro signs that things are

402
00:14:55,524 --> 00:14:55,924
shifting,

403
00:14:56,404 --> 00:14:59,044
you can make some really bad decisions about

404
00:14:59,044 --> 00:15:01,297
debt. And go into it at the wrong

405
00:15:01,297 --> 00:15:03,614
time, and you can make some really bad

406
00:15:03,614 --> 00:15:05,771
decisions about the stock market and anything that

407
00:15:05,771 --> 00:15:07,264
you invest in. And so

408
00:15:07,623 --> 00:15:09,377
that was the moment after o 9 that

409
00:15:09,537 --> 00:15:11,450
I said from now on, I will never

410
00:15:11,450 --> 00:15:14,001
be blindsided about the economy, and I need

411
00:15:14,001 --> 00:15:16,049
to understand and become a student at the

412
00:15:16,169 --> 00:15:18,399
economy as much as I am a student

413
00:15:18,399 --> 00:15:18,899
of

414
00:15:19,434 --> 00:15:22,142
institutional investments in real estate. So I'll stop

415
00:15:22,142 --> 00:15:23,735
a Air in case you've got questions for

416
00:15:23,735 --> 00:15:25,503
me, and then we can keep boeing. Well,

417
00:15:25,902 --> 00:15:27,337
I just wanna make a comment that... I

418
00:15:27,337 --> 00:15:29,672
mean, it was very interesting the

419
00:15:30,049 --> 00:15:30,549
timing

420
00:15:30,926 --> 00:15:33,000
of your investing with what was happening in

421
00:15:33,000 --> 00:15:35,009
the economy that you were learning alongside side

422
00:15:35,009 --> 00:15:36,868
of the economy, but you were buying

423
00:15:37,407 --> 00:15:39,964
in that span right when everything was crashing,

424
00:15:40,283 --> 00:15:41,881
and then you were able to be able

425
00:15:41,881 --> 00:15:42,701
to grow

426
00:15:43,080 --> 00:15:45,957
wealth Yeah. After that time. And so what's

427
00:15:45,957 --> 00:15:49,076
really interesting is you said, let me not

428
00:15:49,290 --> 00:15:50,799
go into debt at the wrong time. Let

429
00:15:50,799 --> 00:15:53,120
me buy it the right time. And maybe

430
00:15:53,120 --> 00:15:55,759
you weren't necessarily deciding that it was the

431
00:15:55,759 --> 00:15:58,000
right time to buy when you were purchasing

432
00:15:58,000 --> 00:15:59,759
real estate, but it ended up working out

433
00:15:59,759 --> 00:16:01,414
well for. Where would you say that you're

434
00:16:01,693 --> 00:16:05,041
knowledge of the economic cycles was when you

435
00:16:05,041 --> 00:16:08,627
were starting that that whole 2008 2009 time

436
00:16:08,627 --> 00:16:08,786
frame.

437
00:16:09,755 --> 00:16:12,770
It was very limited. I really do say

438
00:16:12,770 --> 00:16:14,595
it's by the Grace god that it was

439
00:16:14,595 --> 00:16:17,213
my only option left was to buy real

440
00:16:17,213 --> 00:16:19,294
estate. That made me do it. You know?

441
00:16:19,611 --> 00:16:20,327
I was just like,

442
00:16:21,042 --> 00:16:22,870
I'm not putting more in the market because

443
00:16:22,949 --> 00:16:24,618
I I had already lost so much, and

444
00:16:24,697 --> 00:16:26,287
I didn't know where to invest.

445
00:16:27,339 --> 00:16:29,576
And I I thought, well, I could buy

446
00:16:29,576 --> 00:16:31,174
another 4 unit and it's in my backyard,

447
00:16:31,334 --> 00:16:32,932
and it it'll make me a thousand dollars

448
00:16:32,932 --> 00:16:34,664
a month. So it was just kind of

449
00:16:35,423 --> 00:16:37,898
just kind of going, you know, really praying,

450
00:16:38,137 --> 00:16:38,377
like,

451
00:16:39,015 --> 00:16:41,591
what do we do now? Everything we've done

452
00:16:41,650 --> 00:16:44,146
is for nothing. And I was really

453
00:16:44,458 --> 00:16:46,367
down. I mean, probably the closest. I've ever

454
00:16:46,367 --> 00:16:48,037
been to just being in a depression of

455
00:16:48,037 --> 00:16:48,355
going,

456
00:16:49,627 --> 00:16:51,536
wow. We're gonna lose everything and start over,

457
00:16:51,695 --> 00:16:53,126
and we tried so hard to do it

458
00:16:53,126 --> 00:16:56,105
right and yet know, the economy has has

459
00:16:56,162 --> 00:16:58,705
really blindsided of us. So I didn't really

460
00:16:58,705 --> 00:17:00,692
know a lot about, you know, now, I

461
00:17:00,692 --> 00:17:02,777
know. And now, you know, talking about warren

462
00:17:02,777 --> 00:17:05,590
buffett, he says be greedy when everyone's fearful

463
00:17:05,648 --> 00:17:08,759
and be fearful when everyone's greedy. And what

464
00:17:08,759 --> 00:17:10,194
that means is when you are at the

465
00:17:10,194 --> 00:17:11,550
top of an economic cycle,

466
00:17:12,922 --> 00:17:15,237
everybody wins. It looks like everybody's been winning,

467
00:17:15,397 --> 00:17:17,393
and it looks like you can't lose. Whether

468
00:17:17,393 --> 00:17:19,309
it's the meme stocks or whether it's, you

469
00:17:19,309 --> 00:17:21,145
know, Crypto or whether it's real estate.

470
00:17:22,036 --> 00:17:24,502
Everybody's in. There there's something that's called their

471
00:17:24,502 --> 00:17:26,968
rational exuberance. You know, people are buying Bruce,

472
00:17:27,047 --> 00:17:29,132
it's funny. You mentioned the among a monkey

473
00:17:29,132 --> 00:17:31,123
can make money. People were paying millions of

474
00:17:31,123 --> 00:17:32,340
dollars for N

475
00:17:32,875 --> 00:17:34,388
pictures of monkeys.

476
00:17:35,344 --> 00:17:37,176
And so when you start... You know, when

477
00:17:37,176 --> 00:17:39,267
when my 14 year olds going mom. I

478
00:17:39,267 --> 00:17:41,105
need to create N t's, and he started

479
00:17:41,105 --> 00:17:43,262
creating N t's of monkeys and making money

480
00:17:43,262 --> 00:17:45,513
at 14 on the Internet. I was like,

481
00:17:45,753 --> 00:17:48,887
this is this is like the epitome of

482
00:17:48,945 --> 00:17:51,659
irrational exuberance that people pay crazy money for

483
00:17:51,659 --> 00:17:53,789
anything they think could be an investment. But

484
00:17:54,786 --> 00:17:57,176
typically, what happens is you have these investment

485
00:17:57,176 --> 00:18:00,044
cycles. And at a very high level, you

486
00:18:00,044 --> 00:18:02,132
start out at a trough for a recession

487
00:18:02,132 --> 00:18:04,705
where things have been really, really bad. And

488
00:18:04,763 --> 00:18:07,874
the the government tends to really drastically cut

489
00:18:07,874 --> 00:18:10,426
interest rates to stimulate the economy again and

490
00:18:10,426 --> 00:18:12,139
try to get it being and encourage

491
00:18:12,518 --> 00:18:14,834
investing in the future in the economy.

492
00:18:15,633 --> 00:18:18,030
And then you usually have a recession 10

493
00:18:18,030 --> 00:18:20,279
to 08:18 months long depending on how bad

494
00:18:20,279 --> 00:18:21,954
it it is and how broad it is

495
00:18:21,954 --> 00:18:22,751
and how deep it is.

496
00:18:23,629 --> 00:18:25,623
And then you have a recovery period that

497
00:18:25,623 --> 00:18:27,457
usually takes 2 to 3 years for the

498
00:18:27,457 --> 00:18:29,009
economy just to start

499
00:18:29,309 --> 00:18:32,190
sluggish starting to come back. People get over

500
00:18:32,190 --> 00:18:32,690
their

501
00:18:33,309 --> 00:18:35,390
their psyche and their mindset that it's doom

502
00:18:35,390 --> 00:18:37,150
and gloom, and they start to invest again.

503
00:18:37,643 --> 00:18:39,391
And then you have a period of expansion.

504
00:18:39,630 --> 00:18:41,457
And and that varies, you know, it could

505
00:18:41,457 --> 00:18:43,284
be a couple of years. We actually had

506
00:18:43,284 --> 00:18:46,559
the longest expansion period in history since President,

507
00:18:46,718 --> 00:18:49,032
Abraham Lincoln was in office, which is older

508
00:18:49,032 --> 00:18:52,086
than I am. Right? Where, you know, pre

509
00:18:52,145 --> 00:18:54,060
pandemic, we just had, you know, you know,

510
00:18:54,632 --> 00:18:55,585
12:13

511
00:18:55,585 --> 00:18:56,721
years of expansion

512
00:18:57,094 --> 00:18:59,182
where everybody just saw an economy

513
00:18:59,556 --> 00:19:01,700
that was booming. And the difference this time

514
00:19:01,700 --> 00:19:03,789
is that the Fed kept rates really, really

515
00:19:03,789 --> 00:19:07,009
low almost the entire time. And that creates

516
00:19:07,150 --> 00:19:08,849
asset bubbles. It creates

517
00:19:09,470 --> 00:19:11,798
equity you know, it create whether you're in

518
00:19:11,798 --> 00:19:14,827
the market and almost anything. Everything just continues

519
00:19:14,827 --> 00:19:16,661
to go up in value. Your rents go

520
00:19:16,661 --> 00:19:17,458
up in value.

521
00:19:18,749 --> 00:19:21,721
And so it's really hard to lose

522
00:19:22,417 --> 00:19:24,729
when you have low interest rate debt and

523
00:19:24,729 --> 00:19:27,041
an economy that it's, you know, lifting all

524
00:19:27,041 --> 00:19:30,236
shifts. But eventually, you end up starting to

525
00:19:30,236 --> 00:19:33,279
have things like inflation. Where suddenly, the economy

526
00:19:33,335 --> 00:19:35,877
just can't handle the expansion it starts to

527
00:19:35,877 --> 00:19:38,116
slow. And people think it's just gonna be

528
00:19:38,116 --> 00:19:40,895
this suddenly. It's not. In 2009,

529
00:19:41,054 --> 00:19:43,222
it seemed to me to be a suddenly

530
00:19:43,516 --> 00:19:45,342
because I wasn't watching the signs.

531
00:19:45,913 --> 00:19:48,295
But really there were people warning since at

532
00:19:48,295 --> 00:19:49,962
least early 2006.

533
00:19:50,438 --> 00:19:52,343
We are in an asset bubble. We are

534
00:19:52,343 --> 00:19:55,136
in a a peak. Real estate going to

535
00:19:55,136 --> 00:19:55,533
crash,

536
00:19:56,088 --> 00:19:59,262
not even talking about the Fred default swaps

537
00:19:59,262 --> 00:20:01,423
and mortgage backed security bets that, you know,

538
00:20:01,582 --> 00:20:03,177
really brought the system down, but they were

539
00:20:03,177 --> 00:20:06,288
just saying things are not, you know, gonna

540
00:20:06,288 --> 00:20:08,202
continue. We're we're reaching a peak, but they

541
00:20:08,202 --> 00:20:10,356
were always ignored. Everybody was saying it's different

542
00:20:10,356 --> 00:20:12,602
this time. And that's what it... What's always

543
00:20:12,602 --> 00:20:14,594
said at the peak when there's this fo.

544
00:20:14,992 --> 00:20:16,825
And so everybody goes in,

545
00:20:17,781 --> 00:20:19,941
everybody tells you. I mean, we had consultants

546
00:20:20,259 --> 00:20:22,403
Rachel that told us the economy's is booming.

547
00:20:22,641 --> 00:20:24,388
You'll have no problem. Don't be so afraid

548
00:20:24,388 --> 00:20:26,056
of debt because we had no debt. We

549
00:20:26,056 --> 00:20:28,139
did Dave Ramsey for 7 years. Other than

550
00:20:28,139 --> 00:20:30,136
our house. And then we thought, well, the

551
00:20:30,136 --> 00:20:32,294
going in business, it's different. Right? Because everybody

552
00:20:32,294 --> 00:20:34,371
said it's different this time. So at the

553
00:20:34,371 --> 00:20:36,382
peak is actually the worst time to go

554
00:20:36,382 --> 00:20:38,137
all in or to take a lot of

555
00:20:38,137 --> 00:20:38,637
debt

556
00:20:39,014 --> 00:20:40,928
because you know that that cycle is gonna

557
00:20:40,928 --> 00:20:42,683
correct. And when it does, it starts to

558
00:20:42,683 --> 00:20:45,177
decline, so you have a a contraction

559
00:20:46,048 --> 00:20:48,123
And eventually, if you don't have a soft

560
00:20:48,123 --> 00:20:50,358
landing, you have a recession again. And so

561
00:20:50,358 --> 00:20:53,470
the cycle continues recession, recovery expansion peak,

562
00:20:54,123 --> 00:20:56,059
contraction recession. So

563
00:20:56,437 --> 00:20:59,070
what happens is when everybody is in, and

564
00:20:59,070 --> 00:21:00,767
then it seems to suddenly

565
00:21:01,319 --> 00:21:03,400
crash and you have a recession. Usually, it...

566
00:21:03,640 --> 00:21:04,920
I mean, it could take a year 2,

567
00:21:05,160 --> 00:21:07,799
3 years to actually hit that bottom, and

568
00:21:07,799 --> 00:21:09,734
people keep saying it's different this time. Gonna

569
00:21:09,734 --> 00:21:11,887
be okay. We haven't hit the crash. So

570
00:21:11,887 --> 00:21:13,722
don't worry. Just keep what you're doing, and

571
00:21:13,722 --> 00:21:14,940
we're gonna keep having

572
00:21:15,716 --> 00:21:17,391
appreciation, and we're gonna keep having rent growth,

573
00:21:17,550 --> 00:21:19,145
and we're gonna keep having the stock market,

574
00:21:19,305 --> 00:21:21,474
go crazy like it as the share, and

575
00:21:21,474 --> 00:21:24,608
they don't understand that these cycles always end

576
00:21:25,384 --> 00:21:28,430
eventually. And they make bad deaths. But when

577
00:21:28,430 --> 00:21:30,182
you're at the bottom, and I didn't know

578
00:21:30,182 --> 00:21:32,333
this before, but I know it now. At

579
00:21:32,333 --> 00:21:33,789
the moment that there is

580
00:21:34,165 --> 00:21:34,665
absolute

581
00:21:35,041 --> 00:21:36,258
panic and

582
00:21:36,808 --> 00:21:39,827
you know, everybody's afraid. That is the maximum

583
00:21:39,827 --> 00:21:42,450
point of opportunity. So the maximum point of

584
00:21:42,450 --> 00:21:45,152
of everybody's excited is your maximum point of

585
00:21:45,152 --> 00:21:48,125
risk or when investing, and your maximum pain

586
00:21:48,125 --> 00:21:50,125
in a recession is your maximum point of

587
00:21:50,125 --> 00:21:50,445
opportunity.

588
00:21:50,924 --> 00:21:53,724
Because all the investors leave, you have much

589
00:21:53,724 --> 00:21:54,224
less

590
00:21:54,525 --> 00:21:57,917
competition people are very afraid. They make stupid

591
00:21:58,057 --> 00:22:01,013
decisions, and that creates opportunities for us, and

592
00:22:01,173 --> 00:22:03,011
I I wanna really stress this to be

593
00:22:03,011 --> 00:22:05,183
a good person when you're doing it. But

594
00:22:05,183 --> 00:22:07,258
work out win wins to help people out

595
00:22:07,258 --> 00:22:08,077
of a difficult

596
00:22:08,455 --> 00:22:11,168
situation, but also then buy your assets while

597
00:22:11,168 --> 00:22:12,045
nobody else is.

598
00:22:12,697 --> 00:22:15,259
Also, when there's a bottom, the Fed typically

599
00:22:15,394 --> 00:22:17,774
drastically cuts rates again. So when you're in

600
00:22:17,774 --> 00:22:20,495
the recession, you have really cheap money

601
00:22:20,884 --> 00:22:22,882
not enough people are taking it, then you've

602
00:22:22,882 --> 00:22:25,838
got great opportunity to use leverage at that

603
00:22:25,838 --> 00:22:28,155
point at low interest rates to buy stuff

604
00:22:28,155 --> 00:22:28,475
cheap.

605
00:22:29,048 --> 00:22:31,537
And then write it over the long term

606
00:22:31,673 --> 00:22:34,298
through that recession through the recovery and through

607
00:22:34,298 --> 00:22:37,099
an expansion before you decide to sell. And

608
00:22:37,099 --> 00:22:39,408
really for me, it took a decade to

609
00:22:39,408 --> 00:22:41,718
hit that peak again to be able to

610
00:22:41,718 --> 00:22:44,288
really create massive wealth. But I'm excited

611
00:22:44,920 --> 00:22:47,240
because I believe we're heading toward the same

612
00:22:47,240 --> 00:22:48,140
kind of bottom

613
00:22:48,440 --> 00:22:50,140
that's gonna create massive

614
00:22:50,440 --> 00:22:50,840
opportunity.

615
00:22:51,240 --> 00:22:53,660
I just think until we're officially there

616
00:22:54,053 --> 00:22:55,960
you've gotta be really smart with what you're

617
00:22:55,960 --> 00:22:58,502
doing and not just assume that that after

618
00:22:58,502 --> 00:23:00,011
we have a recession, it's just gonna be

619
00:23:00,011 --> 00:23:01,457
back to the way it was, you know,

620
00:23:01,537 --> 00:23:03,446
3 years ago because it's it's not going

621
00:23:03,446 --> 00:23:03,765
to be.

622
00:23:05,516 --> 00:23:07,448
Yeah. Bruce Yeah. I believe that,

623
00:23:10,702 --> 00:23:12,691
you know, it's I, I'm off in cynical,

624
00:23:12,850 --> 00:23:15,873
but I'm off also optimistic. I I guess

625
00:23:15,873 --> 00:23:18,669
like when Reagan's go Gerber off. You know,

626
00:23:18,749 --> 00:23:20,257
we're gonna trust but verify.

627
00:23:22,798 --> 00:23:24,703
You know, I don't believe... At least, I

628
00:23:24,703 --> 00:23:25,154
don't

629
00:23:25,991 --> 00:23:28,379
I hope maybe it's a better word that

630
00:23:28,379 --> 00:23:31,188
we will never go back to the sustained

631
00:23:31,962 --> 00:23:33,888
interest rates that were near 0. I mean,

632
00:23:33,967 --> 00:23:35,501
if we haven't learned our lesson

633
00:23:35,955 --> 00:23:36,750
at that time,

634
00:23:37,703 --> 00:23:39,055
then I don't know if we're ever gonna

635
00:23:39,055 --> 00:23:41,304
learn a lesson. So I do believe

636
00:23:41,694 --> 00:23:43,447
you know, in the boom and bust cycle

637
00:23:43,447 --> 00:23:44,483
that you're talking about,

638
00:23:45,201 --> 00:23:47,034
interest rates will be cut again. I mean,

639
00:23:47,114 --> 00:23:49,027
that... Because that's south the Fed re reacts.

640
00:23:49,840 --> 00:23:51,039
Even though they were supposed to be the

641
00:23:51,039 --> 00:23:53,279
lender of last resort, now they're the lender

642
00:23:53,279 --> 00:23:55,600
to to prop up the stock market in

643
00:23:55,600 --> 00:23:57,200
my opinion. Yes. Mh.

644
00:23:58,799 --> 00:23:59,299
But

645
00:24:00,249 --> 00:24:02,498
they will ratchet down, but they won't go

646
00:24:02,634 --> 00:24:04,622
as far down as they did in the

647
00:24:04,622 --> 00:24:04,860
past.

648
00:24:05,735 --> 00:24:07,722
And so what that's going to do is

649
00:24:07,722 --> 00:24:09,566
that's still going to cause some of these

650
00:24:09,566 --> 00:24:12,026
people that have these loans that are turning

651
00:24:12,026 --> 00:24:12,526
over

652
00:24:12,979 --> 00:24:15,915
to still not necessarily get to the place

653
00:24:15,915 --> 00:24:17,765
that they were when they had

654
00:24:18,234 --> 00:24:19,750
the type of cash flow they need it

655
00:24:19,750 --> 00:24:21,187
to make the deal work.

656
00:24:21,826 --> 00:24:24,061
So then people that can come in at

657
00:24:24,061 --> 00:24:26,375
what I would call more normalized rates.

658
00:24:27,108 --> 00:24:28,942
With the amount of cash that they can

659
00:24:28,942 --> 00:24:29,442
actually

660
00:24:30,617 --> 00:24:31,972
make the cash flow work,

661
00:24:33,168 --> 00:24:35,423
then they're gonna be in a tremendous

662
00:24:36,373 --> 00:24:39,748
tremendously great opportunity. For listeners, if you wanna

663
00:24:40,046 --> 00:24:41,743
if you wanna get more

664
00:24:42,760 --> 00:24:44,756
information about these boom and bus off cycles

665
00:24:44,756 --> 00:24:47,264
at on as talking about so eloquently.

666
00:24:47,958 --> 00:24:49,970
You could go to the Mis Institute

667
00:24:50,504 --> 00:24:52,494
website, and they will talk about that are

668
00:24:52,494 --> 00:24:54,643
another great 1 is BFE

669
00:24:54,643 --> 00:24:54,881
me,

670
00:24:55,533 --> 00:24:56,170
dot org,

671
00:24:58,477 --> 00:25:00,864
and they really spell out these boom and

672
00:25:00,864 --> 00:25:03,411
bust cycles very, very well. So let's let's

673
00:25:03,411 --> 00:25:04,229
talk about

674
00:25:04,779 --> 00:25:05,975
what you believe,

675
00:25:07,810 --> 00:25:10,862
the sector of real estate coming out of

676
00:25:11,080 --> 00:25:13,074
the different sectors of real estate coming out

677
00:25:13,074 --> 00:25:14,292
of these recessions

678
00:25:15,559 --> 00:25:18,025
might be the first ones to get into,

679
00:25:18,184 --> 00:25:19,616
you know, going forward. If you if you

680
00:25:19,616 --> 00:25:21,764
have, if you thought about that in your

681
00:25:21,764 --> 00:25:22,957
in your thought process.

682
00:25:23,688 --> 00:25:25,677
Sure. Sure. Let me just say this.

683
00:25:26,711 --> 00:25:29,177
You know, what I've learned over time, and

684
00:25:29,177 --> 00:25:31,025
and I learned it, you know, big time

685
00:25:31,025 --> 00:25:33,345
in 2009, but also in Covid, and and

686
00:25:33,424 --> 00:25:35,424
I'm still learning, You know, as I watch

687
00:25:35,424 --> 00:25:38,305
things because every cycle is a little different.

688
00:25:38,545 --> 00:25:40,635
You know, we have these what, the these

689
00:25:40,635 --> 00:25:43,424
long term trends are called secular trends. But

690
00:25:43,424 --> 00:25:45,814
we've also got these short term little cycles

691
00:25:45,814 --> 00:25:49,375
called secular cycle, cyclical cycles. And so

692
00:25:49,970 --> 00:25:52,033
you know, when we talk about what's happening,

693
00:25:52,351 --> 00:25:54,017
you know, are we gonna have a recession

694
00:25:54,017 --> 00:25:56,160
tomorrow, That's a very short term, You know,

695
00:25:56,318 --> 00:25:57,747
are we changing a a cycle.

696
00:25:58,238 --> 00:25:59,827
That's very different than what do we think

697
00:25:59,827 --> 00:26:01,814
is gonna happen long term And what are

698
00:26:01,814 --> 00:26:03,109
the the macro

699
00:26:03,721 --> 00:26:05,175
conditions that could change

700
00:26:05,643 --> 00:26:07,950
the path that we go on as a

701
00:26:07,950 --> 00:26:10,257
nation. And I think there's different views of

702
00:26:10,257 --> 00:26:12,166
that. And I haven't always gotten that right.

703
00:26:13,055 --> 00:26:14,882
What I've learned is that the more you

704
00:26:14,882 --> 00:26:16,311
think it's gonna be the same and you

705
00:26:16,311 --> 00:26:18,932
have it figured out. The more things happen

706
00:26:18,932 --> 00:26:20,624
that could totally change

707
00:26:20,934 --> 00:26:23,095
what you think is gonna happen. And so

708
00:26:23,095 --> 00:26:25,414
you have to start getting to the point

709
00:26:25,414 --> 00:26:28,869
where you do remain somewhat cynical on you

710
00:26:28,869 --> 00:26:29,985
know, any promise...

711
00:26:30,623 --> 00:26:32,697
We're never supposed to promise returns. But in

712
00:26:32,697 --> 00:26:35,648
real estate and s and other private placements,

713
00:26:35,808 --> 00:26:37,882
we at least see something like a preferred

714
00:26:37,882 --> 00:26:40,915
return. So they're not guaranteed. But if we

715
00:26:40,915 --> 00:26:42,819
can make the return, it's the closest thing

716
00:26:42,819 --> 00:26:44,644
to a guarantee you have, You know, we're

717
00:26:44,644 --> 00:26:46,310
gonna try to pay you a 7 percent

718
00:26:46,310 --> 00:26:48,636
per year at least or an 8 percent

719
00:26:48,636 --> 00:26:49,754
per your at least.

720
00:26:50,552 --> 00:26:54,065
You've you've gotta be somewhat cynical about any

721
00:26:54,065 --> 00:26:56,220
kind of projections you have in any real

722
00:26:56,220 --> 00:26:59,183
estate knowing that anything can happen to the

723
00:26:59,183 --> 00:27:01,494
economy to change that. And so you've gotta

724
00:27:01,494 --> 00:27:02,392
be prepared

725
00:27:02,768 --> 00:27:04,999
with what you believe your thesis to be

726
00:27:04,999 --> 00:27:07,556
about the future but also be prepared if

727
00:27:07,556 --> 00:27:09,619
it doesn't work out that way. And in

728
00:27:09,619 --> 00:27:11,205
the... You know, we we tend to be...

729
00:27:12,236 --> 00:27:13,188
We tend to kind of,

730
00:27:14,632 --> 00:27:16,086
look for data that

731
00:27:16,780 --> 00:27:19,007
confirms our bias to where things are gonna

732
00:27:19,007 --> 00:27:21,314
go, when we listen to those people, and

733
00:27:21,314 --> 00:27:23,635
then we drown everybody else out. And I

734
00:27:23,635 --> 00:27:25,698
think that that's a mistake. And so, you

735
00:27:25,698 --> 00:27:27,048
know, I'm I'm gonna tell you where I

736
00:27:27,048 --> 00:27:29,191
kinda think are we're headed, but I will

737
00:27:29,191 --> 00:27:31,753
say that something I've learned that really important

738
00:27:31,753 --> 00:27:34,309
is to listen to the voices that are

739
00:27:34,309 --> 00:27:36,147
older than us that have been through these

740
00:27:36,147 --> 00:27:39,275
things before. And so I listened to a

741
00:27:39,275 --> 00:27:40,950
lot of guys like, you know, I was

742
00:27:40,950 --> 00:27:42,885
listening to Charlie Mu and

743
00:27:43,422 --> 00:27:45,894
and warren buffett. I listened to economist like

744
00:27:46,053 --> 00:27:48,298
Lacy Hunt. Who's been around a really long

745
00:27:48,298 --> 00:27:48,616
time.

746
00:27:49,491 --> 00:27:50,604
I listen to guys,

747
00:27:51,559 --> 00:27:54,025
like Jeremy Grant, you know, big hedge fund

748
00:27:54,025 --> 00:27:57,142
managers, Ray Dal and who have been around

749
00:27:57,142 --> 00:27:59,769
the investing world for a long time. They

750
00:27:59,769 --> 00:28:02,975
have been warning for 3, 4 years

751
00:28:03,684 --> 00:28:06,398
be careful. We're in a big debt cycle.

752
00:28:06,718 --> 00:28:08,714
Not only do we have the secular trends,

753
00:28:08,794 --> 00:28:11,108
but we have a national government and world

754
00:28:11,108 --> 00:28:13,519
governments that are taking on so much debt.

755
00:28:14,238 --> 00:28:17,455
And that impacts interest rates, and it impacts

756
00:28:17,754 --> 00:28:20,091
inflation and our continued

757
00:28:21,759 --> 00:28:25,251
Our continued need for debt means that rates

758
00:28:25,251 --> 00:28:28,347
need to stay lower for sovereign nations to

759
00:28:28,347 --> 00:28:30,195
just pay their own obligations.

760
00:28:30,913 --> 00:28:33,146
But also, if our rates stay lower too

761
00:28:33,146 --> 00:28:36,815
longer, that creates asset bubbles and inflation. And

762
00:28:36,815 --> 00:28:39,884
so we've got this big risk of sovereign

763
00:28:40,025 --> 00:28:42,424
debt out there that is so high that

764
00:28:42,424 --> 00:28:45,144
it requires low interest rates for them to

765
00:28:45,144 --> 00:28:47,868
service it yet they we have more and

766
00:28:47,868 --> 00:28:50,890
more risk of future inflation I believe than

767
00:28:50,890 --> 00:28:52,242
what we've had in the past.

768
00:28:52,798 --> 00:28:55,025
As we've had these wars that have popped

769
00:28:55,025 --> 00:28:56,971
up over the last couple of years

770
00:28:57,346 --> 00:28:59,254
and all the debt that we have,

771
00:29:00,765 --> 00:29:03,150
now essentially, we have to keep keep spending.

772
00:29:03,309 --> 00:29:05,868
We're funding wars. We're funding our our you

773
00:29:05,868 --> 00:29:08,329
know, social security and Medicare that the government

774
00:29:08,329 --> 00:29:11,346
can no longer even afford to fund. And

775
00:29:11,346 --> 00:29:13,966
so we've got big risk that the government

776
00:29:13,966 --> 00:29:16,844
has to keep spending money and keep going

777
00:29:16,844 --> 00:29:19,629
into debt, which creates more inflation in the

778
00:29:19,629 --> 00:29:22,016
future, which will create higher interest rates,

779
00:29:22,587 --> 00:29:25,445
needed to bring down inflation, but yet the

780
00:29:25,445 --> 00:29:27,508
nations need a lower interest rate to cover

781
00:29:27,508 --> 00:29:29,675
their debt. And so I

782
00:29:30,143 --> 00:29:31,817
I listen to them, and I listen to

783
00:29:31,817 --> 00:29:34,048
their warnings, and I say, listen... I need

784
00:29:34,048 --> 00:29:37,314
to prepare myself that, yes, on 1 hand,

785
00:29:37,553 --> 00:29:40,275
I'm I'm getting prepared for a recession. I

786
00:29:40,275 --> 00:29:41,781
believe we're in a recession and we can

787
00:29:41,781 --> 00:29:43,446
go into some data why I believe we

788
00:29:43,446 --> 00:29:45,745
are, even though it hasn't been declared. And

789
00:29:45,824 --> 00:29:48,697
I believe it could be fairly mild, but

790
00:29:48,697 --> 00:29:51,822
it could be very, very deep depending on

791
00:29:52,038 --> 00:29:55,474
the fallout of commercial real estate that's impact

792
00:29:55,474 --> 00:29:58,099
on the banking system, whether we enter some

793
00:29:58,099 --> 00:30:00,644
type of banking crisis where or banks start

794
00:30:00,644 --> 00:30:01,122
to fail.

795
00:30:01,693 --> 00:30:03,998
All those things can play into what happens

796
00:30:03,998 --> 00:30:05,587
in the future in terms of rates and

797
00:30:05,587 --> 00:30:09,004
asset values. But I think personally, I think

798
00:30:09,004 --> 00:30:10,196
we're gonna have a recession.

799
00:30:11,166 --> 00:30:13,472
It's gonna take a couple years to recover

800
00:30:13,472 --> 00:30:15,461
from it. And I think we're gonna have

801
00:30:15,461 --> 00:30:17,505
kind of a flat decade where we're not

802
00:30:17,624 --> 00:30:20,416
gonna have anything that really creates that big

803
00:30:20,416 --> 00:30:21,634
boom and expansion

804
00:30:22,171 --> 00:30:24,404
quickly like we had before. People think it's

805
00:30:24,404 --> 00:30:26,637
gonna be Ai, and there might be some

806
00:30:26,637 --> 00:30:28,722
of that. But I think that with all

807
00:30:28,722 --> 00:30:30,870
the wars and everything going on, there's there's

808
00:30:30,870 --> 00:30:32,722
clearly a move toward d

809
00:30:33,335 --> 00:30:35,721
globalization for national security purposes,

810
00:30:36,293 --> 00:30:38,755
as well as for energy independence.

811
00:30:39,232 --> 00:30:41,932
And so as the United States, for example,

812
00:30:42,250 --> 00:30:44,338
starts to say we need to bring back

813
00:30:44,648 --> 00:30:48,303
more manufacturing here to boom the economy and

814
00:30:48,303 --> 00:30:51,425
to stop these types of bottlenecks we experienced

815
00:30:51,481 --> 00:30:53,652
with. Covid and then through the war with

816
00:30:53,732 --> 00:30:55,250
Russia and and Ukraine.

817
00:30:56,209 --> 00:30:58,365
We res reassure things that costs a lot

818
00:30:58,365 --> 00:31:00,779
of money. And I think that that's gonna

819
00:31:00,779 --> 00:31:03,259
create a lot of inflation again. So I'm

820
00:31:03,259 --> 00:31:04,480
preparing for an immediate

821
00:31:04,860 --> 00:31:05,100
recession,

822
00:31:05,740 --> 00:31:08,144
and how I navigate that in the in

823
00:31:08,144 --> 00:31:10,373
the real estate classes that I think are

824
00:31:10,373 --> 00:31:13,398
good for that is balanced by my belief

825
00:31:13,398 --> 00:31:15,626
that after that recession and recovery,

826
00:31:16,199 --> 00:31:18,353
I think inflation is gonna rear its head

827
00:31:18,353 --> 00:31:20,109
again and the fed's gonna have to keep

828
00:31:20,109 --> 00:31:22,582
rates a little higher again. How low they

829
00:31:22,582 --> 00:31:24,111
go and whether they go back to the

830
00:31:24,111 --> 00:31:26,409
0 bound depends on how bad the recession

831
00:31:26,409 --> 00:31:28,153
is. I think they could go back there,

832
00:31:28,628 --> 00:31:31,140
especially if we have banks start to collapse

833
00:31:31,339 --> 00:31:32,853
But I don't think they stay there as

834
00:31:32,853 --> 00:31:34,924
long. I think they then start to see

835
00:31:34,924 --> 00:31:36,358
inflation, and they say, we gotta come back

836
00:31:36,358 --> 00:31:37,496
higher. So

837
00:31:37,952 --> 00:31:39,785
I think we're gonna have a flat decade

838
00:31:39,785 --> 00:31:40,820
for asset values.

839
00:31:41,315 --> 00:31:42,035
And maybe,

840
00:31:42,755 --> 00:31:45,555
more inflation over the time and and higher

841
00:31:45,555 --> 00:31:48,035
interest rates in the future. And that high

842
00:31:48,035 --> 00:31:49,174
level perspective

843
00:31:49,729 --> 00:31:52,509
is what drives the the answers to your

844
00:31:52,509 --> 00:31:55,448
questions about where I think real estate is

845
00:31:55,448 --> 00:31:55,766
good.

846
00:31:56,798 --> 00:31:59,125
What kind of places you should be investing

847
00:31:59,754 --> 00:32:01,590
I might have a different answer for the

848
00:32:01,590 --> 00:32:03,905
short term. In fact, I do than what

849
00:32:03,985 --> 00:32:06,141
I think if you're an investor that's looking

850
00:32:06,141 --> 00:32:08,137
for, you know, something to buy and and

851
00:32:08,137 --> 00:32:09,175
hold for a decade.

852
00:32:09,749 --> 00:32:12,066
Because short term investing, a lot of investors

853
00:32:12,066 --> 00:32:14,224
wanna go and they wanna flip houses. Right?

854
00:32:14,703 --> 00:32:16,941
They wanna do quick investments. They get in,

855
00:32:17,100 --> 00:32:17,580
they get out.

856
00:32:18,471 --> 00:32:21,576
It's very dangerous to flip properties when you're

857
00:32:21,576 --> 00:32:24,761
coming from a contraction, hitting a recession and

858
00:32:24,761 --> 00:32:27,724
gonna have a flat period or a decline

859
00:32:27,724 --> 00:32:28,383
in values

860
00:32:29,557 --> 00:32:30,992
and a slow recovery.

861
00:32:31,550 --> 00:32:33,544
Same thing with s. You know, I made

862
00:32:33,544 --> 00:32:35,153
a lot of money the last you know,

863
00:32:35,312 --> 00:32:38,016
5 years before this last year really because

864
00:32:38,016 --> 00:32:39,925
this last year has been really tough for

865
00:32:39,925 --> 00:32:42,966
a commercial real estate, but it made sense

866
00:32:42,966 --> 00:32:44,880
because we were in an expansion. So I

867
00:32:44,880 --> 00:32:47,193
could rely on... I can buy an apartment

868
00:32:47,193 --> 00:32:48,709
building. I can flip it in 2 to

869
00:32:48,709 --> 00:32:50,543
3 years and I probably am gonna be

870
00:32:50,543 --> 00:32:51,795
able to sell it for a whole lot

871
00:32:51,914 --> 00:32:54,698
more in an economy that's just continuing to

872
00:32:54,698 --> 00:32:57,641
expand. But when an economy contracting and may

873
00:32:57,641 --> 00:32:58,278
bottom out,

874
00:32:59,809 --> 00:33:00,309
your

875
00:33:00,690 --> 00:33:01,430
interest rates

876
00:33:01,890 --> 00:33:04,049
impact your values in commercial real estate,

877
00:33:04,930 --> 00:33:06,930
because investors want to make more than whatever

878
00:33:06,930 --> 00:33:09,420
the Us treasuries is paying, So if the

879
00:33:09,420 --> 00:33:11,965
treasury rate goes up, then the cap rate

880
00:33:11,965 --> 00:33:14,375
goes up. That means the value goes down

881
00:33:14,511 --> 00:33:16,818
of any kind of asset that's interest rate

882
00:33:16,818 --> 00:33:19,620
dependent. But if you have a recession, people

883
00:33:19,620 --> 00:33:22,010
can't pay rent, vacancies go up,

884
00:33:22,727 --> 00:33:24,241
you might still have higher costs.

885
00:33:24,733 --> 00:33:26,880
And that could also put pressure on value.

886
00:33:27,119 --> 00:33:27,857
So s

887
00:33:28,709 --> 00:33:31,571
apartments that you're gonna flip or self storage

888
00:33:31,571 --> 00:33:32,366
buildings or whatever.

889
00:33:33,018 --> 00:33:35,332
Becomes really dangerous in the period that we're

890
00:33:35,332 --> 00:33:38,203
in and going into a recession. If you

891
00:33:38,203 --> 00:33:40,356
have the wherewithal and you think we're already

892
00:33:40,356 --> 00:33:42,191
at the bottom, and you're gonna hold an

893
00:33:42,191 --> 00:33:43,642
asset for 10 years,

894
00:33:44,120 --> 00:33:46,034
then yes, it's a great time to go

895
00:33:46,034 --> 00:33:48,825
in and start buying some really distressed commercial

896
00:33:48,825 --> 00:33:50,899
real estate, but you have to understand it's

897
00:33:50,899 --> 00:33:53,145
gonna be a bumpy ride. And it's gonna

898
00:33:53,145 --> 00:33:55,532
take maybe 8 to 10 years to sell

899
00:33:55,532 --> 00:33:57,362
it for a profit instead of the 2

900
00:33:57,362 --> 00:33:59,844
to 3 years everybody gets used to. So

901
00:34:00,004 --> 00:34:01,203
I know I just said a lot, but

902
00:34:01,362 --> 00:34:03,919
I'll I'll pause there and and let you

903
00:34:03,919 --> 00:34:06,396
ask me questions. Yeah. No. I. This is

904
00:34:06,396 --> 00:34:07,650
really valuable because

905
00:34:08,246 --> 00:34:09,757
Bruce, I may just for a second. I

906
00:34:09,757 --> 00:34:09,836
think,

907
00:34:11,347 --> 00:34:13,652
understanding what is happening in the economy is

908
00:34:13,652 --> 00:34:16,038
1 thing, then there's all the interpretations. And

909
00:34:16,197 --> 00:34:18,605
I guess, I mean, they're there is different

910
00:34:18,605 --> 00:34:21,485
perspectives on where we are and projections for

911
00:34:21,485 --> 00:34:23,005
the future, and I really appreciate that you're

912
00:34:23,005 --> 00:34:23,505
saying

913
00:34:23,885 --> 00:34:26,844
you're listening to people outside of your space

914
00:34:26,844 --> 00:34:28,619
and your sphere. You're listening to people who've

915
00:34:28,619 --> 00:34:30,139
been through things before, but you're listening to

916
00:34:30,139 --> 00:34:33,179
different perspectives because it's allowing you to be

917
00:34:33,179 --> 00:34:35,430
able to form your own judgment about this

918
00:34:35,430 --> 00:34:37,581
and you're you're saying, well, this isn't the

919
00:34:37,581 --> 00:34:40,210
answer. This is my my perspective on this,

920
00:34:40,369 --> 00:34:40,869
but

921
00:34:41,246 --> 00:34:43,579
I I also recognize that you're saying there's

922
00:34:43,579 --> 00:34:46,240
a lot of risk in certain strategies

923
00:34:46,619 --> 00:34:47,119
specifically

924
00:34:47,500 --> 00:34:49,579
if you're planning to flip or you're in

925
00:34:49,579 --> 00:34:51,514
a position where You know your costs are

926
00:34:51,514 --> 00:34:54,230
gonna continue to go up. If you're not

927
00:34:54,230 --> 00:34:56,548
able to keep rents going the same direction.

928
00:34:56,708 --> 00:34:58,865
And if you have things like your interest

929
00:34:58,865 --> 00:34:59,365
rate

930
00:34:59,759 --> 00:35:02,556
that's driving what you're able to fund the

931
00:35:02,556 --> 00:35:04,394
property for. You have all these costs going

932
00:35:04,394 --> 00:35:06,392
up. You're in a position where you're not

933
00:35:06,392 --> 00:35:08,150
being able to make enough on the property

934
00:35:08,150 --> 00:35:08,650
to

935
00:35:09,044 --> 00:35:10,003
I mean, I don't know if that would

936
00:35:10,003 --> 00:35:11,762
be a bad strategy for even holding in

937
00:35:11,762 --> 00:35:12,661
this position

938
00:35:13,440 --> 00:35:15,358
in in where we currently are. So bruce,

939
00:35:15,597 --> 00:35:17,036
I'd like to have your thoughts, but I

940
00:35:17,196 --> 00:35:19,363
I really would like to come back to,

941
00:35:20,236 --> 00:35:22,617
you said that you can speak to why

942
00:35:22,617 --> 00:35:25,316
you think we're headed into a recession. So

943
00:35:25,316 --> 00:35:27,403
that... And then also just the state of

944
00:35:27,953 --> 00:35:30,265
commercial real estate and and where would be

945
00:35:30,265 --> 00:35:31,641
the ideal strategy

946
00:35:32,098 --> 00:35:35,207
for now and sure. And after the recession

947
00:35:35,207 --> 00:35:35,526
bruce

948
00:35:36,179 --> 00:35:37,695
wanted to hear you. No. Let's just stay

949
00:35:37,695 --> 00:35:39,132
let's just stay with that thought process. That's

950
00:35:39,132 --> 00:35:41,846
fine. Okay. Great. Yeah. You know, I think,

951
00:35:42,963 --> 00:35:44,161
generally speaking,

952
00:35:44,814 --> 00:35:47,146
if we talk about just just the current

953
00:35:47,522 --> 00:35:48,000
economy.

954
00:35:49,354 --> 00:35:49,673
I...

955
00:35:50,469 --> 00:35:52,222
Again, I listen to a lot of economists

956
00:35:52,222 --> 00:35:54,030
that have different views. And so

957
00:35:54,387 --> 00:35:57,012
I I realized that none of us have

958
00:35:57,012 --> 00:35:58,762
it figured out, and it's really hard to

959
00:35:58,762 --> 00:36:00,853
determine timing. You can see

960
00:36:01,324 --> 00:36:03,322
in these secular trends, they play out over

961
00:36:03,322 --> 00:36:05,879
a long period of time. And because different

962
00:36:05,879 --> 00:36:09,735
things spark different recessions, you don't necessarily know

963
00:36:10,608 --> 00:36:12,846
how deep a recession might get,

964
00:36:14,284 --> 00:36:16,621
meaning how bad it is. Right? Like, G

965
00:36:16,681 --> 00:36:19,478
really bad. But how diffuse that is, which

966
00:36:19,478 --> 00:36:21,619
means how broad it is across how many

967
00:36:21,619 --> 00:36:23,523
sectors does it impact? Because that makes a

968
00:36:23,523 --> 00:36:25,607
big difference as to how bad they are

969
00:36:25,607 --> 00:36:27,282
and how big you about bounce off as

970
00:36:27,282 --> 00:36:29,515
well. And then how bad and how broad

971
00:36:29,515 --> 00:36:31,509
they are can make them last a much

972
00:36:31,509 --> 00:36:33,445
longer time. But essentially,

973
00:36:35,434 --> 00:36:38,390
this recession is behaving very differently than than

974
00:36:38,390 --> 00:36:40,308
what some have in the past because it's

975
00:36:40,308 --> 00:36:43,105
preceded by so much unprecedented money.

976
00:36:43,840 --> 00:36:46,960
Helicopter money dumped into the economy as a

977
00:36:46,960 --> 00:36:47,920
response to Covid.

978
00:36:48,320 --> 00:36:48,820
So

979
00:36:49,119 --> 00:36:52,333
not only did did households get checks, small

980
00:36:52,333 --> 00:36:55,446
businesses got checked. Yeah. Big businesses got checked.

981
00:36:55,925 --> 00:36:59,038
Checks. We had so much money dumped into

982
00:36:59,038 --> 00:37:00,235
the financial system.

983
00:37:00,728 --> 00:37:03,108
That I believe it's kept a recession from

984
00:37:03,108 --> 00:37:05,727
happening sooner. I thought it would happen 2

985
00:37:05,727 --> 00:37:07,472
years ago. I thought there is no way.

986
00:37:08,044 --> 00:37:10,437
We're gonna have mass inflation, and then we're

987
00:37:10,437 --> 00:37:12,989
gonna have a deep recession. But there is

988
00:37:12,989 --> 00:37:15,222
something Lacy Hunt likes to call long and

989
00:37:15,222 --> 00:37:18,187
variable lags. You know, it it varies how

990
00:37:18,187 --> 00:37:20,492
long these legs are between peak and trough.

991
00:37:21,127 --> 00:37:23,137
You start to see him come down. But

992
00:37:23,193 --> 00:37:25,235
because we had so much money prop us

993
00:37:25,593 --> 00:37:27,583
investment values. A lot of people are sitting

994
00:37:27,583 --> 00:37:28,777
on a ton of equity,

995
00:37:29,573 --> 00:37:31,642
or they've created a lot of cash flow

996
00:37:31,642 --> 00:37:34,048
with their investments. And so what you see

997
00:37:34,048 --> 00:37:35,668
is you see kind of this bi

998
00:37:36,126 --> 00:37:37,985
economy, Rachel where you've got

999
00:37:38,444 --> 00:37:39,403
66

1000
00:37:39,403 --> 00:37:41,321
percent of American households as of the end

1001
00:37:41,321 --> 00:37:43,413
of May. We're living check to check. And

1002
00:37:43,413 --> 00:37:46,038
that's even people making, you know, 250000

1003
00:37:46,038 --> 00:37:48,765
dollars a year. So people are listening to

1004
00:37:48,981 --> 00:37:49,777
inflation too. Right?

1005
00:37:50,748 --> 00:37:52,506
Exactly. Because the cost of living has gone

1006
00:37:52,506 --> 00:37:55,462
a ballpark 24 percent for the average American

1007
00:37:55,462 --> 00:37:57,434
in 2 and a half years. And so

1008
00:37:57,633 --> 00:37:59,617
when cost of living has gone up that

1009
00:37:59,617 --> 00:38:01,521
much. And those are things that are really

1010
00:38:01,521 --> 00:38:03,346
kind of locked in. You know, we talk

1011
00:38:03,346 --> 00:38:05,904
about inflation coming down. Doesn't mean prices are

1012
00:38:05,904 --> 00:38:07,575
ever going back to where they were. It

1013
00:38:07,575 --> 00:38:09,349
just means the rate of continued

1014
00:38:09,884 --> 00:38:13,401
inflation is lower than it was before. But

1015
00:38:13,401 --> 00:38:15,071
prices are still going up. So when you

1016
00:38:15,071 --> 00:38:18,253
have 66 percent of the population, literally living

1017
00:38:18,253 --> 00:38:19,208
check to check to check.

1018
00:38:19,939 --> 00:38:22,731
That gives you 34 percent of the population

1019
00:38:22,731 --> 00:38:25,304
that's doing fine. And so those

1020
00:38:25,762 --> 00:38:29,611
institutional investors, those family offices, those wealthier people

1021
00:38:30,005 --> 00:38:32,164
Yes, our costs have gone up, but we

1022
00:38:32,164 --> 00:38:34,405
can weather it. So you look at things

1023
00:38:34,405 --> 00:38:36,885
like vacations, You know, vacations, there was all

1024
00:38:36,885 --> 00:38:39,212
this revenge spending. There was a survey that

1025
00:38:39,212 --> 00:38:41,358
just came out Rachel. I just read it

1026
00:38:41,358 --> 00:38:43,344
a couple days ago, maybe a week and

1027
00:38:43,344 --> 00:38:45,728
a half ago, and it asked people, are

1028
00:38:45,728 --> 00:38:48,047
you living check to check yes or no.

1029
00:38:48,604 --> 00:38:51,147
Are you taking a vacation? Yes or no,

1030
00:38:51,385 --> 00:38:53,213
And are you putting it on credit yes

1031
00:38:53,213 --> 00:38:55,934
or no? And of, I mean, the vast

1032
00:38:55,934 --> 00:38:58,166
majority of people are still taking a vacation,

1033
00:38:58,405 --> 00:38:59,760
and they're putting it on credit.

1034
00:39:00,318 --> 00:39:02,333
So people are still spending

1035
00:39:02,963 --> 00:39:03,860
they're hoping,

1036
00:39:04,235 --> 00:39:06,938
it's different this time. My job's is gonna

1037
00:39:06,938 --> 00:39:09,244
be okay. I'm gonna put it on debt,

1038
00:39:09,483 --> 00:39:10,994
and then the fed's gonna cut rates and

1039
00:39:10,994 --> 00:39:12,838
things are gonna go back to normal. So

1040
00:39:12,838 --> 00:39:14,511
not only are they living check to check,

1041
00:39:14,670 --> 00:39:17,061
but they're increasing their debt. And now we're

1042
00:39:17,061 --> 00:39:19,371
starting to see big defaults in credit card

1043
00:39:19,371 --> 00:39:22,574
debt? In auto loans. Now that people are

1044
00:39:22,574 --> 00:39:23,849
having to repay their

1045
00:39:24,328 --> 00:39:25,125
student loans.

1046
00:39:25,603 --> 00:39:28,728
They're deb defaulting on student loans, we're starting

1047
00:39:28,728 --> 00:39:31,286
to actually see an uptick in foreclosure from

1048
00:39:31,286 --> 00:39:33,603
people who had their homes not have to

1049
00:39:33,603 --> 00:39:35,521
pay during Covid. They tacked it on the

1050
00:39:35,521 --> 00:39:38,425
back end. So we see a really stretched

1051
00:39:38,641 --> 00:39:39,119
consumer,

1052
00:39:39,675 --> 00:39:42,459
but we haven't technically been in recession because

1053
00:39:42,459 --> 00:39:44,947
there's just these little pockets that pop up

1054
00:39:45,179 --> 00:39:47,333
that have just enough growth that it keeps

1055
00:39:47,412 --> 00:39:50,044
Gdp just, you know, just high enough that

1056
00:39:50,044 --> 00:39:50,943
we're not technically

1057
00:39:51,559 --> 00:39:53,815
in the 2 quarters of negative Gdp

1058
00:39:54,192 --> 00:39:54,830
definition of recession.

1059
00:39:55,639 --> 00:39:56,139
However,

1060
00:39:57,385 --> 00:40:00,005
again, when 66 percent of your population is

1061
00:40:00,005 --> 00:40:02,148
stretched and can't stretch any further,

1062
00:40:02,799 --> 00:40:04,098
that does finally

1063
00:40:05,356 --> 00:40:07,273
impact the consumer where they stop spending. And

1064
00:40:07,273 --> 00:40:10,716
once they stop spending on most areas, you

1065
00:40:10,716 --> 00:40:13,813
know, most discretionary spending in the country, that

1066
00:40:13,813 --> 00:40:14,051
does,

1067
00:40:14,686 --> 00:40:16,989
cause pressure on employers. You start to see

1068
00:40:16,989 --> 00:40:17,386
layoffs,

1069
00:40:18,197 --> 00:40:20,268
you start to see cut pricing and you

1070
00:40:20,268 --> 00:40:22,601
start to see that inflation coming down. So

1071
00:40:22,658 --> 00:40:24,411
recession really is the cure for inflation.

1072
00:40:25,144 --> 00:40:25,644
Unfortunately.

1073
00:40:26,742 --> 00:40:28,740
But we're seeing all of that now, Rachel.

1074
00:40:28,900 --> 00:40:31,217
And so, yes, we're not technically in a

1075
00:40:31,217 --> 00:40:33,703
recession from the standpoint of 2 quarters of

1076
00:40:33,703 --> 00:40:34,600
negative Gdp.

1077
00:40:36,005 --> 00:40:37,512
But when you look at employment, you know,

1078
00:40:37,671 --> 00:40:40,942
people say employment so low. So I like

1079
00:40:40,942 --> 00:40:43,096
to to once a week, I'll hop on

1080
00:40:43,175 --> 00:40:43,654
Cnn

1081
00:40:44,213 --> 00:40:46,127
Msnbc and fix. I I don't get my

1082
00:40:46,127 --> 00:40:47,961
news from network news, but I'll just listen

1083
00:40:47,961 --> 00:40:49,476
to what they have to say, especially on

1084
00:40:49,476 --> 00:40:52,769
their financial stuff. And, you know, 1 channel's

1085
00:40:52,769 --> 00:40:55,010
gonna say, the economy booming,

1086
00:40:55,570 --> 00:40:57,809
unemployment is still at record lows. All these

1087
00:40:57,809 --> 00:40:59,735
people that say that it's not our doers,

1088
00:40:59,894 --> 00:41:01,403
and they just don't want Biden to win.

1089
00:41:01,642 --> 00:41:03,946
Right? And then they'll... The other channel will

1090
00:41:03,946 --> 00:41:04,184
say,

1091
00:41:05,376 --> 00:41:08,255
the consumer is stretched. We have up uptick

1092
00:41:08,255 --> 00:41:08,755
in,

1093
00:41:09,211 --> 00:41:11,043
you know, all of the new job creation,

1094
00:41:11,202 --> 00:41:13,831
and this is true is federal jobs.

1095
00:41:14,404 --> 00:41:16,482
And it's part time work. There are no

1096
00:41:16,482 --> 00:41:20,079
new net jobs created. And therefore the economy

1097
00:41:20,079 --> 00:41:22,476
is struggling. And then if you listen to

1098
00:41:22,476 --> 00:41:23,915
in, they say you just want Trump to

1099
00:41:23,915 --> 00:41:26,238
win. So, you know, it's it's always done

1100
00:41:26,238 --> 00:41:27,988
with a political spin, but I like to

1101
00:41:27,988 --> 00:41:29,977
look at the actual data. And what I'm

1102
00:41:29,977 --> 00:41:31,902
seeing in the data that's convinced me that

1103
00:41:31,902 --> 00:41:33,572
we are in a recession, And I believe

1104
00:41:33,572 --> 00:41:35,481
we have been since the end of last

1105
00:41:35,481 --> 00:41:37,810
year, at least the third the fourth quarter

1106
00:41:38,106 --> 00:41:41,541
is that when you look at real employment

1107
00:41:41,541 --> 00:41:44,960
numbers, and you look at the adjustments for

1108
00:41:44,960 --> 00:41:47,744
what was told the employment numbers are. You

1109
00:41:47,744 --> 00:41:48,483
will see

1110
00:41:48,794 --> 00:41:51,428
that there has been no net new jobs

1111
00:41:51,428 --> 00:41:53,742
in the private sector. So, in other words,

1112
00:41:53,902 --> 00:41:55,658
the number of people leaving and, you know,

1113
00:41:55,898 --> 00:41:57,116
going into unemployment

1114
00:41:57,428 --> 00:41:59,517
or moving to part time jobs

1115
00:41:59,971 --> 00:42:01,822
has exceeded the number of

1116
00:42:02,196 --> 00:42:04,500
actual jobs created by the private sector.

1117
00:42:04,994 --> 00:42:06,675
There's some stats that I I look at,

1118
00:42:06,835 --> 00:42:08,914
a lot, a lot of data and go

1119
00:42:08,914 --> 00:42:10,594
back and look at prior recessions, and there

1120
00:42:10,594 --> 00:42:12,195
are stats that show you that when more

1121
00:42:12,195 --> 00:42:15,483
than 20 percent of jobs created our federal

1122
00:42:15,483 --> 00:42:18,034
or health care. You almost always have an

1123
00:42:18,034 --> 00:42:20,506
immediate recession. Well, that was the case of,

1124
00:42:20,586 --> 00:42:23,793
for the last quarter of of 20 23.

1125
00:42:24,273 --> 00:42:26,430
The other thing about unemployment numbers is they're

1126
00:42:26,430 --> 00:42:28,667
often revised backwards. So we were told that

1127
00:42:28,667 --> 00:42:30,365
there was a job creation

1128
00:42:30,679 --> 00:42:31,476
up about,

1129
00:42:32,035 --> 00:42:33,072
600000,

1130
00:42:33,391 --> 00:42:35,465
I believe the number was for the last

1131
00:42:35,465 --> 00:42:36,820
quarter of 20 23.

1132
00:42:37,139 --> 00:42:38,416
But when you go back and look at

1133
00:42:38,416 --> 00:42:40,351
the revisions, we actually lost

1134
00:42:40,825 --> 00:42:42,265
780000

1135
00:42:42,265 --> 00:42:44,744
full time jobs. It was all part time

1136
00:42:44,744 --> 00:42:47,305
jobs. So we had a negative. We had

1137
00:42:47,305 --> 00:42:49,875
job losses for the last quarter. But they

1138
00:42:49,875 --> 00:42:51,938
know they don't really tout the revision. They

1139
00:42:51,938 --> 00:42:53,945
just tell you what it was. And so

1140
00:42:54,159 --> 00:42:55,190
when you look at that,

1141
00:42:56,063 --> 00:42:57,704
part of the reason there's this big disk

1142
00:42:57,903 --> 00:43:00,052
connect an employment number. So I'm I'm really

1143
00:43:00,052 --> 00:43:03,417
focusing yes on Gdp, but more so unemployment

1144
00:43:03,793 --> 00:43:06,919
because employment is really what drives continued Gdp,

1145
00:43:07,469 --> 00:43:10,101
and a loss of employment, unemployment is really

1146
00:43:10,101 --> 00:43:12,574
what what leads into a recession.

1147
00:43:13,451 --> 00:43:14,727
Employment is always.

1148
00:43:15,365 --> 00:43:17,141
Unemployment is always the lowest

1149
00:43:17,614 --> 00:43:20,407
just before a recession. But everybody always says

1150
00:43:20,407 --> 00:43:22,242
an unemployment low, so we can't have a

1151
00:43:22,242 --> 00:43:24,398
recession. Statistically, if you go back and look,

1152
00:43:24,557 --> 00:43:26,885
it hits its lowest, and then suddenly, it

1153
00:43:26,885 --> 00:43:29,275
starts to tick up. And there's 2 recession

1154
00:43:29,275 --> 00:43:32,542
rules that have been accurate. Hundred percent accuracy

1155
00:43:32,542 --> 00:43:33,235
just like

1156
00:43:33,752 --> 00:43:35,821
the inverted yield curve is a hundred percent

1157
00:43:35,821 --> 00:43:38,766
accurate predicting a recession. Right? And that's been

1158
00:43:38,766 --> 00:43:40,597
inverted for, I think 2 years now Bruce

1159
00:43:40,597 --> 00:43:41,791
still have to correct me on the data.

1160
00:43:42,030 --> 00:43:44,119
No No. Just I was gonna say about

1161
00:43:44,119 --> 00:43:46,199
2 years. Yes. Yeah. So, you know, it's

1162
00:43:46,199 --> 00:43:47,559
been a long time, but there's a there's

1163
00:43:47,559 --> 00:43:49,320
a rule called them a covey rule, and

1164
00:43:49,320 --> 00:43:51,413
there's a rule called the sa rule. And

1165
00:43:51,413 --> 00:43:54,379
the Mackenzie rule basically looks at any

1166
00:43:54,754 --> 00:43:57,299
month to month change for a 3 month

1167
00:43:57,299 --> 00:43:57,777
period.

1168
00:43:58,348 --> 00:44:00,020
That is a 0.3

1169
00:44:00,020 --> 00:44:02,966
percent change in unemployment. So when unemployment ticks

1170
00:44:02,966 --> 00:44:05,991
up 0.3 percent month over month for 3

1171
00:44:05,991 --> 00:44:07,382
months, it always

1172
00:44:07,836 --> 00:44:10,540
indicates a recession is immediately there. And then

1173
00:44:10,540 --> 00:44:12,552
the sum rule is 0.5

1174
00:44:12,608 --> 00:44:14,438
percent on a quarter over quarter basis.

1175
00:44:15,168 --> 00:44:18,191
As of the end of May, 21

1176
00:44:18,191 --> 00:44:21,771
states had hit sum rule. So 21 states

1177
00:44:21,771 --> 00:44:23,559
out a 50 are in

1178
00:44:24,014 --> 00:44:24,514
recession

1179
00:44:24,889 --> 00:44:28,073
according to the employment, the unemployment ticking up,

1180
00:44:28,789 --> 00:44:31,517
and there are, I think 36

1181
00:44:31,749 --> 00:44:34,306
states that when you look at their unemployment

1182
00:44:34,306 --> 00:44:37,842
numbers versus their employment numbers are technically in

1183
00:44:38,061 --> 00:44:41,668
recession already. From an unemployment standpoint. So when

1184
00:44:41,668 --> 00:44:43,286
you look at the fact that

1185
00:44:43,903 --> 00:44:46,058
more, you know, around half, give or take

1186
00:44:46,058 --> 00:44:47,095
of Us states,

1187
00:44:47,668 --> 00:44:48,644
have growing

1188
00:44:49,016 --> 00:44:49,413
unemployment.

1189
00:44:50,047 --> 00:44:52,269
The employment that is there is mostly part

1190
00:44:52,269 --> 00:44:54,331
time jobs and not full time. It is

1191
00:44:54,331 --> 00:44:56,815
a telltale sign that you are in recession.

1192
00:44:57,054 --> 00:44:58,828
It's just not gonna be declared

1193
00:44:59,284 --> 00:45:02,072
until that ticks into 2 negative quarters a

1194
00:45:02,072 --> 00:45:03,425
quarters of negative Gdp.

1195
00:45:03,839 --> 00:45:06,074
Where Gdp is down below the rate of

1196
00:45:06,074 --> 00:45:08,469
inflation essentially. So there's different measures for that.

1197
00:45:09,266 --> 00:45:11,900
But I see in these unemployment numbers and

1198
00:45:11,900 --> 00:45:13,830
the fact that 2 thirds of households are

1199
00:45:13,830 --> 00:45:16,302
living check to check that the only thing

1200
00:45:16,302 --> 00:45:19,014
really keeping the nation of afloat in terms

1201
00:45:19,014 --> 00:45:21,587
of positive Gdp is government spending

1202
00:45:22,140 --> 00:45:23,180
health spending,

1203
00:45:23,579 --> 00:45:24,800
and it has been

1204
00:45:26,140 --> 00:45:28,400
the way that the Us government calculates

1205
00:45:29,911 --> 00:45:33,240
rental income, the the value of of, the

1206
00:45:33,240 --> 00:45:34,905
cost of living, the cost of having a

1207
00:45:34,905 --> 00:45:36,966
home. It's it's owners equivalent rent.

1208
00:45:37,776 --> 00:45:40,322
That insure and insurance are basically the things

1209
00:45:40,322 --> 00:45:43,265
that are keeping Gdp high, some travel,

1210
00:45:43,742 --> 00:45:45,890
almost everything else is in negative territory.

1211
00:45:46,224 --> 00:45:47,902
The last thing I'll say here because there's

1212
00:45:47,902 --> 00:45:49,661
just so much data, and then I'll I'll

1213
00:45:49,661 --> 00:45:51,498
shift gears for you. But the last thing

1214
00:45:51,498 --> 00:45:52,797
is if you look at Ism

1215
00:45:53,257 --> 00:45:54,855
manufacturing reports. Generally,

1216
00:45:55,428 --> 00:45:58,689
we need manufacturing to continue to create production

1217
00:45:58,689 --> 00:46:00,381
in this country. And

1218
00:46:00,756 --> 00:46:03,858
manufacturing is in a manufacturing recession Again, it

1219
00:46:03,858 --> 00:46:06,022
was in 20 19 just before Covid, but

1220
00:46:06,022 --> 00:46:07,538
it's there. And

1221
00:46:08,175 --> 00:46:10,568
the the surveys on manufacturing companies are that

1222
00:46:10,568 --> 00:46:13,041
they are about to lay off significant numbers

1223
00:46:13,041 --> 00:46:15,035
of people because they just are not selling

1224
00:46:15,035 --> 00:46:17,286
what they need to. And so all those

1225
00:46:17,286 --> 00:46:19,523
things are recession and they make me believe

1226
00:46:19,523 --> 00:46:21,920
we really are in a recession. I just

1227
00:46:21,920 --> 00:46:24,322
don't think it's gonna be declared until 1

1228
00:46:24,322 --> 00:46:26,467
of 2 things happen. We get past November

1229
00:46:26,467 --> 00:46:29,090
and the elections done. Does the N and

1230
00:46:29,090 --> 00:46:31,256
the Fed don't wanna accused of of making

1231
00:46:31,256 --> 00:46:33,570
political decisions with their rates and with what

1232
00:46:33,570 --> 00:46:36,603
they do. And number 2, if you had

1233
00:46:36,603 --> 00:46:37,502
a major

1234
00:46:38,612 --> 00:46:40,784
number of banks start to fail

1235
00:46:41,320 --> 00:46:43,651
immediately or a huge impact

1236
00:46:44,187 --> 00:46:47,307
in mass layoffs between now and November I

1237
00:46:47,307 --> 00:46:49,455
think the N will declare it and they'll

1238
00:46:49,455 --> 00:46:51,046
go back to the fourth quarter to say

1239
00:46:51,046 --> 00:46:52,557
we've been in the recession that long.

1240
00:46:54,963 --> 00:46:57,760
So stating after the fact. But you're looking

1241
00:46:57,760 --> 00:46:59,996
in. It's always after the fact. Yeah. Exactly.

1242
00:47:00,476 --> 00:47:03,282
They they're always late. It's usually... I don't

1243
00:47:03,282 --> 00:47:04,716
remember the exact data because they're all different,

1244
00:47:04,876 --> 00:47:06,332
but it's close to a year

1245
00:47:07,027 --> 00:47:08,722
before they actually declare

1246
00:47:09,034 --> 00:47:11,432
that you started a recession close to a

1247
00:47:11,432 --> 00:47:13,849
year ago. And by then, you're usually

1248
00:47:14,228 --> 00:47:16,706
almost out of it. But it's not till

1249
00:47:16,706 --> 00:47:17,765
it's declared

1250
00:47:18,319 --> 00:47:19,219
that really

1251
00:47:19,757 --> 00:47:22,635
employ, you know, employer start mass layoffs. Once

1252
00:47:22,635 --> 00:47:25,991
it's declared, I mean, that's when employment really

1253
00:47:25,991 --> 00:47:28,553
starts to come down and unemployment really goes

1254
00:47:28,553 --> 00:47:30,856
up, and then you kinda see the depth

1255
00:47:30,856 --> 00:47:32,682
of the recession on the tail end of

1256
00:47:32,682 --> 00:47:34,746
the recession, not at the beginning because people

1257
00:47:34,746 --> 00:47:36,097
don't recognize it at the beginning.

1258
00:47:36,908 --> 00:47:38,982
And that's after that is when the Fed

1259
00:47:38,982 --> 00:47:41,454
really cuts rates. And by the way, when

1260
00:47:41,454 --> 00:47:44,028
the Fed cuts rates, it's kinda counterintuitive.

1261
00:47:44,405 --> 00:47:46,341
It says for the world and the company's

1262
00:47:46,574 --> 00:47:48,964
U, we really are now in a recession

1263
00:47:49,043 --> 00:47:51,274
And that's typically when you see stock market

1264
00:47:51,274 --> 00:47:52,071
values correct,

1265
00:47:52,947 --> 00:47:54,780
and you start to see people panic that

1266
00:47:54,780 --> 00:47:55,735
we're in a recession.

1267
00:47:56,467 --> 00:47:58,376
And and then it just kinda gets worse

1268
00:47:58,376 --> 00:48:01,319
until, you know, people get that confidence back

1269
00:48:01,319 --> 00:48:02,512
to start investing again.

1270
00:48:03,324 --> 00:48:05,422
Oh, this is so rich. Just

1271
00:48:05,881 --> 00:48:08,458
particularly because you're bringing so much data and

1272
00:48:08,837 --> 00:48:10,675
analysis of that data. I mean,

1273
00:48:11,407 --> 00:48:12,916
we're getting close to the end of our

1274
00:48:12,916 --> 00:48:14,345
time here. So I wanna make sure that

1275
00:48:14,345 --> 00:48:16,012
we're able to leave a little bit of

1276
00:48:16,012 --> 00:48:18,180
space for you to really just talk about

1277
00:48:18,315 --> 00:48:20,244
kind of coming back to Bruce's question

1278
00:48:20,793 --> 00:48:22,463
what do you see? And I know that...

1279
00:48:22,622 --> 00:48:24,213
This is a a big topic, and this

1280
00:48:24,213 --> 00:48:25,724
is stuff that you could probably talk for

1281
00:48:25,724 --> 00:48:26,781
hours on, but

1282
00:48:27,966 --> 00:48:30,190
coming from where we stand right now, what

1283
00:48:30,190 --> 00:48:32,017
are the risks that you're seeing in commercial

1284
00:48:32,017 --> 00:48:34,162
real estate? And what are you seeing as

1285
00:48:34,162 --> 00:48:37,045
the ideal place to be now and

1286
00:48:38,309 --> 00:48:38,548
Absolutely.

1287
00:48:39,662 --> 00:48:41,412
Absolutely. So I'll say at a high level.

1288
00:48:41,890 --> 00:48:43,879
I'll talk commercial, and then I'll talk residential

1289
00:48:43,879 --> 00:48:46,607
just because most investors were Rachel are residential.

1290
00:48:46,997 --> 00:48:49,143
Most are not playing in the commercial, you

1291
00:48:49,143 --> 00:48:51,289
know, syndicated space that I'm I'm playing in.

1292
00:48:52,164 --> 00:48:54,389
Commercial has much more risk right now than

1293
00:48:54,389 --> 00:48:56,795
than residential does. It just does. And it's

1294
00:48:56,795 --> 00:48:57,295
because

1295
00:48:57,914 --> 00:49:01,034
commercial loans unlike residential are not locked for

1296
00:49:01,034 --> 00:49:03,275
30 years. We don't get to set our

1297
00:49:03,275 --> 00:49:05,607
rate and, you know, we didn't get to

1298
00:49:05,607 --> 00:49:07,525
borrow it 3 or 4 and lock that

1299
00:49:07,525 --> 00:49:10,242
for 30. So what happens with commercial loans

1300
00:49:10,242 --> 00:49:13,945
is they're typically done for 2 years. Sometimes

1301
00:49:14,320 --> 00:49:16,548
just for multi family, there's Fannie Mae and

1302
00:49:16,628 --> 00:49:18,537
Freddie Mac Financing. So we can lock a

1303
00:49:18,537 --> 00:49:20,526
loan term up to 10 years for those.

1304
00:49:21,018 --> 00:49:22,688
If the property is stable when you buy

1305
00:49:22,688 --> 00:49:25,233
it, meaning it's 90 percent occupied. So you're

1306
00:49:25,233 --> 00:49:27,220
not buying those to do heavy value ads,

1307
00:49:27,379 --> 00:49:29,302
you're buying those to buy and hold. You

1308
00:49:29,302 --> 00:49:31,528
might do some value add increase the values

1309
00:49:31,528 --> 00:49:33,755
and then you wanna sell them after 10

1310
00:49:33,755 --> 00:49:35,743
years. But a lot of investors were using

1311
00:49:35,743 --> 00:49:38,221
those for multi family and then selling them

1312
00:49:38,221 --> 00:49:40,865
after 2 to 3 and taking a huge

1313
00:49:40,922 --> 00:49:43,225
prep payment penalty for locking in those rates.

1314
00:49:43,384 --> 00:49:45,210
And that's why a lot of investors wouldn't

1315
00:49:45,210 --> 00:49:46,402
use Fannie Mae.

1316
00:49:46,973 --> 00:49:49,516
Because they might have A23 million dollar prepaid

1317
00:49:49,516 --> 00:49:51,742
penalty to sell that property before the 10

1318
00:49:51,742 --> 00:49:54,205
year term. So instead, they did bridge debt.

1319
00:49:54,538 --> 00:49:56,125
Or they went to a small bank to

1320
00:49:56,125 --> 00:49:58,425
get their loans, and they typically lock your

1321
00:49:58,425 --> 00:50:00,568
rate and sometimes your term is only up

1322
00:50:00,568 --> 00:50:02,472
to... It's either 2 years or 5 years.

1323
00:50:02,964 --> 00:50:04,719
And you can lock your rate for 2

1324
00:50:04,719 --> 00:50:07,292
to 5 years. But after that, the rates

1325
00:50:07,351 --> 00:50:09,823
reset. And so you have a lot of

1326
00:50:09,823 --> 00:50:12,376
deals that were done in 20 21 and

1327
00:50:12,376 --> 00:50:13,610
20 22

1328
00:50:13,829 --> 00:50:16,650
with a 2 year bridge loan and maybe

1329
00:50:16,869 --> 00:50:20,630
2 1 year extensions. So through 20 25,

1330
00:50:20,963 --> 00:50:23,110
and even into part of 20 26,

1331
00:50:23,507 --> 00:50:25,416
you're gonna see a lot of operators who

1332
00:50:25,416 --> 00:50:28,436
got loans at literally 3 4 percent.

1333
00:50:29,088 --> 00:50:31,640
Now they're going to refinance those debt... Those

1334
00:50:31,640 --> 00:50:34,031
loans and they're 09:10

1335
00:50:34,031 --> 00:50:37,514
11 percent. So you you simply cannot make

1336
00:50:37,714 --> 00:50:40,266
the new payment work. You'll be upside down

1337
00:50:40,266 --> 00:50:42,500
in cash flow that makes you ins installment,

1338
00:50:42,659 --> 00:50:44,494
and you gotta hand over the keys. You're

1339
00:50:44,494 --> 00:50:46,886
done. You've lost all your equity. You've lost

1340
00:50:46,886 --> 00:50:49,797
all your work. You can't refinance a property

1341
00:50:50,336 --> 00:50:52,413
that is worth today than it was when

1342
00:50:52,413 --> 00:50:54,890
you bought it in most cases. So today,

1343
00:50:55,303 --> 00:50:57,848
because that treasury rate went from, literally, you

1344
00:50:57,848 --> 00:51:00,950
know, like 1 up to, you know, almost

1345
00:51:00,950 --> 00:51:03,279
to 5 at some point, your

1346
00:51:03,909 --> 00:51:05,907
treasury rate is considered the risk free rate

1347
00:51:05,907 --> 00:51:08,783
of return went up so high, that then

1348
00:51:08,783 --> 00:51:09,262
your

1349
00:51:09,661 --> 00:51:11,280
cap rate, the the

1350
00:51:11,911 --> 00:51:14,770
for for high level, the cash on cash

1351
00:51:14,770 --> 00:51:16,994
return you demand for owning that asset if

1352
00:51:16,994 --> 00:51:19,059
you paid cash has gone up above the

1353
00:51:19,059 --> 00:51:20,647
treasury. So now it should be 6 or

1354
00:51:20,647 --> 00:51:22,969
7 percent. But when you bought a property

1355
00:51:22,969 --> 00:51:24,641
at a 3 or 4 cap, and you

1356
00:51:24,641 --> 00:51:26,471
have to sell it or refinance it at

1357
00:51:26,471 --> 00:51:28,779
a 7 cap, it's taken about a 20

1358
00:51:28,779 --> 00:51:30,450
to 40 percent hidden in value.

1359
00:51:30,863 --> 00:51:32,536
So when you wanna go ref refill, it

1360
00:51:32,536 --> 00:51:34,369
doesn't matter that it's cash flowing, it doesn't

1361
00:51:34,369 --> 00:51:36,600
matter that it's doing good. Even if you

1362
00:51:36,600 --> 00:51:38,273
could get a lower rate next year if

1363
00:51:38,273 --> 00:51:40,106
the Fed cuts rates because of a recession,

1364
00:51:40,679 --> 00:51:43,225
your value and your cap rate your value

1365
00:51:43,225 --> 00:51:45,532
is lower. Your cap rate is higher. Most

1366
00:51:45,532 --> 00:51:47,601
people don't have the cash to cash in.

1367
00:51:48,095 --> 00:51:50,015
To keep their loan to value rate the

1368
00:51:50,015 --> 00:51:51,135
same as where it was when they bought

1369
00:51:51,135 --> 00:51:52,655
it, So they're losing properties.

1370
00:51:52,974 --> 00:51:54,355
So that's gonna create

1371
00:51:54,735 --> 00:51:57,309
big risk. The risk of buying today. The

1372
00:51:57,309 --> 00:51:58,829
good thing about buying today is if you

1373
00:51:58,829 --> 00:52:00,829
have the funds, You can raise money. You're

1374
00:52:00,829 --> 00:52:02,449
a family office. You have

1375
00:52:02,750 --> 00:52:04,429
tens of millions tens of dollars,

1376
00:52:04,843 --> 00:52:06,908
you can buy properties on pennies of the

1377
00:52:06,908 --> 00:52:09,052
dollar compared to where they were 2 years

1378
00:52:09,052 --> 00:52:11,672
ago. The risk is that you think that

1379
00:52:11,672 --> 00:52:13,419
they're gonna go back to a really low

1380
00:52:13,419 --> 00:52:15,348
cap rate rates are gonna go right back

1381
00:52:15,348 --> 00:52:15,987
to 0.

1382
00:52:16,547 --> 00:52:18,305
And if rates don't go right back to

1383
00:52:18,305 --> 00:52:20,382
0 and the cap rates stay higher, then

1384
00:52:20,382 --> 00:52:22,540
you have more inflation in the next couple

1385
00:52:22,540 --> 00:52:22,940
of years,

1386
00:52:23,515 --> 00:52:25,434
that cap rate will go right back up,

1387
00:52:25,755 --> 00:52:28,394
and you could actually have the same problem

1388
00:52:28,394 --> 00:52:30,555
that people are having today. So you've gotta

1389
00:52:30,555 --> 00:52:33,193
be really careful in commercial real estate. You

1390
00:52:33,193 --> 00:52:34,858
can buy on pennies in the dollar today.

1391
00:52:35,255 --> 00:52:37,237
But you've gotta have the wherewithal that you

1392
00:52:37,237 --> 00:52:39,085
have a low loan to value loan

1393
00:52:39,473 --> 00:52:41,639
you have the wherewithal to handle

1394
00:52:42,012 --> 00:52:44,313
the cap rate tomorrow being higher than it

1395
00:52:44,313 --> 00:52:46,590
is today. And you know you have the

1396
00:52:46,709 --> 00:52:48,778
experience to get that net operating income up

1397
00:52:48,778 --> 00:52:51,245
high enough that if your income high, even

1398
00:52:51,245 --> 00:52:53,235
if your cap rate goes up, which would

1399
00:52:53,235 --> 00:52:56,115
bring values down, that increased income will bring

1400
00:52:56,115 --> 00:52:58,343
values back up to kinda balance it. So

1401
00:52:58,343 --> 00:52:59,855
you've gotta be in it for the long

1402
00:52:59,855 --> 00:53:01,446
term hold if you're buying today,

1403
00:53:02,099 --> 00:53:03,934
not buying thinking you're gonna turn it in

1404
00:53:03,934 --> 00:53:05,690
3 years and and make money the same

1405
00:53:05,690 --> 00:53:07,286
way you did during the height of the

1406
00:53:07,286 --> 00:53:09,360
economy. So that's the biggest thing with commercial.

1407
00:53:09,933 --> 00:53:11,440
The other thing is you've gotta know your

1408
00:53:11,440 --> 00:53:13,208
market. So the good thing is

1409
00:53:13,739 --> 00:53:16,356
most commercial about properties go up in value

1410
00:53:16,356 --> 00:53:17,387
in really big cities.

1411
00:53:18,037 --> 00:53:20,761
Because they're traded by big funds that want

1412
00:53:20,817 --> 00:53:21,771
stable economies,

1413
00:53:22,247 --> 00:53:25,107
stable local economies with lots of employers, lots

1414
00:53:25,107 --> 00:53:25,901
of employees,

1415
00:53:26,393 --> 00:53:27,981
so that even if there's a recession, their

1416
00:53:28,140 --> 00:53:30,363
Gdp is gonna bounce stock faster than the

1417
00:53:30,363 --> 00:53:32,507
nation. So you wanna invest in those big

1418
00:53:32,507 --> 00:53:33,937
cities that are good employers.

1419
00:53:34,349 --> 00:53:35,867
But at the same time, that's where a

1420
00:53:35,867 --> 00:53:38,105
lot of commercial real estate was built over

1421
00:53:38,105 --> 00:53:40,123
the last couple of years. So there's massive

1422
00:53:40,182 --> 00:53:42,100
overs supply in some of these markets.

1423
00:53:42,594 --> 00:53:44,429
Because they thought people would keep coming like

1424
00:53:44,429 --> 00:53:46,981
they did from Covid, so that's gonna impact

1425
00:53:46,981 --> 00:53:49,534
value. So commercial real estate right now. It's

1426
00:53:49,534 --> 00:53:51,687
for those that are greedy, when others are

1427
00:53:51,687 --> 00:53:52,086
fearful.

1428
00:53:52,579 --> 00:53:54,175
And they've gotta have a really good game

1429
00:53:54,175 --> 00:53:56,010
plan with, you know, option A, b and

1430
00:53:56,170 --> 00:53:58,904
C for their exit. When it comes to

1431
00:53:59,122 --> 00:53:59,760
residential rachel,

1432
00:54:01,130 --> 00:54:03,359
most people are buying, you know, less than

1433
00:54:03,359 --> 00:54:05,509
10 units over their lifetime. So if you

1434
00:54:05,509 --> 00:54:07,898
can buy a small multi family property from

1435
00:54:07,898 --> 00:54:10,648
a small multi family operator who's distressed

1436
00:54:11,026 --> 00:54:13,104
because of their loan as well. You might

1437
00:54:13,104 --> 00:54:14,782
be able to buy a small property for

1438
00:54:14,782 --> 00:54:16,140
close to replacement value.

1439
00:54:16,634 --> 00:54:18,468
And if you're in an area that has

1440
00:54:18,468 --> 00:54:18,968
low

1441
00:54:19,744 --> 00:54:22,456
supply and high demand for housing, that is

1442
00:54:22,456 --> 00:54:25,168
really the key because all economics comes down

1443
00:54:25,168 --> 00:54:27,494
to supply and demand. And so if you

1444
00:54:27,494 --> 00:54:30,042
can buy a house, a duplex. A house

1445
00:54:30,042 --> 00:54:31,714
isn't gonna cash flow a ton. It's a

1446
00:54:31,714 --> 00:54:33,704
long term hold. But if you can buy

1447
00:54:33,704 --> 00:54:34,501
a single family,

1448
00:54:35,153 --> 00:54:38,259
ideally, a duplex triple or quad, you can

1449
00:54:38,259 --> 00:54:41,046
lock in sometimes 30 year fixed financing. So

1450
00:54:41,046 --> 00:54:43,196
when we have a recession and rates fall,

1451
00:54:43,847 --> 00:54:45,597
because there's they're cut to stimulate.

1452
00:54:45,995 --> 00:54:47,745
That's the time to go pick up some,

1453
00:54:47,825 --> 00:54:51,343
you know, duplex, triple squads, get 30 year

1454
00:54:51,343 --> 00:54:53,501
fixed mortgage on those things at your low

1455
00:54:53,501 --> 00:54:54,060
low rate,

1456
00:54:54,699 --> 00:54:57,096
cash flow, and then hold those things for

1457
00:54:57,096 --> 00:54:57,895
10 years.

1458
00:54:58,469 --> 00:55:01,175
20 years, sell them at the top or

1459
00:55:01,175 --> 00:55:03,483
create true passive income, but do it in

1460
00:55:03,483 --> 00:55:05,951
areas that are under supplied with a lot

1461
00:55:05,951 --> 00:55:08,761
of jobs, a lot of job diversity where

1462
00:55:08,761 --> 00:55:10,838
you're gonna continue to have that good tenant

1463
00:55:10,838 --> 00:55:13,806
pool and ideally in conservative states that are

1464
00:55:13,806 --> 00:55:16,030
landlord friendly and low tax. And that's where

1465
00:55:16,030 --> 00:55:17,302
you're gonna make the most money if you

1466
00:55:17,302 --> 00:55:19,367
go in and buy now, and especially when

1467
00:55:19,367 --> 00:55:21,288
we have a recession, and then you hold

1468
00:55:21,288 --> 00:55:22,954
them for the long term. Don't try to

1469
00:55:22,954 --> 00:55:25,358
value add or flip properties in the next

1470
00:55:25,731 --> 00:55:27,952
2 to 3 years in my opinion unless

1471
00:55:27,952 --> 00:55:30,039
you you have a a business and you

1472
00:55:30,039 --> 00:55:31,400
really know what you're doing and you can

1473
00:55:31,400 --> 00:55:32,839
also wholesale or retail them.

1474
00:55:34,839 --> 00:55:36,199
Bruce, I feel like we've covered so much

1475
00:55:36,199 --> 00:55:38,059
ground. Is there anything that you want to

1476
00:55:38,532 --> 00:55:40,203
comment on before we kind of wrap up

1477
00:55:40,203 --> 00:55:42,351
and and direct to anna a for anything

1478
00:55:42,351 --> 00:55:43,305
that people wanna follow.

1479
00:55:45,309 --> 00:55:45,949
No. I think

1480
00:55:46,748 --> 00:55:48,826
I think that all the follow ups it

1481
00:55:48,826 --> 00:55:50,903
would take us another hour for me to

1482
00:55:50,903 --> 00:55:51,723
do. So

1483
00:55:52,102 --> 00:55:54,100
the 1 thing I maybe real quickly and

1484
00:55:54,180 --> 00:55:55,871
I know this maybe not... It's not a

1485
00:55:55,871 --> 00:55:56,769
very fair

1486
00:55:57,147 --> 00:55:57,647
question

1487
00:55:58,742 --> 00:56:00,178
to give you a minute or 2 to

1488
00:56:00,178 --> 00:56:02,172
talk about, But do you do you have

1489
00:56:02,172 --> 00:56:04,246
a real rule you have a rule thumb?

1490
00:56:05,539 --> 00:56:08,335
In this in this environment for loan to

1491
00:56:08,335 --> 00:56:08,835
value,

1492
00:56:10,413 --> 00:56:12,650
how you should use leverage is at 50

1493
00:56:12,650 --> 00:56:14,744
percent is 60 percent is a 65.

1494
00:56:15,065 --> 00:56:16,284
I know it depends on

1495
00:56:16,585 --> 00:56:18,744
what the asset is and what area it's

1496
00:56:18,744 --> 00:56:20,918
in and so and support, but is there

1497
00:56:20,918 --> 00:56:23,571
something that you use that the listeners could,

1498
00:56:23,869 --> 00:56:26,182
you know, learn from? I think I think

1499
00:56:26,182 --> 00:56:27,697
at a very high level. It's a really

1500
00:56:27,697 --> 00:56:29,952
important question. So at a really high level

1501
00:56:30,582 --> 00:56:32,646
I believe that you should buy properties that

1502
00:56:32,646 --> 00:56:35,663
that cash flow. So, you know, I I

1503
00:56:35,663 --> 00:56:37,409
say first and foremost, why do people buy

1504
00:56:37,409 --> 00:56:39,489
properties? At any time during your life, you

1505
00:56:39,489 --> 00:56:41,794
have 1 of 3 primary financial goals. It's

1506
00:56:41,794 --> 00:56:44,416
either you need more income, you want equity

1507
00:56:44,416 --> 00:56:46,322
and growth and appreciation for the future or

1508
00:56:46,322 --> 00:56:48,569
you're an at preservation mode. And the answer

1509
00:56:48,569 --> 00:56:50,164
to the question is gonna depend on what

1510
00:56:50,164 --> 00:56:51,839
mode you're in in your phase of life,

1511
00:56:52,158 --> 00:56:54,072
and how much liquidity you have to weather

1512
00:56:54,072 --> 00:56:56,545
these economic conditions. But generally speaking,

1513
00:56:57,039 --> 00:56:58,719
people say, I wanna buy real estate because

1514
00:56:58,800 --> 00:57:00,420
I want income. So

1515
00:57:00,719 --> 00:57:02,400
you're not gonna be able to cash flow

1516
00:57:02,400 --> 00:57:04,800
today at today's prices and today's rates on

1517
00:57:04,800 --> 00:57:05,300
most

1518
00:57:06,173 --> 00:57:06,673
properties

1519
00:57:07,291 --> 00:57:09,606
unless they're in war zones because they look

1520
00:57:09,606 --> 00:57:11,362
really good on paper. They look like cash

1521
00:57:11,362 --> 00:57:14,396
flow. You wanna buy properties in strong areas

1522
00:57:14,396 --> 00:57:16,397
what I call class A or b properties,

1523
00:57:16,556 --> 00:57:17,588
Class A or b market.

1524
00:57:18,222 --> 00:57:20,840
Ideally 30 or 40 years or less in

1525
00:57:20,840 --> 00:57:23,794
areas with really strong Gdp and growth. If

1526
00:57:23,794 --> 00:57:25,152
you're in those kind of markets,

1527
00:57:25,632 --> 00:57:27,650
right now, we're in a negative leverage

1528
00:57:28,348 --> 00:57:31,245
situation, meaning the the more I put down

1529
00:57:31,558 --> 00:57:33,626
the better my cash on cash return is,

1530
00:57:33,944 --> 00:57:35,853
when rates are low and they're below about

1531
00:57:35,853 --> 00:57:37,682
6, the less I put down the better

1532
00:57:37,682 --> 00:57:39,724
my cash amount of cash return is. So

1533
00:57:39,923 --> 00:57:41,674
you wanna make sure that your cash on

1534
00:57:41,674 --> 00:57:44,140
cash return is better than what you could

1535
00:57:44,140 --> 00:57:46,447
get in a 5 year treasury rate. And

1536
00:57:46,447 --> 00:57:48,516
you've got either pay less for the property,

1537
00:57:49,008 --> 00:57:51,257
or put more down and lower your Lt

1538
00:57:51,473 --> 00:57:53,620
in order to get that cash on cash

1539
00:57:53,620 --> 00:57:56,005
return at least equal to the Us treasury

1540
00:57:56,005 --> 00:57:56,641
rate plus.

1541
00:57:57,295 --> 00:57:59,375
And then you have your equity that's paid

1542
00:57:59,375 --> 00:58:00,974
down with your mortgage payment and you have

1543
00:58:00,974 --> 00:58:03,295
some appreciation over time that give you a

1544
00:58:03,295 --> 00:58:06,429
better return. But, essentially, I look at if

1545
00:58:06,429 --> 00:58:08,590
you need it to cash flow, you gotta

1546
00:58:08,590 --> 00:58:09,949
put down as much as you need for

1547
00:58:09,949 --> 00:58:11,869
it to cash flow and hit that Us

1548
00:58:11,869 --> 00:58:14,514
treasury rate, and that's gonna be different for

1549
00:58:14,514 --> 00:58:16,182
everybody at different times in the market.

1550
00:58:17,612 --> 00:58:19,756
Yeah. And, obviously, the higher the interest rates

1551
00:58:19,756 --> 00:58:21,901
the more you'd have to put down necessarily

1552
00:58:21,901 --> 00:58:23,907
to get to that cash on cash return.

1553
00:58:24,784 --> 00:58:25,284
Absolutely.

1554
00:58:26,221 --> 00:58:27,179
Yeah. Okay.

1555
00:58:28,855 --> 00:58:31,103
Anna, This is ben I I'm good. Yeah.

1556
00:58:31,422 --> 00:58:33,887
Okay. Anna, this has been a fabulous conversation,

1557
00:58:34,047 --> 00:58:36,933
And I think for anyone who's listening and

1558
00:58:36,990 --> 00:58:40,276
who is trying to assess the market conditions

1559
00:58:40,276 --> 00:58:42,114
and trying to make good decisions whether they're

1560
00:58:42,114 --> 00:58:44,591
starting in real estate or whether they're continuing

1561
00:58:44,591 --> 00:58:45,650
a real estate investment

1562
00:58:46,043 --> 00:58:46,521
strategy,

1563
00:58:46,999 --> 00:58:49,070
this is a really important conversation to listen

1564
00:58:49,070 --> 00:58:51,779
to. How can people find you to be

1565
00:58:51,779 --> 00:58:53,931
able to lock into what you're doing, Learn

1566
00:58:53,931 --> 00:58:55,340
from you, grow from you. I know you've

1567
00:58:55,459 --> 00:58:58,505
a blog. You speak on podcasts on you're

1568
00:58:58,562 --> 00:59:00,313
doing a lot of work in this space

1569
00:59:00,313 --> 00:59:02,382
and how can people find and follow you?

1570
00:59:03,192 --> 00:59:04,939
Great. So on social media, I'm anna a

1571
00:59:05,018 --> 00:59:06,925
Kelly Rei mom, you can find me on

1572
00:59:07,242 --> 00:59:10,101
Youtube and, and, Facebook. But if you're interested

1573
00:59:10,101 --> 00:59:12,246
in coaching or consulting, you know, looking at

1574
00:59:12,246 --> 00:59:14,806
your portfolio looking at real estate and what

1575
00:59:14,806 --> 00:59:16,637
might be good options for you depending on

1576
00:59:16,637 --> 00:59:17,614
where you are

1577
00:59:18,148 --> 00:59:20,574
in your investing cycle, you know, what your

1578
00:59:20,632 --> 00:59:22,387
financial goals are. And and how much money

1579
00:59:22,387 --> 00:59:24,380
you have to invest. I do 1 on

1580
00:59:24,380 --> 00:59:25,338
1 consulting,

1581
00:59:25,896 --> 00:59:27,890
hourly consulting as well, and then I do

1582
00:59:27,890 --> 00:59:29,485
have a coaching program if you wanna get

1583
00:59:29,485 --> 00:59:31,406
deeper and walk through an entire, you know,

1584
00:59:31,565 --> 00:59:33,787
plan and then start to execute that strategy

1585
00:59:33,787 --> 00:59:35,454
together. So you can find me at anna

1586
00:59:35,454 --> 00:59:40,011
kelly investing dot com. It's ANNAKELLEY,

1587
00:59:40,730 --> 00:59:43,207
investing dot com, and there's a a link

1588
00:59:43,207 --> 00:59:44,645
to set up an appointment with me if

1589
00:59:44,645 --> 00:59:46,659
you'd like help reviewing your port... Your real

1590
00:59:46,659 --> 00:59:47,460
estate portfolio.

1591
00:59:48,659 --> 00:59:50,820
That's awesome. Thank you so much, Anna for

1592
00:59:50,820 --> 00:59:52,500
being with us today. I feel like that

1593
00:59:52,500 --> 00:59:54,514
time just went by so fast. Normally, we're

1594
00:59:54,514 --> 00:59:56,434
doing 3 minute episodes right now, and we

1595
00:59:56,434 --> 00:59:56,755
are at,

1596
00:59:57,554 --> 01:00:00,355
64 minutes today. And so thank you so

1597
01:00:00,355 --> 01:00:02,359
much for just sharing your wealth of wisdom,

1598
01:00:02,438 --> 01:00:04,583
your experience that has led you to the

1599
01:00:04,583 --> 01:00:06,171
success that you have right now. And so

1600
01:00:06,171 --> 01:00:08,077
for anyone who is wanting to make great

1601
01:00:08,077 --> 01:00:10,005
decisions in real estate, I highly encourage you

1602
01:00:10,005 --> 01:00:12,724
to check in with anna, learn from her

1603
01:00:12,724 --> 01:00:14,804
and be able to just lean on that

1604
01:00:14,804 --> 01:00:16,977
was done that she's built. So I Thank

1605
01:00:16,977 --> 01:00:19,280
you so much for your time today, and

1606
01:00:19,280 --> 01:00:20,947
best to you. Thank you to our listeners

1607
01:00:20,947 --> 01:00:22,536
for hanging into this conversation.

1608
01:00:23,647 --> 01:00:24,123
Thank you.

1609
01:00:25,492 --> 01:00:28,924
Awesome. Well, with that, please remember success leaves

1610
01:00:28,924 --> 01:00:32,116
clues. So model the successful fee, not the

1611
01:00:32,116 --> 01:00:34,121
crowd. And build a life in business you

1612
01:00:34,121 --> 01:00:35,314
love. We'll see you next time.

1613
01:00:37,621 --> 01:00:39,371
Discover the secret of how to earn a

1614
01:00:39,371 --> 01:00:41,719
return on the same money in 2 places

1615
01:00:41,778 --> 01:00:43,692
at the same time, so that you can

1616
01:00:43,692 --> 01:00:46,803
strengthen your investment returns. We've created a free

1617
01:00:46,803 --> 01:00:48,478
guide for you that explains the top 3

1618
01:00:48,478 --> 01:00:51,363
things every investor needs their private banking system

1619
01:00:51,363 --> 01:00:53,833
to do. Go to the money advantage dot

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01:00:53,833 --> 01:00:55,348
com slash banking,

1621
01:00:55,826 --> 01:00:57,470
put in your name and primary email address

1622
01:00:57,905 --> 01:00:59,802
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1623
01:00:59,802 --> 01:01:01,541
now and we'll see you on the inside.