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Dying well We’re all going to die, but how we acknowledge death and dying is a very personal experience. Award-winning journalist and author Tracey Spicer and anthropologist Dr Hannah Gould explore etiquette, rites and traditions to find out what makes a ‘good death’. About the episode – brought to you by Australian Seniors. Join James Valentine for the sixth season of Life’s Booming: Dying to Know, our most unflinching yet. We’ll have the conversations that are hardest to have, ask the questions that are easy to ignore, and hear stories that will make you think differently about the one thing we’re all guaranteed to experience: Death. Featuring interviews with famous faces as well as experts in the space, we uncover what they know about what we can expect. There are hard truths, surprising discoveries, tears and even laughs. Nothing about death is off the table. Tracey Spicer AM is a Walkley award-winning journalist, author and broadcaster. And she's an ambassador for Dying With Dignity. A vocal campaigner and advocate for voluntary assisted dying (VAD), Tracey penned a letter to her mother following her painful death in 1999. Dr Hannah Gould is an anthropologist who works in the areas of death, religion and material culture. She recently appeared on SBS documentary: Ray Martin: The Last Goodbye. Hannah’s research spans new traditions and technologies of Buddhist death rites, the lifecycle of religious materials, and modern lifestyle movements. If you have any thoughts or questions and want to share your story to Life’s Booming, send us a voice note – lifesbooming@seniors.com.au Watch Life’s Booming on YouTube Listen to Life's Booming on Apple Podcasts Listen to Life's Booming on Spotify For more information visit seniors.com.au/podcast Produced by Medium Rare Content Agency, in conjunction with Ampel Disclaimer: Please be advised that this episode contains discussions about death, which may be triggering or upsetting for some listeners. Listener discretion is advised. If you are struggling with the loss of a loved one, please know that you are not alone and there are resources available. For additional support please contact Lifeline on 131 114 or Beyond Blue on 1300 224 636. TRANSCRIPT: James: We're all going to die. Happens to all of us. But how we acknowledge death and dying is of course a very personal experience. With our guest and our expert, we're going to explore the etiquette, the rites and traditions seen in Australia and around the world. Someone who knows a lot about the rites and traditions of death is Dr Hannah Gould, an anthropologist who works in the areas of death, religion and material culture. We're also going to be joined by Tracey Spicer, she’s a Walkley award-winning author, journalist and broadcaster. And she's an ambassador for Dying With Dignity. Tracey and Hannah, welcome. Thank you so much. Tracey: Hello. James: Thank you for coming. Hannah Gould. Hello. Thank you for coming. Hannah: Thank you. James: Fantastic. Let's talk death! Tracey: Why not? There'll be lots of fun. James: Do you laugh in the face of death? Hannah: What else can you do? I mean, look, you know. Lots of sadness, lots of joy, every single emotion is reasonable, surely. I mean, it's like the question, the ultimate question of philosophy, of history, of every discipline. Every response is valid. Not always useful, or helpful. James: Yeah. Yeah. Hannah: But valid. Tracey: Well, it's a universal topic of conversation and that's why I've always loved dark humour. Because you do have to laugh, otherwise what do you do? James: I also think it's, it is the ultimate joke that we are all going to die, but we live like we're not going to. We live every day as though it's just not going to happen at all. Tracey: Especially in Western society, I think other cultures have got it right and we're in such deep denial about it. It's detrimental to all of us. James: Yeah. Now this is your area of expertise really, is that do other cultures have it right? Hannah: Everyone does it differently. Right or wrong is kind of a difficult thing to judge. I think certainly there's a big thing called, like, the denial of death thesis, right. And, and people like Ernest Becker, a lot of different philosophers and anthropologists and cultural, you know, analysis have looked at Western culture and gone, Oh my gosh, we are so invested in denying death, right. And whether that's through denying death by religions that say you're going to live forever, like, you know, don't worry, it's not the end. You'll pop off to heaven or whatever it is. Or through, you know, great heroic myths. Yes, you'll die, but the nation will remember you forever. So, you know, you won't really die. You'll be a martyr. Or contemporary, you know. Yes, you'll die, but have you seen how great the shopping is? You know, we can just ignore, we can deny death by being on Instagram and, you know, consuming, right, so, I think Western culture in particular, the way we've organised our society, allows us to not think about death. James: And we've organised death to be somewhere else, usually now. To be in a hospital, to be in palliative care somewhere. And they may be good, but they're not, they're not in the cottage, are they? They're not next to, not in the bedroom. Hannah: Not in the bedroom. So, we know that, say, 70% of Australians wish to die at home. Only about 15% do. And that is a rate that is lower than all these other countries we like to compare ourselves. So Australians are more institutionalised in their death than places like Ireland, like New Zealand, the United States of America, even Canada. We tend, more than other countries, to die in institutions – aged care, hospitals, and hospices. James: Yeah, right, right. The other way in which we deny death is, or the other way in which other cultures have a different attitude to death, will be that it'll either be more accepting – we are all going to die, will be part of their every day – or they may have a notion of reincarnation and coming back, which means that that's a very different attitude to death, really, than a, than a heaven and a hell. Hannah: Yeah, it's not necessarily an end so much. I think that's kind of quite common in, say, you know, Buddhist or Hindu or other kind of dharmic religions, particularly Asian religions. And then, obviously, there's a lot of Asian religion that's part of Australian society, so that's also quite present in Australia. But we can also have a kind of more secular idea about that. You know, a lot of these, a lot of my mum's generation in particular, have kind of a green environmental kind of reincarnation model where she will say, well, I don't particularly believe in heaven, but I do believe I'm going to become compost. Food for worms, you know, I'll come back as a tree or a flower or a tomato plant, you know, and that's, that's a kind of reincarnation of like reintegration into the natural environment, as it were. So there are some kind of myths or stories we can tell ourselves that perhaps help us think about death more positively. James: I've got a, a friend of mine who'd be into her 80s has said, oh, funeral? Just put me up the top paddock, let the crows have a go. Tracey: Yeah. My dad wants to be buried in a cardboard box, and I think that's a wonderful idea. James: We all say that, don't we? That's a really common one as well. I hear that a lot on the radio. People will go, mate, just, I don't care, put me out with the, on the hard rubbish day. Hannah: In the paddock, whatever it is… James: …the paddock, that’s the same sort of thing I said. You know, like, do we really want that, do you think? Hannah: Oh, do we really want that? I do think Aussies are pretty pragmatic about death. I do think we have a certain streak in us that's kind of like, you know what, it's all a bit much fuss, it's all too much. You kind of even get these people who therefore say, don't have a funeral. You know, I really don't want to have a funeral. Please don't even, you know, no fuss. That can be kind of sad sometimes because I think it's some people kind of not acknowledging how many people love them and miss them. James: Yeah. Hannah: Um, but maybe it's also a bit of an Aussie humour, dry humour, that, that black humour again of kind of, you know, trying to laugh in the face of death. Why not? Tracey: I would agree, but then we all get sucked in when we're in the funeral home, and they show you the cardboard box, and then they show you the glossy one that's 10 or 20 thousand dollars, and you think, did I really love that person that much, or should I do it? So it all feeds into what you were talking about before, that consumerism and overcommercialisation. James: Well, I also think sometimes, I would think it's about weddings. Weddings and funerals, well, who's it actually for? Tracey: Yeah, yeah. Well it's a punctuation mark, isn't it? I'm a lifelong atheist, but Tracey: I do enjoy, it sounds terrible, going to those kind of ceremonies, whether it's a funeral or a wedding, because it's important to celebrate or commemorate these changes, these huge changes. James: I love the sharing of stories at a funeral. People start talking. Tracey: Well, you learn so much about someone's life that you may not have known. And also often they're rich for that dark humour. I'll never forget my grandmother's funeral, who I was incredibly close to. And my father's new girlfriend loved my grandmother. She was so distraught she tried to throw herself into the hole in the ground on top when she was throwing the dirt in and I thought, well, that's intense. James: That's good. Tracey: That's, I've never seen that before. That's a first. Hannah: Oh, I've seen that before. Tracey: Have you?! Hannah: I will say that, you know, when you attend enough funerals or attend enough cremations for professional reasons, um, as it were, you kind of see everything, every range of human emotions. Like, we, we kind of think, you know, all funerals are all happy families. A lot of unhappy families, a lot of punch ups at funerals, lots of, uh, mistresses coming out of the woodwork at funerals, conversions, religious, you know, more and more people have recorded messages from beyond the grave that they play at their funeral, or, uh, they've decided that we're having a dance party, or we're having some sort of festivity or an event. I mean, you can do anything these days with a funeral. James: Do you go to a lot, just to observe? Hannah: Yeah, I do my research. So I, I research in death and dying and I, I work at a crematorium and I attend funerals and I hang around with other people in the death care sector. James: Yeah. Hannah: And you do see everything. James: Why do you want to… Tracey: …What got you interested in this? It's your job and I'm just fascinated by it… James: …We'll, we'll, we'll, we'll both do it. I think you've done this sort of thing! So, yeah. Well then, then, why do you want to be around death? Hannah: Oh. I mean, personal and professional. Professional, I'm an anthropologist, and anthropologists want to know what brings us together, what makes us all human, but then also why we do it so differently. And there is nothing else. It is the question, right, it is the one thing we all experience, and yet we've all decided to do it in completely different ways, and completely different ways throughout history. And then, personally, my dad died, and I thought, gosh, what on earth is going on? I suddenly was given the catalogue, of funeral, of coffins, right. James: And you were young. Hannah: I was 22, 23 when my dad died. An age that was perfectly old and mature at the time, I thought. But looking back, obviously, it was incredibly young. But yeah, I suddenly got handed this catalogue of, of kind of coffins, and they all had these really naff names, like, you know, these rich mahoganies, and like, it was like paint colours. Someone had, someone somewhere had decided, these were the options, right, that you were, that this is what was going to represent my dad. And I just felt this massive disconnect and I thought, ‘Hang on, I've got to work out what's going on there.’ So now I spend my life in death, as it were. James: Yeah. I suppose, most of us would think being around death would be a very gloomy kind of thing to be, or way to spend your day. Hannah: It can be very gloomy. But oh my gosh, the gallows humour that those boys in the crem – the crematorium – tell, uh, you know. James: Is there a joke you can share? Hannah: Ooh. Um. Not a lot of them are safe for work or anywhere. James: Tracey, you were going to jump in and ask something there before. What were you going to ask? You know, fellow professional interviewer. Tracey: I really see a connection with you being 22 when your father died and I was 32 when my mother died. Hannah: Mm. Tracey: Even at 32 I felt like I wasn't ready for it. James: Right, no. Tracey: And especially because it happened so quickly. Mum was the linchpin for the family, you know, smart and funny and she could do anything. She was one of those early super women kind of role models. And then all of a sudden at the age of 51 she was diagnosed with pancreatic cancer with seven months to live and she lived seven months almost to the day. And it was blood and guts and gore. She was in agonising pain. My sister and I were injecting her with medication every day. We wanted her to die in the home. Tracey: But it got to the stage where we had to bring her to palliative care, and that's when we started having the conversations about voluntary assisted dying, because, um, Mum and Dad had always said, put me down like a dog. And again, it's one of those things that you think it's going to be easy at the time, but it's not. We talked to the doctor. The doctor said, I don't want to end up in jail. And my sister sat there with the morphine button. She pressed it so often she had a bruise on her thumb. James: Hmm, right Tracey: …we said, surely you can just increase the morphine, because Mum was having breakthrough pain. So everything was fine until she'd scream once an hour, and there was no way they could cap that. So it's cruel, right? It's cruel. I, I don't think there's any way they would have done it. We tried to have those conversations. James: …Yeah… Tracey: Which is why one night, because we were sleeping in a chair next to her overnight just to hold her hand when she was in pain, I picked up the pillow and I did try to put it over her face because I thought, what kind of daughter am I, to let her suffer? And then I stopped at the last minute and then I felt really ashamed of, you know, what a coward I am. Hannah: No, I was going to say the opposite. What an incredibly brave act to, to have so much love and compassion for this person and so much respect, what you knew her wishes would be, that you were willing to do that, you know, for, not – for her, not to her, for her, right? That's extraordinary. Tracey: It's lovely of you to say. James: Did she know what you were doing? Tracey: Oh no, she was out of it for about the previous two weeks, actually. In and out of it. And then she died in the next 24 hours anyway. So she was very, very close. And she'd had that kind of burst, you know, had that almost honeymoon period a couple of days beforehand where you think, Well, she seems like she's getting better and we've read about that, so we expected she was close. Hannah: …Yep, the final, the final burst… Tracey: Yeah. Is there a name for that? Hannah: You know, I don't know what it's called, but you know, that is when usually the palliative care doctors, the hospice workers will call up the family and say, guess what? They're up and about, they're talking, they're eating all of a sudden, and that's genuinely usually a sign that it's not going to be long. James: Wow, isn't that interesting. Hannah: It's the final burst of energy. One of the interesting things about the rise of voluntary assisted dying, of euthanasia, to speak more broadly in Australia, is it reflects this kind of cultural shift that we have about the importance of choice and control towards the end of our lives and how increasingly like that is becoming an important part of what we think about as a good death, right. Like I want to be able to control where I die and who I die with and when and the pain and suffering, right? And that hasn't always been the case, right, you know throughout history there's been periods of that. There's been periods of, ‘Leave it to God.’ Or there's also been periods of, ‘Yes, I must prepare. I have to write my final last note or poetry’, or whatever it is. But that's increasingly becoming important particularly for, we see within the baby boomer generation that they really want to, you know, have some sort of choice, and emphasis on choice. James: Well, I mean, I wonder whether a lot of it is a reaction to, um, the, the medical control over the end of our lives is so extreme that we can be kept alive for so long. And so, it's, it's, it's a reaction to that medical control, isn't it? To want to say, well, surely I can, we can, we can have both, can't we? You can either keep me alive or I don't want to be kept alive. Could you let me go? Hannah: It's one of the great paradoxes, they talk about this paradox of contemporary death and contemporary medicine, is that all of our interventions have increased, right. The medicalisation of death has meant that not only do we have pain control, but we can keep people alive for longer. You know, we have better medicines, drugs, palliative medicine is massively advanced. And yet, if we ask people, the quality of death and dying has not increased. James: Right… Hannah: …And if we look globally, more access to medicine doesn't necessarily correlate with a higher quality of death and dying. There's some correlation, like, do you actually have the drugs? Can you access, access them? But when it gets to kind of over a certain hurdle, just because you're dying in Australia versus dying in a country with no resources doesn't mean you're going to die better. James: What do you, what's a quality of death? How are we measuring that? What do you mean by that? Hannah: There's lots of things you can do to measure it and people try. So one of them is, you know, to ask, ask the family, to ask the dying person, to also ask the physician, did you think this was a good death? You know, how do we assess it? Because it's not just up to the dying person as well. Of course, it's also up to the family, right – How did you experience that death, that dying? It's a difficult thing to measure, right, because for some people death is never gonna be… You know, the words good death, bad death are kind of controversial now because it's like, oh my God, I have to try at everything else, do I also have to live up to a good death? Like, we can't make it good. Can we make it better? James: Yeah. What is a good death, Tracey? Tracey: I think this really intersects with, uh, competition. Everything's become a competition. And also quality of ageing. Hannah: Yes, yes… Tracey: …Because my darling dad, who's 84 and still hanging on after smoking and drinking himself almost to death when he was in his 50s – it's a miracle he's still alive. He has very close to zero quality of life. He's a lovely man, we love spending time with him, but he can barely walk. You know, where's the quality of life? So I've just written a book about artificial intelligence recently, so it worries me, that medtech space, that we're getting people to live longer, but there's no quality of life and also no quality of death. Hannah: There's this phenomenon we actually call, in scholarship, we call it prolonged dwindling. Tracey: Oh, which is so true, I love that. Hannah: What a term! But it's, it's… James: …Sounds like the worst Enya album ever… Tracey: …And it never ends… Hannah: …But yeah, it's, it's, there's exactly this thing, right. So it used to be, if you look at like the kind of time, it used to be that you'd either have a sudden illness, fall off a horse, through a sword, war, back in the day, and you, and then you would die, or you would have a, you know, a serious major illness, like a cancer or a heart attack, and then pretty soon after, you'd die, right? What we have now, what we tend to have now, is these kind of timelines towards the end of life of, you know, multiple hospitalisations, in and out of hospital, or you have something like Alzheimer's, right, where you have a very, very, very slow and long cognitive decline, potentially with very high care needs, so you're in hospital, you're in care for 20, 30 years, right? Which is unheard of previously, that you would need this level. So how we die is changing, and it's a completely different timeline. James: Yeah. Does… Tracey, let's just return to this moment when you started to perhaps really think about death. You know, you're confronting your mother's suffering, and you think about, you know, taking control of that, about doing something. Was that an impulse? Was it something that grew over time? Tracey: It was knowing my mother's character as being very forthright, and she was always in control, to speak to control. She would have liked me to try to control the situation. It was also, obviously, that you never want to see a loved one in suffering. But it taught all of us in the family a couple of important lessons. Dad’s now got an advance care directive that’s 28 pages long, so we know exactly what's going to happen. My husband and I still haven't done that, but we do talk to our kids who are aged 18 and 20 about this kind of stuff. I think part of that is my husband's a camera operator, I've been a long-time journalist, so in newsrooms, a very dark sense of humour, similar to the crematoriums, so we talk about death and dying an awful lot at home, but I think it's important to have those conversations and to prepare for a good enough death as much as you can. Tracey: I mean, what does a good enough death mean to you? Have you thought about that yourself? James: Yeah, well I have. I've had some, you know, health issues, had a cancer last year, and so that sort of thing, you know, you do start to confront it and think about it. I'm the fall asleep in the bed, you know, go to bed one night, don't wake up. Tracey: The classic. James: That's the classic. Give me the classic. I'm happy with the classic. Hannah: …Hopefully after you've just finished penning your magnum opus, surrounded by friends and family. James: The end, you know. For me to be onstage, I've just finished a searing saxophone solo, and everyone's just ‘Amazing! Unbelievable!’ Down you go. Something like I mean, sudden, seems to be, just immediate. Immediate and sudden, no suffering. Hannah: Well, that's the thing. Hannah: People always ask me, you know, do you fear death, are you afraid of death? And frankly, after studying it for this long, no, not at all. And I think in an odd way, there is some kind of horrific privilege of having at least one of your parents die young because all of a sudden, you do start thinking about all these things and you learn to live with death, even if you don't like it a lot of the time. I don't fear death, I do fear the prolonged dwindling. Right, like that, the kind of ageing poorly without support in a way that I can't make the controls, and and you know, can't make decisions. That's much more scary to me than death. Death is kind of a great mystery. James: Your interaction with your mother, Tracey, led you to looking at voluntary assisted dying. What did people say about it? What was the general, when you first started to talk about it, when you first started to campaign for it, what would people say? Tracey: What I noticed was a disconnect, that people in the community overwhelmingly supported this because they’d seen loved ones die. But in our parliaments, I saw there a lot of people, a higher percentage than the normal population, are quite religious in our parliaments. Hannah: …Completely unrepresentative... Tracey: …Unrepresentative. And so a lot of organised religions are pushing back against it and therefore there wasn't an appetite for change because of that. I think it took these wonderful lobby groups to get the politicians to listen and for them to realise that there was a groundswell of support. And also, of course, with the examples in the Netherlands and Oregon and Canada who have quite different laws to us. But very successful laws. You rarely see people, I think it's 99.9% successful – only a tiny amount of people who are abusing the legislation, tiny, tiny – but the rest of it, everyone overwhelmingly aligns with it. So it's done in a very ethical and proper kind of way. James: So do you feel as though when you first started talking about it, really, most people were on board? It wasn't something, it wasn't one of those things where we're really trying to, we had to convince people. Tracey: No, that's right, except for people who were particularly religious. Because, let's face it, everyone, pretty much, unless you're quite young, has had a loved one die, so this is something that affected everyone. James: Yeah. I suppose I was wondering. Like someone, some friend, the other day, you know, how have you been, blah, blah, blah. And he went, ‘oh, I had a weird thing yesterday, like, my uncle died’. And I went, ‘oh, that's sad’. And he said, ‘no, no, it was voluntary, he did the voluntary assisted death. He died yesterday afternoon at two o'clock’, you know. I went, ‘oh, wow, you know, you're there?’ ‘Yeah, we're all there, and, you know, it was great, we had a lovely morning with him. We had dinner the night before, and then it just all took place.’ I said, wow, how amazing. And what I was really struck by was what a normal conversation this was. It was a bit like saying, ‘we went to holiday in Queensland’. You know, like it was sort of, he wasn't describing some outlandish thing, you know, it was suddenly this thing, suddenly voluntary assisted dying was just part of the fabric of our, of our lives. You know, do you feel that that's happened in Australia? Tracey: I do feel it's become more normalised, to your point, over the last 20 years. But there's still a lot of academic debate about at what, at what point should you be able to do it. At the moment in Australia, it's overwhelmingly someone with a terminal illness. And it's done by themselves or their doctor, their practitioner. But there are people who want to bring it in for people who are elderly and, and suffering and don't want to live any longer, to support them there. So we're seeing, I guess, a fragmentation of the discussion and the arguments. And I'll be interested to see which way that goes down the track. There's a lot of debate about people, to your point earlier with Alzheimer's, people who have dementia. Hannah: Sensory pleasures. Like, people being able to taste and smell and touch and hug become really important at the end of life. Tracey: Oh, that reminds me of someone I know who did have a good death, who was my grandfather, Mum's father. He lived until 94, and I cared for him towards the end of his life. Our kids were little then, they were probably 7 and 8. And he had that burst, and they said, come on in, he'll die in the next couple of days. We brought in oysters, we brought in red wine. I brought in the kids because I think it was important for them to see that, and he had a good death within the next 24 hours. So it is possible. I think it's rare, but it's possible. James: Yeah, if you know what's happening. A lot of your speciality, Hannah, is in Buddhism. What do Buddhists make of voluntary assisted dying? Hannah: Well, I will say that Buddhism is a religion with over 500 million people in it. So it's kind of like asking, what are the Christians? James: …Right. Right. Hannah: …or what are the Western people think about voluntary assisted dying? So, a range of views. James: Range of views. Hannah: Really huge range of views. James: I suppose I was just wondering whether there was anything in the Buddhist canon as such or the Buddhist, you know, view that just went, no, let life take its course. That, you know, you must experience suffering, so therefore you must experience all life. Hannah: Well, suffering is pretty important to Buddhism, right? And suffering well, and learning to suffer well, is really important. So there are some Buddhists who would oppose voluntary assisted dying because there's a prohibition against killing, right? But most people in Buddhism will, say, weigh that prohibition against killing against, kind of, the experience of suffering, right, and lessening people's suffering. So certainly there are some Buddhists who would say, no, you know, we need to experience suffering and learn how to experience the suffering at the end of life. And that can be quite instructive. It's also why some Buddhists may, uh, deny pain medication and even, you know, deny anything that kind of clogs their mind, because they want to be conscious at the end of life. They want to experience it all, you know, see where their consciousness goes to the next reincarnation. But there's also a, you know, a massive Buddhist movement that has always kind of seen humanity on quite a similar level to animals, right, that we are all beings of this world, and therefore in the same way that we would, you know, have compassion for the suffering of a pet and, you know, euthanase a pet that's going through unavoidable suffering, with many Buddhists who would therefore support the euthanasia of a human being that's going through suffering, right, in the same way. Because humans are not particularly special, right, we're just another being in this world and we'd want to show the same compassion for both of those. James: Yeah, yeah. Hannah: Huge range of views. James: Yeah. Tracey, you said, you said you're an atheist. Does that mean, you know, once the final curtain falls, that's it? Tracey: Well, I'm one of those very open-minded atheists, James, who, if I am diagnosed with something, I fully am open to the opportunity of religion if I end up needing it at that time. And I imagine a lot of people do that. And if, if I do decide to do that, I would choose Buddhism. Hannah: There's actually a fascinating piece of research that just came out, Professor Manning, a religious studies scholar, and she looked at older atheists and what they think about the end of life. Because we tend to think, well, religious people have beliefs, but we don't really study atheists’ beliefs, right, we just think they all think nothing. But she actually found that there was kind of three different kind of world views or narratives that came out, that can be summarised as: lights out, recycling, or mystery. James: I'm all three. I'm all three. Hannah: So the first one is this idea, it's kind of like – death is like anesthesia, you just, that's it. You're at the end, you know, there's nothing, and it's often very biomedical, right. It's like sleep, but you don't dream, so it's more like anesthesia. You know, we've all, maybe all experienced that, and that's what these people believe, that that will be the end. The second one is recycling. So this is the food for worms idea, right, that yes, I will die, but my, you know… Carl Sagan: ‘We are all made of stardust’, right, we'll go back into the universe and one day I will be an oak tree or a, you know, something, quite, you know, a beautiful idea, which I, you know, I think I subscribe to that, I quite like that. And then the third one that they described around atheists was just mystery. That, for a certain group of people, who knows? And we can't ask anyone. And so that it was, it was almost kind of curiosity and excitement towards the end of life. So there are, yeah, you know, this is quite a great mystery, it's a great adventure, right, that we should all go on. James: Yeah, fantastic. We didn't talk much about, I suppose, the emotion we might feel around death at various points. You know, like, I've observed lots of conversations on the radio where my parents' generation, ‘stiff upper lip’... Hannah: …Stoicism… James: …‘How's she doing? Oh, very well.’ Which means she wasn't feeling anything at all. There's been no, you know, like, that's sort of how you're meant to feel. We now tend to be very emotional about death, you know, like it's, like it's part of our funeral rites, I suppose, to release that, to make sure we all howl. Hannah: Yeah, we have this kind of catharsis model of the funeral, right, which is this idea that, you know, you kind of, even if you might not want to, you go to the funeral and you cry it all out with other people and you have this communal experience of grief. And somehow that is helpful, if not entirely necessary for our long-term grief. But, you know, there's many cultures around the world where wailing is a big tradition, right, so that, you know, women physically throwing themselves at the coffin, howling, collectively crying. You know, it might be an extended period of wearing a certain colour, wearing black, you know, gathering together. Those kind of rituals can also be a way for people to process grief and emotion. You think of, particularly like, you know, in the Jewish tradition of sitting shiva, right, that after someone dies, you immediately gather, right, and there's an extended period of everyone sitting together and dedicated to experiencing grief together. That's quite different to our kind of one-day funeral a week or two after the person's died, and we all go back to our home. Hannah: And it kind of depends on, like, what kind of level of social ties that your cultural society engages in the funeral, right. Do you have a very small private funeral where it's only the immediate family who are the ones that are supposed to be grieving? Or is it everyone you knew in that society, and you have a responsibility to go and be there because you're part of a much larger social fabric, right. And that can be quite different – it can be a 300 or 400-person funeral. You know, one of the largest social groups in Australia is South Asian, Indian, Hindu migration, right? Often extremely large funerals, 300, 400 people in some cases, right, because there's a different expectation about who are the mourners, who is the congregation, who are the people that gather together and stand against death, as it were. Tracey: Another big difference seems to me, and I'd love to hear more about you on this, is the cultures that sit with the body for three days, or have the open coffin for viewing… James: …the body stays at home… Tracey: …of the body, or the body stays at home. Because my sister and I sat with Mum's body for as long as we were legally and practically allowed to in the hospital, which was hours and hours and hours. And when we told a lot of our Western friends, they said what an awful thing to do. But it was really lovely because it cemented the idea that she was actually gone. We told her stories. My sister and I laughed. We cried. It was actually incredibly therapeutic. Hannah: Yeah, and this is one of the difficulties, is people feel, because they have a lot of… People don't have a lot of information, right, so if you're lucky, very lucky, then you'll organise maybe one or two funerals during your whole life, right, and probably there'll be those for your parents, right. And you just don't have a lot of information because we don't talk about it. So you don't know what you're allowed to do. But you know, in all states and territories across Australia, you are allowed to be with that body for an extended period of time. You're allowed to bring that body home. You know, you can actively resist pressures from the hospital and the hospice and everyone else to get you out the door. You can say, no, I would like to be with this body for a bit longer. And as you say, there is also technologies that can allow you to bring the body into the home. I mean, the reason we call them funeral parlours is the front parlour of the house. That is the room where we used to display the body and be with the body and that still occurs in many cultures around the world. You know, it's difficult; it can be difficult. It's not always the right decision, you know, you have to think about your particular circumstances, but it is possible. James: Yeah. Well, thank you so much. Any final words? Tracey: Only that I think we should all choose our own funeral soundtrack. I've been doing that with a girlfriend lately. James: …What's she gone with? Tracey: …Because, you know… well, I've gone with Edith Piaf. Hannah:…Ah, classic… Tracey: …‘No Regrets’, of course. Absolute classic. And my friend is still choosing from five. But I think, otherwise someone else gets a choice, and they might choose something terrible. James: Yes, no, I think that's very important, get your, get your, get your funeral songs sorted out… Hannah: Catering, funeral songs… James: …the whole soundtrack, the catering you'd be concerned about, you want everyone to have something… Hannah: … delicious. James: …any special cheeses or wines you want? Hannah: French. Yeah, this is what we did for my dad as well. It was like red wine, good French cheese, baguettes, you know. If you're going to grieve, if you're going to cry, you need some sustenance to support you. Tracey: Comfort food. Hannah: Comfort food, exactly. James: Yeah, very nice. Tracey: Before we let you go, what's your funeral song? James: Do you mean, what do I want people to hear as the coffin's going out or something like that? I don't know if I've made that choice yet. I don't know. Hannah: Hard rock? Tracey: Jazz? Hannah: Pop? James: No, it'll be something jazz, I guess, or something in that tradition. It's probably none of the Frank songs. Tracey: Something majestic, though. James: So yeah, ‘Zadok the Priest’, Handel… Hannah: …Oh, I like that. Old school. James: …Something huge! I haven't decided. Yeah, it's, it's but you're right. Like everything, do it, put some effort into it, you know, and have all that stuff ready for your children, for those that are going to have to do it, a little folder somewhere. Tracey: You could play some of your television clips from over the years. James: Oh, I don't think so, Tracey. I think yours might have something like… Hannah: …a highlights reel… Tracey: …a showreel! James: Yeah, my showreel. No, let's not do that. It's largely children's television, Tracey. No one wants to see that. Tracey: That would be great at a funeral. James: I could conduct a – I'd like to conduct a beyond-the-grave talkback session, probably, talkback radio or something. That could be very fun. Hannah: People could all call in to your funeral. James: Oh, I love that! Tracey: Interactive funerals! James: It's a ‘simil’ funeral. It's being broadcast on the station and then people can call in with their tributes. Oh, that's good. Hannah: Anything is possible. James: That is good. Okay, we've got it. Thank you for helping me sort that out. Hannah: We've done it. James: Well, thanks so much to our guests, Dr Hannah Gould and Tracey Spicer. You've been listening to Season 6 of Life's Booming, Dying Well, brought to you by Australian Seniors. Please leave a review or tell someone about it. If you want more, head to seniors.com.au/podcast. May your life be booming. I'm James Valentine.See omnystudio.com/listener for privacy information.

Let’s talk about death, baby From breaking the stigma to understanding the conversations we need to have before we die, beloved broadcaster and advocate Andrew Denton and clinical psychologist Dr Kerrie Noonan dissect everything we should and shouldn’t say about death. About the episode – brought to you by Australian Seniors. Join James Valentine for the sixth season of Life’s Booming: Dying to Know, our most unflinching yet. We’ll have the conversations that are hardest to have, ask the questions that are easy to ignore, and hear stories that will make you think differently about the one thing we’re all guaranteed to experience: Death. Featuring interviews with famous faces as well as experts in the space, we uncover what they know about what we can expect. There are hard truths, surprising discoveries, tears and even laughs. Nothing about death is off the table. Andrew Denton is renowned as a producer, comedian and Gold Logie-nominated TV presenter, but for the past decade he has been devoted to a very personal cause. He is the founder of Go Gentle Australia, a charity advocating for better end of life choices that was instrumental in passing voluntary assisted dying (VAD) laws across Australia. Senior clinical psychologist Dr Kerrie Noonan is director of the Death Literacy Institute; director of research, Western NSW Local Health District; and adjunct Associate Professor, Public Health Palliative Care Unit, La Trobe University. For the past 25 years she has been working to create a more death literate society, one where people and communities have the practical know-how needed to plan well and respond to dying, death and grief. If you have any thoughts or questions and want to share your story to Life’s Booming, send us a voice note – lifesbooming@seniors.com.au Watch Life’s Booming on YouTube Listen to Life's Booming on Apple Podcasts Listen to Life's Booming on Spotify For more information visit seniors.com.au/podcast Produced by Medium Rare Content Agency, in conjunction with Ampel -- Disclaimer: Please be advised that this episode contains discussions about death, which may be triggering or upsetting for some listeners. Listener discretion is advised. If you are struggling with the loss of a loved one, please know that you are not alone and there are resources available. For additional support please contact Lifeline on 131 114 or Beyond Blue on 1300 224 636. TRANSCRIPT: James: Hello, and welcome to Life's Booming. I'm James Valentine, and this season, we're talking about death. Or, on this episode, why we don't talk about it enough. Death is really easy to talk about, but avoiding the subject just makes things even harder. From breaking the stigma to understanding the conversations we must have before we die, I'll be dissecting everything we should and shouldn't say about death with two fascinating minds. Andrew Denton is the founder of Go Gentle Australia. A charity advocating for better end of life choices, but you probably know him better from so many shows on our TV. And Dr Kerrie Noonan is a senior clinical psychologist and social researcher, determined to increase our death literacy. Kerrie, Andrew, thanks so much for joining us. Do you know one another? Andrew: Yes we do. Yeah. Kerrie: Yeah, along the way. Andrew: We've had a few conversations about death, dying, literacy, all those things. Yeah. James: How did you learn about death? Like when did you, and who did you go to talk to? When did you start thinking about it? Andrew: Well, I think you learn about death the way everybody does, which is you experience it. And the first time it happened to me, I made a documentary about teenagers with cancer, Canteen, the support group, and one of those young men died. And his parents very generously invited me to visit him as he was dying. And that was the first time I actually saw what death can be. And it was, it was very hard to see and then watching my own father die obviously was a profound moment for me because that was an unhappy death. But how I've learned about it since is, I imagine a bit like Kerrie. I've had thousands of hours of conversations with people who are dying and their families and their carers. And, I've learned so much about death I feel I've mastered it and can move on. James: Yeah, true. That's right. Is that, is this what you mean by death literacy, that, that in some ways we just need to be talking about it more? Kerrie: It's, it's talking about it. That, that's one aspect. But it's, it's kind of developing your know-how and being able to put that know-how into practice. So, you can maybe talk about, maybe have some competency in terms of talking or maybe doing one element, related to death and dying. But, when you put it into practice, that's when death literacy kind of really comes to life. It kind of sits, some of the research we've done recently, it's evident that death literacy sits in networks, in-between people, within people, in communities, so it's not just about individuals. James: I suppose I'm wondering about at what point we might have this, or there'd be a difference in death literacy with 20-year-olds than there would be with 80-year-olds, right? Kerrie: Yes, experience changes your death literacy. That's probably the strongest predictor. So we started this research looking at networks of care and how people kind of come together. And so where we're at now is we're looking at what are the predictors and what are the things that we understand so that we can understand more about how to make more death literacy, I guess. So an example, that's your question, well I can give a real example. When my mum was in hospital, we were, we needed someone to help us to move mum from the hospital to home because we wanted to take her home. And we couldn't get the health system or the medical system to do that. So I put an email out, a text message out to my friends who happened to work in the death space. And within an hour we had someone, within two hours, mum was home. And so. That took, you know, that set off a little chain of conversations, emails, texts. And while I was doing that, my brother was getting the medication sorted and other things sorted for my mum. So we really, we utilised, to bring my mum home, we utilised like every bit of knowledge and our networks to do that. James: But you were at the centre of, you know, you, you study this, you're a, you know, an advocate for it, and so you're at the centre of it. You would have a network. I mean, I don't know that I've got the same network. I'd, I could put it out to my friends and they'd go, we could bring wine. Oh, you know, like, I don't know that they'd, I don't know that they'd be that practical. Kerrie: But that's actually helpful too. You need your friends to turn up with wine and, and bread and whatever comforts. So we found that younger people, for example, so we've done two kind of national studies just to kind of demonstrate your point about younger people. Between, 2019, pre COVID, and 2023, we looked at the population and we looked at death literacy and how it changed. And we found that voluntary assisted dying and COVID had an impact on people's death literacy, particularly for the younger people, anyone who's experienced a death, anyone who's been through loss, has higher death literacy than people who haven't. And so, there's lots of things that contribute to that, but, COVID, I think, we're still kind of looking at the data, but certainly voluntary assisted dying because of the way that you need to kind of have conversations, you need to actually reach out to your networks, you need to talk to doctors, you know, there are actually lots of interactions in that that really stretch your skills and, your understanding. James: It's only a few generations back when death was very present in our life. The conversation about voluntary assisted dying has perhaps allowed us to have that conversation again. Have you seen that? Andrew: Yeah, I think that's right. I mean, there's, there's a lovely, witty observation that in Victorian times they talked about death all the time and never about sex. And today it's the other way around. It's not that many generations ago where the body would lie in the house and there'd be a viewing in the house. And so it was, it was a more human thing, the way Kerrie's describing her friends helping her mother come home, that's a communal and human thing. And when I talk about voluntary assisted dying, I must and I want to bracket it with palliative care, because really, despite the fact politically they were oppositional during the legislative debate, they're very much on the same end of the spectrum, which is we're all going to die, and the concept of palliative care, which is also the same idea of voluntary assisted dying, is not, ‘Let's get you to the dying bit, but how do you live as well as you can while you are dying?’ And that dying process could be very short or it could be very long, it could be several years. You, usually you can't be really clear. So the whole point as Kerrie said about voluntary assisted dying and palliative care is you talk about these things. And interestingly, I think there's a paralysis around death, and you know, you said, well, my friends wouldn't know what to do, they'd bring wine, as Kerrie said, that's no bad thing. But if you put out a call to your friends to say, I need to move my fridge, somebody's going to say, I've got a ute. James: Yes. Andrew: …your need, perhaps, to leave hospital and go home, that's the same question… James: They might have a ute. Andrew: …It's just, it's just a human question, which is, I need help. And not only do we get paralysed in the face of death and assume that the experts have the answers, but the experts often get paralysed in the face of death. They don't know how to have those conversations either. So one of the things that voluntary assisted dying absolutely has done, and there was a, a geriatrician in Victoria who said to me. He was ashamed to admit that voluntary assisted dying had made him understand how limited his practice had been, in that he had subconsciously only been asking questions of patients that he had an answer to: How's your pain? James: Right. Andrew: I can treat your pain. What are your symptoms? I might be able to treat your symptoms. Whereas what he asks now is, how do you feel? What is life like for you? That's a much more holistic question. What is it that you need? If we can't help you with it, maybe someone else can help you with it. So I think it's about transcending that paralysis in the face of death. Which is natural, but the greater group that you can talk with it about, the better. I still remember a woman I met several years ago. And she said to me from the moment her husband was diagnosed with cancer to the moment he died, he refused to talk about it. And the, it was like a sliver of ice stuck in her heart because she was frozen in that too. James: Yeah, yeah. Kerrie: Yeah, and I think what we, what we found in a lot of our research too, Andrew, was that, carers were often, had massive networks that the person who was dying didn't know about… Andrew: Right… Kerrie: …as well. So I think that's, that's the other thing, about some of these conversations is that, once you know that you've got community who's up for the conversation or up for whatever around you that a lot of carers are, can have that access to other people. James: And you mean the person dying doesn't know because they don't ask, unless they're talking about it, then no-one thinks to bring it forward? Is that what you mean? Kerrie: Yeah. I think what happens in that situation is a carer can become quite isolated like the dying person. If they don't want to talk about it, there actually are still practical things to organise. There are still things, where are the passwords? How do you get into the bank account? What bills need paying? Andrew: I'm trying that with my wife all the time and she's not even dying! Kerrie: That's right. They continue but you don't get to have the conversation with the person. Andrew: Actually, Geraldine Brooks, a beautiful author, her husband Tony, who is a friend, he died very suddenly, dropped dead in the street, and he was young, in his early 60s. And she's just written a book about this called Memorial Days, about that whole experience. And that's the strongest piece of practical advice she gives, which is, prepare for your death by helping others. James: Yes. Andrew: Like, leave the passwords, explain how these things work. The best things I've learnt about the idea of preparing for death and thinking about death, actually I'm pretty sure came from some of your literature, Kerrie, which was the idea of an emotional will. And an emotional will is not about, to you James, I'll leave my ute. It's actually about, to you James, I'm going to leave, my favourite city in the world. Limerick in Ireland, and here's some money for you to go there, or to you James, I'm going to leave these five songs, which mean something to me. It's actually about, well this poem, it's about gifting something of spiritual life value as opposed to an object. James: Yeah. Following the, the, the legislation in New South Wales, now pretty much in every state, Andrew, where, what do you see now? What do you see in our society now? What do you see happening? Andrew: Look, there's still the same paralysis and fear about death. I think that's, that's kind of natural. You know, one of the people on our board of Go Gentle is the former federal president of the AMA, who's a neurosurgeon, and he said when his dad was dying in hospital, he was afraid to ask for, you know, more help because he didn't want to be annoying. So, you know, I mean, this is the head of the AMA. To me the big question is not so much, how individual families or individuals respond even though it's very important. To me the big conversation is within the medical professions. And I don't actually say that critically. Because we're all equally struggling with the concept of the abyss. And I think, it is an acknowledged problem in healthcare, of futile care at the end of life. It's giving a 90-year-old a hip replacement, for example, just over-treating. Because of the, I've heard it described as ‘doctor as hero’. You know, we give, we give doctors, quite reasonably, a special place in our society. Because we ask special things of them. But part of that training is, we must win. We must treat. When I was first told this by a doctor in Oregon, when I went there. When they said, oh, we see death as a defeat, I actually laughed. I thought they were joking. I said, it's… James: You know you can't win. He turns up with that scythe at some point. Andrew: So I think there's a much broader conversation about what is dying, and how do we have that conversation with people who are dying. And I think… James: I suppose I just thought, I have had a couple of conversations recently with people who have a relative or parent who has gone through voluntary assisted dying… Andrew: Yes… James: …And what I noticed was the way they talked about it, in a sense, wasn't much different to, oh, we went to Europe. You know, we had a nice trip. Like, it was very normal, the way they said it. They went, I was at my uncle's death yesterday. Andrew: It can be. It can be. You know, dying affects different people differently. There are people who have gone through the voluntary assisted dying process who totally support it and are very glad it's there, but still found the experience traumatic. It's not a silver bullet. James: Right. Andrew: It doesn't, it, it's merciful, and it's peaceful, but it doesn't, it certainly doesn't remove grief, and it doesn't remove, for many people, the unreality of dying. We hear many, many testimonies of families deeply grateful for the way in which they are able to say farewell. And I think that's a very important part of voluntary assisted dying. A genuine ability to say farewell. But people are different. There's one man that insisted, who used voluntary assisted dying, and insisted that he be only with his doctor. And the reason he gave, which I find both beautiful and heartbreaking, he said, ‘I don't want the love of my family holding me back’. So, you know, I always maintain when I talk about this. James: [sigh] I felt the same thing. I did the same thing. I know. You know, huge. Andrew: Whenever I've talked about this, I've always maintained, none of us know how our dying will be. All we know is that it will be hours and hours alone. And I think that's why I struggle with, that philosophy that somehow or other, that, our dying is about society at large or about some universal rule that we might be breaking if we don't do it the right way. James: Kerrie, you know, I sort of want to acknowledge that you've been through death quite recently, that your mother died only a few weeks ago as we're having this conversation. As someone who's then spent their life studying this area and thinking about this area, what have you learned from the death of your mother? Kerrie: It looks similar to what Andrew said before about his colleague, the doctor. Like, well, I went straight to the practical things, didn't I? Like, it's a kick, grief's a kick in the guts, let's face it. Knocks you on your butt. James: And we are very practical in those first weeks, aren't we? At the moment of death and afterwards. Kerrie: Just the other day, when we dropped my daughter off to uni, I went to text my mum, as I would usually do. And text her the photo of her in her dorm. And I think this is, you know, I was really glad of my experience because I just sat there and cried for about five minutes, actually. I just needed to blubber and cry. I could have sucked it up. We could have just, you know, driven on. But actually it was really helpful just to really deeply acknowledge that moment. That was the first time. That I'd experienced that real sense of wanting to, to, communicate with her. Andrew: I hope it won't be the last time you hear her cry about your mum. Kerrie: No, it won't be. It won't be. But when she died, because of the work that we had done, I didn't cry initially. Andrew: Yeah. Kerrie: And this is this individual kind of experience of going through this. I didn't, immediately cry. I felt intense relief for my mum. And so I was just reflecting on that. I was like, ‘Whoa, I'm not crying’. The other thing that is, is on my mind is that it took an ICU doctor on the day that mum… So mum had three MET calls. And if you don't know what a MET call is, and you're listening to this, this is where every registrar, every emergency person on call, runs to the bed of the person who is, who's crashing. James: Right. Kerrie: …and she had three of those. And by the end, I'm glad I wasn't there because I hear that mum was very distressed. James: Right. Kerrie: And it took an ICU doctor to sit down with her and go, what do you want Maureen? James: Yeah. Andrew: Yeah. Kerrie: And mum said, I'm done. And so it didn't matter that I'd done that with the doctors, multiple times, or that she had an advanced care directive, clearly stating, do not give me, treatment that will prolong my life. It didn't matter that all of those things were in place. What mattered, was that ICU doctor who absolutely, compassionately just stopped everything and talked to my mum. And it's a pretty brave thing when your heart is failing and other things are happening in your body to say, no more, I'm done. Because that does, that's a decision about you only have a certain amount of time left in your life then. So, that doctor changed the course of my mum's dying. And, yeah, I'll never forget that. And then the compassion at which she called me to talk with me about what mum had decided. And the checking. The difference – one of the other things that I found – the difference between a doctor with really, like, person-centered communication skills and someone who's focused on getting the job done. They ring and say, ‘Hey, I'm caring for your mum. I'm caring for your person. What do you understand about what's happening?’ James: Right. Right. Kerrie: And every time, they did that… James: …they want to listen to you first, yeah. Kerrie: …Yeah. Every time they did that, it just gave me an opportunity, even though I know this gig, I've talked a hundred times on the other side of that conversation with people, but it just made me realise the just incredible, that empathy, you feel it in your bones on a whole other level when someone is truly going, ‘Tell me, tell me your story, tell me your bit.’ And, that was, that was a big learning and a big reflection as a health professional, as someone who's been there. The other thing, sorry, you cracked that open, didn't you? The other, the other part was, no one asked, me or my brother, about, about our experience, our previous experiences, and who we were, and what we did, and who were these children taking their mum home. My brother's a nurse. I've worked in palliative care for a million years, and it was a really interesting thing having to, like, I just wanted someone to go, Hey, have you done this before? And maybe I'm being a bit biased there because that's something that, because I've got a death literacy lens over things. And I'm always interested in, Hey, what have you done before? Hey, what experiences do you want to bring to this one? What do you know about what you're facing? What do you want to know about next? They were all the questions that I would be asking if I was working with someone. I really wanted someone to ask me those questions. Andrew: In a palliative care setting, you would probably have been asked those questions, you would hope. Kerrie: I hope so. Andrew: In a general hospital, maybe not. I think that speaks to two things, what we're talking about, which is paralysis in the face of death and, a sense of we just treat, we treat, we treat. This is what we do. Everybody's terrified of being accused somehow of not having done enough. So I think there's that. And, the doctor, the ICU doctor you described, that strikes me as a perfect piece of medicine. And it, it absolutely accords with what a beautiful nurse said to me in South Australia some years ago. She was very emotional. She was, she was recording a piece for us about why there should be voluntary assisted dying. It was always instructive to me that the ones that really advocated for it were the nurses, because they're the ones that see the suffering. And she just said, ‘Why can't we do the right thing, human to human?’ And that's why I see this as a multi-generational discussion within the health profession. It's not that people in the health profession aren't humans or don't get that, but it's not how they're trained. And, but I also think it speaks to the pressures on the health system too. Kerrie: Yeah. Andrew: In the same way as we're talking about aged care, even though we have a much healthier health system than, say, America, it's still pressured. And we know, we hear stories from hospitals all the time of, resources that are built but not used or resources that are used but are stretched beyond reason, and so I think it's a reflection of all those things. But there was at times, and I think sometimes we don't talk about this enough, is paternalism in healthcare. Andrew: Can I explain that?! James: Yeah, that's right. Andrew: Sorry. James: Oh yeah, we covered that Kerrie, us blokes know all… Andrew: Please, do go on. Kerrie: Oh, there's a lived experience. [laughter]. Oh, yes, that. Andrew: No, I'm sorry, please do explain. James: …which you ably demonstrated… Kerrie: So, that, yeah, like paternalism, we just don't have a critical kind of conversation about paternalism in healthcare. And there's, you know, there's that difference between really great care. And then, but if you just kind of tip it a little further into ‘Hmm, do you really want to do that? Oh, don't you want to be the daughter, not the carer?’ You know, like there are, there are kind of, there are particular things that happen in healthcare that, that we don't, we aren't critical enough, is what I'm saying. I don't know what the answer is, but I would like the system to be more critical about, about some of those things that perhaps they take for granted a little. And, look, sometimes it would be maybe permission for a family to kind of, yeah, be the daughter. James: Well, even in my experience, my cancer experience in the last year or so, I've now done several talks at doctors conferences and things like that. And what, what sort of strikes me as funny about it is I go, ‘We’re thinking of taking an interest in the patient's perspective, perhaps you'd like to come talk about that?’ Patient's perspective. Is this new? Andrew: You know, I, I went on Q&A, about VAD quite early in my advocacy, which was a terrifying experience, by the way, and, and there was a, another fairly prominent doctor who was strongly in opposition, and I, I completed what I had to say by basically saying, you know, doctors, it's, it's time to listen to your patients. And this doctor, who's a very good writer, wrote this excoriating piece in a magazine afterwards, just accusing me of being patronising towards doctors. And I'm thinking, that's patronising? I mean, the worst example I know of this, there was a, a former AMA official and, they held a debate on this internally in 2016, that I had a link to and I, so I watched it. And he was a, a geriatrician, and a senior doctor. And somebody on the other side of the debate, because he was opposed, had put to him that there's a great public support for this. And he said, and I'm, I'm quoting pretty close to verbatim, he said, ‘That's why we're paid $200,000 a year. We make these decisions.’ And that's, so I think there is significant paternalism. There was another, a female oncologist who wrote a piece in The Australian against these laws, and even though it wasn't her headline, it was what she meant. The headline was, ‘Autonomy, it's not about you’. And you know, going back to what I was saying, there cannot be a more, you-focused experience than your dying. I don't care what your religion tells you, in the end, only you are going there when it happens. James: You've given, is it a decade now, to this? Andrew: More, I think. James: More, you know. Again, I suppose, what's your reflection on that? I sort of feel like I'm framing the question almost, are you glad you did that? You know, is that… Andrew: There are times, and I'm sure Kerrie would agree with this, there are times I think, you know, I've had enough death, thank you very much. Andrew: But I would have to say it's been the most brilliant second act for me after showbusiness, far more meaningful to me. The correspondence I've had and the conversations I've had, have been so privileged, and the gratitude that we as an organisation, Go Gentle, receive from people whose families had the option of voluntary assisted dying is immense. And, so yes, I am glad. And certainly I view this as the real work that I've done, not whatever I may have done in television. Perhaps if I'd won a Logie, I'd feel differently about that. James: I think you peaked at [1980s show] Blah, Blah, Blah, quite frankly! Andrew: Yeah, I think so, and it was all downhill after that first year, exactly! James: Yeah, well, I almost feel like I need to go and have a good cry. It's been, a beautiful discussion. Thank you so much for, uh, sharing it with us here on Life's Booming. Andrew: Can I ask you a question? Before you just wound up, you're getting teary. James: Yeah, yeah. Andrew: What are you feeling? James: I'm taking a deep breath to calm, so I can't talk, not necessarily to squash it. I'm always surprised when it comes up. I, I never quite know when I'm going to get teary. And sometimes it's, it can happen on air, like sometimes if someone starts talking about death or a relative, and I'll be listening to it and I'll suddenly go to speak and go, oh, the emotion's right there, you know. So, I'm not entirely clear. I think I'm moved by Kerrie, and sort of wanting to experience your grief in some ways, deal with that. Or I feel like, I think I'm feeling that you, you holding it in, sort of that, you know, we need to sort of let that, let that go a bit. So, it's interesting. I think I'm moved by your work as well. Look, we have a funny connection over many decades, and to observe you go through, deal with, deal with, you know, to see you transform into doing that work has been quite extraordinary. And I'm probably just contemplating my own death. [laughter] Andrew: And, exactly right, James. And during the height of COVID, quite unexpectedly, a very good, friend of mine, he rang me from Victoria and we knew his wife had pancreatic cancer, which is obviously a very tough diagnosis. And then he said she's chosen VAD and she's going to die in this state. And despite all the thousands of hours spent in that debate to get that law passed in Victoria, which was the first one in Australia, and it was an absolute brutal knife fight of a battle to get that law passed. For some reason, it had never occurred to me that somebody who I knew and loved was going to use this law. James: Yeah, right. Andrew: And I remember, despite everything I knew about it, on the day, Jennifer and I, we got our whisky glasses. We poured a whisky. We lit a candle. But I remember thinking as the clock ticked down to the moment, it felt very unreal to me. But the strong emotion that I felt at the moment, knowledge in the moment of her dying was not that she had died. It was actually about just the richness of life. Oh my god, life is so rich. And that's what I felt. I just felt, wow, life. Kerrie: I think that is what you say there is so deeply important because one of the reluctances around talking about death and dying is not being able to maybe lean into some of that feeling around that richness of life. When we were going through photo albums, there were photos there that, you know, that we'd never really taken notice of before. Damn, we wanted to know about them now. Who were they? Who are these people? Where are they now? It does connect you to life in a very profound way. And all of the messiness of that. And that's, I think, only a great thing. Watching my children, 22 and 17, be with their grandma. We did a very, a simple thing. Put a comb, a brush on the end of her bed. And mum used to love having her hair brushed. And we just said to the kids, just brush her hair, if you want. Andrew: That’s gorgeous… Kerrie: And so that just very simple action just then gave them something to be with her while she was dying. Andrew: Human to human. James: Yeah. Kerrie: Yeah. And my children did that many times, while she was dying. And, and that's when we would sit and talk about what we did with Nanny and things. And we, you know… So it's worth leaning into. I guess that's the other thing. It's worth getting the whisky out and having a think about, about, about these things and reflecting in on it, and how, and what it means to you and what you want to do. James: Thank you. Kerrie: Thanks. Andrew: Thanks, James. James: I'm gonna cry. Andrew: Come on. Let's hug it out. Come here. James: Exactly. It was very good. That was a beautiful moment. Thank you. Thank you. Thank you. Thanks to our guests, Andrew Denton and Dr Kerrie Noonan. You've been listening to Season 6 of Life's Booming: Dying to Know, brought to you by Australian Seniors. Please leave a review or tell someone about it. Head to seniors.com.au/podcast for more episodes. May your life be booming. I'm James Valentine.See omnystudio.com/listener for privacy information.

Ma$e & Treasure "Stat Baby" Wilson are back with another one!! On this episode, Trysta Krick fills in for Killa and we discuss the SAS & LBJ Beef that went down over the weekend when Lebron stepped to Stephen A about talking on Bronny, Lebron and the Lakers just need to stay healthy for the playoffs, Jokic's WILD night doing something NOBODY has ever done going 30-20-30 in a NBA game and Charles Barkley vs. Kendrick Perkins! Please rate, review, and follow the podcast for more content.  Support the show and sign up for Underdog Fantasy HERE with promo code CAM and get a $1000 first deposit match, and a Special Pick'em pick. Follow the show and our hosts on social media: It Is What It Is, Cam'Ron, Ma$e, and Treasure "Stat Baby" Wilson , Producer Ayooo Nick Learn more about your ad choices. Visit megaphone.fm/adchoices

In this episode of the Building Texas Business Podcast, I spoke with James Dieter, Chairman and CEO of Principle Health Systems. James shared his journey from orthopedic and interventional pain specialist to healthcare entrepreneur. Motivated by inefficiencies he witnessed firsthand, he created a more efficient healthcare model focused on mobile diagnostic services. Principle Health Systems has now conducted over 3.2 million mobile lab tests in 2024, demonstrating the success of his patient-centered approach. James opened up about leadership challenges and the importance of self-awareness when managing strengths and weaknesses as a CEO. By redefining Principle Health's mission, vision, and core values, his team created a unified direction that improved employee satisfaction and strengthened company identity. His insights on strategic partnerships showed how the right team can transform an organization. We explored their innovative "daily DON" program, an AI tool that helps Directors of Nursing prioritize patient care in long-term facilities. This technology enhances clinical decision-making while serving as a distinctive marketing asset for the company. James also discussed the Texas healthcare landscape, including Medicare conditions and reimbursement rates. Throughout our conversation, James shared practical advice on informed risk-taking and learning from setbacks. His experience navigating the healthcare industry offers valuable lessons for leaders and entrepreneurs looking to make an impact in this complex field. SHOW HIGHLIGHTS I explore James Dieter's journey from an orthopedic and interventional pain specialist to a leader in healthcare entrepreneurship, emphasizing his efforts to address inefficiencies in the healthcare system through mobile diagnostic services. We discuss the transformation of Principle Health Systems, highlighting its achievement of conducting over 3.2 million mobile lab tests in 2024, with a focus on patient-centric care. James shares insights on balancing strengths and weaknesses as a CEO, stressing the importance of self-awareness and strategic partnerships in building a thriving organizational culture. We delve into the development of a strong company culture at Principle Health Systems, driven by redefining mission, vision, and core values, which has enhanced employee satisfaction and strengthened company identity. The episode covers the innovative "daily DON" program, an AI-driven tool that aids Directors of Nursing in prioritizing patient care, which has been recognized for its impact on clinical decision-making and marketing. We examine the challenges and opportunities in the Texas healthcare landscape, including favorable Medicare conditions and low reimbursement rates, alongside the growing role of AI in insurance claims processing. James reflects on leadership and problem-solving, emphasizing the need for quick decision-making, informed risk-taking, and learning from setbacks to drive business growth and sustainability. LINKSShow Notes Previous Episodes About BoyarMiller About Principle Health Systems GUESTS James DieterAbout James TRANSCRIPT (AI transcript provided as supporting material and may contain errors) Chris: James, welcome to Building Texas Business. Thanks for taking the time to come on the show. James: Glad to be here. Thanks so much for having me. Chris: Yeah. So let's start at the beginning. Just tell us a little bit about your company and what it does and what it's known for. James: Yeah, so Principle Health Systems has evolved over the years. When we started out we really had multiple directions. We were going in just as a healthcare services company. So a little background on me. I started out in orthopedics and interventional pain. I was really just dedicated to practice inpatient, outpatient and surgery. So going through that for my first decade of work, I saw a lot of inefficiencies in the healthcare, outpatient and surgery. So going through that for my first decade of work saw a lot of inefficiencies in the healthcare services sector, specifically in the Southeast region of Houston where I worked. So I wanted to build a better system right. Our lab results took too long to get back. Our pharmaceuticals weren't in stock at the pharmacies we'd send our patients to. Mri results took too long and started to, through my entrepreneurship journey, go out and started to build little sectors of where I could have influence really over my own practice to have a better outcome and through that over time started over 20 businesses in the first 10 years Just had numerous pharmacies, laboratories, diagnostic facilities, did three surgery centers. I was involved in one large hospital system and then got to a point where I said, hey, let's wrap this thing together, let's put it together. I want to have really just one source solution where we could come in and work with physicians and provide a host of different services. That went fairly well. The service level was outstanding. The most difficult aspect for us was really the payers actually having reimbursements without being contracted with certain individuals. From there, we really, about six, seven years ago, found a niche and that was called long-term care. So we define long-term care as skilled nursing facilities, assisted living facilities and home health facilities and we provide laboratory and diagnostic services to those guys. So, in-house, you call it your house if you live in a skilled nursing facility or assisted living facility, or at home, but we provide mobile diagnostic services. So we go out and we offer labs, x-rays, ultrasounds, echocardiograms and ekgs in the home. So you bring it to the patient. Bring it to the patient, that's right. That's right. And last year, 2024, we performed over 3.2 million lab tests mobile. So, with a large amount of those being for stat tests, right? So tens of thousands of stat tests per month where somebody needs something in four to six hours and we get us turned around for them. Chris: Okay, so it sounds like the inspiration for you was maybe frustration born out of frustration, for sure, and a gap in our healthcare delivery service, so he's shedding more light on that. I mean, you've mentioned this entrepreneurial journey. I mean most physicians and doctors don't have that. So what was it for you that you kind of took frustration and turned it into action? James: Yeah, I mean just a matter of you know, I'd have a patient that was really suffering right, specifically on the interventional pain side. This is not uncommon. You have a patient who's in a very bad position and you're already jumping through hoops with insurance companies. So it might take three to four weeks to get something approved. And then you're in, then you set them up for surgery. Well, you, the assumption is okay, we're going to have the lab work back, we're going to have the MRI back in time, and then it just wasn't happening. So you're pushing off surgery, you're pushing off procedures and just over time it's just a great deal of frustration. At the end of the day, the mission was always to help the patient, and if it's all about the patient, we've got to do something different here. And that was the biggest frustration for us was just the delays and turnaround times on the imaging and laboratory specifically, but then also getting medications, you know, sending patients out and having sometimes three, four, five phone calls come back up. The pharmacy didn't have my medication, the pharmacy didn't have my medication, the pharmacy didn't have my medication. So that's when we started opening up our own pharmacies back then as well. Chris: So just there, right, you said we. Who did you partner with? How did you go about finding a business partner? If that's the case, going about setting up a business, because you don't just turn on a switch right. There's planning, there's financing. Entrepreneurs in any industry, in all industries, go through that when they're starting a business. Let's talk a little bit about that journey in the beginning, of how you got it going and some of the lessons learned in that process. James: Lots of lessons learned in that process. You know, speaking of that, we call it chewing glass, right, okay, I? heard that one. So much of it's just a grind right and just figuring it out. But as far as partnering goes, I've had numerous partners in different individual business units over the years. When I formed Principle Health Systems in March of 2016, I had to get really specific on who am I going to allow on the bus, who do I really want to partner with on the bus? So I pulled away from certain partners, left goes, let go of certain businesses and then brought some together. So, in total, I believe we started out with there were three of us on day one that we brought in, you know. But I had different skill sets, right. I mean, I was trying to always try to be very honest with myself about where are my weaknesses right. I'm I would say I'm highly visionary. I like to think big. I like to have that 50,000 foot view of where we're going, set goals, set mission, set vision. Big culture guy. I love to talk about culture and instill culture throughout the organization. Chris: We'll get to that in a minute. James: Cool yeah, but just frankly, I would say weaknesses are on details, right. So I've just always been someone who likes to move forward and not analyze every aspect of it. So partnering with some people that were strong in an analytics and detail side of the business was really important for me, and I still have some just phenomenal business partners today in that regard. Chris: That's great. You touched on two things that I think are very common, some of which when we're advising clients. The first is choosing your partners right and being clear about expectations, documenting what the deal is on the front end and making sure you know that where everyone's going and what the roles are. The second is understanding, especially when you're the leader, your weaknesses in hiring around that, because you can't do it all and you're not going to be good at everything, and so I think everyone that I've met that's been successful has that self-awareness Right. How did you go about getting comfortable letting go of some of those job responsibilities and whether it was a good hire or a partner that you chose. James: That's a tough one. I mean, some of it was truly difficult to let go of. And then other pieces. You know you tend to be good at what I would say you tend to enjoy what you're good at. Sure, yeah, and that's one of the so to really convince yourself like, let's go spend more time at what we're good at, more time at what we enjoy, I would say I didn't focus so much on letting go as focused I wasn't spending so much time focused on what I'm not good at as what I was good at right. So it was just a matter of, by virtue, of spending more time on what I enjoy, doing less and less of what I don't enjoy. And that was easier for me to let go. It was almost to to to let it slip to let it slip away rather than to give it away and know that because you weren't giving it attention. Chris: someone needed to Right. James: Right. And then you know, obviously just helping to build folks up I mean, we have right now an unbelievable director of human resources who was in project management at one point and just understanding the value of different people in the organization that you already have built trust and rapport and you believe in them. and then to find, hey, I really think they'd be good at this and then move them into these roles to fill gaps was so important and just finding, really analyzing the people that are around you to understand what are they great at and what might else they do from where they are today, that could be a greater opportunity and bring greater value to the company and organization. Chris: Yeah, so you touched on culture, let's go ahead and go there. Anybody you talk to at a CEO, entrepreneur, business owner, leader will say, right, culture's king. We believe it a hundred percent. We talk about that constantly around here. It's just part of our DNA. We believe it 100%. We talk about that constantly around here. It's just part of our DNA. So everyone goes about it differently. Let's talk about how you have gone about building the culture at Principal Health. How would you describe it first? And then, how have you gone about building it and nurturing it? James: Yeah, so great question. I mean, starting out, I couldn't tell you when we started the organization what was our mission, what were our core values. I couldn't even tell you what they were. There was something we came up with. I think two of us came up with one day, in a couple hours, some marketing stuff yeah marketing stuff. We hung it on the wall, just like you would expect right from most organizations to do most organizations do. And we had a phenomenal, you know, I would say the top 20 people in the organization just had a great relationship together and I would say that we thought culture was very strong. Four years in we polled the entire company and it was pretty, pretty terrible. I mean, it was like a 60% satisfaction, maybe even in the fifties, and we were kind of horrified like wow, we thought we had this great culture and everybody loved this company and it was. You know what it was. Well, I decided a couple of months later I did an offsite. So we did a two day offsite and kind of big hotel room, you know, or I guess I said conference room, with these big windows overlooking clear lake, and you know it know, the whole idea was like let's think big, and we brought in just management. So I think there was 46 managers at that time in the organization and we all came in the room we said, hey, we're here for two days to figure out three things Our mission, our vision and our core values. And we're going to sit together and this isn't going to be the C-suite telling everybody what we're about as a company. We as a people, as a community, are going to discuss what is this company? Who are we Not? What are we? Who are we? Chris: And what do you want to? James: be Exactly, and we did come up with a BHAG. We ended up throwing in a BHAG as well there. But where do we want to go? Classic Jim Collins. So we did get through that two-day period and we came out with a really strong mission, vision, core values. Our mission is to improve patient outcomes and experiences. Relatively simple, very difficult to do in healthcare. We decided our core values would be URPHS Principle Health System the acronym I should say is URPHS. Understand the mission, respect everyone. Patients are our purpose, happy to help and step up. So and we talk about simple, right, exactly, I would believe at this point, 90% of any you know we're approaching, I think, right, right, 500 employees today. I would think 90% of those folks could tell you that and not just tell you what they are, but give you examples of how they've done those things. We live culture. We no longer talk about it. We did that in the beginning. Now we live it. It's brought up in every management meeting. It's brought up in all the leadership training sessions, all the offsites and it's kind of what I call the North Star. So we look at culture as the direction. If you're not sure about a decision that you're going to make in any regard. I want you to think about the North Star. Is it in alignment with, are you walking towards, the culture, are you walking towards the mission of this company? And that helps to drive behaviors so important. Chris: I mean, that is the true key to the kingdom. I think the word I would use is it sounds like your culture has become institutionalized. Right, it starts out where it is you as the culture cop or maybe the C-suite, and getting it deeper in the organization. But once you've done that and everyone knows it and everyone lives it and everyone can hold each other accountable to it, then you've got a true directional tool To your point. I think the more you can tie behaviors to those values that's when they become real the more you can tie behaviors to those values. That's when they become real. And so when you're praising people because whatever they did connects with these two of our six or whatever number is of our values, it becomes real to them and they know how to repeat it A hundred percent. James: Yeah, I'm fairly unapologetic about the culture, so I would say it's even unusual Some of the things I'll say when I'm in management meetings or even when I do a quarterly coffee and conversation. So I meet with the entire company. It's usually takes six or seven sessions, but I go company wide, we bring the big groups and I'll sit down with the entire company for an hour every quarter and what I'll typically say when it comes to culture is that it's up to you to you know we can't police it from management. It's up to the people to police the culture. So one of our core values is respect everyone. So if there's someone who's not respecting everyone, I expect that the people of the company will kick that person out, go after them, make sure they don't work here, and I'll literally look out and I regularly look out across when I'm talking to the whole team. Chris: And I tell them. James: If you really can't say that you're here for the patient, if you can't say that you're really here to serve our mission, I was like I really don't want you here. I was like I prefer you to quit. I was like we will replace you and I would prefer to go without somebody for a short period of time. I'm unapologetic about it. We truly believe it. That's what we're about above all things. The rest of it, because at the end of the day, in our business, if we do a really great job treating patients, everything else will follow. Yeah, the doctors want to work with us, the facilities want to spend time with us, the payers will respect us. It's really about the patients. So we put patients first. Everything else comes next and if you can't get behind that, we don't want you. Chris: Yeah, I think that's a great point. Some of the words we use here, right. We're passionate about our mission and our values, which means they resonate in our heart and our gut. Right, we just it's in our fiber. If they don't resonate with you, it's really okay, because it means it's not the right organization for you, right there's a different organization out there that you're going to be happier with, you'll connect with and we'll go find someone that connects with us. Happier with you will connect with and we'll go find someone that connects with us, because they're going to be the better performer, the self-policer, the self-motivator. They're going to be the ones that connect with for us, similar to patient care, client service, right and mutual respect amongst everyone. So I agree with you it's okay to tell people if you don't connect with this. Actually, I use it in interviews when I'm interviewing someone. Here's who we are, we're very clear about it. And if you don't connect, it doesn't make you a bad person 100% doesn't. It just means it's in the right organization for you and there's a gazillion other organizations. Advert Hello friends, this is Chris Hanslick, your Building Texas business host. You're a Building Texas business host. Did you know that Boyer Miller, the producer of this podcast, is a business law firm that works with entrepreneurs, corporations and business leaders? Our team of attorneys serve as strategic partners to businesses by providing legal guidance to organizations of all sizes. Get to know the firm at boyermillercom and thanks for listening to the show. James: There's another team, there's another team that'll work just well for you. Yeah, totally. Chris: No, let's switch a little bit because I want to get back into kind of the business I'm always interested to ask about, like innovations and technologies I mean no-transcript. James: Yeah, I mean, you know, obviously, with the increased levels of compute, you know, now you have the large language models, you have artificial intelligence and that has already made an impact for us. So I would say that we are the next 18 months are going to be very interesting, but we are already using automation from AI that is changing the way we do things and I can give you one example in particular. Well, two really good examples. One in the back office, we have a team of I believe it's three ladies total. Still we had three ladies that would handle all of our facility invoicing right and it's very complex. We have the decipher between patient to patient each day who's part A, who's part B and how we do the billing, and some of it gets billed to facilities. Some of it's billed to without getting too much in the weeds. Some of it gets billed into the insurance company and we've been able to quadruple our volume with still having the same amount of people and not have to scale payroll because of implementing automation techniques through AI that help to decipher where those go. These get scanned in and it all gets brought up. Still have a little bit of a you know, a people component to it. But, just you know, we would be sitting here with and one division. It's just a great example, because that one division would probably be 10, 11 people, yeah, and the cost increase Exactly. Chris: That's an amazing statistic. James: So that is kind of a back office area that we're really focused on going. Where else can we, where else can we look at the bringing in this technology to help as we continue to scale, so that we don't have to just keep hiring bodies? which is you know, from a real estate perspective even difficult. So we're, you know, we're, we've been tapped out on space for two years and we're it's been very challenging. Where do you just put you know, where do you keep putting people Right? So, but on the I guess I'd say on the actual business, well, that's the back office on the front of the house. We've got a program. We call it the daily DON. So, right, so it's a DON is a director of nursing. A lot of the facilities we work within, you know, skilled nursing facilities, assisted living facilities, they have someone who really oversees the house. They're the clinical expert in there that makes sure that all the patients are taken care of. That's called the DON. So we have a form that's. Thousands of these go out every morning to all of our facilities and it's an AI program that picks out the most important things that happened the prior day. So here's, you know, bobby Sue had a stat test performed at X time and here's the result. Here's a critical result or whatever is most important. They kind of have a clinical mind and says, hey, this is where we think you should pay attention to your patients today. These people are trending in the wrong direction. These people if they're doing just fine, they're at the bottom of the page. The things that are most important are highlighted at the top of the page, but it's really helping us provide better healthcare diagnostics for our providers so that they can treat the patients better. So it's right, in line with our mission, but it's really just automation and again, it would take an army of people to do this. Chris: Yeah, that's really cool stuff. I have to believe that is also, if not already, will become a huge marketing tool. Oh, it's a big marketing tool. Right, people are worried about the family mergers they're putting in there, where they're really going to get care, because, you already know this, your industry doesn't have a great reputation as a whole. No for sure. James: And so the more you can say no, this is what we do to make sure we're taking care of your loved one, yeah, so there's a huge journal publication called McKnight's and it is the, you know, the premier publication for the long-term care space and you know, all over the country, the daily DON. We actually won a bronze medal this year against thousands of applicants for innovation. So it was actually yeah, we were awarded. Chris: I guess that was 2024, but last year yeah, close enough, yeah, so let's talk a little bit just about, you know, being in Texas, being a business, primarily in Texas. What are some of the advantages that you have experienced being here, not just in Houston, but taking advantage being in Texas? For us is related to the Medicare Advantage plan, right so? James: or, excuse me, the MAC right so? Different Medicare has Medicare administrative plans and they actually carry out Medicare's will in an area. Texas has a MAC that is somewhat more favorable than the rest of the country. Now there's a few states that share that, but just in general, for us, from a standpoint of clarity they're a little bit more clear. There's a lot of bureaucracy that goes on in just getting paid, so this might be surprising to people outside of health care, but today I believe we are paid on 61% of the business we do and we're actually probably one of the really high end. We've run studies on this and we're we are, better reimbursed than most companies out there in our space, and so we still, you know, roughly four out of 10 patients that we treat, we get paid $0. Chris: It's just fascinating to me that it's that poor it is very poor. James: However, we are in one of the more favorable areas, so I can only imagine if you don't have a lot of clarity and guidance on how to bill, it just becomes more and more challenging for you. Chris: Yeah, this may be one of those, but I'm just interested as you kind of look out going forward, what are some of the challenges or headwinds you see maybe coming at your industry? Some of the challenges or headwinds you see maybe coming at your industry, lots of changes going on in Washington right now will have an effect, I'm sure, on your business but maybe also affect what goes on at the state level. James: So one thing you're kind of worried about as you kind of look out, I would say just one of the concerns, and I mean I think again, everybody likes to point the finger to the big bad guys and I really look at them more as a partner than they're not a, you know, an adversary to us or more of a partner. But the insurance companies have become more active in utilizing ai to to identify discrepancies within chart notes to deny claims. So that's something where, you know, recently went to, one of the conferences I attended was for health care payers and they have booths set up, you know, trying to sell to the health insurance companies of how to use artificial intelligence to identify the to not pay. They're already not paying much and you know they're now. In reality, the reason they are not paying is because the notes are lacking in something. So, rather than paying a person to go and evaluate each note, which is very expensive, you think about the health insurance companies if they have to hire thousands of people to evaluate the charts, or they can use AI programs to evaluate the charts it's going to save them money and hopefully that money gets passed on to the consumer. So I actually don't think it's a long-term a bad thing, but I do expect in the meantime it's going to just decrease even further, decrease the amount of claims that get paid. Chris: Right, it sounds like it would be incumbent upon companies like you to kind of push back a little more in the short term. James: to be able to take advantage of those efficiencies later. Absolutely yeah, and I look at it from our perspective. We're in a really good spot. We're pretty developed to where we can handle those kinds of headwinds. Chris: So let's switch again a little bit. Just talk about leadership. How would you describe your leadership style? How do you think it's evolved over the past, you know, 12 to 15 years since you've kind of been moving forward with this company? James: Yeah, I mean. So starting out with a group, I think, start with five people and 500 folks. So leadership looks very differently as business scales. And, to start right, I mean I used to take out the trash and do the accounting. I mean I've worked every job in the company personally and in the beginning, worked with a lot of people who were for lack of a better, better word incompetent at what they did, and today, having been able to develop people and hire and bring in and partner with incredible people that are, frankly, better than I am, a lot of things it allows me to go and do what I'm really good at and, from a leadership perspective, I've probably, if I've, believed in you from the beginning. I've always given you. I'm not a micromanager. I don't believe you can't really grow a large company if you're watching over everything going on. So you have to truly, just, I would say, collaborate with those around you and I guess, if I had to define it who I am, I try to be a great collaborator, right. I try to really help, provide as many resources for the people around me as possible so that they can be successful. Chris: That's good. Let's talk about problem solving right. Especially where you are today and probably have been in your role, probably more of what you do is facing issues, and how are we going to work through this and solve an issue, solve a problem? What have you found to be the most effective way to kind of get the information you need to make those informed decisions that you believe would be in the best interest of the company? James: Yeah, I mean. So again, that's something that over time, has become, I would say, much more of a process, right? So now we have data analytics and we have incredible CFO that's been coming in and able to provide information. There. We have all these additional resources, from accountants to lawyers, to folks. We sit down. I like to surround myself with the right group. We try to sit in a room with the right people at the right time and analyze all the information, but very quickly. I do not like the old analysis paralysis. That's not us at all. I move very quick, I like to make decisions very fast and I don't look in the rear view mirror very often. I'm always looking out the front window and just moving forward. So when there's challenges that are hitting us, it's just a relatively. Let's get as much information as we can today, let's analyze it and let's go. Chris: Yeah, I love that because I agree, I think, the idea that stagnation will kill the company right, and so I think you try to get as much information as you can, knowing it's never going to be perfect. But I think the key then is, I agree with the mindset of kind of move quick. To me, the next piece of that is to evaluate the decision as it's implemented, because then you're continuing to learn and gather information. If you're doing that so that you can adjust right, Because the plan goes out the window as soon as you start to act right, so some people will act and then ignore, and I think that's a mistake. I think if you act, continue to analyze and then align behind what you've learned, it may not be a pivot, it may just be a tweak, but you've got to keep moving. James: I totally agree and you really touched on a great point that I like to speak about. Often and it plays a little bit in the culture. I tell people, guys, we've got to make mistakes here. If we're not making mistakes, we're trying nothing new. So I hesitate to say I encourage mistakes, but to some extent I think I did in my last meeting ask for mistakes directly. So the idea here is that it's okay to make mistakes, it's not okay to make the same mistake over and over again. But if we're not trying, we're not growing. If we're not growing, we're dying. So we've got to continue to move forward. And the culture is that if you are focused and I mentioned that North Star earlier but if you're heading towards the North Star and you make a mistake, you're okay, there's no problem If you're doing something new and you're trying something for the good of the company and the good of the patient, that's okay. Let's learn from it. Let's learn from it, let's change course and let's keep moving. Chris: Yeah, that's right. Comfort and complacency aren't good, and I think that that freedom to take risk as long as it's an informed risk, as long as it aligns with our mission and values, is the type of risk you want to encourage your people to be doing and learn from it 100%. So that's good. People always learn from setbacks. So let's talk about a failure or setback you've experienced, and I know there's probably two or three examples from yesterday. James: No, but yeah, I mean, where do we start here? Chris: But what was it you know, and how did you learn from it, and how did it make you better? How did it improve you or the company, whatever the example may be? James: Yeah. I think geez, you know, this is only a tough question because I have so many. Chris: Yeah, I think geez, this is only a tough question because I have so many. You're not alone in it. A lot of guests say the same thing and I can identify with that. James: Yeah, so. I think for one this just comes to mind somewhat early on in our business we had just one massive customer. We had a great deal of revenue concentration in one customer who ultimately had a bankruptcy and put us in a really bad financial position when we lost out on. You know they were way behind on paying their bills and you know such and such. You've heard the story. Chris: Oh sure. So not only did you not get paid. If you were that beholden to them, you didn't have a lot of other things coming in Correct. James: Correct, correct. And just to learn from that example of not letting yourself get too far out over your skis for one, but also just to diversify, not just the customer base. We were actually diversified in our revenue and how we were paid, but it was all one customer. So you've got to diversify your revenue base and your customer base and not have too much concentration. That was a really early on lesson that just comes to mind. That, I feel like, was still one of the most painful. I think I laid off 40 or 50 people that day and it was just a tremendous. That one scarred me pretty bad. Chris: Layoffs are never easy. Those are ones you'll remember. James: Yeah, that one still haunts me, so again I've. Which mistake would you like to talk about? Chris: we could do a whole show. Yeah, you really could, but yeah so kind of you know, bringing this more to a close, any advice you would share with our listeners, entrepreneurs and business owners out there that you know, if there's one thing you're if you're thinking about, if you've just started the journey or you're thinking about it, here's one or two things that you would kind of want to pass along. James: Yeah, I mean I just, you know, from an entrepreneurial standpoint, I had a one of my, one of my father's good friends when I was a young kid, you know, probably high school. He told me at one point he said, hey, your business really isn't going to fail unless it runs out of time or money. And just kind of keep that in the back of your head, because I can think of at least six or seven times that we were done, you know, and I had to sit there and go well, hold on, you know, we haven't completely, we're not completely done because we haven't run out of time or money. And that was how, you know, I spoke about chewing glass earlier. I think you know one of my buddies, he's a new entrepreneur. I always I tell him ready, shoot, aim. You know, at some point you can analyze all the data. And if you do analyze all the data, you're probably never going to start Right, because the odds are of starting a new business are challenging. Chris: For sure, as everyone says, it's not for the faint of heart. James: It For sure, as everyone says, it's not for the faint of heart. It's not for the faint of heart. And everyone will run into a lot of problems and challenges. And that's why because if it was easy, everybody would do this Correct, and so just I would. Just it might sound a little silly, but just don't give up. I mean, if it's something you believe in, if it's really a great cause, if your heart's in it, just keep your head down and push on, because you will be successful. Chris: That's great, and perseverance and grit is what it takes if you're going to be a true entrepreneur 100%. But the ready shoot aim is kind of like you were saying earlier, in decision making, at some point you got to make a decision, absolutely you got to go. James: Yeah, I see that as just a big mistake that folks are making over and over again is sitting around just waiting and by the time they actually make the decision, the opportunities passed. Chris: yeah well, let's, we're going to close with some more fun stuff. Talk a little bit more about texas, any favorite vacation spots within the state. James: Things you like to do in your spare time you know we have a little piece of land up in west texas so we're out in the lakey area okay it's kind of kind of over there by Garner State Park for those that know the river and just absolutely love. We go out there probably every month. You know I have two boys and a little girl so I spend a lot of time out there. The family makes it out there every now and then, but I definitely try to grab a boy and go out there every month. How fun is that? We just go and shoot guns and hang out and, you know, take the kids and their friends over to the Garner State Park, dance and do all that kind of stuff. Chris: God's country over there. James: It is God's country. It's fantastic. That was my favorite place. Chris: It's just beautiful out there, yeah, so any like books or anything that you've read lately that you might pass on to a listener as something to go spend some time reading or learning from. Reading or learning from. James: Jeez, you know I'm actually doing 10 books with my kids right now, so there's nothing new and exciting, but they're all you know. I've got them reading Seven Habits of Highly Effective People, so that was the book they read last week. They're reading a book a week, so this week they're on the Five Dysfunctions of a Team Peter Lencioni. Chris: Yeah. James: So those are kind of what's going on. That's what's on my mind at the minute. I like it At the moment, yeah. Chris: And teaching them young. James: I love that, yeah, I mean well, they're 15, 13, not too young. Chris: Right. James: But kind of when I was reading those books and trying to. So a bunch of oldies but goodies. Yeah, we're going through right now. Chris: We're doing Rich Dad, poor Dad world from that perspective. Last question do you prefer tex-mex or barbecue? James: barbecue, all right, yeah I guess you can't go out to lakey and and not have barbecue in that area or on the road trip to and from no, I mean I it's. Chris: That's a tough question I always save it for last and everyone says the same thing. It's a trick question what's yours? People turn that on me and I think I it's a tough one that they. You know, once it's turned on me and I think it's a tough one Once it's turned on me, I realize how unfair it is. Yeah, I think my answer has always been I love barbecue, but my go-to is probably Tex-Mex more than barbecue. James: So if I was going to say Tex-Mex with a margarita, that might go above barbecue For sure, but if it's just food, it's barbecue Okay. Chris: Yeah, because it's hard to have Tex-Mex without a margarita. James: Yeah. Chris: And then, of course, you have places now, especially here in Houston, I'm sure, other places where they're combining, you know, like the brisket into the Tex-Mex. James: so brisket, burritos or tacos, and that, to me, is probably the penultimate, it's fantastic. Chris: Yeah, there really is. It's challenging when it comes to healthcare. So, James, this has been great man. I really appreciate you coming on and sharing your story. It's pretty fascinating, and congratulations for all the success and what I know will be successful in the future. James: Awesome, thanks so much for having me, Chris: you bet. And there we have it another great episode. Don't forget to check out the show notes at boyermillercom forward slash podcast and you can find out more about all the ways our firm can help you at boyermillercom. That's it for this episode. Have a great week and we'll talk to you next time. Special Guest: James Dieter.

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In today's episode, we sat down with James, a Freelance Web and Graphic Designer based in Bedford, Bedfordshire, who brings a wealth of experience in creating websites for Coaches. During our chat, we covered a lot of useful topics that can really help you level up your coaching website. We started by demystifying the differences between graphic and web design. Then, we dug into how to make sure your website truly reflects your coaching services and personal brand. James shared some great tips on planning out your website content effectively, and how to present your services in a way that resonates with your potential clients. We also explored how your website can connect better with your ideal client and the strategies you can use to keep them engaged and interested. Ever wondered whether you can change your website once it's up? We talked about that too. Plus, James shed some light on the ongoing maintenance that websites might need, and what to look for when choosing a website host. Whether you're a seasoned coach or just starting, this episode has something for you. In this episode James and I discuss about: The difference between a graphic and web designer How a website represents your personal brand How to plan out my website content How to position my services on my site What strategies can I use to engage potential clients and encourage inquiries? Is a website a static thing or can it be changed once I get it back from the designer and much more Ep 170 transcript [00:00:00] Sarah: Hello, Humane Marketers. Welcome back to the Humane Marketing Podcast, the place to be for the generation of marketers that cares. This is a show where we talk about running your business in a way that feels good to you, is aligned with your values, and also resonates with today's conscious customers because it's humane, ethical, and non pushy. [00:00:23] I'm Sarah Zanacroce, your hippie turned business coach for quietly rebellious entrepreneurs and marketing impact pioneers. Mama bear of the humane marketing circle and renegade author of marketing like we're human and selling like we're human. If after listening to the show for a while, you're ready to move on to the next level and start implementing and would welcome a community of like minded, quietly rebellious entrepreneurs who discuss with transparency what works and what doesn't work in business, then we'd love to welcome you in our humane marketing circle. [00:00:58] If you're picturing your [00:01:00] typical Facebook group, let me paint a new picture for you. This is a closed community of like minded entrepreneurs from all over the world who come together once per month in a zoom circle workshop to hold each other accountable and build their business in a sustainable way. [00:01:16] We share with transparency and vulnerability what works for us and what doesn't work so that you can figure out what works for you. Instead of keep throwing spaghetti on the wall and seeing what sticks. Find out more at humane. marketing. com And if you prefer one on one support from me, my Humane Business Coaching could be just what you need. [00:01:40] Whether it's for your marketing, sales, general business building or help with your big idea like writing a book. A book. I'd love to share my brain and my heart with you together with my almost 15 years business experience and help you grow a sustainable business that is joyful and sustainable. If you love this [00:02:00] podcast, wait until I show you my mama bear qualities as my one-on-one client can find out more at Humane Marketing slash coaching. [00:02:10] And finally, if you are a marketing impact pioneer and would like to bring humane marketing to your organization, have a look at my offers and workshops on my website at humane. marketing. [00:02:29] Welcome back to the humane marketing podcast. Today's conversation fits under the P of Promotion. If you're a regular listener, you know that I'm organizing the conversations around the seven P's of the Humane Marketing Mandala. And if you're new here, then you probably don't know what I'm talking about with these seven P's and the mandala, but you can download your one page marketing plan with the Humane Marketing version of the seven P's of marketing at humane. [00:02:58] marketing [00:03:00] forward slash one. page, the number one and the word page. And, uh, humane is with an E. So not human, but humane with an E at the end dot marketing. It comes with the seven email prompts to really help you reflect on these different Ps for your business. So humane marketing is not prescriptive. [00:03:21] It's not a six. step approach. It's a reflective approach. It's, uh, where I ask you to question all your assumptions that you have about marketing. So that's what you get with the one page marketing plan for the seven piece of humane marketing. Today I'm speaking with a new friend, James Mall, who's a web and graphic designer. [00:03:44] Uh, but before introducing you to James, I want to remind you that I'm talking to potential participants for the Marketing Like We're Human program, also known as the Client Resonator. This three month program is my main offering and it's connected [00:04:00] to this podcast and based on the seven Ps of the Humane Marketing Mandala because we'll dive deeply into these seven Ps during the program to help you discover your true self and passions so you can bring more of your. [00:04:16] into your marketing. It's really about marketing from within, marketing authentically. It's also much more than marketing. It's really about business building. And I do bring in kind of this different. business paradigm. While the main goal is to connect with your ideal clients, it goes beyond marketing. It forms the foundation of your life's work. [00:04:41] We'll start by focusing on things like passion and personal power, your why, and then move to other aspects like people, product, pricing, promotion, and partnerships. The program is in a small group setting, ensuring therefore a meaningful experience that aligns your business with your values. [00:05:00] It's a mix of videos, 20 to 30 minutes, uh, video per week. [00:05:05] Uh, beautifully designed workbook with lots of questions. My program is for deep thinkers, those who want to really roll back the sleeves and think deeply about, um, how they want to market, how they want to run their business, journal prompts. And then of course the live group calls in which I facilitate the conversation to take us even deeper into the topic of the week, who's this program for? [00:05:32] It's for entrepreneurs. Uh, who are quietly rebellious as well as change makers who have different levels of business experience, whether you've been in the game for one year, five years, or even 10 or more, it really is never too late to build a strong foundation for your business and your life's work. [00:05:52] So. If you want to know more, check out humane. marketing forward slash program for lots [00:06:00] of testimonials and case studies from past participants. And if this program feels like it might be the right fit for you right now, let's talk. There's a button on that page to schedule a call with me. So, uh, yeah, please do that. [00:06:15] We're starting on August 24th. All right. Thank you so much for letting me share about this. Now let's go back to today's podcast and back to James. So James is a freelance web and graphic designer based in Bedford. Bedford Shire, uh, that's the UK. And having worked with a variety, variety of clients, his portfolio includes fashion, swimwear, academics, coaches, property, charities, and photographers. [00:06:47] He now specializes in building websites for business coaches, and he loves and believes in helping coaches to build a better web. experience for their clients and themselves. In our [00:07:00] conversation, we talked about the difference between a graphic and web designer. I think that's really key for, uh, clients to understand. [00:07:09] How a website represents your personal brand, how to plan out. Your website content, how to position your services on your site, what strategies you can use to engage potential clients and encourage inquiries, uh, whether a website is static or whether it can be changed once you get it back from the designer and so many more topics. [00:07:34] So let's dive in with, uh, James Moll. Hi, James. I'm so happy to hang out with you. Welcome to [00:07:42] James: the show. Hi, Sarah. Thanks very much for having me. Thank you. [00:07:47] Sarah: Yeah, I'm delighted to have this conversation about websites. So let's see all the different topics we could get into. Um, we tried to beforehand, right? [00:07:57] Come up with some, some questions. [00:08:00] And so I do want to ask you one that you're like, Hey, maybe not this one, but I'm like, well, I'm going to ask you anyway, because, because actually, you know, in the bio that I just read about you, um, I did say you're a, uh, uh, web and graphic designer, right? So website designer, graphic designer. [00:08:19] And, and I know that quite a lot of people sometimes get confused. Well, what is what, who does what? And so I'd like to start us off there so that you can kind of give us a good Um, distinction between what does a graphic designer do and what does a web designer do? And if I need a website, who do I look for [00:08:44] James: then? [00:08:45] Yeah, sure. Um, yeah, it's actually quite a good question, I think, for people that are not aware, obviously, the difference between a web and a graphic designer. Being in the industry, um, a lot of people are aware. So, so a graphic designer is someone [00:09:00] that designs, uh, graphics. It could either be print based or digital based. [00:09:04] So it can either be. Uh, brochures, leaflets, um, billboards, um, and they could do digital design as well. So they could design adverts on social media. Um, there is crossover between that and websites. So they can design graphics that specifically go on websites as well. So they can sit on a, on a, um, a website, but how they differ from a web designer is that they're not techie. [00:09:29] So they're not able to, most graphic designers are not able to develop, uh, and build websites. So web designer is. actually more technical in terms of they're able to either code, uh, build a website with code, HTML, um, WordPress, um, software like that, or they can, uh, use no code software as well, which I, I worked with as well. [00:09:52] So I worked with a program called elemental along with WordPress. So I'm able to kind of use drag and drop software. Um, some like I've come, I'm [00:10:00] coming from a graphic design background to a website background. So there is some crossover, um, but generally. Graphic designers tend to design, um, the graphics either for print or digital. [00:10:13] Um, and they don't really tend to do websites. So they differ in that instance. I hope that kind of clears [00:10:20] Sarah: up things. Yeah, that makes a lot of sense. And I guess. A graphic designer can learn to be a web designer and then be both, which is your case. And a web designer can also, or that's a question, do web designers sometimes also go into graphic design? [00:10:40] Or maybe that direction is less common. What would you say? [00:10:45] James: Um, I've actually met quite a few people that have gone both. So from like myself on graphic design into website design, and then vice versa, website design to graphic design. And I think it just [00:11:00] matters on your technical ability and what you enjoy. [00:11:04] If you enjoy graphic design, if you enjoy sort of creating. You know, anything from logos to branding, you know, brochures, um, graphic design is so wide as well. Um, and then it easily crosses over onto, um, website design. Um, it's kind of similar to coaching in a way, I guess, because a lot of sort of business coaches, for example, that I work with tend to do, you know, personal coaching as well, life coaching, um, and vice versa. [00:11:36] So there's some crossover there as well. So, um. Yeah, they can be cross over as well. [00:11:41] Sarah: Yeah. Yeah. In my, um, sense of understanding this is the graphic design has to do with the beauty. It has to do with the aesthetics, with the art, with the colors, with the logo, uh, you know, with the, yeah, the word says it graphic, right? [00:11:58] And so [00:12:00] the web designer would be probably more, um, oriented towards the functionality of the site. Uh, of the website. So being like, you know, all of these click funnels and lead generation things that, that is more tech related. So, uh, in a way, I guess it's a good idea to look for someone who has an understanding of both. [00:12:24] Because then you get an aesthetically good looking website that also has the functionality behind [00:12:30] James: it. Right. Yeah, that's right. And that's why people like to hire me. Yeah. Because, uh, yeah, because I'm able to do, to do both. And, um, you know, from a UX and UI point of view, I'm able to kind of wireframe, uh, create like a blueprint and a map of, uh, the user experience as well, which is quite key. [00:12:51] I think a lot of web designers. Don't tend to think of that as well. Um, so it's not just making sure the website looks pretty, but also the [00:13:00] fact that you're thinking about calls to action, you know, your call to action buttons, getting people to book discovery calls or sign up to your mailing list. Or, [00:13:09] Sarah: yeah, so let's get in all of that because there's a lot to, to uncover. [00:13:13] So, so basically, yeah, we now know that there's both, right. There's the aesthetics and then there's the actual user friendliness and the. The functionality behind the site. So, so maybe before we go into the functionality, like what I, this is embarrassing, but like more than 15 years ago when I started out, I actually also designed some small websites for, for clients, you know, WordPress was like really new back then. [00:13:43] And so I quickly noticed how difficult of a job it actually is. Not so much big because of, you know, I was using WordPress. So it's pretty simple to put a website together, but where I always got stuck is with the [00:14:00] clients and their content, like the, the, the design of the site and their actual understanding of what needs to go on a site. [00:14:09] So I think that's also why there's. A lot of people, I don't know if that happens to you, but I know it happens to me that come with baggage and they complain about their website designer. They're like, it just didn't work out. Uh, and oftentimes it's because there is a miscommunication of who does what and in what kind of timeframe. [00:14:31] And so how can we help or, or, uh, to which level do we as the client have to be prepared? Uh, when we go to a website designer in terms of our content, in terms of knowing what needs to go on this website. [00:14:50] James: Yeah, so the content is, um, is a key thing in any website. And before, when I kind of started out, I used to kind of [00:15:00] rely on the client giving me the content and it doesn't always work out because what you've, you know, you designed a website and you put everything together and you made it look nice and you've put stock images there and you've put some. [00:15:12] Laura Ibsen text to kind of fill the gaps and you create a nice looking website and then the client either They do two things that either hand you Very little content. So there's hardly any text or any writing that they've put together themselves Or they can either give you too much Content so there's a lot to kind of pick pick out and put on the website And the information is is key because the information is what's gonna Sell your services. [00:15:40] So it's it's one of the most important things On a website and before when I started out, I used to always think about the design side and coming from a graphic design point of view as well. I used to always think about looking at making the website look pretty and probably less on the content, but as I've developed as a web designer and working with with coaches. [00:15:57] Now, I realized that, you know, [00:16:00] part of what we do is working with the coaches and having copywriters on board to help them create. Copy that is great to go on the website. Um, and that, you know, it's talking about their target clients, um, addresses, um, their pain points, um, and sells their services in a way that, um, reflects them, uh, in a, in a positive light, really. [00:16:25] Yeah. Yeah. [00:16:26] Sarah: Yeah. So, so you see the same thing is like, it can really be a, this idea. Oh, I need a website. But then once they talk to you or talk to any website designer, then they tell them, well, have you thought about, you know, who's your ideal client? How are you going to describe it? So it's like, it's this basically box of worms that all of a sudden gets. [00:16:52] you know, discover is like, Oh, I thought that was going to be quick and easy. And then I have, you know, all these other things that I now [00:17:00] need to look at and write about. [00:17:01] James: Yeah. Yeah. I mean, the planning stages is key with any website. Um, you know, sometimes clients will come to you and I used to have this a lot when I was starting out, you know, they'll say we need a website done in a week or two weeks or, you know, unrealistic deadlines and they're kind of rushing and they've got. [00:17:19] content ready and they're trying to create a website and they think that, you know, you can very easily create a website, you know, in a matter of a few days or a week and you can, but you know, it's like with anything, it's good to sit down and plan out, you know, the user experience, uh, wireframe and on paper, just, just even sketch out what, what kind of number of pages, the menu structure, uh, the calls to action, uh, what kind of information you're going to have, testimonials, um, All of that kind of stuff, social proof, um, and then layout, what kind of, what goes where, and think about that and spend time thinking about that [00:18:00] before you've done any kind of development or design. [00:18:03] That is a, is a must, I think now working with clients because we spend, we spend a good couple of weeks actually just, just on that. Um, when I work with clients now, uh, before we do any development work. [00:18:16] Sarah: Right. So take us into this user experience because you mentioned it a few times now. So, so what does that mean? [00:18:24] Take me on this journey. So let's say, you know, I'm landing on a website for the first time. Uh, I'm on the homepage. What needs to happen next? So take me through that journey. [00:18:39] James: Yeah, so when you're, when you've landed on a, um, homepage, for example, which is a, um, land, another word for landing page as well. So a landing page could be any page really on the website. [00:18:49] It's the first page that you're directed to. And often that is the homepage. But often you'll see a homepage and you'll see, you know, you've got the menu at the top. You've got your, um. [00:19:00] Items below it. So you would have like a hero image and you would have welcome to the website or whatever the company or person does on the website. [00:19:09] And then you'd have, you know, testimonials below it and you would have services, uh, what the coach does, for example, calls to action. Um, but it's. really mapping out clearly what goes where in terms of the information. So you want to be, for example, you don't want to be telling people about you necessarily what you do and how great you are. [00:19:33] You want to be talking about how you're helping them with their, with their problem, this problem solution. And you'll, you know, you, you've got a list of. your ideal client, you know, what kind of issues they're going through. Uh, for example, if they've, um, if you're in a corporate kind of coach, um, that's helping people that are coming out of corporate, the corporate environment, you want to say that, you know, uh, here's a, [00:20:00] this is what I do. [00:20:01] You know, are you coming out of a corporate job? Are you looking to start your own business getting into coaching, for example, and As soon as they see that at the top, you know, they know that this site is for them because people would immediately turn off in the first, you know, couple of three to five seconds. [00:20:18] If they don't see any benefit in, in, um, in the website and they'll just click, click off. So you have a high bounce rate as well. [00:20:27] Sarah: Yeah. It's actually in what we're just talking about this today in the humane marketing circle is the unique value proposition. You know, what it is you are offering To me, as the visitor to your website, how is it different from anybody else's offer? [00:20:44] And, uh, yeah, do I feel concerned? Like, yeah, do you speak to me or, you know? Yeah. Instead, do you just speak about yourself? And then I have to figure out if you're actually the right [00:21:00] fit for me. Um, [00:21:01] James: yeah, yeah. I think a lot of people make that mistake because. They want to say, you know, how great they are, you know, how many qualifications they've got, certifications, um, testimonials. [00:21:12] They want to, you know, literally tell the whole world about how great they are, but they forget about the client that they kind of helping. And what their problems are and really speaking to the client, you know, everything that you should be doing should be speaking towards your ideal client. And again, that's tied into the marketing side of things that you're aware of. [00:21:33] And a lot of web designers or graphic designers don't tend to think about that because it's a shame because a lot of web design and graphic design is quite separate from marketing. So coming from a background of both, I'm able to kind of use have both sides and think. You know, from a customer user point of view and think from a technical point of view, uh, and also from a design and colorful and making [00:22:00] everything look pretty kind of point of view as well. [00:22:02] So that it's a problem that I think we have in the industry where. In the whole kind of design industry where there's a miscommunication often between the marketing message and what you're trying to portray on an advertisement or a website. Um, there could be a misalignment there. Yeah. [00:22:24] Sarah: Yeah, I totally agree. [00:22:25] I think that the, you know, it's often a case in corporations as well, where they separate marketing from sales and, and here it's the same marketing should be part of it because that's essentially what you're doing with your website. You're not wanting to talk to yourself. You're wanting to talk to your ideal clients and everything you just said about the homepage. [00:22:48] I learned it's the same thing about on your about page, uh, on your about page, of course we think, Oh, it's about me. And yes, it is, but only in a second instance, it really [00:23:00] is again. Uh, people come to your about page because they want to find out if you're a good match for them. So they're really looking at the about page as a mirror much more than, you know, I'm so interested in this person that they don't know yet. [00:23:15] Right. And so it's kind of like just more like a checklist. Okay. Yes. This aligns this lines. Uh, and so it's the same thing for the about page. Um, so talk to us a bit more about the, uh, engagement. So. You know, it could be perceived that a website is a static thing because, you know, it just sits there. So how do we make it engaging, um, that actually people stay on it, first of all, you know, read our information and then maybe even go a step further. [00:23:50] How do we get them to stay in touch? [00:23:53] James: Yeah, I mean, One of the key things is not to put all of the [00:24:00] information out there in terms of content. So if you want to create engagement, for example, um, FAQs are a good example of this. So you don't want to frequently ask questions that you have. You don't want to sort of list them all out on the website. [00:24:14] You want to have options where people can click on a, on a question and they have a drop down and it tells them a little bit more about it. So anything that kind of people can interact with and engage with buttons that lead them on to another page, for example, that tells them a little bit more information. [00:24:31] So if you've got like a book, for example, that you're selling and you said, you know, do you want to buy this book right now? And then you clicked on the book and it just went to the purchase page. And it was just like. selling you the book, you know, from a buying point of view, it's not a great sales experience because you're not really giving them any more information about the book that they're buying. [00:24:51] So you want to create, um, almost like a sales funnel where you're, they click on, uh, to find out more about the book that you're selling, for example, [00:25:00] uh, how it can benefit them. Um, maybe give them like a free sample or demo, uh, That they can download like a PDF and then an option afterwards to then click and purchase. [00:25:14] So it's very much thinking about that user again, thinking about the user journey and experience rather than, you know, people are so desperate to kind of, you know, sell stuff, for example, or book a discovery call. And it's very much that you've got to kind of educate people. You've got to create that. Um, That trust, you've got to build that up, I think. [00:25:33] And you can't just rush into it. It's, it's, it's again, it's like us talking for example, now, and if we were at like a networking event and we met for the first time, for example, when you often meet people at networking events and, you know, they're just telling you how great they are and they're just like, do you want to buy my stuff? [00:25:47] Do you want to have a, let's book a call. Let's let's talk by my stuff. It's all me, me, me. And they don't really kind of create that opportunity where they, you know, you, you kind of. Meet them or add them on online or, um, go [00:26:00] to the website, find out a little bit more about them. And then a little bit later on, in the, in the kind of buying decision, you kind of decide that you want to work with them, um, rather than sort of rushing in. [00:26:13] It's kind of people kind of rush in. Um, [00:26:15] Sarah: yeah. Tell us how this would apply to the discovery call, because I like that a lot. So, so, um, and, and I'll share what I have in place, but yeah, I'd love to hear from you. Like, Okay. So I get it for the book. Yeah. How would you apply it to a discovery call? [00:26:34] James: So for a discovery call, for instance, you will, um, you've also got call to action on the site. [00:26:40] So I've got call to action. If people do want to book a discovery call straight away and they can click, you know, book a discovery call. So that's for people that have already made their decision. Um, so they've looked at your website, they've seen your homepage senior about page. Um, What you offer us is, you know, problem solution. [00:26:58] You can [00:27:00] help them with their, um, what their, whatever their problems are, issues are, and they've already made the decision to work with you. And they, you know, just click book a discovery call. So they're those kind of people are, um, sort of warm leads and they kind of, they're in that sort of. Uh, they want to buy from you and they want to buy what you're, what you, what you've got, but people that are, um, maybe need to be a bit more educated, for example, um, you'd kind of maybe I've got a few landing pages, for example, um, I've created for coaches where they could find out a bit more about me. [00:27:36] Uh, about what I do, the kind of clients that I work with. So it's kind of testimonials, social proof, um, talking through people, through, through the discovery process that I go through with clients. Um, and then they can, from there, they can decide to book a call at the end. So they can scroll right down to the bottom and then they can decide to book a call. [00:27:59] So those kinds of [00:28:00] people need, um, probably a bit more. educating and kind of getting to know you. Um, it just depends. I think if people are coming from online and if they've never met you before, then they're going to need a bit to know a bit more about you and probably add you on social media as well. [00:28:13] Follow you on, on LinkedIn and Facebook and Instagram, um, for, you know, at least a couple of months or, or, or whatever time period. And before they start working with you, uh, people that you've already met from online or networking or face to face networking, and they kind of know you and aware. The problems and solutions that you kind of solve. [00:28:36] Um, they're a little bit of more of a warmer lead. So they, they can, they just want to book a discovery call and they just want to talk to you. Right. Yeah. [00:28:44] Sarah: I would say the quality then also of this discovery, discovery call is, is very different. Um, if Someone comes to your site for the very first time and then just books a discovery call to me, those are often the clients [00:29:00] who just want to discover about, you know, website design. [00:29:04] Uh, so it's not like they are necessarily already. Um, on the gentle sales paths, like I call it that, that they don't know about you. They're not buying into you yet. They're just buying, they just need a website. Right. And it's like, Oh, this is one of them. Okay. Let me book a call. And then you're basically spending your whole time on this call, educating them, uh, instead of actually them, them educating themselves on their own time. [00:29:33] That's how I look at it. I'm like, well, I have all these things on my website. Spend some time there, you know, listen to the podcast, read the books, whatever, you know. There's a lot of information there. And then let's get on a call because otherwise, what often happens is we can spend our days on these discovery calls and then kind of end up being frustrated because, you know, people are just not there yet in [00:30:00] terms of where they are in their, um, sales decision. [00:30:04] Uh, and so that's, that's why often people who come to me and say, you know, I'm not closing. I'm like, well, you know, what do you have on your, I call them signposts. What do you have on your gentle sales path? Like your, um, like your templates that you're going to share with us for the landing page, right? [00:30:23] It's education like that, that then also leads to a better quality, uh, sales call. So, so yeah, I totally see that. Um, I also have an intake form. Where I didn't actually ask, you know, have you read, uh, my blog posts? Have you listened to the, so that I also come to this conversation knowing where they're at, because there's nothing worse than to be on a sales call and feel like being sold to, and, you know, and then. [00:30:52] After I do all this talking, they're like, actually, you know, I just want to talk to you and see how we can get started. [00:31:00] And so it's really good to pick them up [00:31:01] James: where they're at, right? Yeah. And also you don't want to be in that position of convincing them kind of thing as well. I think in my earlier days, I would often have to convince clients because, um, before I kind of niche down and work with. [00:31:16] Coaches and consultants and mentors and, you know, speakers and authors. Um, I used to work with quite a large variety of clients and I didn't really niche down in anything, so I didn't specialize in anything. So, um, I was seen more as a commodity. So, um, you know, it was all about price and it was all very much, um. [00:31:38] Yeah, fix it on price. So I'm kind of like, I lost track of where we were. Right. Checking around. Where were we? Sorry. Yeah, [00:31:46] Sarah: it's so important. Um, yeah. Any, any other things about the, you know, engagement and, and how to get more inquiries? Cause I think that's something that, you know, people [00:32:00] are really. Yeah, wanting to know more about, like, which part is content related and which part then is, like, we didn't talk about newsletter signups, right? [00:32:11] What are some mistakes you, you see there that, um, on websites related to that? [00:32:18] James: Um, I think a lot of times I think people have a newsletter signup and they don't really know what it is or, um, they don't really have a newsletter in place. So I think one of the key things is to have a just a mailing list. [00:32:34] Or a newsletter in place and tell people like, I've got one that's coming soon at the moment. So I'm just taking emails at the moment. So I actually don't have a newsletter at the moment. But a lot of the times people are just having a newsletter for the sake of having a newsletter. And I think you could have some sort of strategy behind it and know, because it is another way of bringing in leads. [00:32:54] Um, but it's not going to be straight away. Like, it's not going to be a, like, So today, tomorrow or next [00:33:00] week, you know, you you're still educating people about what you do. And it's again, it's the same with a blog on your website, you know, people come back and they will read your blog newsletters. So people are aware of, you know, your services, what you're offering, and they can see you on social media as well. [00:33:19] And if they've signed up to your newsletter, for example, as well, they see you quite active. So the more you're kind of, they're aware of what you do and who you are as a person, um, they, they have you in mind. So even if it's not for them, um, they will have you in mind for someone else. So as long as you're like that person that they think of when they think about sort of, um, You know, humane marketing, for example, um, and, uh, me being a web design consultant, working with coaches, um, you know, want to be like the first person that they think of. [00:33:55] So you want to have that, the newsletters were part of that sort of, that sort of [00:34:00] marketing strategy. Um, I think people don't often look at that hand in hand, like together, they just sit kind of separate. Um, but Anything that you do, if it's even if it's, you know, social media posts, um, uh, newsletters or blogging, you should always have like an end goal when you should always think about it from what, you know, what benefit are you giving to your clients? [00:34:27] Um, and it shouldn't really be just, you know, bragging about how great you are again with the website. A lot of times, you know, people are bragging about what qualifications or what things they're getting up to and what they're doing. As opposed to, um, how they're benefiting their clients and what kind of problems they can solve them for their clients. [00:34:44] Sarah: Yeah. Yeah. Thank you. So let's say, okay, we have designed this, this website, we have the content, uh, everything is in place. And then, I'm sure you're used to that, the client's like, Oh, I need to change, [00:35:00] you know, this copy again and, and, and this and that. When, when do you hand the site over and is there, you know, can we still change it? [00:35:11] I think that's probably a question that people wonder is like, okay, uh, I've heard of WordPress, uh, you know, how easy is it to then change the site [00:35:21] James: myself? Yeah, so it depends. I mean, if the client either wants content or design changes, um, I have a, um, maintenance, uh, package that I offer clients that for the upkeep of the site and, uh, updates as well. [00:35:41] Um, so that could be an ad hoc kind of basis, um, or, or they could, yeah, pay as and when they need it. Um, but ideally, um, I also do videos as well. So I do a video to show clients how to edit the [00:36:00] site themselves. So they've got like that on their dashboard, um, how to upload images and text and change all that stuff. [00:36:06] But it just depends on the client. If they're You know, it's like a lot of coaches are too busy, so they don't have time to update their site themselves. So they either fall into two categories, the one that, you know, they do have time and they would like to do it themselves, or they're too busy and they don't, they would like you to do it. [00:36:23] So it depends on, on the, on the, um. So basically [00:36:27] Sarah: it can be changed, it just needs time. Yeah, yeah. Or you can do it for them and, and well, it takes money. Yeah, yeah, yeah. It's always that equation. [00:36:38] James: But it should always be changed. I mean, I would do recommend for, you know, keeping a site regularly up to date, um, helps with your SEO, um, search engine optimization. [00:36:48] Um, you know, Google likes it when you've got up to date blogs and content on there. So a lot of times people will design a website, have it designed, and they [00:37:00] will just get excited and launch the website and make a lot buzz around it. And then within a few months or a year down the line, they've done nothing with the website. [00:37:10] So they've not added to the website and there's nothing new on their website. So from a search point of view, it gets ranked lower. Um, so the more engagement you've got on site, the more, um, people that are clicking on the site. So you want to constantly be putting content on the site and advertising on social media, for example, and plugging the site as much as possible. [00:37:33] Um, but it should always be Up to date in terms of content as much as possible. Um, but yeah, again, it's an, it's an additional charge. So once the site has been done and handed over to you, it's, um, it's an additional charge, it's kind of like. Decorating, for example, if this room that we're in, for example, if, you know, it's painted white, but if you wanted to paint it, you know, yellow or whatever, you know, there'll be an additional charge to purchase paint and do repaint the [00:38:00] whole room. [00:38:00] And then again, you want to pay it like orange or something or purple in a year's time. It's again, it can be done, but it's an additional. It's going to cost more time and money to kind of do that. Yeah, of course. [00:38:12] Sarah: So you mentioned, um, maintenance to me, there's two different things. There's maintenance, uh, which is kind of like updating the plugins and making sure it's the last, uh, and most recent WordPress, uh, addition, things like that. [00:38:28] Um, Or, you know, even backups and then there's updates, which is content updates or even design updates. So they're separate things like so like how much maintenance so purely functionality oriented maintenance does a website take once it's. [00:38:51] James: Yeah. So once a website is published, um, no matter what kind of software you're using, I mean, I build websites using WordPress. [00:38:59] Um, [00:39:00] if you could be using Wix or, or another software, for example, um, but it may certainly needs to be maintained in terms of security, uh, any kind of bugs that can happen on a site. Um, so it needs to be all anything plugin related that you've got any software that you use to kind of build, for example, if you've got, um, Um, I'm trying to think now, uh, scheduling software, any kind of, uh, appointment booking software, any additional plugins that are required. [00:39:29] If you've got Google, for example, or you've got Google site kit on there, uh, you've got Yoast SEO, um, on there. So you've got all these kind of different plugins, um, on there. They need to be kind of up to date and maintained. Um, otherwise they can kind of break the site as well. So if you've, uh, not updated a site after a while, if it runs into any kind of conflicts with plugin, um, Um, different plugins. [00:39:51] It can actually break the whole site. Uh, so you've got that as one issue. And then also you've got potential any, any site is vulnerable, [00:40:00] uh, online is vulnerable to being hacked as well. So, uh, twice to me [00:40:04] Sarah: already. So yeah. Yeah. So it's not like this. Thing that never happens. It [00:40:07] James: doesn't happen. Yeah. Yeah. So again, um, software in terms of security wise, um, needs to be monitored, monitored. [00:40:15] Um, so there's all that kind of stuff to kind of think about. And that's the more kind of techie kind of stuff. And that's the stuff that A lot of people don't like to kind of think about, but it's very important because obviously in terms of the longevity of the site, it's not nice to have a site that's being, being hacked. [00:40:32] Um, you know, so, um, it's always good to kind of, it's almost like insurance is always good to kind of just pay the extra to, to, to, to have someone do it. Or at least invest the time, you know, you could watch YouTube videos and learn how to do it yourself. But again, it depends if you want to spend the hassle time kind of learning that as well. [00:40:53] But it's the, it's [00:40:55] Sarah: the hassle of learning it, but it's also then the hassle of finding somebody who's [00:41:00] gonna fix your hacked site, right? Yeah. Where if you have kind of put aside some, uh, some for maintenance. Then that person somehow becomes responsible as well of, uh, having to fix the site or at least you'll come up with a fair price where if you just come to a new person and say, Hey, please, can you fix my site? [00:41:23] It's been completely hacked. They're going to charge you quite a bit to do that. [00:41:29] James: Yeah, yeah. Again, obviously with the backups, um, you know, all our sites are backed up. Um, content and design is backed up regularly. So if there is a problem, we can get back to a backup. Um, uh, so it's quite easily, uh, again, a lot of people don't back up their site. [00:41:49] So a lot of people, um, Sort of presume that's really done. And I've seen it in the past with clients that come to me and they've had cheap hosting in the past where they said, you know, they can get hosting for [00:42:00] like, I don't know, like 499, 599 or 10 pound, 10 or whatever it is a month or whatever it is. [00:42:07] And they think they're really happy with the hosting, but then they don't realize the fact that there is no added security or backups in place. And when something does go wrong, they All their content, everything is lost on the site again as well. And if you've got no backup of that all, um, you've got, for example, your blogs, if they're written in sort of Word documents and you've got them stored on, on your computer, it's good, you know, that's another backup. [00:42:34] Um, but again, you've got to go for the hassle of. You know, republishing everything, republishing everything and that sort of thing. So it's very, that's a hassle as well, you know. [00:42:44] Sarah: Yeah, yeah. All right. We want to end in a positive note, not in a, Oh my God, it's so scary out there. Um, yeah, just like everything. [00:42:55] Yes, everything can happen. It's, it's online and, and, and there is. That, [00:43:00] um, kind of tech stuff that, that happens. So, um, but yeah, like I said, let's, let's not end in a, in a negative note. Um, do you have a template that, um, you're sharing with our listeners? So. Why don't you tell us a little bit of what that is and where people can find [00:43:19] James: it? [00:43:20] Yeah, sure. Um, so I'll provide a link. Um, it's called the two week landing page challenge for coaches. So it's, um, a lot of people, a lot of clients just come to me that used to have, you know, trouble creating a landing page. And, um, I realized that I didn't really have. You know, if it's stuck in my mind and I like kind of can do it, but I don't realize that all this information was out there. [00:43:44] So I put it create like a template for people to kind of for coaches to download and very easily kind of put together. So, um, I'll provide the link for that. But yeah, it's just anyone else kind of. in the coaching space that needs to create a landing page to [00:44:00] sell a book that they're providing or um, a call to action, um, book a discovery call or any kinds of call to actions that they really just want to that specific key rather than providing it on the entire website. [00:44:12] They just want to specifically one pager, one pager. So it's a template that people can freely download. Um, and again, if you did want to book a discovery call with me and if you needed any help, I'm available to, um, help you out with any questions as well. [00:44:27] Sarah: Wonderful. Yeah. Thanks. We'll make sure we, we link to that. [00:44:31] And, um, yeah, your website is also in the, in the, um, in the text, uh, jamesmall. co. uk. Right. Uh, where are you most hanging out? [00:44:42] James: Sorry. And it's forward slash coaches to go on the actual coaching landing page. [00:44:46] Sarah: Okay. Great. And you're mainly on which social media platforms? So I'm [00:44:52] James: quite active on LinkedIn. [00:44:53] LinkedIn is probably the most best place. It's the best place to kind of connect with me and find out more about me and um, [00:45:00] just DM me and I'm always happy to talk. So. [00:45:02] Sarah: Wonderful. I always have one last question that is, what are you grateful for today or this week? [00:45:10] James: What am I grateful for today? Um, I suppose I'm grateful for feeling a lot better and being able to eat normal food again. [00:45:19] Uh, cause I've had a ongoing, I've had an ongoing chest infection for the last couple of months. So yeah, I did kind of stop working for a little while and I couldn't eat some foods. Um, so I'm, I'm glad that I got my energy back and, you know, I'm able to kind of, I'm out of breath and I'm able to enjoy food. [00:45:38] Um, [00:45:39] Sarah: which is a big deal. Yeah. Yeah. Yeah. We don't realize it until we don't have it anymore. [00:45:44] James: Right. Yeah. Yeah. And I'm actually going to a Retreat this weekend, helping my friend up, um, we were talking about it earlier. Um, so I'm going to be helping them out in the kitchen and there's going to be yoga and meditation and sound therapy there. [00:45:58] So yeah, I'm grateful [00:46:00] for being able to kind of take part in that as well. So, um, delightful. So yeah, I'm grateful. [00:46:06] Sarah: Thank you. Awesome. Well, thanks so much for coming on to the show. Really enjoyed this conversation. Thanks, James. Thank you for inviting me. Thank you very much. Thank you. I hope you got some great value from listening to this episode, especially if you're new to business and are needing to build your website. [00:46:26] You can find out more about James at jamesmall. co. uk. And as he mentioned, James also has a gift for us. It's a coach's landing page template, uh, which you can get at jamesmall. co. uk forward slash humane marketing. Uh, this is also a page where you'll find the two week challenge that, uh, James mentioned when he was speaking, James mainly hangs out on LinkedIn. [00:46:57] So make sure to send them a message [00:47:00] there, connect with him and tell him that you listened. And if you're looking for others who think like you, then why not join us in the Humane Marketing Circle? You can find out more at humane. marketing. com You find the show notes of this episode at humane. marketing. [00:47:21] com 1 7 1, sorry, 1 7 0. And on this beautiful page, you'll also find a series of free offers, uh, such as the Humane Business Manifesto, the free Gentle Confidence mini course, as well as my two books, Marketing Like We're Human and Selling Like We're Human. Thanks so much for listening and being part of a generation of marketers who cares for yourself, your clients, and the planet. [00:47:51] We are change makers before we are marketers. So go be the change you want to see in the world. Speak soon.[00:48:00]

❤️ Love and Peace ☮️1819

It's about Watson somehow. You know this show. And if you don't, WELCOME TO THE PARTY!

Todd: Hey, James!James: Yeah!Todd: Let's talk about seasons.James: OK.Todd: James, what is your favorite season?James: My favorite season is spring.Todd: Yeah, why is that?James: Because it's not so cold but it's not so hot that I'm sweating on the train. I can go to the beach. I can relax with my friends outside. It's very nice.Todd: OK. What is your least favorite season?James: My least favorite season in Japan is the rainy season ...because I don't like rain at all.Todd: OK. What season are we in right now?James: Right now it is the very end of winter. It is just starting to become spring.Todd: What's the weather like today?James: Today, it's very sunny. It's a little cool. A little breezy. It's very nice. I enjoy it.

Todd: Hey, James!James: Yeah!Todd: Let's talk about seasons.James: OK.Todd: James, what is your favorite season?James: My favorite season is spring.Todd: Yeah, why is that?James: Because it's not so cold but it's not so hot that I'm sweating on the train. I can go to the beach. I can relax with my friends outside. It's very nice.Todd: OK. What is your least favorite season?James: My least favorite season in Japan is the rainy season ...because I don't like rain at all.Todd: OK. What season are we in right now?James: Right now it is the very end of winter. It is just starting to become spring.Todd: What's the weather like today?James: Today, it's very sunny. It's a little cool. A little breezy. It's very nice. I enjoy it.

John: Hi, this is Doctor John Dacey with my weekly podcast, New Solutions to the Anxiety Epidemic. Today, I have a friend of mine, James, who’s going to be talking to us about his own situation and his own familiarity with anxiety. James, how are you? James: I’m doing alright, how are you? John: Good, thank you. I wonder if you could tell us a little something about yourself before we get started. James: Well, I am currently a junior in high school. I’m 17. John: How are you finding taking courses online? James: Online? It’s presented its own set of challenges. I wouldn’t say it’s better or worse than regular school but, I think there’s less work but it’s a different kind of material. It feels a little bit less meaningful. John: Yeah, I can understand that. People say that there’s such a thing as Zoom exhaustion. After you’ve spent a certain amount of time on Zoom that it’s much more tiring than sitting there and talking to somebody. James: Yeah, I don’t do too many Zoom calls because of the way the school has set it up for us but I get that. John: Today, what I would like to do is go over 7 of the 8 types of anxiety that there are and have you tell me, do you think that you have a condition in that area, the anxiety syndrome, and we’ll talk a little bit about if you’ve discovered anything that’s helped with you. Is that ok? James: Sounds good. John: I’m going to skip the first one which is called simple phobias because everybody has them, agoraphobia, afraid of falling from heights, things like that. We’ll start with probably the most common one which is social anxiety. Social anxiety is things like fear of speaking in public, feeling of not wanting to go to parties, that sort of thing. Do you think you’re bothered by any of that? James: Not generally. Sometimes I’ll have a little bit in large groups but generally speaking, that’s not something that I tend to experience. John: I remember some years ago watching you sing by yourself in front of probably 300 people in the audience and you seemed to be very calm about the whole thing and very confident. Is that typically the case? James: Yeah that tends to be the case. John: And you’ve been in some theater things where if you were going to have social anxiety, that’s where you’d have it. James: Yeah, I’ve been doing theater from a very young age so it’s something that I’ve got pretty used to. John: That’s great. Separation anxiety usually bothers younger people but sometimes older people. Separation anxiety is when you feel like if you’re not around a person who is very powerful, that knows how to take care of you, that you’re in trouble. Did you have any trouble starting school, for example leaving your mother? James: No, I don’t think I did. John: I don’t think you did either. The next one is called generalized anxiety. Just a general nervous feeling at least half of the time. James: Yeah, that’s the one that I definitely have. John: That usually comes about from a bunch of experiences that didn’t go so well for you, or  that you feel like they didn’t go so well for you, and you become sort of nervous, on the lookout and what we call “hypervigilant.” Do you know what I mean when I say hypervigilant? James: Yeah, exactly. John: What about that does that seem like something that you’ve been dealing with? James: Yeah I think it’s something that I definitely have. It’s something I was diagnosed with and it’s something I’m on medication for. John: Oh ok. When you talk to your therapist who’s the one who did the diagnosis I suppose, what suggestions do they make about why you have this? Do you have any guess as to why you’re generally anxious? James: There’s a history of anxiety in my family. John: So, you think it might be genetic? James: I think genetics certainly has a large role in it. John: We say that everything is biopsychosocial in my field so the biological part would be genetics. Can you think of anything that psychologically might have oriented you toward that? From your experiences, for example. James: Yeah, I think some of it’s genetic and some of it’s from my experiences. Some of it from when I was younger, but it’s a combination of things that have added up to this. John: What is your position in the family? James: I’m the youngest. John: Do you think that might have anything to do with it? James: Being the youngest? I think there’s a certain level of insecurity about being young and having to prove yourself so I’m sure that played a role. John: Yeah, that’s absolutely true. Your siblings are pretty smart if I remember. They are smart people. James: They are. They’re quite intelligent. John: But as I think you know, I think you’re very smart and I’m inviting you to be in a group of mine called “Spirituality and Science.” It’s almost all adults, older adults for that matter but you’re probably the youngest person in the group but you seem to do very well supporting yourself. James: Well thank you. John: Do you feel nervous when you’re in that group? James: No, it’s a very relaxed environment. John. Oh, that’s great. Now that’s the first four and they tend to be less serious so let’s look at the next ones. Agoraphobia is fear of being away from home because of lack of control. Are you bothered by that at all? Do you feel nervous when you’re about to go on a trip or something like that? James: No. John: Ok so being out of the house or being away from the home is not a problem. James: No. John: The next one is called panic attacks. Those are feelings of fearfulness that seem to come from nowhere. They don’t seem to be related to anything. All of a sudden you start to feel really nervous. How about that one? James: Yeah that’s one that I experience. John: I’m going to guess that you probably think that’s genetic also. James: I don’t know if it’s genetic. It’s not something that I experienced when I was younger. It really didn’t come up until fairly recently, actually. John: How recently, James? James: About a year or two ago is when it first started and then it’s ramped up in the past year or so. John: When you say started, what was the first one like? James: The first one I think was actually in my chemistry class and it was just like I was doing my work. The whole room was silent and I was just doing my work and then all of a sudden, something changed and I’m not 100% sure what it was but something shifted and it was like I couldn’t breathe, my chest was compressing, shaking. It was a terrifying experience. John: That’s exactly how everybody describes it. We can be very sure you had a panic attack because that’s exactly what it sounds like. And it seems to come out of nowhere am I right? James: Yeah. John: Has anybody ever told you that it seems to be, but it actually isn’t? When I talked to my clients about panic attacks, I make an analogy to a bunch of cowboys out with a heard of cattle and if the heard of cattle starts to get nervous and one or two of them start to stand up, the cowboys have to start whistling and singing to calm them back down. Because if they all get up and going, then the next thing you know, you got a stampede on your hands and there’s nothing you can do except follow along. That’s sort of an analogy to what a panic attack is described as. I’ve had a couple myself, only about two, and it’s the weirdest thing, it seems to come out of nowhere but it really doesn’t. And what we tell people is, “you’ve got to try and be aware of your subconscious.” And that’s a really hard thing to do especially when the subconscious is saying, “something scary is about to happen” because you try to deny it. Nobody wants to be scared out of their minds. It’s a very unpleasant feeling and that’s what a panic attack is like. Instead of saying, “I think I’m beginning to feel the beginnings of a panic attack” you try and avoid it and it makes it worse. Does that sound right? James: Yeah. John: have you had any success with stopping them? James: Yeah I think I have. John: As I might say, “cutting them off at the pass.” Do you know what I mean? James: Yeah. It’s something that’s really hard to do. John: It is really hard to do. The biggest thing that’s hard about it is that you don’t want to be thinking about this. Am I right? James: Exactly. It’s something that I’ve had a lot of, so I’ve had to get pretty good at preventing them, cutting them off before they get to that point and recovering after them which is also something that’s I’ve struggled with because they’re pretty debilitating. They’re hard to come back from. John: One of the things that I’ve heard is that they’re especially hard for males because males are supposed to be strong and not give in to something like this. Am I right? James: Yeah, I think there’s some pressure. John: When you’re having a panic attack, do you tell all your friends around you that you’re having one? James: Generally, no. John: Do you feel a little bit ashamed of it? James: Yeah, I mean, it’s not something that I want to be experiencing. John: Yeah of course not. Of course, you don’t. And of course, with the stereotype that we have that men are so brave and tough, it’s not the image that we want to give to ourselves. “I can’t talk to you right now because I’m having a panic attack.” But, you know, that’s how it is. Okay, there’s only two more. OCD, which is obsessive-compulsive disorder. James: I think I have a little bit of that. John: What’s your evidence? James: I find myself having to do things a certain number of times. It’s pretty manageable and it’s not super severe, but there are certain things where like, I have to flip a coin in my hand a certain number of times or whatever so it’s even on both sides. John: James, my understanding of OCD, or obsessive-compulsive disorder, is that it is not necessarily coming from a learned experience but from another part of your brain called the amygdala and that’s it’s definitely genetic. Do you have anybody else in your family, you don’t have to say who, but do you have anybody else in your family that has trouble with this? James: Yeah, definitely. John: Would that be your father or your mother? James: I believe it’s my mother’s side. John: And anybody else in your family? James: Yeah, some siblings. John: Ok, well dealing with that is a tough one and what you have to do is basically reprogram your amygdala, is what we say about it and it means when you got to go back in the house or you got to do somethings repeatedly because they make you feel safe, you know that old phrase, “don’t step on a crack, you’ll break your mother’s back,” do you remember that? James: Yeah John: That sort of OCD-ish because it means that if you don’t step on a crack, then your mother’s back won’t be broken. But if you do step on a crack, your mother’s back will probably not be broken. It just makes you feel a little bit better that you can do something about which you almost really have no control. Am I right? James: Right. John: Okay, James, one more. Post-traumatic stress disorder. You’re pretty young for this. It’s usually soldiers and people who have been in battle or firemen who have seen burnt up bodies. Do you think you have anything in PTSD? James: I don’t think so. John: Well, James, I appreciate very much you talking to me about this. You’re very brave and I think also one of the things it does is it shows other males that it’s OK to talk about some of this stuff and in fact, it’s really necessary to talk about it, even if you don’t feel like it. Would you agree with that? James: Yeah, 100%. John: Okay, James. Thanks a million for participating today, I appreciate it.

James: Hey, audience and listeners, this is James Kandasamy from Achieved Wealth Through Value Add Real Estate Investing Podcasts. Today I have Jeremy Cyrier from Boston. Jeremy is one of my mentors, you know, I'm happy to have him here to talk about commercial real estate and Jeremy has been focusing on taxes and a lot of markets out of North East U.S like Rhode Island and you know Massachusetts and of course Texas and he have done a lot of bills, you know, I think he used to syndicate and now he's also investing as a passive investor and he focuses a lot on multifamily medical office buildings, retail and also office.  Hey, Jeremy, welcome to the show.  Jeremy: Hey thanks, James.  James: So, what's happening? I mean with all this covid 19, I know you're not in New York, but you're in Boston, which is, you know, almost near to epicenter there. I mean, what's happening with you personally and the commercial real estate business right now?  Jeremy:  That's a great question, we're all healthy, we’re home. I've got four kids, eight and under and it's a little crazy, but we're feeling just frankly blessed at this time to have a moment of pause in our lives to focus on the basics together. I think, you know, amidst all the tragedy that's unfolding around us, that's actually a blessing.  James: Yeah. Sometimes you know, you have to look for positive things in a, you know, whatever situation that we are in right now. Right? So tell me, I mean, about what are you seeing right now in the commercial real estate space? What was happening in February before this whole covid 19 and now we are in the middle of it. This is like almost in April, mid April to, you know, towards the end of April. What are you seeing right now that has completely caught your attention and create that "aha" moment for you?  Jeremy: Well, I'll tell you the interesting thing is we've been over the last three or so years saying, well, when's the recession coming? And we were looking for it, we're looking for leading indicators of a recession and here it is, it's upon us and it's more of a black swan event than really any of us would have expected to have happened to such a point where I've been talking to people about this being similar to our country being invaded and the government shutting down our economy is a defense mechanism. So, that's a pretty fascinating set of circumstances for us to be operating within right now in any business, let alone the commercial real estate space.  James: So do you see a lot of transaction has died down right now from what you were doing two months ago and  Jeremy: Yeah, so the, one of the things I do is I track data, so I live outside of the Boston market. I track that data very closely to see what the volumes look like and I'll tell you the 2020 Q1 data was up 75% in terms of sales volume over Q1 of 19 and so it was a very healthy start to the year but as soon as you go and you shut down the economy, all the volatility comes into the market and buyers start to pull back, lenders try to figure out what to do, who to lend to, how to lend and then you've got sellers pulling back saying, am I exposed here? Is this a dangerous time for me to be selling my property?  So, I'd say the first month of this event was really characterized by people trying to figure out what's going on, what's happening and this last month it's being characterized with more intentionality. Okay, here's what I'd like to see happen in three months, six months, nine months, twelve months. So the discussions are moving forward to a, I'm going to stop focusing on the hourly new cycle and I can see more of a two to three day new cycle and within that environment I can start to think strategically about what's next for me.  James: Got it. So do you see, so you're saying sellers are starting to look at more strategically, so, I know some people were talking about V-shape versus U-shape and I think some of the V would have changed to U right now, right? I don't know where the Nike swish. Right. So where do you think we are heading from March, 2020 you know?  Jeremy: Yeah. What's the letter of the alphabet are we going to see? You know, I listened to a great webinar, which was done with KC Conway and Eddie Blanton, Eddie's the president of the CCIM Institute. KC is the chief economist, they got on a webinar and I think you can see this; you can catch on YouTube and KC got on and he talked about the letters and he goes through the different shapes. Some of them I'd never heard of before, but they, like, what happens when you have a fiat currency recession, it's a Q, I guess but he said, you know, if early on we were hoping for a V he thinks it's going to be a W and I think he's right, I think the W is, we go through an initial dip, we have a recession now.  We start to rebound and recover, in the summer, people start to get outside and start to circulate and you know, return the flow of capital but we go back into a secondary recession in the fall driven by two primary things. One a concern over covid, you know, spiking again and the second being the, all the bad news that accumulated from March through September that shows up and we see a secondary recession as a result of what's happening right now. He said it's probably, and I think he's right, we probably don't start to see the volatility come out of the market until this time next year, 2021 and it's just going to be a matter of writing this, you know, writing things out the best we can in 2020  James: So, when you talk about the second V, right, I mean, I think first of the V and after that is another V which is coming in, which makes it a W? Right?  So are you saying the, from your perspective, do you think the second lowest point will be lower than the first low point or will be higher than the  Jeremy: I don't know but I know those low points take a lot of pain and they dish it out and so in our business, in commercial real estate investing, is it, people have been asking me: Okay, so when one of the deals are going to show up, you know, where are all these distressed sellers? Well, it takes time. Right?  James: What kind of time, why do you think we need to take time? Jeremy: Well, if you look back historically when we go through, we've gone through recessions and they happen just about every 10 years in the last four years. This one was a longer cycle than we'd seen.  So typically you see expansion kickoff and the third year of a decade, you see a transition year in the eighth year of the decade we go into a recession, then we come back up and out. This one didn't happen that way. I think it's because the Obama administration didn't push the FDIC to recycle assets like we'd seen in prior recessions, which extended the recovery period, it took longer to recover and expand in this last cycle, so as a result of that, the cycle lasted longer. I think it just was a longer period of protracted growth. So we have, you know, in the time frame of how things tend to play out, on the inside, you might see real estate deals two quarters after a Dow correction, but typically I see like a fourth to six quarter lag off the Dow.  And there's a reason for that, if you follow the money, so start with the Dow. What is the Dow? The Dow is a highly liquid market people are trading on nanoseconds and they're trading based on projections and perceptions. So from their companies, their shares are devalued, they, report, you know, revenue, they have revenues coming in lower, their earnings are lower, they start adjusting their P and L's, they lay off people. Okay, so unemployment comes up. Then they start to look at their real estate and they say, well, we need to reduce our exposure of real estate, we're not demanding as much square footage. Let's give some back. That goes back to the landlords. The landlords get the space back, they rent it for less or they can't rent it. They burn through cash?  Then they go to the bank and they say, hey bank, I'm having some issues. Bank says, okay, well let's work with you for a little while and see if you can get through it. That takes another three or six months before ultimately hits the point where the bank says you have to get out of the asset, we've got to take it. So, it's a slower moving asset class. That's one of the reasons why people like it. I mean, when you're buying, you want it to happen now you want it to be fast, but when you own this, it has less volatility than the stock market does and that's one of the reasons why people get excited about building durable wealth in the space.  James: Really interesting. So, I just want to touch back on what you mentioned just now. So you said during the Obama administration, the 2008 crisis, you said FDIC did not recycle assets as quickly as you know. So can you clarify that because that's completely new and I never learn about that. Jeremy: So, if you look back at the savings and loan crisis, this was back in the late eighties, the tax reform act. What happened was depreciation schedules were changed on how real estate was owned and written off. The tax world had distorted real estate evaluations, that combined with the junk bond industry and banks investing in junk bonds, chasing yield, okay, to make money. So, those two things together broke down the system and what happened was banks, the FDIC went into banks and said, we've got a lot of, your balance sheets are a mess, your ratios are out of alignment, we want you to call your notes and recapitalize. So, banks actually started calling owners up and saying, you have to pay us in 30, 60, 90 days. Pay off your mortgage. Well, okay, but when all the banks are doing the same thing, there's a problem. So owners were foreclosed on, they dropped their prices to liquidate their buildings. They filed bankruptcy and all this real estate ended up coming onto the bank balance sheets and the FDIC came in and said, okay, well now we're going to set up a corporation called the resolution trust corporation to liquidate all this stuff, flush it out. Okay? Establish the market bottom and then we'll come out of it. So, in 08', a lot of people were thinking that was what we were going to see. We had finance and demand induced recession and so we expected to see real estate defaults go back to the banks.  The banks would take the properties over, the FDIC would come in and say, push the stuff back out on the street, market down, recapitalize, and then we'll get back to business, they didn't do that. Instead what they did was they came in, they closed the really sick banks and they, a lot of them were set up as M and A deals. So they had other banks buy out the sick banks to dilute the balance sheets and then clear off the sick real estate. But what they ended up doing was they did a lot of forbearance agreements and they extended loan terms so that they could keep the owners operating the assets even through all the pain of the recession. So as a result of that, we never saw a real mark down or mark to market on all those properties. They weren't quote and quote recycled.  So if the idea was to keep all the real estate and everyone's in all the owner's hands, you saw fewer deals on the buy side and you just saw these owners just barely making it, holding onto these things, waiting for the economy to start to pick back up and for demand to come back into the space so they could recover the valuations and ultimately refinance the bank off the asset or sell the asset and recover or just break even on it. That takes a little while to do that. So I think that's one of the reasons why we saw this sort of longer cycle this time. I mean, a lot of people were looking at Trump's administration and his policies for continuation of this. I do think that was part of it but I think what we really had was, we had a long recovery and it took us until 2013 to really jump into an expansion phase from 08' but it wasn't like a jump, you know, it, it was kind of a slog to get there.  James: Yeah. You can see 2013 onwards and other property, the caplets not comprising a lot more compared to, you know, from 2008 to 2012 right.  Jeremy:  Yes. James: So do you think that's gonna happen in this market cycle where somewhere there's going to be, you know, FDIC going to come and do inaudible15:42  Jeremy: I don't, I kind of think that's not going to happen because if you follow the logic here with me. So country gets invaded, government shuts down the economy. People are forced out of business. Landlords default on mortgages. Banks have to foreclose on property. FDIC makes them and says; now you got to recycle the buildings. So if I'm the owner of the building that went through that whole horrendous experience, I'm looking at the government going, “Well, wait a second, you shut down the economy and now you're telling the bank to take my building away. How can you do that?” So I'm not sure that's the outlet on this one, I think the outlet's probably going to be just a market and it's going to be buyer demand and what buyers are willing to pay but it's going to be driven by two things over the next couple of years. One is who your tenant is, their stability and their durability to pay rent and number two, the lending resources that you have available.  My concern about this situation we're in is banks freezing lending, to attempt to reduce their exposure to the degradation of net operating income? That's a concern because they take the debt liquidity out of the market, when that happens, that slows transaction velocity down considerably and that will bring pricing down and that's, you know, if you're buying and that's the time to buy, when money's hard to get, when it's easy to buy and money's hard to get. James: Would you still be you have a challenge in terms of lending, right? The terms may not be as favorable during the peak tomorrow. Jeremy: But it's interesting, I think the lenders, when we go through recessions, they get picky about who they lend to, having relationships with your lenders is critical so your local banks are extremely valuable. They want to know that they've got strong hands operating these assets and using the money correctly. So those are elements to be very focused on in maintaining those relationships. It's the national banks that concerned me with inaudible18:30, so working on a deal last week and well as Fargo said, well, we're not doing it, we're not doing the deal, we're not lending period. Just shut it off.  James: Yeah. Except for multifamily, I presume all of the asset classes, like very less in terms of landing multifamily. I know Fannie and Freddie still doing it even though they have additional visa requirement, which is good for multifamily, but I think it's just hard to do any deals anyway right now because no one knows what's the price. Jeremy: What's the price? James: And no one knows what the cap rate, I definitely know Capita has expanded, right? Definitely not compressed as they, from what, two months ago but how much it has expanded, right? And who's going to take the risk of, what are they buying? Right? No one knows.  Jeremy: You get back to good old fashioned cash flow and I always tell people, there's always a market for cash flow in any market cycle, there's a market for cash flow. So the key is figuring out who the tenants are and in multifamily, where do they work? It amazes me when I talked to multifamily investors about their properties, I asked them, when your tenants fill out credit apps, you know, our rental application, you get their place of business, wherever they work, you should be cataloging every single employment center in your portfolio and finding out which industry sector they're in because you could, I mean for all you know, you might have 60% of your tenants working in the cruise industry. You just don't know, you know? So having an idea of what your economic footprint is by income diversity in your multifamily properties is really valuable information to have.  James: Yeah. Even multifamily near to airports, right? Where there's a lot of workers from airports and the airports are shut down, right? So that can be a bigger issue as well in terms of demographic, right? So yeah, we never really looked at it because, you know, but I recently looked at, it looks like we have really good diversified in my portfolio, but I don't think so many multifamily bias have done, you know, demographic analysis until now, recently, right?  Jeremy: Yeah, it's good to do.  James: Now, it's like, okay, you better know who are your dynamics.  Jeremy: Yeah, you want to know who is paying rent. So I have a question for you.  James: Sure. Jeremy: Okay, so multifamily deal making, where the deals are, where are they going to be. One of the things that KC Conway mentioned on his webinar that fascinated me was he said he expects to see hotels converted into multifamily housing and he also said, we may even see cruise ships become multifamily housing.  James: I just heard recently, I mean in fact, this morning I was listening to a podcast, by Robert Kiyosaki and Ken McElroy, who are talking about 10 years ago, someone was pitching this idea, let's convert the cruise ship into a moving condos and sell the condos as an apartment. I mean, if you heard about that, I was like, wow, really? Maybe that's coming back.  Jeremy:  It may, these crew lines they're going to have surplus cruise ships, aren't they?  James: Yeah, absolutely. Jeremy: I don't imagine demand will drop off for a considerable period of time and hotels.  James: Yeah. So let's go back to the tenant demographic analysis and the economy. Right? So, looking at what happened 2008, we did some kind of a benchmark with what happened then and what happened now but what happened now is basically the service industry and the people who want a paycheck, you know, paycheck to paycheck, right?  People are living paycheck to paycheck, they are the biggest impacted because everything stopped, right? So the people who have higher pay, who are basically living in A class or you know who are working on a normal, you know, highly paid job, they are working from home, they didn't lose their job, right? So, this is my thinking, right? My thinking is just like, yeah, I mean people, once everything opens back up, you know, the paycheck to paycheck is going to go back to work, right? But there's also going to be a global economy slow down because now this virus has impacted almost every country, right? The whole economy, the whole global economy is gonna slow down. So, my thinking is, you wanna multifamily class B and C, you know, where people are living paycheck to paycheck, they're going to go back to work and they might be a quick recovery, but people want class A, who are, you know, who are working from home, the company is going to have impact, right? That's where the Dow is going to have impact cause now your corporate profits going to come down because now you have a global economy slow down, right? So, I think even though now you're saying this is just my thinking, maybe we can just, you can figure it out whether you're thinking of the same, the class B and C is gonna is getting impacted right now. Class A not so much, but it's going to swamp later on, maybe in the second part of the W right? Or the V in the second.  Jeremy: Well it's starting already. If you look at, office work and employment and you read the news, you're going to see that companies that didn't lay off office workers are reducing their salaries.  James: Okay. Jeremy: And you're hearing about owners saying, you know, the owner of the company saying, okay, I'm going to waive my salary, everybody in the organization is going to take 10, 20, 30% pay cut with a floor, you know, not to be no less than. So following that logic, you're taking all that money out of circulation and it's not being spent, of course that slows things down so the question is how long you, you definitely have a slowdown, that's, inevitable but the second piece is how long those people stay employed? And are they able to get through this and operate at a level that with those cuts they can sustain operations and then start to pick back up when spending returns and it's going to be incrementally returning.  It's not, it doesn't just, this won't be a light switch so we're talking about W's and then I talk about it's a dimmer switch, you know the dials so you go and you can flip the switch in the room and the lights come on, but there's the round dial, you kind of push the knob and then you can adjust the, I think we're going to be doing that for a little while, turning the lights up, turning them back down, turning them back up and it's going to be partially in response to people hearing about hotspots or breakouts of covid until we have a situation where majority of the population has been exposed and we've processed the virus or we have a vaccine to manage the virus.  James: Yeah but this is going beyond the virus, right? So, I mean maybe the vaccine is already up in the next, you know, eight months or one year. I'm sure people are saying one to one and a half, but I'm sure the administration is going to cut a lot of red tape too, you know, well that.  Jeremy: Hey, they built a nuclear bomb pretty fast, right? They had to. James: Yeah because you know, during these times, everything is all hands on deck, right? So all the processes get thrown away or you know, there need to be some kind of leadership happening there but I think it's happening, but I just think the second order effect right on the overall slow down on the job losses on how the world is going to change. Right? And how it's going to impact commercial real estate. So, well, what do you think would be impacting a commercial real estate? Let's say, you know, you have experience in office, multifamily, retail. So let's go to each asset class and see, you know, what do you see it?  Jeremy: All right, retail, very, you know significant damage to retail. Okay? I mean, department stores are pretty much talking about the end of their era here this may be an extinction event for the department store.   James: So do you think if today we have a vaccine, what would the impact be if you already have a vaccine?   Jeremy:  If we had a vaccine, for the department stores? James: Yeah, for the department store for the retail industry. Jeremy: I don't know that they really cut, they survive longer, but this is devastating for them when Walmart, Target, Costco and Amazon are seeing 25 to 35% revenue growth, all that money is flowing, you know, flowing in different directions than Macy's and Lord and Taylor and Nordstrom's.  So the department stores are definitely, they were weak coming into this, this is terrible for them. General retail, you know, I think quick service restaurants like with drive-thru's come back very quickly, the drive thru is kind of an ideal service model for this environment where we'll be going through and coming out of and the cost hits a point, it's a low cost dinner, you know, dinner for the family, to go to Chick-fil-A, you know, and grab, you know, feed the family for 50 bucks. So quick service comes back quickly, I think some of the other sectors where we've got, you know, experiences, you know, it's interesting, services and experiences were really kind of the bellwether in this e-com impact on retail real estate but they're getting hammered and so you're going to have some service and experience spaces return, they'll reemerge from this and the weaker ones, they just won't make it back. They won't make it back, so it's, I think in restaurants, full service restaurants, maybe half of them come back from this. It's just going to be very difficult to reopen all those.  James: But don't you think someone is definitely going to buy that space? Somebody else that have the same vision as the previous owner. I mean, maybe the original owner is no more there, 50% have gone right because they kinda lost it. Jeremy: You're going to see new operators come in and it's, that's, look restaurant, full service restaurants, they can be recycled and you're going to have operators say, well we, you know, we made it through, let's open another location cause it's on sale. We can get the equipment and refurnish it and open and go. So there'll be opportunity there for new operators.  James: So the industry is not going away, it's just the operators are disappearing.  Jeremy: The operators that disappear, it's a slow recovery for them. It's a difficult recovery and the real estate; there will be some good restaurant real estate that will become available. It will happen. Okay, so I know retail, that's sort of my take on it. I wish I did. James: Are you seeing a lot of distressed sellers right now. I mean are you doing a lot of transactions right now?  Jeremy: No, not right now. I think it's early.  James: Yeah, I think it's still early. I think people are just riding through their cash flow. Just walk up and watching and nobody knows what's the price and nobody, not many people are distressed.  Jeremy:  Yeah. Multifamily, I agree with you, if you segment by class ABC, you look at the populations that are renting from those units. The A-class seemed to be more insulated because they tend to be professional, high-income office working  James: Those that work from home as well, right? Jeremy: Yep. The B's and C's tend to be more service level and they've got a lot more exposure in this environment. So, you know, they get laid off quickly, but they get rehired first because they're lower cost, the office workers, they get hit later and they, you know, they're slower to come back. I mean, what's that rule of thumb, if you've got, for every $10,000 in salary, it takes you a month to replace, to find a new job. James: This new ratio. Jeremy: I know this new ratio if it's true, but I've heard that. So the bigger question that I've got on multi-family is the suburban versus urban, we've been in an urban cycle the last 10 years.  James:Yes. Jeremy: And I've been. James: Explain that a bit, what do you mean by urban cycle? Is it people building more multifamily in the urban areas?  Jeremy: Yeah, it's the live, work, play, lifestyle, millennial, you know, millennials and baby boomers wanting to live in the city near where they work, walkability people that live in rich environments. There was a quote that I was reading today from Goldman Sachs and they're saying, they're expecting a flight of millennials to the suburbs from urban markets and it makes sense.  What does this suburb offer? Less density, more value for what you rent, you know, you may be working from home more so they may be making decisions about, well I could have done a one bed but I have to get two bed cause I need a home office, that's a consideration to take into or keep in mind and then there's just the overall comfort of, hey, you know, I don't want to be in downtown New York right now. That's not a good place to be, I want to get out to the burbs and just have some more space. So I think the idea of urban versus suburban is it's going to be a big topic here over the next four or five, six years.  James: Got it. So I think that's very prevalent in where you are, but you also buy in Texas, right? I mean, from what I see in Texas, everything is a suburban mid-rise apartment, not in style apartment. So I mean there is very people I know who buy apartments near downtown, even though they [33:34unclear]  Jeremy: Sure James: It could be depends on which market you're talking about.  Jeremy: Yeah, I agree with you on that. In Northeast, we have a very clear urban, suburban experience. You know, Texas, you guys just keep building rings.  James: Yeah, we have a lot of land here, right? So everything is garden style and [33:58unclear]  Jeremy: Yeah, as long as you got the water.  James: Yeah but there could be like tertiary market where it could be more interesting. I'm not sure it would be less density or not, I mean everything seems to be less density for me in Texas just because we have a lot of land here, you know, people move around pretty well, everybody, I guess so. Jeremy: Yeah, you got a lot of roadway.  James: Yeah. Could that also mean that there's a lot more investment coming from the coastal city to places like Texas or Florida or where  Jeremy: It could mean that, yeah. What's interesting about the last cycle nationally, the suburbs have been kind of out of fashion. So, it didn't have the same run up in value that the urban markets did so I started to see that the last couple of years where investors were starting to look at suburban markets and say, well, I can still get some yield there, so I'm going to go invest in the suburbs. This is now going to really bring that conversation to the forefront.  James: Yeah, I think that's why I like places where you are like Boston is called like gateway cities versus you know, places like where I inaudible35:17. Jeremy: Yeah. James: Suburban market, I would say so. Jeremy: Yeah. So industrial, I'm still bullish on industrial. I think we'll see some dislocation in distribution and port industrial, I don't know what the future looks like with China. I mean we import a lot from China through Long Beach and it goes to the inland empire and I think we're going to see some of that shift to other port markets as we start importing from other parts of the world but overall with consumer behavior shifting, it had already started before this. If there's been anything that's going to accelerate the demand for industrial spaces, it's this because you're going to have ghost kitchens, you know, restaurants that basically just, they're like catering kitchens that they just run full time, they have no seating and they deliver food, you know, basically meal prep. You're going to have more demand for online consumption and distribution and shopping, that's going to put more pressure on existing in industrial inventory, I sort of thought the industrial market was peaking in the last couple of years, but that may not be the case, there may still be some runway in that market.  James: So when you're talking about industrials, basically, warehouses where, you know, products made and distributed, I would say, right? I mean, I can see that with more manufacturing going to be coming in house right now, I mean, with all this, that's one shift that's going to be permanent.  Jeremy: Yeah.  James: Everybody knows that, right? So, do you think industrial would be the asset class that most beneficial from that? I mean, because I'm looking it’s going to be a lot more manufacturing factories coming here; I just don't know which assets.  Jeremy: Yeah and that's really, I mean, if you remember doing 102 in CCIM and we talked about basic employment. James: Yes, absolutely.  Jeremy: As soon as you start to see manufacturing coming back into the United States, that's going to be really good thing for our economy.  James: Correct.  Jeremy: It's going to really boost multifamily, a lot and it will help retail and it'll help office but you know, it's really a value, it's a power source, it's an economic engine for importing money into economies, local economies. So, I think industrial overall in terms of, if you're on the buy side, it's like you want to be really careful about industrial exposure to China, but the rest of the industrial story I think it's going to be a good place to be, I think it's going to be a good asset to own.  James: So, is industrial equaling to manufacturing factories.  Jeremy: Yeah, so manufacturing, flex R&D, so that's research and development, Warehousing, distribution, bulk storage, cold food storage. Just there, you're going to see that stuff cranking.  James: Cold food storage  Jeremy:Yeah, cold food storage. James: This is not the same storage that we are talking about now? Jeremy: No, we're talking about like freezer facilities that type of thing, yeah. James: Why is that? Jeremy: It's because people are going to be continuing to demand home delivery of food and you got to store it somewhere.  James: Well, I never seen one when I drive around, so I don't know.  Jeremy: Kinda funny looking, you know, if you, sometimes on the outside they're a little funny look.  James: Now, it's going to be looking nicer because it makes more money. So how do I position myself or anybody else listening? Let's say if I want to take advantage of this manufacturing coming in house right now. I mean, how would a commercial real estate investor should be able to position?  Jeremy: It's a good question. So you want to, you know, the main thing about manufacturing is you want to find buildings that have good characteristics for an efficient manufacturing operation. So grade level, you know, Celeste slab on grade buildings with ceiling heights in them that are preferably 16, 18 feet or higher, that have good loading access, you can get a truck, tractor trailer, multiple tractor trailers in and around the building to access it, plentiful parking for labor so typically you're gonna see, you know, one parking space per 800 square feet is kind of the building code standard for manufacturing warehouse but depending, you know, power supply, how do you have enough power coming into the property and utility services.  So you could probably, you know, you're probably going to be able to find some outlier properties that you can bring into that market and you know, convert over and, I mean, the other thing is you might want to be looking at retail and converting that to distribution, zoning is restrictive for that because typically municipalities don't like to see industrial uses in retail locations but you may end up seeing big box or department store or retail buildings that have those characteristics of what I just described cause a lot of them do being converted to that use, it could be manufacturing or it could even be distribution.  James: So which market should we be looking at to position ourselves for this kind of industrial asset class?  Jeremy: I think you can look at pretty much any market in the U.S, I think this is not a specific market, now if I, you know, I think you do this, you to follow that formula in any market in the U.S now if you want to do a, let's look at the demographics and the economic drivers in a market. You want to look for population growth, employment growth, that it's, you know, if there are more people move in there and live in there and it's growing, that's a good thing because people demand space.   James: Yeah. Well I mean the other way to look at it also is like, if there's already a manufacturing hub in that city or state, you know, that could be a good expansion place, right, if you find some assets around it. I guess  Jeremy: It could be, the other thing you're going to see are companies trying to find manufacturing redundancy. So if they've got a facility that goes down in their location, they can continue supplying from an alternate, which is, it's really interesting cause it's sort of contrary to what Gordon Gekko would tell us to do, right? Build shareholder value, become more efficient and be more profitable, do things faster and increase volume and the way you do that as you bring everything into one location and make it as streamlined as possible but now we're looking at a situation where, and this has been going on in manufacturing for a little while, customers demand redundancy because if there's an event or a disruption to a location, they want to make sure that they still have a continuity of supply chain.  And so they're getting what they need so that's even more important now than it ever was. So we'll see some of that. So I think you gotta kind of get into that world and talk to people and find out you know who's looking at bringing things home who isn't, and then start to think about the properties that they could be using and you might even have the opportunity to go out and pick up some land and put something on the land for someone.  James: Yeah. And I'm sure there's going to be some kind of government incentive to do that, right? Because now the government wants lot more manufacturing.  Jeremy: So I think so. Yeah. So office. James: Yeah, let’s go to office. Jeremy: You working from home, if you had a choice today to go to the office or work from home, which would you prefer? Is the question and I got to imagine a lot of people are saying, I'd love to get back to the office. I miss talking to people, socializing that's missed and I think the home office thing is great, but boy, when it's home officing and schools are shut down, it's really hard.  James: That's a good point.  Jeremy: This sort of experiment is, you know, forced home officing can companies do it? We've got a variable that shouldn't be there and that is the kids, the kids should be in school. But it's, I think people go back to the offices, but they, you know, offices may end up seeing a similar thought, which is, hey, instead of piling everybody on the train or getting their buddy into the center of the city to work, maybe we need to have a smaller office in the center of the city and then have some suburban offices, spread people out, improve their commutability and create redundancy in our workforce.  You know, with people being closer to their smaller offices. So I think that, I'm hearing that a little bit in the market now with people I talk to, I think that's something to keep an eye on that. So again, I kinda like the suburbs, I think there's an opportunity in the suburbs and office may actually be a suburban opportunity here.  James: Got it. So what you're saying is people are just going to go back to office. I mean, it's not going to die.  Jeremy: I don't think it dies. No. I mean if anything, you know, we've gone from, in the office space, I mean you see these offices where people are like in their benching and I mean I went into an office building and people were waiting in line to get in the bathroom, in an office building and the reason is that the building was built for more or less one employee for every 300 square feet and when companies come in and they go, we're going to be more efficient, we're going to get 1 employee in for 135 square feet, all of a sudden the bathrooms are overloaded, the parking is overloaded and that the buildings, it's too dense. The amount of people in there, it's not designed to carry that density. We'll throw a pandemic in the mix and the idea is for us to be six feet together in this world we're in right now. Maybe we're going to see that, you know, that office demand change where you know, I want to be able to shut my door to an office, I don't want to be at an open bench next to my colleague sneezing on my keyboard, you know, so that, I think we would go back to the office.  It's important, the nature of the office is to bring us together and for us to work and collaborate, share ideas, but also to have deep work time, need to be able to do deep work and we need to go somewhere to do that. So maybe it's not about packing as many people in and forcing them to assemble and work together rather spreading them back out a bit, providing some, you know, some work from home, some work from the office days, maybe your home two days, three days in the office. So I, this is a fluid one, but I think we go back to offices. I think it's how we do work. We can do it this way, you know, we can talk to each other, but it's not as fast in my opinion, information slower than it is in person.  James: Oh yeah, absolutely. Yeah, I was talking to a doctor, Glenn Mueller, right? So I'm sure you know him, right? This was like two months ago when we're looking at all of the asset class and office was the opportunity it was going from, into the expansion cycle. Right? So, and I asked him the same question, what about people working from home? He said, well, you know, humans are social creatures, you know, they like to be together, right? And you're absolutely right about communication and deep work and all that, just so hard to do working from home. Right? So I think people are going to go back to the office, especially after the vaccines is [48:47unclear] right?  Jeremy: Yeah, I will make this prediction. So just like after 9/11, the U S government moved in security and defense. This is a healthcare crisis; I think the next decade will be a healthcare decade. We tend as people, we tend to overcompensate for a trauma that we just experienced so that we never have to feel it again and so I think we're going to see when we rebound from this, healthcare will come back very quickly because there'll be such a backlog of demand for everybody else who's not suffering from Covid but has a knee replacement or you know, an oncology treatment and everything, they're going to be there, they need to get in for services but we're going to have a situation where healthcare is going to be at the forefront of government decision-making, investment and in development of protective and planned responses to anything like this coming again. So I see that space is a very fascinating space to watch and get involved in as you see us start to come out of this and these discussions come to the forefront.  James: So how should we prepare for that opportunity too?  Jeremy: Well, it centers around the hospitals and if you follow a hospital strategy, they've been merging with each other to become more efficient as they struggle to operate profitably in a very narrow margin environment and one of the things they've done is they've expanded by going out into retail locations and creating outpatient and urgent care services that essentially become a feeder for the hospital. So I expect to see more of that because that's a lower cost way for hospitals to expand. Hospitals are very expensive and they tend to be constrained geographically because of where they were cited. You don't see a lot of just new hospitals being built around the country. They tend to have additions put on them. So as a result they expand out into multiple locations that become more like a hub and spoke model. So I'd be looking at anything in the healthcare space in the next several years. I think it's just going to be really good place to be.  James: So are you talking about like medical offices or you're talking about labs or life sciences Jeremy: Medical office, yes, I can't really comment on life science, I don't follow it very closely, it's so specialized, but I probably should know more being out of Boston cause it's just a center for it, I hear about all the time. I just kind of go,"...oh yeah, labs, ugh"  But, that I, anything with healthcare, I'm loving it in the next several years.  James: But even on medical offices, I mean, the tenants have a long lease terms, right? I mean, how would that increase the valuation of the property as a real estate investor? One is, we look at the cash flow, the other thing we want to look at value increase as well. Jeremy: Well, there's, it's durability, yeah, that's one of the great things that medical office offers you is 90% and higher renewal probability rate. The you know, historically it's been a recession, quote and quote proof, investment class, not this time. I mean, I was looking at data last week 42,000 healthcare professionals lost their jobs, were laid off. I mean, you go, what, no way.  James: Why is that?  Jeremy: Why is that? Because hospitals aren't allowing for elective procedures, urgent care only. So they're laying people off, it's a fiscal nightmare for the healthcare system right now. So they, that's short term, okay? There was the version, what is it, version three of the P we're on now that just came out and there's billions of dollars going to the healthcare system, which is a good thing.  James: Got it.  Jeremy: Good thing. So short term healthcare is volatile that may be the opportunity to pick up some property, I think that over the next decade it's going to be a wealth builder.  James: Okay, so you mentioned about some of the healthcare which is located in the retail centers and all of that become like a hub and spoke model. So that's like single tenant healthcare, right? Compared to a multi-tenant. Jeremy: It could be single tenant, could be multitenant. You might have a medical office building with four practices in it. Sure. Yeah.  James: Got it.  Jeremy: Yeah, I think those are really good investments.  James: Okay and it could be offices converted to medical offices.  Jeremy: Yeah, it could be. Yeah, I mean it's, I just looked back at 2001. I mean if you were in the like the metal detector, you know, security business in 2000, probably not really interesting. James: Right, like 2001 [54:48unclear]  Jeremy: Yeah, so that's what I see here. I'm like, this is going to be interesting, there's going to be an overreaction in healthcare. I think there's going to be opportunity there.  James: Could there be like construction of healthcare facilities like medical offices or do you think just buying new medical offices.  Jeremy: I think there could be development, we're early on that. I don't know that's anything that we're going to see probably for three years. I'm just following the trend, I'm kind of following how people are, what they react to and then where they go and for us to come out of this and not have a national discussion about how are we going to be prepared for the next pandemic.  James: Yeah. Jeremy: Yeah, it's going to happen and money is going to flow there and, and there's going to be a lot of pain and people are going to say, I don't want to do that again.  James: Yeah. Jeremy: I don't want to hear about ventilators next time. You know? And so, I think that presents an opportunity for investors to get in front of that now. James: Yeah. I'm sure for the next three, four years people are going to say we didn't want to have that healthcare problem again. Right? And I don't mind paying for this. Right? Some kind of thing. It's going to be a lot more investment. So I think medical offices would be a really good investment.  Jeremy: Yeah. I liked it before this and I like it even more after that. James: Awesome. Good. So what about other asset classes like self storage or mobile home parks and you know, what else is there, warehouse I think is probably part of the industry.  Jeremy: We talked about warehouse, hey, you know, self storage, kind of a maturing asset class in this last cycle but I think it's still very viable and it's a good place to be. You are going to have dislocation of residences the next couple of years so self storage is going to be valuable to people who need to store their belongings, mobile home parks, I mean, look, everybody needs a place to live and if it's affordable, you know, it's gonna work. So again, there I think I see an opportunity too. James: Got it. I think multifamily; we did talk to her in detail about it, right? Do you think there's going to be a lot of crash happening in the single family space because there's so much short term rentals, people bought a lot of short term rentals as second houses and probably right now there's no short term rentals happening.  Jeremy: Yeah, that's not so good like kind of the Airbnb, I mean you're sort of in the hospitality business there so yeah, those folks are gonna need to convert to long term or sell.  James: Correct. So I think there's going to be, you know, a lot of people, you know, giving up their second short term rental houses that way to the banks. It could be a lot more houses available I guess. Right?  Jeremy: Yeah. That could be an opportunity, you know, if you want to buy and rent or buy in rehab and then resell that space could have some volume coming through. Yeah.  James: Okay. Got it. Interesting, yeah, I mean, did I miss out on any asset classes? I think that's the more important. Jeremy: I think we got most of them.  James: Yeah and do you think we are going to be much better in terms of economy wise? Just because there's going to be a lot more base employment, which is manufacturing happening in the U.S. Jeremy: I'd love to see that, I hope our companies can come home with that and who knows, I mean with the unemployment rate being what it's going to be for a while and the wage growth that we didn't really see in the last 10 years, and we just lost on that, maybe there's an opportunity for us to employ people that otherwise we couldn't have a manufacturing basis to make it make sense. I don't know. I'll leave that up to the manufacturers to figure out.  James: Got it. So, I didn't want to forget one asset class, which is hotels, right? I'm not sure whether we went deep into hotel. So that's going to be, I think the hotels are really suffering right now.  Jeremy: Oh, it's terrible.  James: Right now.  Jeremy: When I hear 9% occupancy rates.  James: Yeah. Jeremy: That's bad news.  James: Yeah, that's crazy right now. So hopefully hotels survive through this downturn, I guess. Right?  Jeremy: Some will, look, we still need hotels.  James: Yeah, I know.  Jeremy: We still need them so they're the strongest, best located hotels will come out of this thing, others, you know, they'll fail and they'll either get bought at the discount and with a lower basis they can compete in the market and grow back out or you're going to see them reused for something else.  James: Got it.  Jeremy: That's maybe the multifamily conversion.  James: Yeah, if the city allows it of course, then they can be a lot of studios and efficiencies, I guess and I've seen that happening in some cities and some projects. All right, Jeremy, thanks for all the value, can you tell our audience and listeners how to get hold of you?  Jeremy: Sure. So you can check out our stuff on CREinvested.com, that's C R E I N V E S T E D.com, I've got an investment course there, that is available and if you ever want to chat with me, you can email me @jeremy that's JEREMY@creinvested.com  James: Yeah, Jeremy is a wealth of knowledge. I mean, he's also a senior CCIM instructor, right. So that's a lot of knowledge if we came in, absolutely, you will be a really huge value to connect with you and just to learn from you. So thank you very much for coming on the show.  Jeremy: Hey, thanks James, it's a pleasure. James: Alright.

James: Hi, audience and listeners. This is James Kandasamy from Achieve Wealth at Real Estate Investing podcasts. Last week, we had Jake and Gino from Wheelbarrow Profits. You know, Jake and Gino have tons and tons of deals on their own and you know, recently have moved into syndication space as well. And their story is just very interesting in terms of knowing how did they get started, how did they refinance their first deal to launch their multifamily investing career.   Today I have Rich Fishman from Dallas, and Rich has almost 8,000 units right now across 23 complexes and he has been buying in Texas, Tennessee, Indiana, Pennsylvania, Ohio, Mississippi, and South Carolina. So Rich is going to be giving us a lot of valuable insights into how he had bought so many apartment units. And imagine half of that 8,000 units is fundamentally owned by Rich itself and the other half of it is more of a partnership and syndication. Hey Rich, welcome to the show.   Rich: Well, thank you, James. Glad to be here.   James: Good, good. So, Rich, it's going to be a very interesting podcast because, and I'm going to be learning so much from you and I'm sure my listeners is going to be learning so much from you. How did you get started? I mean, you have like 8,000 units right now. You started almost 20 years ago. So walk back, how did you get started in multifamily immediately when you get started in real estate?   Rich: Well, actually, I was the owner of a mortgage company in the San Francisco Bay area in Berkeley, California and I financed mostly half homes, but I also financed apartment complexes. And I had a deal to finance, it was a six-plex in Alameda, California, and it was a foreclosure. Back then, there were a lot of foreclosures and the realtor gave me the deal, I got the loan, and then the buyer fell out of escrow; they didn't like the deal. And then there was another buyer; same thing happens. And I said to the realtor, I said, “What's wrong with this deal? It looks like it makes money.”  And she says “Nothing's wrong with the deal.”  And I said, “Well, I don't know how to manage anything like this.”  She says, “Well, I know management company, don't worry about it.” So I went to the property, then I dragged my wife there.   And it's a funny story because my wife is from Scandinavia and they don't do very well there. And so we went to the property and we had one of those, you know those long screwdrivers that the termite guys have because we are poking around, seeing if it was well-built. And the screwdriver went right through the wood into the drywall. And my wife says, "No, I can't buy this with you.”  I said, "No, we're buying this.”  And she looked at me and she said, “Okay.”  And so we bought this six-plex. And the six-plex was the beginning of us starting to buy real estate in earnest. So that's the story is we cut aside. There was a sidebar from the mortgage business.   James: Got it, got it, yeah. I always wonder, like whenever I meet brokers, mortgage brokers, and even brokers, I always ask them, why not you guys buy these deals, right? Why are you just doing transaction? And a lot of times, I mean not a lot of times I think once I talk to someone who went from a mortgage broker to become an investor. I'm sure you know him; it's like Michael Becker, right? Yeah. I think he's a big buyer in Dallas. I asked him this question because he used to be working in Wells Fargo and he told me not everybody likes to take risks like a business owner.   Rich: It's not only about the risk. The main reason that people get into the investment side is because, when you're doing transactions as a broker, you're making income and you're only as good as your last deal. You have to keep churning and closing deals to make a living, and every broker is off to the next listing, or the mortgage person is off the next loan and you'd live and die by the transaction. So eventually, most people either say, I've got to own this stuff; build wealth rather than income. Or I'm not interested; I really don't want to own anything. It takes the risk and the responsibility of owning property. So that's the thing, I had to make a decision to own it, take care of it, use my free time because I was still a mortgage broker. I had to use my weekends to run the real estate with my wife. We want to get started because we couldn't just go into multifamily; we needed the income from the mortgages. So it takes a lot of sacrifice for the first couple of years to get into something like this.   James: Got it, got it. So you must know the industry; working as well in the mortgage and to really successfully become owner and take advantage of that knowledge as well. So after how many years or after how many unit count that you, you said, okay, I'm going to give up this mortgage business, I'm going to be just a fulltime, a real estate investor?   Rich: I think we hit about a thousand apartments. And at that point, I let go of my duties in the mortgage company and concentrated on just buying and selling apartments.   James: Got it, got it. So, 20 years ago you started buying the six-plex, when did you see your fastest acceleration of purchase or acquisitions?   Rich: Well, we hit about 4,000 units and then the recession came 2009 to 14, 12, 13 as on the area of the country, and that was really hard. So we didn't really grow during that period. We were selling off as fast as we were buying, just kind of trying to keep our head above water. We got to about 5,000 units, about two or three years ago, and then we've grown a lot more. I could probably have 50,000 apartments today if I wanted them. I would have to basically align myself with someone on Wall Street or some investment banking for like a Goldman Sachs or something like that. And they would be happy to raise the money and give me all that money and I could then own five or 10% or 15% or whatever it is that is bought, BUT I'm not that going to ho for that strategy.   So the growth at this point is really about organic growth for me and our company, and also quality of life because when you have institutional mining, you have to take care of it in a way that suits the institutions. And they have requirements that family and friends and other people don't have. For example, they might want audited books every year. That doesn't sound like a lot because we don't; we have books [inaudible 08:46] and everything, but that just takes a lot of time to get an audit done. And if you multiply that by 15 or 20 EO, now you have to have a whole audit department, and CPAs work who for you and things like that. So it's been really about opportunity and raising money mostly from either my own, resources or family and friends and other methods.   James: Got it, got it. So, Rich, I think you bring a really good perspective in terms of economic cycle because you have went through, I mean, you started 20 years ago, you went through that 2008 and everybody said 2008 multi-family, you know, fat better than any other asset classes, they are very, very low. What you call, you know, who went into a receivership or bankruptcy; multifamily, so is that true?   Rich: That's not true at all. Most of the people who are in multifamily today, we're not even involved in the business.   James: Exactly, that's what I'm asking because everyone is sort of newbies--   Rich: A lot of people were wiped out in that recession and a lot of other people were underwater. I mean, there were thousands of apartment complexes that were foreclosed on. Now was it as bad as office buildings or retail? Maybe not, I really don't know, but it was bad. Now they say anybody who lasted eight years, they could come out the other side feeling good. But most people don't have the capital to take five or six or seven years of losses, and large losses. If you're not making debt coverage, if you're not able to pay your loan and you're coming out of pocket, that might be okay for one deal. But if you have 20 deals like that, yeah, that's a whole different story. So it's quite a different thing than when people say. Now, the multifamily was hitting extremely hard, and I think the default ratio was up to about 8%.   James: 8%. Okay.   Rich: Yeah, I think so. Yeah. That doesn't sound that bad compared to student loans. But if you think about it 8% is, you know, you're talking about housing that touches the lives of millions of people.   James: Got it. Yeah. It's very interesting data because you are giving me true data. I mean, sometimes we read in the news and they say low delinquency rate and it was not a hard hit and we don't have real, true story. Right, because a lot of it depends on the sub-marker, depends on which class we are talking about, and you know, depends on the operator as well. So how did you survive the 2008 crash?   Rich: Well, I have some properties that cash barge really well and I had others that really couldn't survive and I got rid of them. I sold them off or actually, I had you cut my portfolio down in order to survive and retrench a little bit, but I only had a few deals that were like that, the rest, I didn't have the leverage. If you were totally leveraged up in a bad market, then you cannot save yourself because, and if you're a partnership, you can't save yourself either. Because, if you own 10 or 20% of the deal and the loan is negative, then you would actually have to make a capital call every month on your partners in order to make those payments, and if you raise money. You know that there are two words that should never be spoken ‘capital costs’.   James: Exactly.   Rich: And so it's hard to really get money out of people to feed something that's losing money. So, there are a lot of people who gave; I know one fellow in the Houston market, he had property all over Houston, Atlanta, I think he gave up about 40 yields back. And there were other people like that who had just a tremendous amount of deals that they gave back to the banks.   James: So was this deal when they give back did Fannie and Freddie was giving non-recourse loan at that time?   Rich: Yeah, non-recourse loans, they just won't; if you give them deals back, they don't want to lend to you again unless you pay a heavy penalty to offset their losses because they take losses, themselves or the service or takes the loss. And in Fannie Mae's case, the loan originator slash servicer usually takes about five to 10% of the risk of the loan. So, you know, that could be pretty substantial too, to them because they're usually own companies by either large wealthy individuals or by banks. They don't like taking losses at all.   James: Got it, so they--   Rich: Hopefully we won't be there again.   James: Yeah, absolutely, we didn't want to be there again. So it was non-recourse and the owners were able to just give up their property, they lose their equity and the service that takes some loss and they gave it back to Fannie Mae and that's it.   Rich: Fanny Mae never own; one of the problems with the way the system was set up, is that Fannie may never really own the loan. People don't realize this, but Fannie Mae is just a broker.   James: Really? Okay.   Rich: There's really like nobody, you know, there's not like someone in Mumbai who owns or in Shanghai who owns all these loans. I mean, they basically securitize the loans and they sell the loan as a bond in the world financial markets. And so there's a special servicer who represents the interests of the bondholders and that person is delegated decision making, but they're not able to cut deals on Fannie Mae loan. So, they don't generally go and say, we see that you're negative, and why don't we go from 5% to 3% and you can owe us the money later? Things like that; they're not flexible. So, actually, Freddie Mac is, is more flexible, they act more like a bank, and so they can do workouts in a much better way than Fannie Mae can. It's just one of the things people don't know.   James: Got it. Wow, that's interesting. That's a lot of information out there. Yeah, I mean, Fannie Mae does a, securitize the loan and they sell it to the investor who buys it as a bond and they get certain percentage out of it. And in the middle there's servicer, there's Fannie Mae, everybody makes a few percent like this one [inaudible 15:59].   Rich: Everybody is making money, and at the end, the only people who generally lose money are the bondholders.   James: Okay, are the bondholders. But if the deal is given back, I mean the equity holder, whoever, the owner also lose the money as well, right? So there are two people, the buyer, and the seller, right?   Rich: The borrower absolutely loses a whole lot of their entire investment. And then the lender, if the lender can't be made whole by the sale of the real estate, they may lose money too. Things can get pretty bad in that cycle, that the value of the property often sunk below the outstanding balance of the loan. There're a lot of negative things to talk about, but let's talk about more positive things.   James: Got it. So you talked about people who are highly leveraged, right? So let's say you're buying a deal at 75% leverage. Do you think that's high level, I mean, can you define highly leverage? What is the highest leverage that you think?   Rich: Well, in today's world, you can leverage up to, Oh, even 90% for the first and second or preferred equity. And that's not necessarily a bad thing. It's just that you don't want to leverage that high on a stabilized property. It's one thing if you buy a property that's a value add and that you're going to add value and renovate a property, increased rents, increased value, and you're looking on a stabilized basis that okay, you went high leverage, but within a year or two you're going to be catching up and the leverage point will be at 60%, 65 or 75% or something. But if you're basically highly leveraged in stabilized properties without any value add then. If the rents go down five or 10%, then you're underwater, you want to have some protection; you want to certainly have 20% or debt coverage or something like that.   James: Yeah, that's a good point. I mean, that's the reason where I'm going with the question because we buy deals, we buy deals or value at deals even at 80% leverage, but in one to two years, that 80% leverage is going to be, 70 to 65% leveraged. So basically it's not leveraged at the start of the loan, it's basically, where are you going to be once you're stabilized; that's the more important thing. Sometimes people get confused that you shouldn't be highly leveraged? Why highly leverage and you don't understand that we are looking for buffer for DSCR? We want to be as further up from the debt service coverage ratio. That's the fundamental discussion about what highly leverage and costing higher risk.   Rich: Right, leverage is your friend, if you're using the leverage to invest capital, if you're using leverage to service debt or to pay out dividends, then you're making a huge mistake.   James: Okay, absolute point, that's an awesome point. That's well-said. I couldn't have said it better. So what about the guys who have done breach loans at that time in 2008 what happened to them and what would you give advice to that kind of people who are doing--   Rich: You mean the answer 2007 or 2008 with a value add deal, and then they had a bridge situation. While those people probably suffered, I mean they didn't execute. If they executed, that's fine. It was hard to push rents back then, everything is based on increase in rent. Fundamental multifamily strategy is how can I increase the rent? What value can I give the tenant so they'll pay more? Now, between 2008 and 2012, the only value add strategy that I know that worked was the fixed deferred maintenance to make sure you kept the lights on, for the most part. So beyond that, I didn't see people putting granite countertops in and all this other stuff because everyone was just trying to supply.   So those people, many of those people who got in at the cycle; at the end of the cycle, didn't make money unless they stayed all the way through 2015-16, so there were about seven years. But you would have to stay in that deal in order to make it. Now I did buy a property in the Midwest that I bought for about 15,000 units. You can get things that way back then. And I bought it in 2006 and I did do really well on it, but it was unusual because I got it so cheap; my basis lever was very high. But at the time it seemed like I had really jumped the shark as they say because the economy wasn't very good, and it wasn't easy to rent up any apartments for a while.   James: So coming back to Midwest, which I believe is MAVA secondary or tertiary market, right? So like right now in 2019 right now, market is so hard and people can't buy in the hot cities like Dallas, Houston, San Antonio, Austin, people are, I mean, I'm just looking at Texas, right? I mean, we're in Florida, we have Orlando, Tampa, and what Jacksonville, and I mean a lot of people have started going to other States and tertiary market or States which is like supposedly supposed to be upcoming. So, what would you give advice to them?   Rich: Well, I think my advice on the States like South Carolina or those kinds of places, is that to study the local market and make sure that it's vibrant, that there are good jobs there. There are a lot of great secondary and tertiary markets. Huntsville, Alabama or Hoover, Alabama or you know, Greenville, Columbia, South Carolina, I mean there's just, you know, Asheville, North Carolina, there's a lot of great secondary markets. I think the biggest problem that people have in these markets, one is they think they can increase rents more than they can. Because if you go to some of these markets and you think you can get $200 for putting in a new kitchen, you might find out you can only get $35 and 20 cents because there's a limit to what a lot of these people were willing to pay in these markets.   And if you go too high, they just want [inaudible 22:56], but there are still some markets that are small that people are really surprised at. I mean if you've been to Indiana and you know, there is Columbus, Indiana, well that sounds like a real nothing place, but Commons is located there, it's a very large company, and it's a pristine town with really high rents. Bloomington is also a great town in Indiana; it's got the college there. So there's a lot of college towns and there are capitals and there are places where there's a lot of manufacturing that's particularly in the Southeast that they didn't have manufacturing before. Some of these places have become very desirable for retirement and for our businesses like Charleston, South Carolina, nothing was going on there except history about 20 years ago. If you've been they are now, they are building homes like crazy. People are moving there to retire. There's a huge tourism business, I think ranked the number one wedding venue one year recently. And then they have they're making small planes there; just tremendous amount of activity going on.   James: What happened to this kind of tertiary market? I'm sure you had similar tertiary market during 2008 where you thought, okay, this is really good to go in and invest in. Looking at some of the cities that you're looking at it right now, what happened to that kind of market in 2008 how did they do compared to the major cities that are well known for--?   Rich: I own the property, and the answer is different. Every tertiary market was different, just like every major market. For example, if you look at the major markets or the secondary major markets take Tucson. Tucson was wiped out in the recession, now people say it's a good investment. Phoenix was wiped out, Vegas was wiped out, Reno was wiped out. Today Reno; people think Reno is part of California. It's hard to buy something under 150 a door in Reno now. So back then it was 50 a thousand a door was a great retirement exit. So I own property in Sierra Vista, Arizona, and there is an army base there. Now, I will never buy another property next to an army base. I don't care what the numbers look like because the politics of the army base are things that I cannot control.   And they decided that army base that they didn't need hardly anymore. So they cut the enrollment at the army base there by about half. And it was the town that depended upon the army base almost completely, not just the army people, but the people who were feeding and the vendors, and everybody else. And so the town really; rents went down about 30-40% in the town, but then there are other locations. I owned a property in Davenport, Iowa and it got hit, but it didn't get hit that bad. And agriculture, which was a real feeder for Iowa, stayed pretty good. And you know, they had the ethanol and that was pretty good. We never got below in general 90% occupancy in the properties that we own there, so it just really depends, you've got to do your research. Just how you can't make a blanket and say tertiary market, secondary market; core markets; it wasn't long ago that people considered Baltimore to be almost a core market.   Because of its proximity to DC on the Amtrak corroder from New York, the new Harbor that they had built there with the aquarium and today, a lot of people don't think of Baltimore as a core market and back then people didn't see DC as a core market. They thought it was crime, wedding blah, blah, blah, you know, stay away from DC. And now today, I mean, you're talking about very expensive real estate all over DC.   James: Awesome, awesome. That is a lot of insights there. So Rich, which market have you been focusing on, I mean, you bought in a lot of markets before these and you probably own some of it over there, but what has your strategy has been at this hot--?   Rich: Right now my strategy is really to buy more in DFW.   James: Okay.   Rich: Our office is here. This is probably the best multifamily market in the country. The cranes are all over the skyline. The jobs are coming in like crazy every day or week there is another multinational company that's relocating from California generally to Dallas Fort worth. There's a lot of vibrancy here. Rents keep tricking up. I like DFW. I've liked Houston a lot in the past; Houston is very squatty though, and there's a lot, I can't just tell you that Houston's going to do well because every part of Houston is so different and there's no zoning, so it doesn't have a character. Neighborhoods don't have as much character that they do here. But Houston is great Austin is great, it's just the real question, isn't what do I like, the real question is, is there an upside? Where is the upside in multifamily today?   And the answer is that there isn't the kind of upside today that there was until a couple of years ago because we were still basically catching up from the recession; a lack of housing, deferred maintenance and household formation. During the people said to me, "aren't there going to be more renters?" Because people were foreclosed, I don't know if you remember that. They will say, "You're in a great business". All these foreclosures, they have to rent now. No, they didn't have to rent. They moved in with their families, they hold up; whatever they had to do. People are much more flexible and adaptable than statisticians and university professors. So people didn't create households, kids stayed in the basement, and so here we are 2012 wondering where are all the renters? Well, it turns out that they were hiding out.   So when the economy got good and they got jobs, they all came out and that created a lot of household formation, a lot more renters. And that created a boom in multifamily. So, either more and more people who need rental housing, absolutely, and particularly in areas like Dallas, Fort Worth where they're coming in for the jobs, they need housing; Austin, they need housing. That puts pressure on rents and they usually start building a lot more too. The areas that have a declining population, I wouldn't invest.   So if a deal's in a city that has a declining population, I automatically say no, I'm not interested in, even if I could fix it up and make some money, to me that's; I'm going against the tide. I'm just one guy, I can't make an ocean. I have to get in my little boat, and I have to have the-- I want the ocean to work for me and not against me. I don't want to fight that. Same or crime; if I'm in an area that has just tremendous amount of crime, it's still, crime is [inaudible31:42], but if it has a lot of crime, I don't want to own it because I can't do all the things necessary to stop crime in my neighbor. I'm not a police department. I'm just one person owning one complex or two in a neighborhood and I've got to have an ability to deliver safe housing to the people who rent from us.   James: Got it, got it. Just want to add one thing to the listeners and audience. If you want to find a city where there's declining on appreciating one free resource, which is very quick to check, it is called bestplaces.net. Bestplaces.Net, and you can go and enter the city information and you can go to a household. I believe it's a real estate statistics and it shows you whether there's a declining population or increasing population. I mean in general, I think Texas is increasing in general. Everybody's moving to Texas and I believe Florida as well, so--   Rich: I mean, if you're looking in Texas and you say, well, why don't I buy in Amarillo or Abilene or these kinds of places, I don't have anything to say. I don't know those markets, but those are not vibrant places generally.   James: It makes sense; vibrant. Okay, got it. But I think the major cities in Texas are pretty vibrant.   Rich: The major cities are really San Antonio, Austin, Houston, and Dallas. Then you have cities like El Paso, Lubbock, Tyler, you know, places like that that are in the second tier. Corpus Christi is another one that is in between the second and third-tier cities. Aon, actually in Corpus Christi real estate, and that's on a lot of people's radar because they are putting along money to the ports and the petroleum industry, but it's not as vibrant as it San Antonio or Austin.   James: Got it. Got it, got it, very interesting. So but Dallas, I mean, I know you're focusing on Dallas, but Dallas prices have appreciated from what 50,000 a door. I mean, I think all over Texas it's like this, right? For the past five years, $50,000 a door to almost a hundred thousand a dollar for a C-class property. So how are you planning to buy deals? I mean since, don't you think at some point the price per door is just going to be limited by the rent wage growth of the--?   Rich: Well, I think that it's a mistake to really focus on price per door. I think it's a better thing to focus on cap rates.   James: Cap rates, okay.   Rich: And if you could buy something over a five cap rate and put loan on it for under 4%, then you have positive arbitrage, and you're going to make money. So a lot of properties are expensive, but property in San Francisco is 350,000 a door. Now, I was a mortgage broker there when they were going for 100,000 a door, and I thought people were crazy. Who would ever pay that? So, we can't let a number and you shouldn't let a number per door impact your buying decision. What your buying decision should be based on is what return on your investment you're going to get. Now, it's true that you want to make sure there's an exit there, meaning that there's somebody else who would buy a property at more per door if that's a problem.   Now there are some markets where maybe that is an issue still, but they're generally very depressed; places like Detroit or things like that or Cleveland. But even those places are not any more per door oriented. So I've seen deals recently that are 120,130 a door. They were bought for 80 a door just three, four years ago. And before that, they had one for 55 a door. And I don't really care what people bought them for in the past, I just care what can I do? What's my return going to be? If I could hit my numbers and I don't really care. Now the question is, can I hit my numbers? Am I chasing a dream that's-- is the ship already sailed? Is there really any more room in this property to enhance value? And the answer has to be yes. And a lot of the areas in Dallas are improving. The income levels are going up in some of these places. The number of jobs in the area is going up, so they're not static environments. Today, a suburb of Dallas is not the same place as it was 20 years ago because now there are four times as many people living in the area, shopping in the area, working in the area, and those people are all competing for housing.   James: Wow, that's interesting. Okay, so how do you underwrite your deals? I mean I'm sure you're looking for upside, right? That's what you talk about in any deals and whether you can make a return on your investment, right?   Rich: I'll tell you my tricks of the trade, which is nothing unusual; first of all, we go into the numbers and make sure we understand the expenses. And we also increase the property taxes based on what we think the assessor will increase the taxes too. Yeah, that's a really big thing; people don't realize they come from out of the outside Texas that your property is assessed every year a new bag. So you can't look at a tax that your seller's paying and think that you're going to have the same tax. So we get the real expenses, and then if we're going to do a value add, we want to find a property that's very similar, same vintage and everything that's already done the value add and see what rent they're achieving, what they've done, and we're not going to go past that.   In other words, I'm not going to be a pioneer and decide that I need golden faucets or Berber carpets or whatever it is; I'm going to make a nice value-add, the same as everybody else. Maybe you are a little better, but I'm not going to a guest that I can get more rent, so that's where I get my revenue, just estimating how many of this was going to renovate? What rents can we get today, today in the marketplace, not tomorrow? And then use those numbers, and if those numbers show that I can get a great return based on what it costs and what the money we put into the property, then it's a go. If the numbers, there's nothing here, I can't get a return from doing this or the rents are tapped out, that kind of thing. Then I pass. And we use a model. I think we use the CRM model. We bought the model because it got too complicated for Excel for us. And so we use a model that we bought to program the IRR and all that stuff.   James: What about the rent growth assumption? How do you usually predict that?   Rich: We don't put more than two or 3% a year in there? We're not looking to create false expectations. 5% rent growth sounds nice, but that doesn't happen all the time. In fact studies in Houston show that there's been virtually no rent growth in two or three years in Houston. And every year they say that they had four or 5% rent growth. And I asked the realtors, is the four or 5% rent growth that these reports say? And nobody seems to know where the data's coming from.   James: Yeah, absolutely. But do you think we can get that 3% rank growth moving forward from now on the next five years? I mean, do you think it's real estate?   Rich: I think we can get the two to 3% rent growth just by doing nothing; if you're in a market that is strong.   James: So it depends on the market as well.   Rich: It all depends on one thing and one thing only, which is wage growth in the market you own.   James: Correct.   Rich: I own a lot of property in San Antonio and there was virtually no wage growth in San Antonio. And I have property that I've owned there now six years, seven years. And the last two or three years there's been virtually no increase in wage growth or rents in none of these markets. The cap rates keep going down, so people keep paying more for these properties. They expect wage growth and rent growth, so everyone has a different expectation.   James: Got it, got it. So what about the, I mean, you mentioned that I mean, you did this for 20 years, own like 8,000 units, you could have multiplied 10 X your holdings by going with private equity money which some people have done. And some people have gone to private equity and came back to be a [inaudible41:31]. Some people are trying to get into working with private equity because it's easier to rent and raising money from retail investors which is like family and friends. I know you mentioned some perspective, but can you give a full perspective on why you didn't choose that route at all?   Rich: Well, we do have family and friends, and private equity, and some family offices in our deals. I have three deals that I have is tuition in, and I just prefer the flexibility that-- I prefer working with individuals and with people I know because multifamily is not a straight line. You buy something a lot of times prizes after you close, you don't know, some problems that you run into. Sometimes you have to replace staff. A lot of times you have a staffing issue. It could take a year or two longer to execute your business plan. And still, it's very good. When you execute your business plan, you make a lot of money, but instead of taking one or two years, it could take five years or four years. And when you have institutional money, they're not very patient and they are very willing after; if you don't make your numbers for one to two years, they're very willing to take the management away or threaten you with your cramming, taking away your investment. Actually, you're cramming down; they call it crammed down; to make the return.   It can be pretty nasty, so that's one of the reasons. It's getting easier to raise money from family offices privately. There are a number of crowd-sourcing platforms; we've done some crowd-sourcing rising for a couple million dollars as infill, you know, to fill in a partnership after a family or friends invest, and we still have a couple million left. Well, we've been successful at raising that money there. We've also used preferred equity, which is kind of a hybrid deal. It's not secondary financing, like mezzanine financing, but it's similar. What they do is there is a pay, they want a pay rate of around four to 6%, and then they want a complete return of let's say nine to 11% or 12%. They'll take the difference when you sell the property well when you refinance. So, it gives you more leverage, you might say, but it's not partnership money, so it reduces the money that you have to raise as a partnership.   James: Got it, got it. And what would you give advice to people who are saying that you know, when the market turns, I mean, they will not be any more private investors anymore, I mean, you have to go back to private equity? Do you think that's the true case?   Rich: You mean institutional equity? You have to go back to-- that's all private equity. I think the reality is when the market turns, everyone goes back into their little clamshell, so what you call it and money is money. And if people don't feel that they can make a return, then they won't invest. Now, what happens is that if the market turns and people are not making return, some deals will go south and will go sour, and then you'll start a new cycle of this trust real estate. And then there'll be opportunity funds or vulture capital guys who are trying to invest in those deals and they'll be looking to invest. So every part of the cycle has a different kind of investor. Right now the profile of the average investor is looking to clip coupons. Most people know that the glory days of making two, 300% on their money is over and they're very happy with what they'd done and now they really don't want to lose their principal. There have gotten more conservative as wealthier people do, and then they say, well, can I get a seven or an 8% or 6% coupon clip every month when you send me a check? And there are a lot more of those people today. There is virtually none of those people in 2008, nine, 10, 11, 12. Yeah, but today, most people have the profile as investors of wanting to have lower risk and are willing to take less reward.   James: So what you're saying is in 2008, everybody disappeared; nobody invests retail, right? And then after that, there is some vulture capital and then now people are looking more into stabilized assets with lower risk.   Rich: The people who appeared in 2008 were the people who worked at Goldman Sachs or Blackstone or these other Carlisle group and these other large accumulators of capital. And what they saw is a tremendous amount of blood on the street as they say. They saw just a lot of financial suffering and they were looking at enabling because of their massive amounts of capital to scoop up troubled assets for pennies on the dollar. So a lot of the mortgages that went bad were sold off for 20, 30, 50% of their mortgage value to these conglomerate; these large companies. And then they went through the process of foreclosing on individual assets. Some of them actually created management companies themselves, and they got the properties back. A bunch of then they put them back on the market and made a lot of money. So there was a lot of business, a lot of wealth created in that time frame, but it wasn't created by people like you and I, it was created in Goldman Sachs, and in Blackstone, and these kinds of places.   James: Got it, got it. So where do you think we are heading in the next two or three years or five years? Are we going to have a slowdown bump or it's going to be a crash into like 2008 or there is just going to be a coupon rolling in multifamily?   Rich: I don't think that we're going to have a crash. I see it more that it's just a steady market and I just think it's going to go up and down a little bit here and there, and I don't see much change from where we are for a couple of more years. I can't see out too far into the future. Sometimes politics and things like that intercede, and we don't know if someone politically comes in and starts changing the tax code like they did in 1986 or something like that. But the way I see it is that America is fundamentally becoming a retro society. People are living a lot longer, and the longer people live the less they want to own a house. A lot of people will own houses and raise families there, but they will exit houses more and more frequently to live in places like central cities or small main street America so they can be near services and doctors and entertainment and [inaudible 49:41].   And I don't think that we're going to go back to the white picket fence for everybody's environment. Now, that doesn't mean people won't buy houses, but when people are not raising children, they will prefer generally to live in smaller environments, more like Europeans do, and I think that pertains, well, for multifamily. There are so many good trends that are feeding into the multifamily trough that I can't imagine right now that in general, multifamily would have a crash.   James: Got it, got it. And so we're coming almost to the end of the show. Can you give us one advice to people who are thinking of becoming like you owning thousands of units and they're just getting started?   Rich: Sure. So this is my main piece of advice is that if you want to be in this realm, then you must make it a full-time job. This is not an investment, multifamily is not a stock that you-- it's not putting money on Microsoft and watching it go up and down. It's an active business, and if we're going to try to be somebody who owns several apartment complexes, then you just really can't buy the complexes and hand away the keys to the management company and expect great results. You have to be very actively involved, visit your properties, know the rents in the market, walk vacant apartments, and make sure you hire good people. It really is a business, and if you're not prepared because of your lifestyle, your other job or something like that to devote most of your time to this business, then my recommendation is become a limited partner in a deal or two, try to make money that way. But don't think that you could become a principal and own five or 10,000 apartments that way, no, it's not going to happen.   James: Got it. I mean, this is one of the requests from our listeners. Is there anyone advice that you want to give to a passive investor who is investing in this deal? What they should look for [inaudible 52:14]?   Rich: Well, the big issue for passive investors is that they should really understand what they're investing in, like any other investment, and not take the offering that they get from the company or the operator at its face value because it could be too optimistic. You want to make sure you agree with the assumptions. So you would probably at the very least get on the computer and look at how much are units really renting for in that area. If they're going to renovate, well, what does a renovated unit look for? Is this an achievable rent that they're projecting and are their expenses realistic? Are they in line with what expenses really shouldn't be? So do a little homework; that's my main thing, and don't just trust that, just because somebody sent you something that said that there's a 30% return, that that's a real thing.   James: Yeah, I have many, many times some passive investors just look at the final return numbers and decide whether they want to invest or not, but they forgot that we are making thousands of assumptions in that spreadsheet. So you rather check the assumptions rather than just the final numbers.   Rich: Absolutely.   James: Right, so Rich we're really happy to have you here. How can the listeners and audience reach out to you?   Rich: Well, they could, we have a website, alcapgroup.com and they can send me an email through there. If they want to know about our upcoming deals, we'd be happy to put them on their list and work with them, talk to them, and see if we can do some business together.   James: Awesome, awesome. Thank you very much Rich for coming onto the show.   Rich: Thanks James, been a pleasure.   James: Pleasure to have you. Thank you.

James: Hey, audience and listeners, this is James Kandasamy from Achieve Wealth True Value-add Real Estate Investing. I'm here today with Mark Kenny, who's the founder and I'm not sure, the president or what's the title?   Mark: Yeah, well my wife and I together so we might have different opinions but...   James: Okay. Both of you run the King multifamily. But before that, before we go into the hot topics that we're going to discuss with Mark, make sure that you guys look at last week's episode where we had KK Singh being interviewed. KK has moved from a business owner. He used to own gas stations and laundry mat and now he's become a multifamily investor, which is a very, very interesting concept. Because I think any business owner, anybody who wants to know how that business is run and why he's using multifamily, why did he go into multifamily? And he didn't even pay tax last year just because of the multifamily investment. So you guys want to check out the last episode.  But let's come back to this episode. Hey Mark, welcome to the show.   Mark: Thanks for having James. Great to see you again.   James: Awesome. Also, I'm happy to have you on the show. So, Mark, he's a GP, almost like 5,200 units, out of that 2000 units where he's basically the primary active asset manager and he's also GP on another 3,200 on top of the 2000 units. And he goes across multiple markets, which is very interesting for me. I want to go a bit deep dive into that. You know, he's in Texas, he's in Alabama, he's in Tennessee, he's in Florida and I believe that's what I covered. Right. Mark?   Mark:  Georgia, as well.   James: Georgia. Okay, got it. Got it. Atlanta. Right. So yeah. So Mark, did I miss out on something about yourself? Do you want to tell the audience about yourself?   Mark: No, I mean, yeah, real quick. So I grew up in Michigan. I'm in Dallas now, so not too far away from you, James. But I was a CPA for a while, did IT consulting, which you and I traded some stories about that before about the IT side and I started buying small multi-family when I was 22, I was a senior in college. About two to four units and then my brother and I...I didn't know what syndication was. Syndication is the fancy word for raising money from other people for the most part and pooling it together to buy properties. I didn't know what that was. So I started buying two to four units. And then my IT business was doing pretty well. That was, I really had no time. I always, I'd say 80, 85 hours a week and start really doing the math.   I was probably 90 to a hundred hours a week and a lot of weeks. And you know, frankly didn't have any time for my wife, caused some issues and so she basically said, you need to do something different than what you're doing. And I said, well, yeah, I will. But you know you have to deal with me and we both love real estate. So we started buying larger properties through syndication. I invested passively first in a syndication with a friend of mine, said it makes a lot of sense and you know, why don't I look at doing it myself and that's what we started doing back in 2013.   James: Got it. Got it. It's very interesting about your story when you're working on a W2 job, especially in the IT tech industry. I mean, it's a lot of work, we put in long hours, right? It's a constantly changing sector, right? The industry is consistently changing. We are always driven by schedule and I was just talking to, Shanti, who's my wife and all and how our life has changed when we used to be in W2 every day, like Fridays when we can really open up our time, open up because from Monday to Friday we are like so busy working like [03:55unclear]  focused and where I used to work, we used to work remote as well. So after five, six o'clock we used to work like, you know, we have lunch, we have dinner, and we continued working with the offsite team. So life never ends. And now with real estate, it's so much of a difference. Now you own your own time and you're out on what to do and we can, you know, my traveling time in Austin is like 11 to 2. That's it because it's a bit of traffic.   Mark: Yeah. It's interesting, right? I mean, I actually started my own IT business 2008 so I didn't even have a W2 job since 2008. But I got in a situation where, you know, any project that came up and any unrealistic timeframe that was out there, I would do it. I would make the dates. So that's what allowed me to get more and more projects. I had a number of Fortune 100 companies as customers, but so even though I have my own business back then, I still didn't have the luxury of time. You know, I was always going somewhere, always doing projects and yeah, I'd be up, I sleep three hours a night, like consistently, that's all I would sleep.   James: I mean, you don't have to go by numbers, but did you make like almost a similar amount of money compared to what you made in real estate? I mean, it's a time versus money investment, right?   Mark: It's a great question because when I first started looking at syndication, I said I'm not going to be able to replace my IT income. And I truly, it was a mindset. It really was. I really did not think I'd replaced my IT income. It was pretty, pretty high at the time. And after three projects that I did in multifamily I stopped doing IT. I had not replaced my IT income at that point in time, but it was enough to live and live, you know, decent. And then we've done, you know, we've done 37 projects, whatever now. But I didn't think I was gonna replace IT. But yeah, we've far surpassed it. I mean a lot frankly, and the time we have, and I don't have to ask anyone to go anywhere or you know, things like that, you can turn it on and off if you want to. Where in IT, if you're not working, not making any money, you don't have that passive income.   James: So you have a very interesting life cycle because you were working in IT, a W2  job and then you went to do your own business but still in IT. And now you are completely a full-time real estate investor. So, so in terms of time wise, I mean from what we're discussing, I mean, real estate investment gives you the best return of time, right? I mean, you get really good pay and at the same time, your time is like, really low.   Mark: There is no comparison. You know, you mentioned about talking to your wife a higher life is different. I mean, my life has, you know, 180 degrees different for the better than when it was before. I was on the verge of, you know, I'm not sure, you know, Tammy, my wife wasn't only happy because of my work schedule and now we got to work full time together. Just like you get to work with your wife, which is great. And the time, you know, if I want to go somewhere and you can get to the point with multifamily or any real estate investment, you get enough of it. If you choose to go sit on the beach, which I don't want to do, frankly I don't but if you choose to go and do that, you get in a position to do that for sure. With IT, I wouldn't be able to, I had to keep working projects in order to make money.   James: Yeah. But can we go back to your mindset when you are working, not as a business owner, when you are working in IT? Because I sometimes analyze my own mindset when I was working, because when I was working in IT, I did look at Robert Kiyosaki's book and I could not read like a few pages because it just doesn't make sense to me, we are so busy working. What is this guy talking about business. And after a few pages I put it down and I forgot about it until recently I started reading it and I was just surprised that that book changed a lot of people, real estate investors' life. But I don't know, I think when you are working you're really, really working, you really don't care about the business side of it and I mean, I think it's up to your circle, right? Who are you mixing with?   Mark: That's a great point. I know when I worked originally at KPMG Consulting and I worked for SAP you know, did some Salesforce consulting and things like that. And you're looking at other people that are older than you at the time I started out, it was, you know, early twenties when I started out. And look at other people that are partners, for example, and you have this image, you're like, that's my lifestyle. I'm going to be traveling all the time and I'm going to be working seven days a week, which is what I did. And you know, and then, you know, some point in time, not everyone gets to the point where I was, where my point was. And my wife was pretty much ready to leave me if I didn't do anything. And that was a big eye-opener for me. But you're right, you get trapped in that circle of influence, right? And everyone's doing the same thing. And at that time, I aspire to be a partner and I would've made partner, I mean, made a manager in two years and things like that. But I would have been miserable, frankly. I would have been.   James:  So compared to the job security, I mean, I don't know whether there's job security in any job or not because there is no job security, right? I mean, when I was a manager, I used to hire and fire people very quickly just because of non-performance, right? So there is no job security, right? I mean, I use to work on a semiconductor industry for like almost 20 years and we thought we were going to retire there but we realize you know, during different economic cycles, the company doesn't really, you know, honor your loyalty.  I mean, there's no such thing. They have to make a business decision, they'll let you go if they need to let you go. There's no such thing as a company is going to be keeping you forever.    Mark: Right, right. That's true.    James: Right. So yeah, coming back to real estate venture. So 2008 was when you got into IT and when did you start your real estate venture?   Mark: Syndication; 2013 is when I first started investing passively and invested in a few deals. And about that time I started looking at syndication, but it took me almost a year to get my first deal. And it was partly, I was looking at other things too; self-storage and building custom development, you know, homes and things like that, franchises. I looked at everything. I was looking for something to get me out of the bad situation I was in. But it still took us about a year to get our first deal.   James: So did you stop work and start into real estate? Was it a step function or was it like a...   Mark: It is gradual; for me, it took me three deals. So I'm thinking, let me see, 2014 is when I think I got my first deal, I don't remember exactly. But by '16 I had stopped doing IT.   James: Got it. Was that a painful transition from a business owner to a real estate investor?   Mark: No, it really wasn't for me anyway. You know, I've always had a big fear of money and you know, I wish I did, but I always did cause growing up and things like that. But we had enough money set aside to where, you know, I looked at it, if I had to go back and do IT, I had so many connections at a time, I could get a job pretty much, you know, right away. I didn't want to, but I was like, okay, well, I have a transition I'm making here, but if I fail, that was my mind, if I failed at doing this and after taking a year to find my first deal, I was pretty skeptical. And then we started getting the traction. So I was like, Hey if I need to go back, I can do that. I don't want to do it. But if I do, I can support the family. The transition wasn't hard for me. We were buying at that time only in Dallas, so I really wasn't having to travel outside Dallas. Yeah. So it was a pretty easy transition.   James:  Got it, got it. So as I was talking about that, you had like three different lifecycles, right? You're a W2 employee, you're a business owner and then you become a real estate investor and you are a CPA. So I'm going to ask you, similar to CPA question, how was your tax advantages comparing these three life cycles?   Mark:  Okay. So you know, even though I'm a CPA, I haven't practiced for 20...   James: But at a high level, was there any tax benefit between...   Mark:  Oh yeah. Without a doubt. When I had the IT business, you know, I was actually paying taxes quarterly. I was getting hit hard. I mean, I was making decent money. Now, in the last two years, we haven't paid any federal income tax like zero. And in fact, it's negative. So people were like, Oh, you didn't make any money. No, we make money. But from the tax benefit we received through depreciation and cost segregation and bonus appreciation, we pay zero federal income tax. So, I mean, think about people listening to this, if you didn't have to pay taxes, how much more money you'd have in your pocket and what you could do with that?   James: Absolutely.  Yeah. Yeah. I have a chart that shows how a $2 double for the next 20 years. And you know, at a 25% rate, that $2 becomes 72,000 after 20 years because you're taxed 25% every time you double, right? But if you don't have tax, that $2 becomes almost like $11 million, you know.   Mark: Oh, boy, Oh my goodness.    James: So the tax does impact your compounding savings. And if you don't look at it, you may not know. I mean, when I was working, I never really looked at tax because as I say, we are busy working. We just look at net pay coming to the thing. I mean taxes, like it's not nice for me. But when I look at that kind of chart, you know, it does make a lot of difference in terms of, Hey, you know, it does impact your overall savings. You know, if you compounded for not [13:53unclear]  you see a big difference, millions of dollars of difference.   Mark: Oh yeah. And like you mentioned, when you have a W2 job, it just comes out, you notice it, you don't like it. But when you have your own business, my own IT business, you have to write check every quarter you really notice it. And then you're like, I made that much money this quarter and where did it all go? And now I have to write a check for, you know, X number of dollars. And you know, you're just scratching your head and you're frustrated and stressed out. But with real estate, it's literally zero.   James: So did you have employees under you when you have a business?    Mark: All 1099.  James: Okay. So if you have an employee, then you're to pay tax for them too, I guess. So that's double taxation   Mark: That's exactly right.   James: Okay. So W2, I mean, I don't know. I have a chart that shows W2 people are paying almost 70% of the tax in this country. So this country is supported by people who are in W2. They are the ones who's paying taxes. They're the ones building the roads, the bridges, and all the infrastructure. Right? The 30% is from the other people who are earning less than 30,000 or people who are earning more than 500,000 and above.   Mark: Yeah.    James: Right? I mean, people who are earning more than 20,000 to pay a lot of taxes. But in general, if you look at it, the big bulk of it is paid by our W2 employees.   Mark: Right. Makes sense.    James: Just because you can't run away.    Mark: You can't. There are no savings, no tax shelters.   James: Absolutely. I'd say real estate investors, all kinds of you know incentive in the tax code to not paying taxes. So coming back to your real estate venture in multifamily, and you skipped over buying single-family and you went direct to multifamily.   Mark: We did. I mean, multifamily, two to four units when I was 22. Yeah. So it was smaller for sure. It made more sense to me, frankly. I don't remember, I actually didn't look at any homes. I don't know why I'd go back and think about that. Why I didn't start looking at any single-family homes. To me, we looked at two to four units at a time.   James: Well, I mean if you look at cashflow, two to 14 definitely make a lot more sense in terms of cash flow. Right? Maybe that's what it is. And how many two to four units did you own before you come to multifamily?   Mark: We had like 17 units total.   James: Okay. 17 in two to four units, I guess. Smaller multifamily. And do you think that helped you when you scale up?   Mark: It did. Because I know you manage, right? You and your wife manage. When we did the smaller properties, we self-managed and we took care of things and evicted people. So it definitely helped from that perspective. I didn't like the process, it's not something I want to do now, but it also, even though it's drastically different how you evaluate four units and below and in five units and below is drastically different, people can argue all day long steps are almost identical, right? You identify your criteria, you go drive by a property, contract, blah, blah, everything's the same. So it helped for sure. Plus just kind of, you know, getting comfortable with buying your first deal is the hardest. So once you start, you know, I bought like whatever it was, you know, five deals, six deals, I don't remember the number, exactly.  It gets you more comfortable. So when you go buy a larger property, it's bigger numbers. So it is concerning whatever I had already done, you know, like six transactions before that time, even though they're small, it helped.   James: Got it. Got it. I mean, in a way, it helps because I mean, you know at least how to read the lease and you probably know how real estate section happens, right?   Mark: Your first time signing for your first deal, usually you're most likely going to be pretty freaked out, right? You've done six smaller deals. It's still, then when you start doing bigger deal, then it's the money. Right? The only thing that concerned me, you know, I have to say only it really was the, you know, brain capital to the deals. I had no concerns about how to underwrite the deals that I knew how to do that or how to find deals or talk to brokers or loan. It was always about, you know, the capital. That was my biggest concern.   James: Okay. Okay. But do you think that's still an issue in this market cycle?   Mark: Yeah. I'm always concerned about capital. You know, we have like eight deals under contract right now. You know, so we've never not closed a deal, but you know, that's the one thing that's still stressing me out sometimes, frankly.   James: Yeah. Because you need to figure out whether you have big enough investor base too in all those eight deals.    Mark: That's right.    Mark: Okay. Got it. So coming back to this, no multiple markets that you have, I mean, do you want to explain on how did you get into this so many markets? I mean, I think some of it is you've partnered with some of your students, right?   Mark: Well, originally I was just buying pretty much with one other person off in Dallas. Dallas, and at least, in my opinion, was definitely getting more expensive and it's even more expensive now. I have a twin brother that moved to Atlanta so I used to visit him and Atlanta has a lot of similarities to Dallas. Dallas is yet, and it may never be, but it definitely has a lot of similarities. So I started traveling there. I looked at properties for about a year and a half before we got our first deal. And I just really like the market. That kind of was if my brother wasn't there, I don't know if I would be in Atlanta, frankly. I don't know if I would have thought about going there. When I'm going there, I see a lot of activity, new buildings, new development cranes, things like that. So it was an attractive market.    And then, so that's Texas and you know, kind of the Atlanta area. And then we started looking in the Southeast. This is a general statement. Some of the brokers cross different estates sometimes too. They might, if they have a license, they can actually sell in multiple States and they might say, Hey, now, we're in Tennessee, we have a project here, we have a project up in Arkansas now, which we don't own anything there yet. So these brokers started giving us deals and I started checking out different markets. And really, the way I got into the other markets as far as initially was I would have brokers in Dallas typically reached out to other brokers in other markets and make an introduction for me. And that kind of gives you instant credibility and they're going to typically give you the best of the best of brokers to work with in another market. And that's how we got involved in other markets.   James: Got it. So how did you choose this market? I mean, except for Atlanta where you said your brother was there, you initially went there because of Atlanta, but now you are like in five different markets. Tennessee, Alabama, Florida. I mean, now, how did you choose these markets and why these markets?   Mark:  Yeah. A friend of mine who I've done a lot of deals with, he had bought a smaller deal in Memphis and I never would have considered Memphis. And some people don't like Memphis. We own a lot there. We've done really well there. But Memphis also has, you know, even though [21:05 unclear] job growth population growth, things like that, it's okay, but not like Dallas, of course. But the rent growth has been going up. They're putting, you know, several billion dollars in investments of downtown. But that particular city also has something called a pilot program, which we've done multiple times. Where you can go in, you buy a multifamily property, you have to put a certain amount of capital into it. It's a lot. And then you'll get your property taxes cut in half and then they're frozen for 20 years. So I mean, as you know, property taxes is typically one of the largest, right?  [21:44unclear]  I can freeze them for 20 years. Cash flow is going to typically be pretty nice on it.    James: Hmm. So you're basically taking advantage of that particular program. What about the other States that..."   Mark: Yeah, Florida, I always looked, I like Florida just because of probably the weather initially and when we were in Atlanta we started looking in Florida as well. And Florida has, I mean, some areas like Miami that as you probably know are extremely expensive, just not going to buy there. But I also have a cousin, multiple cousins actually live in Florida and so I heard different things from talking to them. And then some of the brokers we were talking to like in Georgia and stuff like that, had some properties in Florida and a property came up and the first time we're looking at properties there. I liked the properties in Jacksonville and we have a few properties there now. And it was one of those markets, again, similar to Atlanta, job growth, population growth, rent growth. It doesn't have to be off the charts, frankly.    Some of the markets where it's so off the charts, it's just too expensive to buy in, the yields. You can't get the returns. And then with Alabama, it was a guy that had a deal and was looking to partner and I partnered with him on a few deals. He had deals there in Alabama. And then we have another one right now, a guy in our coaching group that has a deal in Alabama as well. He's closer over by there as far as that's where he'd been looking. So usually it's through some sort of relationship. Somebody either already lives there or someone is looking there and then it kind of gives me an opportunity to check the markets out.   James: Got it, got it. So basically if you have boots on the ground as part of your program, that's an advantage definitely. Right?    Mark: It is for sure.   James: But don't you find, you know, establishing broker relationship in that kind of market it's harder because you, I mean they did not know you, right?   Mark: It is, there's no question. I mean, you know, I think that's why it took us so long to get into Atlanta. We had a really hard time breaking in there. And then once we got in there, you know, it was just one brokerage firm in Atlanta that we closed 11 deals in like 18 months with. We've definitely had their attention. With that first deal., I went to Florida. I mean, I was banging my head against the wall because we couldn't get any traction with brokers there. I would say, you know, you just keep sticking with it, but there's no question, you know, if you're an outsider, don't live there and you've never bought a deal there, you're at a disadvantage. You can use things like, Hey, your track record and you can have brokers that I know.    So when we got a deal in Florida, our first deal, it was with a brokerage firm that I had bought a deal in Dallas with and the broker in Dallas had called me about it. So he, you know, if you want to say put a good word in for us. So a lot of these brokers talk as, you know, it's very small world. Yeah. And I don't think we would've gotten that deal in Florida if I had not bought a deal without a broker, you know, brokerage firm if you want to stay in Dallas, I think we would have probably not been selected for that deal.   James: Got it. So let's go a bit more detail into that step by step. So let's say today somebody, you know, in your circle or one of your students come, Hey, you know, I found a deal in Florida, right? Somewhere in Florida, right? So what are the things that you would do to underwrite the deal?   Mark: Yeah. You know, the underwriting different aspects of it, forget the reports and stuff for a second. But you know, even financing terms can be drastically different across the country. Some of the pre-review cities and stuff like that start at 65%. So you want to first understand, don't assume we're getting 80% leverage in three or five years IO in every single location because it's different. So understanding first, the insurance can be drastically different. You know, if you're on a coastal area, it can be a lot higher than all the other areas and understand kind of the fundamentals there.    Taxes, you know, do they get reassessed? And that can be through, we have a tax consultant we use, but also you can typically just call the County and the County will tell you kinda how the taxes will be reassessed and when. You know, in Memphis, that's every four years so that's important to know. They only reassess every four years. And then we'll get like a report, whether it's Yardi or CoStar. Those are paid reports. We'll also use things like some free...we have a number of links on our analyzer that take you to things like crime and the school districts things like that. Those are all links we have on that. But overall, nothing beats having someone on the ground, you know. So if you can talk to other people there and talking to lenders, you know, lenders have the biggest investment in a deal than anybody as a general statement where they have more money involved. So try to understand from lenders to kind of how some of the properties are performing there, it is important. In the report, as I said, it's only as good as the report. It is good data. A lot of it's based on, you know, actual transactions that have happened, but I'm trying to get someone like a broker or property management company. So if we have a property management company you know, David Shore is multi South in Memphis and he's in seven other, he's actually in seven other States.   Once we built that relationship, then we start asking him questions. He'll tell us, don't even look at that deal, it's not a good deal. This deal maybe you can look at, you know, 95% of deals he tells us not to look at there. So having some boots on the ground can't be replaced. It might take you a while to do that. It's typically going to be like a management company or maybe, you know, a broker, but you know, brokers in to sell, you know, they wouldn't, don't get paid unless they sell a property. So kind of all the different aspects. Reports talking to people, visiting the area, trying to understand what happened before in the past. Those areas are all good ways to kind of get more Intel on the property.   James: So you basically look at location, crimes, making sure how are you underwriting your tax records.    Mark: The tax is huge.   James:  Every state is different.   Mark: Yeah. Every state, county; city even sometimes. So we have like I say a tax consultant, but we have found really if you call the County and tell them the property what you're doing, they'll tell you how they reassess and they'll give you a good number. And we've only had like a couple of occasions where it hasn't really given us the information we want. Generally speaking, we always get the information we need from the County.   James: Got it. Got it. So who have told you the most knows? I mean like who say don't touch that deal most of the time? Is it a property management company or is it the tax consultant or insurance company?   Mark: Property management company. Without a doubt. It may be they don't want to manage it.   James: Well how do you know they just don't like that property. Maybe it's just because...   Mark: I know you self-manage. We have found in almost every submarket we ran with a management company, even if they don't manage a property today, they're like, we manage that property five years ago and you know like in that, you might have some Intel. We got a property here where a number of properties in Dallas I've looked at and our management company managed it. So I called the guy and said, Hey, what's up with that? And he'll say, you know, it had like $200,000 of plumbing issues or whatever it might be. But usually someone that's large in a submarket, they know the property or they at least know you know the area well enough to give you some really good Intel and it seems to amazed me where people are like, well, THE manageMENT company says we can push rents like $75, I think we can do it like by 125. it's like there's no basis for that. Like why do you think you can do that?    You can push your management company and ask them questions and things like that. You know, if I go try and do a comp for a property myself, I don't fit the demographics, I'm probably not going to get a good comp. Have a management company do it for you. They'll actually send people out there that fit the demographics. They'll actually get you comps and pictures and things like that. Go into some of these reports...I get called all the time from, I won't name them, but these providers of data call me all the time. I don't talk to them. And half time the information you get, you don't even know if it's right. It's coming through there. So, yeah.   James: So how do you know the management company that is calling is not the current management company?   Mark: Yeah, it's happened before. You know, you can ask the broker who managed it today. They'll tell you because it could be for sale and the property management company doesn't even know it. And if you call them and tell them, Hey, I'm looking at this property for sale, then they're going to be pretty upset.   James: Yeah. I've looked at out-of-state as well at one point. And I realized management company gives me the best quick data. They can tell me a lot of things about a state compared to anybody else, right. Because they know the pain of managing it. So yeah, I would say they are one of the best resources to call if you're looking at out of state investment. So after that, what do you do? I mean, you already looked at taxes, you already looked at the property, so it's all good. So what do you do next?   Mark: So then we'll underwrite it. Usually using, you know, we have a quick analyzer. We have a much more detailed analyzer. In the detailed analyzer, we're going to go through every expense category, like line by line, compare them to the, you know, T12. We'll try to get two independent property management budgets so we get that. And then our analyzer also has industry standards based on property, class, and size. We'll tell you what the standards are for every single category. Which is very helpful to see if something's out of whack. You know, I just had an example. Somebody not in a group, if someone's sent me something, it was two properties. It was over 300 doors together and they had payroll at $750 a door. I'm like, no, it's not going to happen. Or we're going to share the property manager on-site across the two properties and might not for 300 plus units, we're not going to, not very easily.  So I said, okay, so does the management company say they're okay with that? No. And if they did, what happened was that if you have to get rid of them and now you're going to bring in another management company, they're going to be at $1,200 a door. It just happened, another one today actually on something where they're getting charged two and a half percent on 80 doors. I said that's pretty low, two and a half percent. I'm not saying it's impossible, but you need to probably bump that up because just because one management company said they'll do it for that, if they're not your management company anymore, then you're going to be paying more.   James: Yeah. Yeah. You can't underwrite just because one person said it. I mean two and a half is really low compared to any industries. Whenever I see sponsors or syndicators showing me a deal, I mean, not many people should me their deals, but I do get to see some people still.  I mean, when they say they want to share management, that is an indication that you know that deal doesn't have that much upside. They have to do really, really creative weird stuff. They will share this, share that, we have to do. [33:15 unclear] covered parking. We have to do washer dryer and that's all that really small amount of upside. And that is not a good deal.    Mark: That's just the gravy. You're exactly right. I mean, you know it, right? You manage your properties and people are like, I'm going to share. I was like, you're not going to. I mean, if you think it was that easy, don't you think all the management companies would do it?    James: You're going to compromise a lot of things when you share management. And as I said, when you're going to that extent to really justify your upside in the deal, that means the deal is really not a good deal.   Mark: Well, James, I have people who'd be like, we're going to put in like wifi and charge this and they're trying to put that in an underwriting and I'm like, yeah. First of all, you might not be able to because of the cable contract. Right. You might not be allowed to, and second of all, let's just assume you're able to do that, is that needed in your analysis to make the deal work? I sure hope it doesn't. You know, it doesn't mean that.    James: Those who are learning this business, the biggest bulk of the deals that work is when you can bump up rent and you can reduce expenses if you can do these things is a big thing. So if you see any deals that you can, majority of your upside comes from here. You know, I don't look at adding more one or two washer and dryer, adding parking, adding wifi. That's what you said or sharing management. That's all right. Really the deal doesn't work at all. I think the sponsor's just trying to squeeze all kinds of juice and tell you that it's going to work, but in reality, it is really, really hard to make all that work. I mean that all that is just a bonus. If it works, it's good.   Mark: Yeah, that's exactly right. And your total expenses, you could go up because the property taxes, but you know some of your points of your own, you reduce the expenses. I mean there are huge savings in water lots of times for operators. You can go in there and do repair and maintenance. We see lots of times you do as well, I'm sure were people are putting capital items in repair maintenance and they're like $1,400 a door per year. I mean that's a really high, right? So they're just putting stuff up there. If you go in and get a loan you're able to put capital in there and maybe do roofings and a/c and things like that, you can most likely bring your repair maintenance down more to industry standard. So for looking for those things, but if you don't know what those standards are, you know, you don't have any gauge.   James: Sure, sure, sure. So we don't have to talk about your detail and analysis that you do, but on the sniff test that you have a quick analysis. So one of the few things that you would look at to, you know, kick out a project   Mark: Return wise, I'll look at, you know, we still shoot for like a 10% cash on cash return, which is getting harder   James:  10% with the IO on year one, I guess.   Mark: Yeah. Overall or if the product is a five-year project, 10% cash in cash, 15% plus IRR and 100%; 100% is getting harder on five years, frankly for a lot of properties, closer to six.  In some markets, it's more than that, but usually we try to stay in six and below to double the money. And then I'm looking at other things like, you know, what cap rate are they using? You know, on their exit, how they get the current cap rate, the broker. I mean, I had someone, no joke, in Florida called me and said- it wasn't Miami, by the way- they said, Oh, the broker told me the cap rate is 3 and a half. You know what I mean? So those types of things, right. So you can make any deal work. It's on a piece of paper,   James: Just change the exit cap rate.    Mark: Exactly right. I have an example, I do in our workshop where I'm like, you know this, and then you do the cap rate down to two, what does it do? And then, you know, other things are going to be more round, you know, total income growth over the first couple of years. What does it look like? You know, I'll see sometimes people think we're going to grow income 30%. I'm not saying it's impossible to do that, but I see a property as, you know, 92% occupied and you go up 30%, your total income in a year is pretty high so you need to have justification for that. So basically we look at a lot of different gauges, break-even occupancy, break-even reds and then the financing. You know, people don't understand financing well enough. Lots of times as far as what the hell they're going to do that.   James: It can make or break a deal. Right? So let's look at like the rent growth and the exit cap rate, right? So how do you differentiate these rent growth and exit cap rate on this like five different markets there?   Mark: Well the market cap rates, so we always start with the submarket cap rate, doesn't matter which property it is. And we have different ways to get that through reports and things like that. And then we put an escalator on it, an annual escalator, and it'll be different between ABC assets. And we have some ranges there. Some markets actually, you know, Dallas has gotten compressed so much on class C, you know, it was like eight and a half percent in '13. Now, it's like five cap for a lot of properties and you don't know if it's ever gonna go back. So we'll usually use you know, minimum 0.1 up and then up to a 0.2 for a year. So it could be, you know, full a hundred basis points on a five-year exit and a lot of it's depending on the property and location.    I mean some of them, some of the markets that the cap rates the banks compressed there but they haven't compressed as much as like Dallas. I mean they might've been..I'll just make an example, say Dallas eight and a half. Now it's five and the market there might have been seven and a half and now it's six. So it went down, you know, one and a half percent total. But we'll actually, we'll look at the property, the type of property that, you know, the age of it as a class and then the demographics and we'll add an escalator on an annual basis for it. So each year it escalates up.   James: But how do you decide that? So for example, I think in Texas a lot of people uses 3% rent growth, right? Even though some cities are different.   Mark: Well, no, for rent growth we usually use 2%. This is across the board, across all markets after year two. Your first two years as you know, you might have come in and you're increasing rents, rephase revenue in and things like that. After year two, the general statement is going to be 2%.    James: What about expenses?    Mark: Two.     James: Okay, so 2% income growth. 2% on year two onwards I guess. Which makes a lot of sense. I mean, you're not really counting for the first year for value add.   Mark: Right and it might be higher. I mean some people were like in Dallas, you know, seven and a half percent rent increase growth for a while. And people were like, I'm like, but that's like today, one point in time it's proved where, you know, Dallas rent increases have gone down considerably. It's still a great market, I like the market. I don't really buy here right now, but you can't count on today. Or someone will say, Hey, the economic vacancy is 6% and I'm like, yeah, but I mean, good for them. But you can't count on that.    James: You can't count on that. Yeah. Yeah. So yeah, I mean, yesterday there was a national multifamily trend report which shows I mean Dallas is below national average in terms of rent growth, right? So San Antonio and Austin, Austin has been always higher than national rent growth but San Antonio is higher than national rent growth. I never seen that San Antonio being higher than Dallas. I mean it's just cities change. You have to be really conservative in your underwriting.    Mark: I think people are like, enough is enough, right? When rents go up, you know, seven plus percent for a few years in a row, people are like, you know. And it doesn't mean it's a bad, bad market. I mean, there are 150,000 people a year here that moved to, [41:07unclear] you know, net. So there's great jobs and population growth. I've been arguing that for a while. It doesn't matter all those things happen. At some point in time, people will say enough is enough.    James: Yeah. People can't pay anymore.   Mark: In a 2% increase in their wage or whatever they get in 7% in rent, you know, four years in a row, it has a big impact on them.   James: Absolutely. Absolutely. But how do you like for example, in your experience, because you're working on multiple markets, right? I mean apart from Texas, which has seen a good rent growth, I mean, I think even Florida is seeing a good rent growth. I do not know what other markets house in Tennessee, Alabama and I think...   Mark: Georgia is good as a whole. I mean some markets and we bought in a place called Gainesville, Georgia, not Florida. The property has done phenomenal. But that's a secondary market for sure. It's about 45 minutes from Atlanta, but it's like, you know, a 7% rent growth right now. Same with Dalton, Northeast, you know, almost close to Chattanooga rent growths. Florida, like you said, is high; parts of Georgia is definitely high. Alabama and Tennessee, I would say are mediocre, frankly, they're just going to be average. Now, Memphis in general, the random amounts are lower, but the rent growth there is quite high right now from a percentage standpoint. But you know, the starting with rents, half of Dallas, wherever it is, right. So it's proportional, but the percent of rent growth in Memphis is actually quite high right now. The last I saw, it was in the top 10 in the country.   James: Oh really? Okay. Okay. And what about the exit cap rate? Right. So usually, I mean the usual underwriters, people use like one, to 0.2 more than what the market is. Do you use the same exit cap rates in the other markets?   Mark: We take the current and we'll add...so let's say the current was a six cap, we'll add 0.1 per year, 0.20 per year. And in some cases like to your point, and so like that's to the end of five years, you would've gone from a six to a seven. And in some markets, yeah, we'll be, you know, if we're going to be doing a 0.15 in a certain market and we're like, well, maybe this market isn't quite as attractive or in the past it hasn't performed quite as well, we might do the 0.20. At the end of the day, I mean, as you know, nobody knows what the cap rates going to do. We can all guess. And the important thing to consider is that you know, the cap rate has no impact on your cash flow per se. It's really more of a capital event like a refi or a sale, things like that. So if you can still cash flow and you know, get good returns, then you know, you wait to sell when it makes more sense to sell.   James: Correct. What about a loan wise? Have you guys been doing a longterm agency debt or you've been doing some short term loans as well?   Mark: We do about a third of the deals we do prior bridge, but not necessarily short term is still up to five years. So it's not short term really. And the rates are attractive and there's, you know, a lot of advantages too. Bridge and some disadvantages, but there are a lot of advantages. I like them, especially in the big value add deals from what you have to get them. And then we do Fannie, Freddie, and then a number of bridge frankly.   James: Got it. Got it, got it. So I mean, you work with a lot of you know, students who are trying to come up in this industry, right? So can you describe one characteristic of a student who made them really successful you know, sponsor on their own?   Mark: Okay.  Characteristic is, I mean, you know, if you want to say grit, not giving up, but as far as a whole, it's getting really good at something that really, you know, one skill set. You don't have to know everything about multifamily necessarily to get started. You have other people there to help you. But getting really good at something that's a value to somebody else. And it sounds like, okay, that's kind of obvious. Well, we've seen it work time and time again where someone, all they do is pretty much come in and just find deals. That's where the specialty is. They don't want to raise money or sign the loan or know things like that. But I think it's being patient, you know, when you have to wait a year, potentially. I waited a year to get my first deal. That's a long time, you know, to wait. And then you look back on it, it's like, that's not a long time to wait when you started buying more deals or you're like trying to do something new and you're spreading, you know, 12 months before you get a deal that can be frustrating. So just being patient.   James: Yeah. Especially when people are already committed, I'm going to do this.    Mark: Yeah, some people give something up to do it.   James: Yeah. I mean, I really just remember there's not much deals out there. So, you know, finding that one deal that makes sense takes time. Right. It's not easy, If it was easy, everybody would do it.   Mark: That's right. That's right. Okay.   James: So coming back to your personal side of it. I mean, is there any proud moment in your life that you think I would remember that moment? That one particular moment in your experience in your real estate venture?   Mark: Yeah.  That's a great question actually. I would say when I got that third deal and it closed because I had already decided if I close that deal, I was going to stop doing IT. So when I got that third deal and said, Hey...my son kept asking me cause I kept looking for deals when he's like, if you get that deal, can you stop doing IT? Cause he was seeing me work so much. And so when I got that that was huge for me, for my family.   James: Got it. That was a transition point of view, getting away from IT to real estate, I guess.    Mark: Right, right. And making the decision, like you said, to do it full time.     James: Yeah. It's a hard decision, especially if you're already used to a certain industry. And what has been, you know,  paying your bills, right.    Mark: Paying your bills, which is great. And you know, the other thing, unfortunately, when I was doing IT, that was kind of my self-worth. That's where I got my value. I wasn't really good at a lot of things, but for some reason, my mind just worked that way. And so I got my self-worth out of my job. So to give that up, you know, it is a big thing. And you don't know how successful you're going to be or not in your new adventure. So, but I mean, the best decision I ever made.   James: Yeah. I mean, you brought up a good point. Sometimes that whole industry, what you study for, define you 20, 30 years in your life and suddenly, you are changing your complete identity. I mean, it's a big thing, right? I mean, a lot of people do not want to do that. If they're known as engineer or a CPA or the IT guy, they don't want to know, what! Suddenly this guy's doing real estate.     Mark: Oh yeah. I mean, my CPA said, what are you doing? He did. Now he doesn't say it anymore. He did. He said, what are you doing? You're making a lot of money doing IT, why are you not doing it anymore? I mean, you know, he couldn't even comprehend it.   James: Yeah. And I have to mention this; when I was in IT, when I was an engineer, you know, I always think that people in IT, people who are engineers are really smart guys. So these are the smartest guys because that's what your circle is, right? Your circle of friends is there. You think this guy's smart solving problems. And I mean, I did my MBA, it was really eye-opening because I realized there are a lot smarter guys than me with a lot more money in the financial industry. So that was a big aha moment. And that's where I realized that you know, you have to go into business to make a lot more money. And there are a lot of other smarter guys in other smarter professions out there that make a lot more money. And so, I mean, before I forget what is the most valuable value add that you've seen in all your deals? What would you do in case your rehab budget got cut into half in a deal?   Mark: Oh, you mean from a CAPEX?    James: Capex wise, yes.   Mark: You know, one, people need to be...if the property looks like junk outside...I've been in properties that look good on the outside and they're not that great on the inside. But you need something outside to kind of attract you. And it could just be paint, you know, something so it's not dreary and dark, dark colors, you know, but using something a little bit more attractive color-wise for paint. Landscaping, simple stuff to do. It's basically thinking about what does a tenant see? When people say I'm going to do, you know, electrical work and you know, things like that. It's like the plumbing, stuff like that need to be done, but tenants don't see that. So first start with the outside and see what the tenants, you know, whether they go up to the office and it's kind of decked out.   Sometimes we'll spend a lot of money around the office to kind of put a lot of landscape in there and make it really nice, exterior wise. Interior, I mean, paint, it's pretty easy to do. Flooring is huge just from a maintenance standpoint. So if you can do it, but as you know, it's not that cheap to do floor and then we'll like resurface countertops. I wouldn't do cabinets and stuff like that if you don't have the budget for it. I wouldn't do appliances unless they need them. You're not going to get the bang for the buck for that. Again, people will see paint, they'll see flooring and they'll see like maybe surface countertops, paint the cabinets, things like that. But some people have really high aspirations. They want to do all these things, but at the end of the day, you're not living in the property so don't outdo the market. I won't be the first guy to prove something in a market, I let other people prove it first. But I would say for sure start with the outside. We start like with landscaping and paint, stuff like that. People can see that.   James: Got it, got it. Awesome. Mark. So we're at the end of the podcast. Do you want to tell our audience and listeners how to get hold of you?   Mark: Yes. An email address is Mark@thinkmultifamily.com and love the chat with anybody and I really, really appreciate you spending time with me today, James.   James: Sure, sure. Absolutely. Thanks for coming over. You had a lot of value. And I really like going across markets here because sometimes it's hard to find someone who has done deals in different markets, right. Because it's important. A lot of people want to do markets everywhere. I mean, there are deals everywhere so you just have to buy it right and you have to analyze it right. And, you know, just make sure the numbers work and the location works. Yeah. Awesome. Thank you, Mark.    Mark: All right, James. Appreciate your time.    James: Absolutely. Thank you. Bye.

James: Let's get started, 1 2 3. Hi listeners, welcome to Achieve Wealth Podcast. It's a podcast where we focus on how to achieve wealth through value add real estate investing. And today I have John Jacobus from, John, where are you from?  John: I'm from New York.  James: New York. Awesome. Awesome. Why not John, you talk to our listeners about, you know, about yourself and what you've been doing and we are going to be focusing a lot on a mobile home park investment and John is an expert in the operation of mobile home parks. And I thought of bringing him on board and learn that asset class through the level of details where we can learn and figure out, you know, why that would be a really good investment vehicle for everybody. So, John, why don't you go ahead and take a and tell our audience things that I would have missed out. John: Sure. Yeah. Thanks, James for having me on the show, it's really good to be here. As I said, I live in New York City but I invest in the southeast and the southwest. I got started in real estate investing in the early 2000s just doing single-family rentals and fix and flips, down in southern California. I'm originally from the San Francisco Bay area out on the west coast. And there was an equity opportunity down in southern California in the early part of this century. And with my dad, brother and I, we just got started. At the time, I was about 18, so I got started early and that really triggered an interest in investing and building wealth. And from there, just sort of followed my nose. So I got interested in stock market investing and just general assessing quality businesses. And then maybe four years ago, got interested in multifamily investing, being surrounded by skyscrapers and multifamily housing here in Manhattan. I poke my nose into that, got to know people, build the network and started my first multifamily opportunity as a limited partner in a project in Dallas, Texas. And since then, just sort of took incremental steps to become more active and raising capital. As you know, James, it's gotten pretty competitive in the apartment space, especially when you're out of state and don't have the ability to get on planes and meet brokers or property managers for tours. So seeing that it was a sort of impossible for me to compete with locals and the markets that I wanted to invest in, I stumbled across mobile home parks. And the more I learned about it, the more I poked my nose into it, the more I liked it. And I found that I could be competitive despite being located out of town. And for about the past year and a half now, I've been focusing full time on mobile home park investing. Now, I've acquired a portfolio of three parks and I'm looking to continue to scale where we find value. James: Awesome. So yeah, I mean mobile home parks, I mean, I do know some things about mobile home parks, but not to the level of details that you would know. Right. So can you explain to the listeners how does the whole, and at a high level, then we can go into a bit deeper into the details of mobile home parks. Why did you start with mobile home parks? Why not self- storage or office or retail warehouse and all that? John: Yeah, so I'm generally attracted to assets that are under the radar and have a kind of negative stigma with them. So I mentioned I am into investing in businesses on the stock market as well. And I tend to adopt a contrarian mindset where, you know, the more popular or something is in the media or among, you know, the masses, the less interested I become. And so, I think point number one that triggered me to look into mobile home parks was when I would attend these conferences of real estate investors or go to meetups or just hear about mobile home parks in the news, generally, there was no one really focusing on it. So amongst the thousands of people that were at a conference, there was maybe two or three people that were focused on mobile home parks.  And anytime you hear about mobile home parks in the news it seems to be negative. Nobody wants to brag about the fact that they're in the business full time because of the negative public stigma. To me, that's attractive because there are fewer competitors and especially when you dig into the details and see the fundamentals of the business, they're awfully attractive. So I think just generally the unpopular nature of the asset class was something that really appealed to me. And then, you know, the fact that it actually has appealing economics was even more of an attractive factor of the asset class. James: Okay. That's exactly why people can still find really good deals in mobile home parks where there's a lot of stigma tied to it, to mobile home parks and that could be just an opportunity. So I mean, I attended like a two days boot camp, on mobile home parks, like two, three years ago. And I thought it was a really good asset class to enter at the time because as you said, not many people, know mobile home parks, it's not out to the masses. There are not many gurus teaching mobile home park too even though they're teaching, they are not everywhere, right? They're not in the social media guys like what's happening now. And that's a huge stigma on mobile home parks. This is a bit cross kind of thing, right?  I mean that's what even the guy who was teaching that three-day boot camp was telling us, which can be a really good thing, right? I mean, I know the day we want to make sure that we have a good asset class where you know, it's very stable and able to predictably give you good cash and good returns at a high level. So let's talk about how do you make money out of buying a mobile home park? John: Yeah, so a number of ways. We focus on turnaround parks. So one of the areas, well, I said that mobile home park investing is unpopular relative to self- storage or apartments. There is some competition in the market so I still face very healthy competition in some of tier one, tier two markets, where the parks are closer to class B Class So, in an effort to find value, we've found that there's value currently in parks that are rough around the edges. So whether they have high vacancy rates, they have a high percentage of park owned homes, there may be an issue with the infrastructure, whether the sewer or the water. So those things that have a little bit of hair on the deal, those we're finding pretty attractively priced. So currently we focus on those turnarounds and that's where we're able to generate outsize returns, by digging into those problems and fixing them and either elevating the class of the asset or simply filling in vacancies or in some cases, like one of the projects that we have under ownership right now in San Antonio is we're actually expanding the size of the park.  So it's almost like a development deal, where we bought it for 20 units and we have plans to expand it by double. So those types of heavy lifts in terms of either turnaround operationally or expanding the footprint of the park, that's how we're finding ways to make money currently in the mobile home park business. James: Got It. Got It. And correct me if I'm wrong, so the mobile home park is basically you own the park, you don't own the housing units on top of it, right? John: So in an ideal world, and it really, depends on your perspective and what your preferences, but in the traditional way is that you just own the land and not the infrastructure. So you buy the land and you rent out the land to homeowners who pay you for the privilege of placing their home in your park. So in terms of operational cost standpoint, if you pursued that model, your operating costs are pretty low because you really just own the dirt and you're collecting rent for owner residents to use your land. Now, as you look more deals and get involved in the business, there are very few of those types of properties available because over the course of time, where residents come and go, ultimately you're going to find yourself as a park operator with some homes that you end up with, whether they're abandoned or sold to you or just come with the deal.  So there are models in the southeast, in particular where there are parks, where the park owners not only own the land and the infrastructure but also own all of the homes, in which case they're more or less operating an apartment complex just with a different look. There are individual units rather than stacked or adjacent to each other. And for those that can do it and have the model and the pricing is right and their strength in the market, that can be awfully attractive. But I think if you're looking to reduce the amount of time and energy to operate the park when you're a dirt owner, that's the lowest touch, lightest maintenance, I think most appealing and certainly most profitable model from an operating margin perspective. James: Yeah. It's like you have a big parking lot where people come and park their houses on top of it, I guess.   John: That's right. Yeah. Look at it. And it's great because you know, it's very high margin, but also you've got owners that are in your community so there's an alignment of interest. You've got people that have skin in the game because they own the home and they want to take care of the community. So that's a really unique aspect in contrast to apartments where, you know, apartments, you always have renters and just by nature, you know, they're going to treat their place as if they're renting it. And that's very different from the mindset and the behavior of owners who are in your community. It's a stakeholder group shared alignment of interests and it's a mindset shift and something that I really pursue and try to cultivate in our communities. James: Got It. Got It. Yeah. It's a very interesting model. It's a very simple concept. It does serve the affordable housing crisis that we have. Both apartments and mobile home park do serve it, even though it's two different, slightly different tenant base. One is one who wants to be a homeowner, even though it's a cheaper house, right? It's not like normal single-family houses but it's something that gives you a roof on top of your head and people liked that. And they have that community feeling when they are in that park so they are able to take care of it much better than like what you're saying in the apartment. You have leases turnover and you're 50% turnover per year and they leave the place every two years. So you have to go and do a turn around cause a lot more management intensive. How do you add value in mobile home parks? John: Yeah, so a couple of ways. So increasing the rents. So one of the appeals of being in the asset class is it's a very fragmented and somewhat a non-professionally managed business. So in contrast to apartments where you have, I think very high transparency into pricing, because you have things like Yardi Matrix and some of the other platforms, where you can get a very quick insight into what the market rates and comparables are, you don't have that level of transparency into pricing in mobile home parks. So there isn't this invisible hand of pushing up rents with inflation or with market forces because the industry is just sort of 30 to 40 years behind, relative to single-family and multifamily, in terms of just, you know, pricing transparency. So simply coming in and raising the rents to market rates or what should be market, is one way in which you can add value. Another that I described was expanding the footprint of rentable space. So in some cases, like our project in San Antonio, the former owner had given their residents very large lots, so they were almost twice as much as was required or determined as per the setback requirements. And so we found that if we simply move the homes over a bit and decreased the density by half, people would still be given pretty reasonable living space, we would be able to adhere to the setback requirements, and we would effectively double the rentable units within the property. So that's a way in which we're creating significant value by simply taking a look at the zoning requirements and the setbacks and seeing how we can reconfigure the lots well within the land to create new rentable space.  A third is just operating it more professionally. Again, this industry is not one where there's a very sophisticated network of third-party property management. And you know, it's largely mom and pops owner-operators who, you know, at this point in time probably own the property outright. They don't have any data on it and they don't really have a need to maximize or optimize the performance of the property and in which case they let things go. So they may run operating expenses high, where relative to where they should be, they may have their friends working for them doing maintenance and or day to day operations. And as a result, probably pay them at higher than market rates. So coming in and introducing professional practices and professional management, running it as a real business, that's a way to bring down operating costs and increase the NOI. Those are really the main drivers, you know, rent increase, increase the rentable space and push down operating costs, those are the things that we focus on and usually have the greatest impact in terms of value. James: So what about loans? I mean, you said a lot of these are mom and pop and fully, they own the whole thing, right? There is no debt on it. Are you able to get like seller financing deals? John: Yeah, so of the three properties that we own, two of the three are seller financed. So we've got interest-only loans for six years on those two. And it's awfully attractive not to have to go through a bank or an agency to go through the underwriting process. James: So you structure your non-recourse or recourse or how did you do that? John: Yeah, non-recourse loans on both of them. So really great, fairly low down payments. So we have a 75 loan to value on one and 80% loan to value on the other. And we even on the first one, we strung out the timing of the down payment so that we could minimize the use of upfront capital. So, yeah, just increased flexibility, ability to execute with speed and fairly attractive loan terms. Again, another appeal of, of the businesses, you have a lot of flexibility with the lending for some of these smaller to mid-sized parks. James: Yeah. Yeah, that makes it really interesting because recourse versus nonrecourse and loan terms, you know, in this case, you can structure this how you want, right? Because you're talking to mom and pop owner and how big are these parks? John: Yeah, so for us, so we have one in North Carolina, which is 75 spaces. That was the first one that we took down. And that was, we negotiated seller financing for six years at 75% loan to value. And then the second park, we closed the month after. That's in San Antonio, that's 20 spaces and we're currently in the process of expanding that to 49 spaces. So by the end of the summer, that's the one where we're reconfiguring the land and bringing in 29 new homes to expand the footprint of the park. And then the third one is in South Carolina and that's about 45 spaces. So in a 20 to 75 space range, that's where we're finding opportunity value and that's about in the zone where you can negotiate seller financing. You know, it's good and bad, the financing.  One, the pool of capital and the liquidity and access to the debt market is not at the level that multifamily is. So one of the nice things about multifamily is, you know, through Fannie and Freddie and other conduit lenders, you just have masses of capital available to you and it's an industrialized process to go through and get financing for these projects. That type of infrastructure doesn't exist really to the same extent with mobile home parks. So you know, on one end, financing can be really difficult, especially for the smaller parks. But what that affords you is the opportunity to negotiate more flexible and creative deals, through seller financing. Because ultimately, and in many cases, sellers, they don't have a choice. So if they are really interested in selling, buyers can't get financing through traditional sources and so they're sort of left with one choice, which is to carry a note. So, you know, in some cases we celebrate the fact that we can do this stuff, but in other cases we kind of bang our heads against the wall and say, if only we could go to Fannie or Freddie and get this financed, that, you know, very long term, low-cost rates. James: So you are in New York and scattered all over the nation. How are these parks being managed, who's managing them? John: So we have onsite managers for all three of our parks. And for all intents and purposes, they carry out the actions that we dictate. So all of them either live onsite in the park or live very close by and most of the time, we have daily calls with the managers to tell them what to do. Now their level of sophistication and their ability does not rival what you're accustomed to in multifamily because you know, in multifamily you've got a level of professionalism and sophistication that just isn't there yet in the mobile home parks that we deal in. So for us, it's just, we've got boots on the ground. Their jobs are primarily focused on collections. So making sure that people are paying rent on time, posting pay or quit notices or facilitating evictions, coordinating repairs to the extent that we need to bring in someone to fix the plumbing, for example. And then to the extent that we're filling in new units, they're coordinating showings with prospective residents to come and see homes and see if they want to sign a lease. So that's really where their job is focused on. So it's not a full-time gig really for any of them, it's part-time income for them and it's in peaks and valleys. So depending upon the activity, whether that's new rentals that we have, rental units available or repairs that are happening, they may be either really busy or find themselves with not much to do. James: Yeah, I agree. I mean, I see they're not very highly sophisticated people. They are basically, you know, house-owner. So you know, mobile home users, on how people are paying, then we don't expect a lot from them in terms of management. I mean, even in multifamily. Yeah. I mean, we have a lot of professional management, but still, you have to manage them, right? So much moving parts, there's so many expenses, so much of repair and maintenance that need to be taken care of, which doesn't exist in mobile home parks. Because mobile home parks, supposedly, you know, you're just looking at the land and collecting rent. Looking at some common area, usually this kind of thing. So I think it would balance out in terms of, you know, the amount of time that you need to spend, especially for operators. 20:56inaudible] me who's managing our own property management and also people who are not having their own property management, their own active asset managers of apartment, failing to be involved very, very closely. You can't just go to the party. I mean they'll take it to somewhere else. John: Yeah. Right. Yeah. Great. You know, and I think that's an important point that a lot of people miss. You know, going to the boot camp that you mentioned, I also attended, I think one of the things, I think the boot camp, people who leave the boot camp are fairly transparent about what it's like day, day in, day out. But for whatever reason, I talked to a lot of people that are interested in the mobile home park industry and one of the appeals to them is this sense that it's passive. And I would say, you know, it is very hands-on in the projects that we're involved with that we're turning around and trying to increase the value. We are pretty close to being full-time property managers as opposed to seeing the checks, you know, come in and you know, loving the passive income. So that's fine for us. I mean we like getting our hands dirty and taking action and being involved but that's one thing I would caution people about for whatever reason. I think headline news suggests that this is a passive income source and that's absolutely not the case at all when you're dealing with value add, you know, medium size mobile home parks. James: Yeah. I mean if you want really passive and you invest passively or [22:28unintelligible] I don't think there's any business, which is really, really passive in real estate, right? Especially if you're an active operator and you want to make the most money. If you want to be at the top of the food chain, then you have to do work. If you don't do work, you can buy the deal and all that but the thing is you've got no control on the returns that are being made and being generated unless the market is getting up. There a lot of guys out there who are making, who are boasting themselves that they made a lot of money real estate without doing work. But it's actually the market is doing the work for you.  John: Right, exactly. James:  So this is the elephant in the room, right? So how're the returns compared to multifamily class B and C in mobile home parks? Because you have worked a lot on the capital raising side on the multifamily, so you can see a lot of operational stuff on that side compared to mobile home park, you know, how does that compare to..? John: Yeah, so I'd say just general rule of thumb, it all depends, deal specific. I know that there are, you know, opportunities that you come across in apartments, they get into the 20% IRR. But generally speaking, I think hurdle rate for me, for apartment complexes, is about 15% IRR over say a five year holds. Whereas the hurdle rate for me for mobile home parks is about 20% IRR. So I'd say it's a 5% difference in terms of a return premium there that I'm seeing and that I'm using as a guideline for allocating capital in my projects. James: Got It. What about cash flow on a yearly basis? What do you expect between these two asset classes? John: It's about the same. So whereas, you know, you may expect an 8% yield a cash on cash for an apartment complex, larger apartment complex. We're looking at sort of 10 to low teens on cash on cash return. James:  Are you syndicating this deal or you're doing this on your own? John: No. So we use our own capital for all three of our projects and with this fourth in the pipeline. So, I work with other partners. There are about four of us that work together and to date, we've only used our own capital and that's intentional. We think we're still learning. We want to build a track record and we really want to get our arms around these heavy turnarounds so that in the future, we can raise outside capital and go to market with credibility and feel confident taking other people's money to do projects. So yeah, to date, it's just our own capital that we've used. So we're all active partners and no syndication. James: So you could do a Jv type of thing.  John: Exactly.  James:  Okay. So you're saying when you're doing syndicate, you know, I mean, if you do syndication then you have to make sure you allocate some money for your passive investors as well from [25:24inaudible] whatever you guys are putting in I guess. So you're saying cash flow wise is almost similar, is that what I heard? John: So like 3 to 5% premium, cash on cash return. Whereas the IRR was about 5%. That's what we're seeing. We see a significant portion of the overall return allocated towards the equity, the increase in equity because we are doing a turnaround. So you know, the cashflow is nice, but a majority of our returns are coming through the boost because we are fixing problems, elevating the class of the property or expanding it to generate significantly more income. James: Got It. Got It. Got It. I mean audience just want to let you guys know as I wrote my book, you know, as a passive investor, you can choose any asset class, right? It's not only multifamily. I know multifamily is a lot of, what popular names nowadays is more famous than anybody or anything else. I mean, yeah, it is doing very well. There's a black swan effect of people become renters, you know, just demographic shift too. You know, people becoming renters. But there are also other asset classes like mobile home parks, self-storage, office industry. There's a lot of different asset class in that people are doing very well, right? Like, I mean, if you as a passive investor can make a couple of percents more compared to multifamily and you can find a good operator who will give you the returns on the backend you can always definitely do that. The key thing is to diversify your investment from what I see, even though I only do multifamily but I just think that, you know, wearing a bigger hat, my thought process, I think that's the message for passive investors, right? So the question for you is, you're talking about the 5% premium with the IRR and that's where the value adds are being generated, I guess. Right? And how do you plan to exit? I mean, are you going to sell to someone else? Is there like a big reap that is coming in? John: Yeah, so for us, I mean, we like buying and we don't ever want to sell. So I say that in air quotes, you know, we'll own it forever. But for us, the exit is really through a cash-out refinance. For us, we find these smaller to medium size parks where we think that we can elevate the class of the property. So take it just under a million dollars and you know, at a low vacancy and augment it such that it can be financed through, either a conduit loan or a Fannie or Freddie debt. And at that point, we will have created sufficient equity that we can more or less pull out all of our capital that we've put in. And then when we're done, we've got long term, low-cost debt on the property and then we'll just collect the cash and go on and do our next thing.  So that's the vision for all three of these properties is to execute the heavy turn of the value add in the first three to four years and then refi, take out all our capital and then go rinse and repeat and do that elsewhere. Because, I mean there's a very stable asset class. We liked the business. Affordable housing, we think is going to be a thing for the very long term. We like owning productive cash flowing assets and so we don't have any desire to sell now. So someone comes along and gives us an offer we can't refuse, well, we've got to, you know, do the math and see if it makes sense. But we're definitely not looking to go in, execute a turn and then exit to other private equity owners. James: Very interesting. I mean that's what value add keeps you in commercial and that's the real power of commercial real estate. The other day, I was talking to a passive investor. He said, hey, this guy is giving me, you know, 8% cash on cash flow and that's it. Right? What about the back end? He said, oh, I don't care what the backend. I say, well then you can get much higher cash flow on mobile home parks. So if cash flow is the only thing that you're looking at, you know, you shouldn't look at multifamily alone. Or maybe you should look at 'A' type, 'A' class multifamily in a very strong location near to core urban center as what I call a core type of deal, right? You really don't have to do just multifamily, you can do a lot of other asset classes, right?  The power in commercial real estate is actually on the cash flow plus the backend. The equity growth that you generate through value add, right? So that's why I named this podcast as value add real estate investing, because that is the gs of commercial real estate, right. Otherwise, I mean, unless you are rich or unless you are a big family office where you want to preserve your wealth; you're not investing, you're preserving your wealth. You're making slightly more than your inflation. Say inflation is 3%, you're making 8% cash flow. There's nothing on the back end, then you can go and do, you know, that kind of deal. The majority of people, people want the value-add component where it grows on the backend. John: Sure. Yeah. I mean, we'd love to sell to those types of buyers. The ones that are looking at this squeaky clean, I mean, we'll do the work, we'll create the equity and then, you know, for those that just want to collect the rents, we're happy to sell for a premium. James: Yeah, there's a lot of syndicators who buy the type of deal where you just cash flow because they get fees. Right? But for the passive investors and you don't understand, you're just going to get a cash flow, right. And some times people are very intrigued by the cash flow concept. Suddenly they come out from work, you know, working w two for their whole lives. Oh, there's a cash flow coming in monthly, you're going to jump on it, which is okay. It's okay for some people, but there are much better alternatives out there. Where you can grow your wealth as well on top of preserving your cash against the inflation. So that's good. So, how are you finding these deals because you are New York, how do you find it? John: Yeah, so we explore all channels. So we do cold calling, we network with other owner-operators. We had done some fairly extensive direct mailing. We no longer really do that much. We talked to brokers, we go to industry conferences, we look at Facebook, Craigslist, eBay, a variety of other digital platforms. Really, we try to cast as wide a net as possible because again, this industry is really fragmented, not as industrialized as, you know, apartments are. You'd be hard pressed to find significant deal flow on a loop net, for example, for mobile home parks. So we just try to put ourselves in the flow of deals in as many instances as possible. Which means that we look at a lot of deals, we say no to most of them and it's very structured and haphazard. But, I mean, the three deals that we've sourced so far have been through relationships. So whether it's through meetups, we've met people and they needed to refer a deal because they had other priorities that they were going after. So despite, you know, we've done the work and built out databases of owners, throughout the country and, you know, done the cold calling, done the direct mail, despite all that time and energy put into revving up that engine, ultimately today, it's come down to relationships with other people. James: I mean, it is so fragmented, right? It's just so hard to go and get to a broker and buy a right deal. Right. And daily, even in mobile home parks there to work hard for it. But that's okay. I think you're able to find it, which is really awesome. John: Yeah. Yeah. And again, it's good and bad. It's hard work to do it because it's so fragmented. But at the same time, that's one of the reasons why there's value there because you've got really mispriced opportunities because the market isn't as efficient. So I mean, I'll take the hard work any day if it means you can still get good deals. James: Got It. What about the depreciation or tax benefit of mobile home parks? How does that compare to the apartments? John: Yeah, so with those parks where you're owning the land and the infrastructure, so you don't have quite as a large depreciable base as you do in multifamily. One good thing is that you have a condensed depreciation timeline. So while the depreciable base is not as high in terms of absolute dollar value, you can take a decent material dollar value for the depreciable base and depreciate it over sort of a 12 to 17-year timeframe instead of the, I don't remember the exact number.. James:  27.5 John: Yeah, 27 and a half year timeframe. So what you find yourself in a situation is that in the first sort of 10 to 15 years, you have about the same depreciation benefits and taxable losses that you would experience in multifamily. But then after sort of the 10 to 15-year mark, you run out of the depreciation and then, you know, you find yourself in with a larger taxable income. James: Well, I didn't know that that is shorter than multifamily, is it 12 to 17 years? John: Yeah. About that because it's not real property that you're depreciating. These are the utilities, so [35:11crosstalk] and the light posts and the roads and I mean this is equipment, essentially, depreciating. With the schedule, you apply a different shorter schedule depreciation. Then you do the actual structures, James: You're not paying for the whole, I mean, you're paying for the land plus the utility infrastructure. Infrastructure maybe 10% of the overall cost, is that right? John: Roughly. Yeah, it depends. It depends on what your infrastructure looks like. But it's still material; in most cases, it's material amounts that you can depreciate, but it accelerated, right? So now while you may have a lower absolute dollar value of an asset that you can appreciate, you can do it over a much faster time so it's accelerated, which means your yearly depreciation charge is higher and can also be a significant portion. But again, that expires faster than you find in multifamily. James: Yeah. Yeah. But even in multifamily, I don't think anybody owns it for 12, 17 years. I mean, on syndicated deals, I guess. John: Right. James: Interesting. So, okay. So yeah, usually I think in commercial office industrial, is it 39 years? Multifamily residential, it's usually 27.5. And you're saying some of the utilities or infrastructure in the mobile home parks minus the land is 12 to 17 years. Okay. Yeah. Very interesting. So, John: Yeah, so not quite as attractive from a tax basis. Look, after tax returns, I think you still find yourself in a very favorable situation because you know, the overall returns generated by the property are at a premium. And so even if you are paying taxes on that, you're after tax returns still tend to trend above what you would find in other commercial... James:  Are you able to get a negative K1 in the first few years? John: Yeah, yeah, definitely. James: I mean, let's say after value add is done, let's say after value-add is done stabilized, do you still get negative K1? John: I'd say, I mean deals specific, but it would be reasonable to expect that for, you know, the initial years of operation for sure. James: Okay. Okay. Yeah. For our listeners, I mean K1 is the form that everybody gets when you're invested in a deal where it shows what is your paper loss or a paper gain. But usually most of the times, it's the loss. Because your mind is seeing the mortgage or you're minusing the depreciation of the asset and also you're minusing the interest on the loan that you are doing. But in this case, I think, John's case, there is a lot of it is seller finance so that still be interest. Yeah. You still have interests, right? Because for your IOS and all that.  Interesting. So where do you think you want to grow from here in mobile home parks? John: Yeah. So continuing to scale. As I mentioned before, we're probably right on the cusp of taking in outside capital. We'd like to complete the turnaround with the three properties that we have under our ownership now so that we can prove out the concept, you know, go to market credibly with we've executed, have you turn arounds. We did it successfully and just have the inner confidence to be able to go and take outside capital. So look, we're trying to find value and when value presents itself, we'll act. We don't have any stated goals in terms of the number of units that we want to acquire. We do want to get larger. We wanted to do, you know, more complex, more interesting projects. Well, it's hard work, it's also really fun and we find a lot of sizes faction and turning around some pretty beat up and run down communities and augmenting the sense of community, beautifying the neighborhood and again, solving a really meaningful problem, which is the lack of affordable housing. So we get a lot of satisfaction and find fun and interest in solving these problems and continuing to grow the portfolio. James: Yeah. And how frequent do you go and visit these parks? John: So I make trips about quarterly. So I was just in San Antonio in April and was out there for a week and then flew back through the Carolinas to see the other projects. And in South Carolina, North Carolina, I'm going back to the Carolinas in June. So about, you know, every two to three months, I'm a boot on the ground, either looking at deals in the pipeline, checking up on progress on existing turnarounds or, you know, in some cases, we've got to get state licensing in order to do what we want to do in terms of lot infill. So for example, you know, I was in Austin in January to sit for the dealers licensing exam. So in order to execute the law and fill that we want to do in San Antonio, we need to be licensed dealers in order to buy homes directly from the manufacturer. So we were in Austin doing that. The same thing is happening in June. We're getting a dealer's license in North Carolina to be able to execute these large turnarounds. So between checking up on projects, chasing new deals and getting whatever required licensing we need in states, we're on the road a lot and touring around the southwest and the southeast. James: Yeah. Yeah, that's very interesting. How are you getting dealer license to turn it on these properties and how are you finding a lot of fun in doing a lot of value? That's where you make the money. To solve problems that other people don't want to solve.  John: Exactly.  James: Right. So, and what's the point of buying a cash flowing deal?  John: Right, right, exactly. You know, in maybe 30, 40 years from now, great. I'll do those and just collect the rent checks and that'll be fine. But in the meantime, you know, I'm still relatively young, hungry. I want to make an impact. And so that's where value add is really where the opportunity is. James: I don't know, I mean, I think if you didn't want to work hard, I mean, I know if people want to get into real estate, but just so many people either, they don't want to take action or they think the problem is too hard or they just didn't want to put their mind into solving that problem. And that's where the barrier to entry comes in. Not many people want to solve the problem. And people like you who are in New York, you know, is solving the problem like in San Antonio and North Carlina, it's hard work but that's fun. And you make money out of it and it's generational wealth too, right? Because after you refi, you take out your money out, it's your cash flowing for your whole life. So you don't have to answer to anybody since you're not syndicating anyway, so that's awesome. So let's go to a bit more personal side. Why do you do what you do? John: Yeah. So again, I think it's just fun. I'm the kind of person that I don't think I'm ever going to retire and sit on a beach or golf all day. I like to be active and doing things that are interesting. I liked doing challenging things and so, you know, for me, I just get a deep sense of satisfaction in doing hard things and really doing those hard things with teams of people. So I like surrounding myself with partners and binding together as a team to solve challenges that are just intensely satisfying for me. James: Got It. Got It. Is there daily habits that you practice that you think has made you more successful? John: Yeah, so I would say I'm a distance runner. So I'm an athlete, I've been running marathons for what seems like forever. And what that practice is instilled in me is a couple of things that have really translated directly into investment success. One is just the concept of compounding. So logging miles every day, over long periods of time. You know, maybe in a week or a month, I don't notice the progress, but over years of repeated activity and continuing to grind it out despite pain or cold weather or you know, emotional blocks that would, you know, would it difficult for me to want to move forward, I keep powering through it and ultimately it's led to a lot of success in my running endeavors. Implying that same approach of compounding and continuous daily incremental action in the investing space has really helped position me for success in investing there too. James: Got It. Any advice that you want to give to newbies who want to get started in the mobile home park operation or investment in the business? John: Sure. I'd say definitely learn about the nuances of the industry. Take the time to not only attend boot camp or something similar, but talk to other owner-operators about the details of owning and operating parks. You know, it's not enough to just read materials or listening to podcasts, I encourage people to do that, I do it myself, but really get to know owner operators because there are a lot of nuances about running or even finding parks that are glossed over or not adequately covered in podcasts, reading material or boot camps. So I'd say education, definitely take the time. I mean, I took about a year to really get my head around, you know, what is this industry like and what is it going to take to succeed? So education and then just get started. I mean, there's a lot of reasons to say no and to walk away from opportunities. Again, with mobile home parks being kind of 30 to 40 years behind the times relative to multifamily. There's just the nature of the asset classes, there always are going to be problems with these assets because they're not usually professionally managed and they all have some level of hair or warts on them. Don't let that scare you, that should inspire you to learn about which problems are fixable in which are not; where you should run away quickly and where you should dig in. And really find an opportunity to solve problems and create value. So I think those are my two best pieces of advice. Just get educated and then learn to get started and get going. James: Awesome. Hey, John, why don't you tell our audience about yourself and where to get hold of you or if they want to contact you? John: Yeah, so my website has my contact details. So Loan Juniper Capital is the name of my firm. We own and operate mobile home parks in the southeast and southwest. That's loanjunipercapital.com. There you can find my email address, my phone number and I'm on Bigger Pockets as well, I'm all over Facebook as well and the mobile home park forums and multifamily forums in Texas. So I try to be active and get my face out there and I do a fair amount of attending conferences in the southeast and the southwest too. James: Awesome. Thanks for joining us today. I'm very sure that you added so much value. You know, I like to talk about different asset classes such as mobile home parks, other than just multifamily. Because as I said, opportunities everywhere. You have to find the right guys to partner with to know or to learn from. So, absolutely, I had a lot of value. Thanks for coming to the show, John. John: Yeah, thanks for having me, James. This was fun. Appreciate it. James: All right. Okay. Bye. Bye.

ow how to deploy it and learn about real estate. Started with the single-family space. And so, the first thing I bought was a fourplex than a bunch of houses. And then I realized it was too much brain damage in terms of just scaling. Right. I mean it's, having 12 insurance policies, 12 tenants and 12 loans and 12 of everything is kind of a pain. And so, learn about multifamily and then kind of the rest of the history. So, I've been running with that since.   James: Yes. I really disliked, the insurance part of the single family because--   Feras Moussa: Yes.   James: --lot of it expires at different times of the year.   Feras Moussa: That's my biggest pain point honestly and I literally will, I'm willing to pay a premium for a broker that'll just take care of it and I just don't have to think about it because it's just not worth the hassle of thinking through and spending the time and effort there.   James: Yes. Yes. I think you can pay like a monthly is the same amount and it's all automated, but insurance is one thing you have to print out and you have to scan, and you have to do all kinds of things.   Feras Moussa: Yes.   James: So, let's go a bit more into the thought process here before we go into the details of your deals and all that. So, three IT guys, right? I'm also with an electrical engineering background with some software. Why do you think a lot of these IT guys like commercial real estate investing, especially in multifamily?   Feras Moussa: Yeah, I mean.   Ben Suttles: From my perspective, I think it's the numbers right. I think it's-- you come from a kind of an analytical side of the brain, right? And I think in real estate, a lot of it is numbers driven. Now there's a relationship side of the business, right? Which we all have to have. We have to have that side of it to raise equity and obviously work with the brokers and stuff like that, but at the end of the day, it's a numbers game, right? You've got to be able to underwrite the deals. You've got to be able to make, projections, financial projections and all that as numbers and spreadsheet driven. And I think that's a lot of why the IT and engineering guys, get into this space. Also, I think the other thing is too is that allows us to be creative. When we're not able to be creative in some, some respects, whenever you're able to kind of put your stamp on the rehab of a property and improve that and, and kind of get out and roll your sleeves up. That's another thing that we were lacking probably in a lot of our jobs. And so, I think, at least personally for me, that that might be part of the reason why, I don't know, Feras might have another take on it as well.   Feras Moussa: Well, no, I think the numbers things. Definitely one of the biggest factors, but it's also, it's a space that you can learn it yourself, right? Meaning, you know, a lot of engineers are willing to go above and beyond, spend the effort, research, read books and learn it. You can do that in this space and, there's not like an engineering exam at the end of it where you have to do, you can pass. Right?   James: Yes.   Feras Moussa: And so, it's the kind of thing where you can learn it and it makes sense, right? The numbers don't lie. And so, two engineers, right? It's like, you can see a clear path of the progression, right? There's not like a leap of faith any point in time. And then the other part of it too is problem-solving, right? I think all engineers like problem-solving as part of the challenge. And to me, that's what I like about multifamily. It's bigger and harder, right? Sure. I could've probably scaled out a rental portfolio part, really wanted to, but I mean, it's just not fun to buy, hundred thousand-dollar assets, $150,000. It's a lot more fun to do bigger projects, a bigger team, and really, work through each issue as it comes up.   James: Yes. Yes. I mean in my mind is a lot about-- I mean real estates, there's a lot of creative thinking that you need to put on and that's really fun, right? Because you want to, I mean, I'm sure when you guys handle deals, we want to solve that problem. Right?   Feras Moussa: Yes, absolutely.   James: You want to break; I'm going to break that deal. Right? Hey, why? Like for me, I always say, how can I break this deal? Why you should, why you should work for me. Right? That's why I think, I'm sure you guys do that too.   Ben Suttles: I was doing that earlier yesterday, man. Yes, man, [inaudible 13:36], how do you blow up the deal, right? And--   James: How do you blow up the deal? There must be something wrong with this deal. Let's find that out.   Ben Suttles: [crosstalk 13:42].   Feras Moussa: Oh yes that's fun. Let's have a deal that makes sense. It's like, this not right, I'm just going to offer a lower, I might've otherwise because something doesn't make me, go 100%.   James: Yes. If that [inaudible] make sense, you are like, let's say to break it. Something must be wrong and when you can't break it then, then it makes sense. That okay, that's [inaudible 13:58].   Feras Moussa: Yes.   Ben Suttles: That's the one.   Feras Moussa: And then the other part too is that it's a people game, right? I mean, so something, some engineers might not like it, but at least me, I mean nothing. Ben, same. We like it because it's a team effort. It's not one person. It's how do you combine people really get the thing done both on, on the GP side as well as the operations side, right? How do you build rapport with your manager, with your regional, whoever it is? Right. And kind of help accomplish the goals and give them motivated. To me, that's part of the fun.   James: Yes.   Feras Moussa: I guess what we do is like project management on steroids.   Ben Suttles: Feras, if you touch us up on that, that was really interesting to earlier which was the project management piece, which I had forgotten about. I mean a lot of us to come from big, we've done big projects, we've worked with teams and let's be honest, and this is a team sport, right?   James: Absolutely.   Ben Suttles: This is, yes you could maybe be solo and respectful, you've got a team in the background that's helping you accomplish your goal and you've got project management or manage that whole entire process in order to get it to close. And then even after you're closing it, right? In order to asset management or to do the asset management, to do the construction management and for you James too, you do the property management.   James: Okay.   Ben Suttles: All of that stuff is, you're juggling a lot of different pieces and making sure that the ball is continuously moving forward towards that goal. And I think a lot of IT and engineering folks come from that background, understand that. So, once you can kind of segue that into the commercial real estate state space, it's just essentially just project management at the end of the day.   James: Yes. Yes. You one might, throughout my 22 years in the corporate world, I think 16 years I was a manager and I was also a project manager and I was a very good project manager. I need all that translates to this multimillion-dollar business that you're managing, right?   Ben Suttles: Yes.   James: Because to make sure your transactions happen correctly; you need to make sure you communicate to people. And that's what we all learned in project management. But how do you over communicate? How do you make sure people don't mess up? How do you take proactive action to de-risk a project? Right? So that's, that's how the game is played. Even in the commercial real estate with this [crosstalk 16:00].   Ben Suttles: And it's never going to be straight forward. Right? There are always challenges.   James: Yes.   Ben Suttles: So, I mean, that's where, we're those project management skills really kind of come into play because, anybody can run a smooth project, right? And we're nothing ever bad happened, but let's just be honest. There's always something that happens.   James: Yes, yes.   Ben Suttles: And so, you have to, you have to have that, that acumen to be able to, to keep that ball moving forward towards that common goal.   James: Yes. So apart from the, IT education itself, do you guys think that your work experience, the classes that you have been at your workplace and the environment that you have gone through? I mean as given certain edge to you guys as well.   Feras Moussa: I will say absolutely. Like I said, I mean what we do is project management on steroids. Right? And so, having done that for years had-- knowing how to keep track of multiple projects simultaneously. That's another thing too, right? A lot of people will get into the business and they realize like, hey, syndicating start to finish is not a walk in the park. There's a lot that happens, both lending and legal and issues come up and they, it's a lot to keep track of. But then she tried to do two deals at a time. Right. And how would, it's not really two weeks, it's kind of a square, issues. So, I would say absolutely. Right. And then the other thing that we've seen, being on the tech side is how do we differentiate ourselves from other people too, right? How do we, create a better impression for investors? How do you position, everything professionally, right? All of our stuff is mobile friendly. All of our stuff, certain ways. And those are the things that I've brought at least from the tech world, to make sure that we kind of do and do well.   Ben Suttles: Yes, I think, I think efficiencies, right? That you come from that IT engineering background, it's all about productivity, efficiency, how can we automate things and James you probably saw the same thing when he got into space and to completely fracture. A lot of it is backward or outdated and there's a, there's a lot of low hanging fruit stuff, ways that can be improved and I'm sure your team is looking to do that constantly and so are we. And that's all come that comes from our background, right?   James: Background, yes.   Feras Moussa: I told Ben I have to stop myself from wanting to start a software company every few months. Being an entrepreneur and being a software guy, it's like man, this place some of the stuff we do is pretty archaic.   James: Yes.   Ben Suttles: Yes.   Ben Suttles: I think real estate is the last, most, what it called?   Feras Moussa: [crosstalk 18:28].   James: Fragmented industry, you know, that is, they're like something like AI or something is going to take over soon, right. Because there's so much inefficiency.   Ben Suttles: Yes. But it's, you can take it to an extent, but then there's that personal side, that relationship side. Right. And I think that's kind of, that's, that's one of the parts that I took from my former job, which was, a lot of sales and business development work as well. Right. Taking that, that networking, that relationship building side, that building rapport side into this space. But, I mean, I agree. I think there's their software and AI and these types of things are going to automate a lot of that back-office part of the process and maybe even the analysis piece. But there's always going to have to be those two people coming together to make a deal happen, right?   James: Yes.   Ben Suttles: Because ultimately, it's going to be one person or one group and trying to sell on one group trying to buy, and you have to come with some kind of an agreement. Right. And then even after you buy it, right, there's always those relationships with vendors and employees and all those different things that you have to kind of manage to. But anything that we can bring and that we've seen in our past gig where we could make that more efficient here, we're, we're obviously trying to introduce that.   James: Got It. Got It, got it. So, let's go back to the business side of it. So, what are your guys' focus, in terms of market? Right now, currently Atlanta and some cities in Texas, right? Why don't you guys talk about, why did you choose these two markets?   Feras Moussa: Yes. So, in terms of why we chose them, I mean, the same reason you're probably in San Antonio to some degree, right? We're looking for strong, attractive markets that are not a single industry that is growing right. Population and the business side. And then, really the important thing for us to is the yield, right. So that's why we got into San Antonio too, was that we can't find returns in Houston. We look at a lot of bills and use of our base and we don't own anything in Houston, right? We're looking for returns that we can, that that will actually, you are looking for deals that'll give actual turns, foreign investors. That's also why we don't look in Dallas, right? Price points are too high that you having to pay so much that you basically have no yield on the deal. And so that's kind of what really got us into Atlanta. We got us into San Antonio as well and yes, Beaumont's kind of a slight story, but those are the things that we look for. And then in terms of future deals, right? If future markets, so, we've really kind of manage to, I would say streamline a lot more of our acquisition pipeline, right? In terms of underwriting deals, identifying deals and really keeping a pipeline going. And so, what that's allowed us to do, especially with a fulltime asset manager now, is we can look at a lot more deals. So, we've kind of identified two markets that we want to get into, hopefully, this year. Orlando in North Carolina. And that just, just to give us, just to keep our pipeline going. Right. We can keep looking at more and more and more deals. Yes, we'll hopefully be finding something that makes sense.   Ben Suttles: Absolutely.   James: So how do you guys choose your market? So, like now you say Orlando and not Carolina, right? So, I have a lot of stats on Orlando because I know it's growing very quickly. So, let's take, not Carolina. Why did you guys identify? Not Carolina?   Ben Suttles: I mean, I think, I think all of it boils down to population growth, job growth. We also like to find areas and that's not every single market, but I like to see a good concentration of different universities and colleges as well because I feel like a lot of the bigger corporations are going to follow where they're going to have a good funnel of potential students to take from it as well. So, we'll look in college towns as well too, because, but let's be honest, North Carolina, it's got, the research triangle, it's got a ton of universities. And, it's calling to be called the Wall Street of the south. The problem with North Carolina is that we're not the only ones looking there. So, it's, it's pretty competitive there too. But it's got a lot of those good data points that we like to see in terms of population economic growth--   James: Okay.   Ben Suttles: --that you see in Texas and in Georgia. And really, we are, we look at in Texas for quite some time and we found Georgia was very, very similar in a lot of ways to Texas. And so that's the reason we started kind of focusing on Atlanta as well. But it ultimately boils down to, is there enough population job growth to continue to drive demand for the workforce housing that we're, that we're looking for. So, people are always like, well, you're not renting out to fortune 500 folks. So why do you care about that? I'm saying, well, the ancillary service companies and service jobs, they're going to feed into this white-collar job is what we're looking for. So, if you don't have any of the fortune 500 stuff rights, then there's not any real need for a lot of the infrastructure where a lot of these people are going to be working. So, when you, when you look at it in Texas, when you look at it and Georgia, right? One of those people is there. So there has to be serviced workforce type jobs that are going to have to be feeding into that. And that's why we like those markets. And, we see a lot of that same type of thing happening in Orlando and some other markets and Florida and as well as North Carolina. And we've looked in Tennessee, we've looked in some other spots as well. From us we've got so much deal flow coming in that in order for us to be a little bit more strategic work as a team, we've decided to focus on about three or four major markets and then just go deep on those and then we can go horizontal and find out that markets in the future.   James: Got It. So, let's say now today you're getting a deal, right? Let's say from North Carolina, what other steps that you guys take? So today let's say, I mean how do you guys get deals nowadays. Is it through broker relationship, off-market, on the market? How are you guys sorting out the deal flow?   Ben Suttles: Yes, everything in between. A lot of it is brokers. A lot of is people that know what's his buyers, people that you know, we will get the deal closed, right? Whether it's the broker that knows it and they might know. Seller. One thing I tell every broker is like, hey, if you have a deal that you don't have the exclusive on and you need someone to make a pre-emptive offer to try to get that locked down. Like, where are your guys? Right? So, you find ways to motivate the broker is motivated. Other people that know someone that knows someone. So, we, I mean really deals come in all shapes and forms. And so, for us, the biggest volume is definitely the brokers, but it's really, it's not about the ones that they just email outlasted, right? It's really about the follow-up deals that maybe are near, getting to the finish line and getting the finish line in terms of the-- in terms of the marketing, but they haven't had any such interest or for whatever reason. Right. So, I think that's important. So, once the deal comes through in terms of the analysis side of LLC, dig into the P12, dig into the OEM, but more importantly, talk to them. Sorry, go ahead.   James: I'm just saying, what do you look for first in the deal? Do you get a-- so you get a deal, what do you look for? What are the, what do you, what's your sniff test because I --   Ben Suttles: Yes.   James: underwrite everything, right? What's the sniff test?   Feras Moussa: I'll tell you what my first sniff test. I look at what the average rents are and what their price point is, and then I can deduce from that, right.   James: Okay.   Feras Moussa: Is this going to be anywhere. And really what I'm doing kind of mentally ballparking what the cap might be. Right? But really, I'm looking at what are the average rents and what does the purchase price. Right. And then yield. Is there, are they close enough that I think that there's some meat on the bone, right? It's really what it boils down to. I'll give you a real example. There was a deal in Atlanta that I-- so North Atlanta, Atlanta has a really unique market. North Atlanta is really expensive. South Atlanta is the complete opposite. There's a deal that came through on the northern side and I think the average rents on that deal were like, 850 $900. So, I'm okay, this one might be at a reasonable price point. Right? And so, I'm like in my head, mentally I'm like, okay, let me call the broker. If this is 80 maybe 90 you know, there's a deal to be had here. Hey, call the broker. And it's 130 a door, right? So, I mean, that already instantly ruled it out. And so, you're really looking for some of those kinds of low hanging fruit just to figure out, okay, is this still even in the ballpark for us to look into it anymore.   Ben Suttles: Yes, absolutely. And I think the first sniff test James is really, I mean then the location of it too, right? Do you know what I mean? We're getting the deal flow and these places that we want to be, and we've identified different pockets within those submarkets that we want to be in. So, if it's not within one of those pockets and we're automatically, putting that to the side. Now that doesn't mean that there's not a deal there. Right.   James: Yes.   Ben Suttles: So those are usually kind of the maybe deals and we're, we want to kind of circle back maybe we're bored or something. Let's do that one-- -   Feras Moussa: Exactly, whether we are bored, we go back and look at those deals.   Ben Suttles: Yes, we'll go back and take a look at those. Right. But we're looking for that are going to be the net, that those are some market pockets, right? That we like. And then from there, right, just like what Feras was saying, you can almost, you can almost immediately tell if it's going to work. Right. And you pencil out so many deals. I mean, we, at this point we've analysed hundreds and hundreds of deals. So, you can on them almost look and say, oh, that's not going to work for us. Right. Just based on what they're asking for. And you can also kind of tell that to, by the price per pound versus, sometimes the median income of the area. Right. I mean, are you going to be able to achieve the rent that it's going to, it's going to take to make that deal work. And if you're going to be maxing out your median income, then it's not going to work either.   Ben Suttles: So, a lot of the things that we look at, population growth, we look at job growth, all those things too. But one of the things that we also look at as the median income, right? And a lot of these is workforce housing, right? So, I mean, you look at, what's the, what's the average rent? We're usually doing the three-x income test. Whenever we're taking perspective tenants in, right? Like everybody should, and then you determine, what the median income level is and if you're going to be maxing that out, you're above that, then the first sign that something is going wrong, let's get ready to skip. They're going to stop paying rent, right? So, you want to make sure that you're under that, right? You don't want to; you don't want to be at the top of the market. Yes. Maybe they can keep up with it for a month or two where they're going to get behind. And so very, very cognizant of that.   Feras Moussa: And to add those, it's not that, if it's a lower income area, we won't buy a deal very well. It's really these are just kind of rules of thumb. And then from that, you start to work back, okay, well if it's a lower income area, can assume they are economic occupancy is going to be much slower. So, you should underwrite it that way. Right? Cause there's a deal to be had anywhere, right? I mean I'll buy any deal at the right price point, right? Assuming as long as it's, to me at least this has been new instead of a growing market. Right. And that's not a deal at f four worry about the city, essentially no one even wanted to live in that general area. But in terms of price points, in terms of, average incomes, all of that, it's really, again, depending on what price point are we buying it at.   James: So, let's say the rent and the price seems reasonable right? At the first sniff test, what's your next level sniff test? What do you guys do?   Feras Moussa: Then and actually started this. The thing I do before that is actually called the broker and just get there [inaudible 29:18].   James: Okay.   Feras Moussa: Right? And that's the first, usually, right? Because a lot of times there's more to this story, right? Is it, is it a partnership where you know, one of the sellers passed away and they're looking, you know, they're a little bit more motivated or is it a deal that just, the Bro, I've had brokers a little bit tell me these sellers are terrible operators, right? And you can kind of, and if you have a relationship with a broker, there'll be honest with you about that aspect. Right? Brokers are all, a lot of times brokers, I don't want to say always, but there'll always be, a lot of times we'll say, yeah, you know, you could do this and this and get, a $200 rent pop. Right?   James: Yes.   Feras Moussa: Take that with a grain of salt. But I'm looking for something that's kind of that ancillary information to help the deuce. Like, Hey, is there an actual opportunity to do, what's the value add that we can do is we can kind of take that into what we just talked about. Then kind of once, like you said, once you know the numbers make sense or the deals make sense, then you start to dig in and near. That's where we really do just to, go down to the numbers, right. Look at the t 12, look at where they are today on expenses. Look at where we think we will be on expenses. Where, what does the rent currently, right? What's the spread on just the rent, the market rents versus what their marketing right. Today. I mean kind of, we really starting to put the bigger picture together. Right. And then understanding is, hey, does this make sense at a high level? Right? Yes. That's us. Sorry, go ahead.   Ben Suttles: Oh, I was just going to say, what I mean, we don't even look at the OEM. Right. Do you know what I mean? We're going straight from our perspective, right. That just use your, you'll get, you'll get the skinny from the broker, right? Because they'll usually-- but the marketing packages is the marketing package. Right. And I feel like that sometimes skews people's numbers when they look in. Concentrate on that a little bit too closely. So, it's always best than if it passes your initial test and you talked to the broker and there might be something there and you just go straight to the spreadsheet analysis. Right. Because, I mean if you start trying to dissect what they're going-- what they have in terms of pro forma income and expenses, then you start getting that none of those numbers in your mind. And guess what, there, they're making those numbers work. So, we always, we always go straight to that and then only then do I then look at the OEM and I see how far apart we are. And usually, it's pretty significant. But, it's those classic sales tips, like, below replacement costs and all of these things that they love to say, that makes it sound so sexy.   James: Yes, its--   Ben Suttles: At the end of the day and it has to pencil out. It's all about the numbers.   James: Yes. I remember in one of the deals I never look at the OM until I close because I need a logo for that property. And I say where is the logo and then I called the broker, you understand the OM, I say yes.   Feras Moussa: Oh, you had the floor plan. Yes, we had that for the floor plan. You go back to the OM and grab the floor plan that [inaudible 31:56]--   James: Exactly.   Feras Moussa: --time and effort on.   James: Yes, yes, we did a floor plan and the logo from the OM, that's it.   Ben Suttles: There you go.   James: So, it's interesting. And so, the type of deals that you guys do, I mean, where do you categorize it? Value add deep value add or [inaudible 32:14] yield play or core type of tails.   Feras Moussa: I mean right now we're focused on value add. I mean we would like to do a more, really to me, the ideal deal for us now or given where we are given, our network, et cetera. It's really kind of that B minus space. Right? We've done the heavy value add, it's a lot of work. Right? And those skills have worked out. They performed, but for us, I mean it's just she consumes you, right to some degree. And so, we're trying to less of those and we try to vary it up. Right. Always have a value add going on, having a stabilized going on. Just cause from a bandwidth perspective, right, we can kind of handle one at a time, but we don't want to take on three big value add the one time because then he would get lost in that. And so, I think for us we're typically in that C plus B minus space is really the focus for us.   Ben Suttles: Yes, yes.   Feras Moussa: One day we'll do an ADL but not in, but not-- but it's about matching it to the right equity pool. Right. If we have equity that's okay with the lesser returns. Right. We can go do a B plus or a minus. But so far, we've been kind of in the C plus B minus space.   Ben Suttles: Yes. Yes.   James: Got It. Got It. So, what about that, that strategy? Do you guys do only agency Loan, Bridge, Bridge through an agency?   Ben Suttles: I think we're doing all this. It's really deals dependent. Right. Do you know what I mean? I think the bridge has gotten a little bit of a bad rap. I mean there's, there obviously you have to be careful with it, right? You have to understand that your exit strategy, you have to be able to hit those targets in terms of, especially if it's a value add, tell him the hair on it, which is, it's going to with a bridge, right? You got to be able to hit those timetables in terms of your construction, your rehab in order to refi out of it quickly. And then at the best price point that you can write, because obviously, you don't want to have to bring money to the table. So, we'll do a little bit of the bridge, but for the most part, where everyone, just like every other smart operator, you're looking for agency debt when you can. But at the end of the day, we're looking to maximize returns for our investors. And so sometimes, going bridge versus agency has been a better way in order to do that. And people understand that there's a little bit higher of risk tolerance with those. But we always get a three-year term with two years' extension. So, at the end of the day, it's still five years on a bridge that, it's not something like an 18-month deal. So, I think that that gives people a little bit of, they feel a little bit better about it as well. But we've done agency all the way up to 12 years too. So, it's a little bit about, just depends on the deal.   Feras Moussa: Yes. For anyone listening, I mean I think we have a Ph.D. in the agency space. Unfortunately, we've had issues that people that do 50 deals never hit. So, we've seen it all. And so, if anyone has any questions, feel free to reach out. But we've seen the good, the bad and the ugly on the dead space. So, it's, you kind of, you work through those problems, right? If you get the closing, which is the good news, but then you kind of learn from it and you know, start to figure out what are the things that could be learned from this to basically avoid the situation in the future. Right. We've had, we've really seen a variety of things. Unfortunately--   James: Oh, let's talk about--   Feras Moussa: --that's where Ben lost all this hair.   Ben Suttles: Just one. Just one lender, which I'll tell if you want to email me, I'll tell you which linear it was.   James: Okay, tell me the worst story with an agency, just let's just go--   Feras Moussa: The worst agency story. I'll tell you one, and this is one near and to you James. So, it's in San Antonio.   James: Okay.   Feras Moussa: San Antonio deal its a, a deal that pencils in really well. And for those of you that know on the agency side, right? With a standing loan, you can do what's called fully delegated, which means that fanny lets the dust lender, which in our case could be Arbor, could be haunted, it can be any variety of them. For us, it was an Arbor deal and lets them operate in the wrong capacity, right. To some degree. And so, there's kind of a box. As long as they're within the box, Arbor could approve the deal, no questions asked. Well yes, we're like three weeks from closing pretty much at the finish line. Money's in the bank. Well, we're already looking at the next field that we had to go on and then kind of going back, what happened was that because it's the San Antonio deal and the deal pencils in really, really well, right from a financial perspective, the lender said, well hey, we can go get your five years IO. And we didn't think much of it. Right. It was like, okay, that's fine. Well, at least we'll back out to where we are today because we run the road at one-year IO. Well, long story short, this deal essentially used to be on a watch list three years ago. The sellers are only deal in San Antonio. They struggled with it. Plus, it was kind of whenever they're in the midst of a lot of rehabs. So, he got on the watch list, it wasn't on the watch list the past few years. And that whole you, that market better than we do James. And that whole area has really turned around from where it was three years ago. But guess what, it was already flagged by Fannie and they just wanted to essentially get it off their books. Right. And so, this is something very, I actually did this just the other day where I, I was talking to a broker about a deal and asked him was the saber on a watch list.   Feras Moussa: That's something I've learned to ask now because and what sucks about it is that once a lender, a dus lender, this gets Arbor went to fanny, right? Once Fannie times in, Fannie is the authority, right?   James: Correct.   Ben Suttles: Versus if we would have just not ever done that, we could have closed the deal agency with Arbor, no questions asked. And so, it's a very unique situation. I don't know anyone that's actually ever encountered that. Right. But these kinds of things do happen. And so just knowing that they can happen, figure on how much risk you want to take because we would have been happy with what we had-- what we could have closed. Right. We were happy with the one-year IO. That was great. That was fine. But it's your kind of get a little bit more than that and then now completely bag of worms. So.   James: Yes, I learn, even I learned about this watch list, last week when was looking at another dealer then someone says, Oh, I backed out because of watch list, I say what is that? Right? Then we realize there are so many other issues with the deal. Right? So that's crazy. Yes. I mean for listeners, just FYI most dus lenders, they have one-year authority on a delegated underwriting. So within, if they give one-year IO, they don't have to go back to Fannie Mae and get approval. But once they go above that they have to go to Fannie Mae. And a lot of things can change when you go to Fannie Mae.   Feras Moussa: Yes. So, I have learned that there are different tiers. Right? So, there's the tier two, tier three. So, if you're at higher leverage that can only give you one. But if you're willing to go down to 65% they can actually approve 5 years IO, no questions.   James: Okay.   Feras Moussa: So, you start to learn. And again, why did I learn that from a different deal? So, start to understand really the mechanics of what's going on behind the scene. And this is where having the right mortgage broker makes all the difference, right? They can help steer you in the right direction and help catch some of these. So, I mean for the-- for the watch list, the sellers were actually more pissed that we were about the whole, they didn't think that was going to be an issue in terms of us getting the next one. Right.   James: Okay.   Feras Moussa: And they never thought to just close it. You don't think it's going to be an issue.   Ben Suttles: No, they thought it was off too.   Feras Moussa: Yes.   Ben Suttles: But, do you know what I mean? I think there's that just like, like our earlier part of the conversation. Right. You know, we're project managing these things, things are going to pop up. So, we were able to make it through that process--   James: Right.   Ben Suttles: --and still come out on top in terms of the debt. But yes, I mean we're always looking to maximize returns and risk and minimize risk for our investors. And I think that having this different background and different debt products and having a good experience with some of these different lenders really gives us a good broad overview of the debt market and which deals are going to make sense where, and I think that that's huge when you're looking at who to invest your money with, because know some people, let's be honest. So, they'll just go straight to Fannie, if it's not Fannie or if it's not Fannie then I'm not doing it. Right.   James: Correct.   Ben Suttles: But I think sometimes you're missing out on opportunities there as well.   James: So, wasn't, like three weeks before closing, didn't you guys had a rate lock at that time?   Feras Moussa: No, we're supposed to [inaudible 40:01] lock a few days later.   James: Oh okay.   Feras Moussa: Like little, they're just waiting on the final. Oh, because they went to Fannie, Fannie kind of asked-- this is where really, I think we could have-- it's about positioning the story. Right. Again, I think the lender just went in thinking that it's going to be easy down the middle because really that's what they told us. Right?   James: Okay.   Feras Moussa: They didn't even bother. We had a great story for the deal, for the sponsorship team. They tried to do it retroactively and kind of wants Fannie comes in it's really hard to change. But we were literally at the point of rate locking and getting, being done with the steel. Like we will do, so.   James: Yes. [crosstalk 40:36].   Feras Moussa: You do full 360 and charge full 180 and change things and kind of Redo. So, in my mind, it was really, we did, it took us to close if get that deal done.   James: Yes, it's, yes, it's, it's a day just to do it at the end because you're almost at the closing table. Right. So,   Ben Suttles: Yes.   Feras Moussa: Yes. So, so in that situation, just maybe to complete the story, right. The seller realized kind of what happened. They gave us more time, right? They gave us another 30 days they knew that wasn't really for lack of use or lack of anything that we did. And so, we're able to buy more time and then redo the process and kind of, get to where we needed to be.   James: So, did you do a different loan?   Feras Moussa: Yes. So that one we call back every investor because I mean we basically what we did Arbor realized the mistake that they made, which was they should not have gone to the lender, tell Fannie, they should have just closed. And so, they basically gave us a balance sheet loan, right? Which is like a bridge loan on their books that essentially, the short term just to get it off of Fannie's book, --   James: Okay.   Ben Suttles: --then in nine months. Right. So, for us, we kind of turned it into a value add reprice scenario. Right.   James: Okay.   Feras Moussa: And so, when that case, we will, nine months, 12 months, somewhere around there. Right. We're also pushing our NOI as hard as you can. We'll refi, pull equity out and get back into a panty permanent loan.   James: Got it.   Feras Moussa: And so, but the deal changed, right? And so, we had to call every investor, tell every investor here's what changed, here's what happened. Then thankfully pretty much everyone stayed in the deal. Right? So that kind of-- for us that it's a sigh of relief. But also, it's like, everyone just doubled down on us. Right? So, we're--   James: Right.   Ben Suttles: --going to get babysat through the finish line.   James: Yes, the amount of pressure for you to go, on the contact to rate lock it so much. Right. So, I mean, I don't know, I mean-- there's a lot of pressure on, responsibility. You have so much money tied, and you are under the gun and you have all your reputation out there. You are doing the deal, investors are looking at you, you are to be a leader. You have very strong leaders. So.   Ben Suttles: Yes.   James: Yes, it's a lot of work.   Feras Moussa: Absolutely.   James: So, kind of back to value add, right? So, you guys do value add strategy. So, what's your, what do you think is the most valuable value add?   Ben Suttles: I think, ultimately, what tenants care most about, right? I mean, whenever you're doing value add, unfortunately, you have to cure a lot of [inaudible 42:52]. You have to do a lot of things that you not going to get the best return on your investment on. But the two things that tenants care about, first being their interiors. So, what was actually in my unit, the second thing that they care about is amenities, right. Probably a distance second. Most of the time with the workforce housing, they're caring about what their units look like. And I think that's where you're going to get the best return on your investment when you're doing value add. And then you can obviously update and add on amenities as a secondary thing to that. But unfortunately, with those value adds, you got to do things like roofs and HVAC replacement and other things that just people just say, hey if I'm renting from you, I expect that to be working. So, you know, but you might be spending a hundred or two hundred grand on some of this stuff, right? So, your return on investment is almost nothing, but you have to do it. So, you've got to balance those two things, right? You've got to work in curing that deferred maintenance along with how do I push the NOI and the revenue side by, really updating the property for the way that the tenants are looking at it. So, I mean that's kind of how we look at every value-add play that we do. A combination of those two things.   Feras Moussa: So, James, is your question really specific about ROI? Like what are the things that we putting kind of deferred maintenance aside, what other things would we do to really try to maximize our return?   James: Yes, other than deferred maintenance, like the roof and all the big stuff [crosstalk 44:21].   Feras Moussa: Yes, so I mean it's, its properties specific, right? It's really depending on the asset, what it looks like currently and what is the market doing right now? That said from our experience, right? The most common thing, flooring, two-tone paint, right? And pimping out the kitchen some degree. Right? And you can go as crazy as replacing all the cabinets or you really replacing the front or even just putting fixtures, right? Like for us, fixtures are definitely cheap. Easy to do. It gives a different, pop to the thing, right? Flooring almost always, painted and really two-tone paint. It's important. And the other thing too that we like to do is really putting a backsplash. You can do backsplashes with this kind of stick on backsplash, really, really cheap to do per unit. And it gives the kitchen, which is usually known the seventies, eighties build kitchen, a bit of Pop, right? It gives it something to modernize it. Right? We didn't go as far as putting granted in. Right. But you are putting that in kind of coupled with a resurfacing. It actually looks pretty good. And then, the obvious is white and black appliances. Right?   James: So, let's say--   Feras Moussa: And that's all, white, black or aluminium.   James: Let's say how the interiors, right. So, let's say you guys lost for some reason you thought you had 100% of your interior budget, but now you need like 50% of the budget. What would you focus on, on the interior?   Ben Suttles: Yes, if the property needed any flooring or paint. Right? [crosstalk 45:38] Those are important things to think.   James: Okay.   Feras Moussa: Yes, I mean, you got appliances too right, but I mean appliances, you're going to be two x in your interior budgeted, just adding those in. But a lot of people they take, there's a price difference between white and black appliances are really not, but there's a perception that they're a little bit higher quality. So, you can even do that too. Right? You got to replace the appliances, but you don't have a whole big budget for that. You can just go from white to black to and I think that adds a nice pop too.   James: Yes, that's a really good point. I mean I realize a lot of times if you give them even white, really nice appliances, people are happy. Right?   Ben Suttles: No. Yes, you can do, right. It's-- I mean, but like, you'll see people like, they're just ecstatic that they've got black appliances. Right now, the market is about the same in terms of pricing.   James: Correct.   Ben Suttles: So, but it's just a perception thing or just, like I said, backslash 150 bucks.   James: Yes.   Ben Suttles: [crosstalk 46:38].   Feras Moussa: Let me turn the question around to you, James. Would you, the same question to you, right, would you do the same thing, or would you do something else?   James: So, we, so for me, I think my most valuable value add would be just giving them good management, right? So, there are so many bad operators out there, which is mismanaging not respecting the tenants, not taking care of it. So, we just want to make sure, really good management that's on the management side. But if you go back to the interiors, I would say, of course, we do the appliances and we do the painting and flooring. That's what we would, I would say the most, so, but I think, a lot of people just love having good management people who take care of them. Everything--   Ben Suttles: Oh, absolutely. I mean, they want to feel comfortable and who miss their right. People that understand what's going on. I mean, that's to me, and that's why for all of our properties, we're big people, putting, doing parties, doing tenant events, pretending retention vents. Because from the operations side, right. This is, you have the backdoor and you have the front door, right? You don't have people renewing, right. You're going to have delinquency problems, not a delinquency problem, you're going to have an oxygen problem, right? And so really keeping people happy, renewing, right. Well, then it makes it easier on the front end to start the push friends, right? Because you have people that are enjoy working there, living there. Right. You know, for another 10, $20. Sure enough, it's more than the cost of moving. Right. And so that's absolutely.   James: Yes. I think at the end of the day the tenants just want to be felt appreciated. That you just-- so many properties out there. You don't have to be being mismanaged.   Ben Suttles: Yes, clean, quality, safe housing, man. I mean, it seems so easy and the way that I describe it, but so many operators, I've just run some of these properties in the ground and they don't take care of it. Right? And so, the tenants, therefore, don't consider home and they don't take care of it. So when you get a good operator, I know you get a good management company in there and they showed that they're taking care of the property, then by default you're going to get more loyal 10 tenants, you're going to have people that are going to be more apt to take a renewal increase, cause they like, they like coming home again. Right? It's home.   James: Yes.   Ben Suttles: Versus just a place just to sleep.   James: Yes. Yes. I think one of the episodes, maybe episode five or six, I interviewed, Addie Lauren from California strategic alliance and he had been doing this for 30 years, more than 1 billion in a transaction. And he told me very simple, clean, basic and functional quality is what his motto is that's it. Right?   Ben Suttles: You don't have to get; you don't have to be creative about it. Right. I mean, you know, the space that we plan is essentially workforce housing. I mean, across our whole entire portfolio, our average rents are less than a thousand bucks, right. So, folks aren't looking for crazy amenities and crazy things even in their interiors. They just want a good quality place to come home to and then, and the management side is a big piece of that too.   James: Correct, correct, correct.   Ben Suttles: Yes, she bought up a good point.   Feras Moussa: And then another thing too with good management, right. You get lower delinquency. So, for us, I mean that's night and day. We had a deal that we, one of our heavy value add deals where essentially where we were, I went back and looked at numbers July versus where we are today. We have three times more revenue collected than we will, we did before total, like literally straight revenue you and that's a combination of, cutting back the delinquency, bringing units, align, updating. But I mean, it’s, once people know that it's, someone taking care of the property and enjoying it, people want to stay there. All right. People are eating $200 rep push because guess what, this place has been completely turned around. It's more family oriented and even just bringing more families on board helps to come back for delinquency. So, for us really looking at how do you build that community and some people really cheap about it, but like, hosting these parties is you, I mean, do the math, right? How much does it cost to go get a hundred hot dog and a hundred burgers? Right?   James: Yes.   Feras Moussa: I mean it's very, very cheap, right? To be there and grill it out, have like a little patio, you know, a party, whatever it is. These things are almost, you know, half of the units rented a month, right. It's kind of thing. And so, they're almost rounding errors, errors where we are, but guess what? It changes the dynamics in the property. And so, I mean, some people don't really-- people are very short-sighted. I see. And really it has a much bigger kind of longer-term impact.   James: Yes.   Ben Suttles: And I think going along with the value add, right? I mean, you know, a lot of what we're doing is repositioning the property too, which is kind of where you're going with this James. Is bringing in better management. You're getting a better tenant profile at the same time too. So that's part of the value-add strategy as well, so once you, and once you show them that you care, you've got tenants in there that care than the properties just starts performing. There's a whole-- the energy shifts are palpable. Do you know what I mean? You go from a bad energy deal to a very good energy deal and you have less delinquency. Yes. Better occupancy people more apt to take a renewal increase and you can, you can rent that out more easily because people that prospective tenants that are walking around fuel that same thing too. So that's a huge part of what we do. We don't like to focus the value add just on the what the aesthetic of the property to, it's how you manage it and tenants that you have in there as well. A huge part of it.   James: So, you guys operators, which is the definition. What I mean is very active asset management because you know the details of what's happening on the side by side. Right. So, is that a correct assumption? Right? So.   Ben Suttles: Absolutely.   Feras Moussa: Yes, absolutely.   James: How do you guys manage this third-party property management companies?   Feras Moussa: Man, that's, that's part of the secret sauce. But I mean, it's really is nothing to it. There's nothing secret about it. So, we have an asset manager now that we've brought in who very experienced, 20 plus years if families a property, he manages family really. And so that's starting to help, but we plan to keep a pulse in general on what's going on in every deal. And so, for us, it's really about putting systems in place with each of your property managers, right? And having accountability. Right? And so, we have not brought in property management in house, but we've been successful with managing our property managers. Right? Yes. And it's a partnership, right? It's not like they're your employee. You really need to get on the level of like where they understand like, hey, we're partnering, we're growing together. Right? And so, they've seen that, and you know, yes. Identify the good property managers from the batch. So, there's a whole betting cycle. I don't want to get too far into, but really, we have the weekly calls, we have the weekly reports come in at a certain time. We have certain expectations that within a few days we expect them to follow up with hearing all the action items and did these all get done? Yes or no? Why not? Right? And how do we, I can keep them accountable, so.   Ben Suttles: Yes, it's all about obviously keep it to an agenda, keep into the processes that we put in place to templates and checklists. And we're very upfront when we get into a partnership with these property management companies that this is what we expect, that this is when we expect it. Right. And then we, like we said, we keep them accountable through--   Feras Moussa: And this is the format that we expect, that these are the numbers that we need and sent out.   James: Okay.   Feras Moussa: Just to help us track everything the way we want. And then you learn from it. Right. We're not perfect. It's not, it's an iterative process, right. Anytime we identify something that we can improve from one property manager, we applied to the portfolio. The nice thing is really is that having different property managers, we see the strengths and weaknesses of each property manager and you figure out how do we make them all better and so what things can we do across the board to make everything better?   Ben Suttles: Yes.   James: So, can you name like three things that you guys always look out for in the property management performance? When you realize that someone of these three things is not going well, things are not going right.   Feras Moussa: Oh Man. I would say renewals is the lowest hanging fruit. Look and understand what's going on in renewals and how important it is because early renewals are indicative of a lot of other things. Are they following up with tenants for the renewal? Right. Did they really? That's just a-- that's the number that you can kind of look at and realize that there must be other problems going on. I would say that's my answer. I don't know about you, Ben.   Ben Suttles: No, I think, yes, I think you're right, man. Totally. Yes. I think my biggest, my biggest hanging out in delinquency because it's like that's the properties money. Like you know, go out there, how are you going to collect the rent that is owed? And so, when you start seeing that slipping and we're increasing, that's my big red flag that hey, there's something going on here, right? As our management on site, not, not doing their job, or are we getting bad tenants in there that aren't capable of paying the rent that we're asking of them may be what's the, there's a, there's usually a bigger problem going on, but yes, I mean all of these, these metrics we expect on our Monday morning report. And so, we're looking at each of these things weekly and we're also having follow-up calls throughout the week to either our asset management or asset manager or us or having calls with the property manager to track these things. So, it's not like a weekly thing. And that we don't have any kind of insight into what's happening for the rest of the week. If there's a challenge, we're having a follow-up call that week about it as well.   James: Okay. So, do you convert like renewal to percentage and look at, give that as a goal, that what you guys delinquency at two percentage and give that as a goal?   Feras Moussa: It's a balancing act depending on how hard you're pushing. Right? So, it's not like you can just say, hey, we expect 50% renewals across the board. I think it's really, it's deal specific and I mean we're looking at renewals, we're looking at least as we're looking at delinquency, right? We're looking at how much traffic came in versus how much leases got closed and then going in and really both on leases, we didn't close. What's the story? What's the story? What's the story? Sometimes there are cases where you, maybe you, no, you can go save that, that person. Similarly, on the delinquency, we go through what's this person's story? Are they going to pay? Cause really in Atlanta, our delinquency is higher than it isn't and Texas, right? It's just by nature of the market. And so, you, you kind of need to be more flexible in one market versus the other. And so really go through and understand what's the story behind me. Just like whenever we, you asked me earlier about the properties, how we analyse it, you're looking for that story. And so, we talked through each one of these and figure out what makes sense to kind of do moving forward. Because to us, it is very different between different properties.   Ben Suttles: Yes, and I, I would say targeted for delinquency, right? It's always zero. And do you know what I mean? So, the property management companies will say, oh yes, we got zero across our whole portfolio, I'm like, yes right. Do you know what I mean? Not, not the workforce housing stuff. So, you got to be realistic. But I would say your target, there's probably one to 2%, you know, on a stabilized property if you're dealing in the workforce housing space that we are and so that's usually the metric that we're pushing towards. But on the renewal side too. One thing I want to point out, right? When you're doing a heavy value add and you've got a lot of interior budget to kind of burn through and you have units that you need to update too, right? You're not going to be chasing after those folks as aggressively as you would on a stabilized property because maybe you don't have a lot of down units are a lot of vacancies and you need to free up, you know, units actually update them, right? So, you're not going to be as aggressive in renewing those folks. So, we've been able to connect like Feras says, right? I mean, you don't want to, you're not going to burn that bridge completely. So, you're constantly looking at occupancy, versus how much, how many units are we supposed to be turning a month in order to hit that target of, 60, 70, 80 units a year. Right. Because people have, people aren't moving out. What are we going to do? We can't sit on the money and there's usually a finite amount of time that we can, we can actually use that cash. So.   Feras Moussa: To expand on Ben's point too. It's almost like, we have a deal where we almost went the opposite. We don't want renewal. And what I mean by that is that one of our deals in Atlanta, we've pushed rents an insane amount on this deal. Like we're probably up 30% honestly, you know, 30 40% and we still have 98% occupants are choke when they're property managers at one day on the call, it felt to 97 and a half. And then, we called her out on it like, Oh, you're at 97 and a half, you're not a 98% anymore. And she's like, no, no, I just had someone who fucking renewed. She's back at 98, but in that deal, we have interior budgets that we need to go spend. We were literally just sitting on the side-lines. Right. Trying to, so you were kind of that balancing act is because we knew what was below market. Right. And figure out, where can we land on to where we have some people not renewing and we can go in and actually spend the money to even get, you know, that better push.   James: Yes. I think you need to look for where is the base rank, where's the base rank before you really go and spend all that rehab money. Otherwise, you can't be spending, spending, spending.   Ben Suttles: Exactly.   James: You don't know where's your base. Where is your starting point? Right. So, yes, I've had properties where we didn't even spend, we have the money yet, but we already bumped up just because people like it just because we are just a better operator than the previous guy. Right. So, --   Ben Suttles: And you'll get that. Right. Do you know what I mean? You'll just, you're amazed that how much they'll take it on renewal too. And that's great. You know, I mean, I just think it's a balancing act sometimes, but yeah, you have that, you have to kind of see where the market is and, and obviously be strategic with those dollars as well.   James: Yes, correct. Correct. That's right. So, can you give us some advice on how do you choose third-party property management? Because you guys are going in multiple markets, right? How would you give them expectations? Because a lot of, I'm sure a lot of property management company don't like, active asset managers. I couldn't control, [inaudible 59:57] I guess.   Ben Suttles: Well, hey now. [crosstalk 01:00:01].   Feras Moussa: Ben. I think, yes, I think.   James: [inaudible 01:00:04].   Feras Moussa: Well I will say though all of our property managers literally, you ask them, they say we're one of their favourites.   James: Oh okay.   Feras Moussa: So, let's not because we're active or inactive. [crosstalk 01:00:15]. Well, it's, we're doing maybe some of it, but it's more so that we're realistic. Right. I think what I was surprised to hear from them as a lot of people will just sell their property may, here's your budget, here's what you have to go, you know, accomplish. And sometimes it's not realistic. Right. I said before any of your deals because we've already worked on a budget with a property manager, we have an agreement on what that looks like, what the plan is, and we're not just picking numbers out of a hat just to make our deal work. Right. And really kind of do it the other way around. And then, yes, whenever issues come up, we're both, I mean, I hope people on the audience, I get this impression. Ben and I are pretty level headed, pretty easy to work with. And so, they understand things happen. And so, the property management companies, at least they enjoy because we're easy to get a hold of. We understand what's going on the deal. And we're realistic. And so, because I've asked them and pretty much all of them have said that we're one of, we're one of their favourites. Right. And so, --   James: Okay.   Feras Moussa: Now, that said, maybe to answer your question, Ben, do you want to answer? Do you want me to answer?   Ben Suttles: I mean, I, I think, I mean, you've got to be stern, but at the same time, you can have a friendly relationship with them at the same time. Right. But I think it's all about setting the right expectations and just betting them in general. I think it's, it's all you usually start off with referrals. Right?   James: Okay.   Ben Suttles: But I think some of the big things are as, go take a look at some of their properties too. Go secret shop those deals, so you're going to say, okay, hey you, you're a good referral on whatever market. Right. Give me three of the assets that you, and then you fly out there and you go shopping. What does the property look like? Is it clean? Is the management, is the leasing agent and the manager, are they friendly, are they knowledgeable of the property? Are they good or are they leasing it properly? All of these things go back to the property management side and, and as long as that's, that's kind of coalesces with what you've heard about them and everything. That is good. Obviously, the fee has to be online and those roles have, the references have to be there. But I think the biggest, the biggest asset test for us is, vetting the deals that they currently have, and do we like what we see, and they call them out, right? I mean, if they don't, if there's a deficiency saying, hey we went to Xyz property and there's trash on the ground, what's the deal with that and then how do they respond to that? Because that's going to be, -- there are always challenges, but it’s how you respond to those challenges is what I'm looking for on the property management side.   James: Yeah.   Feras Moussa: And then a couple of things too, just to add, I mean it's about what's kind of, what's the impression and feeling you're getting from them? Right. And, and working on a budget with a property management company is actually a great exercise to understand how they look at things and how are they going to meet what you're looking for. And I mean that in multiple, always, right? A, are they, -- is their budget realistic? Right. And B, is there pushback? I mean we actually like when they push back, right? If we say, well we think we can run payroll at x amount and they're like, well no, payroll is going to be this amount. Here are the 10 properties we have nearby to prove it. Right? That's good. Versus we've had property managers that are essential yes people, right? That'll say yes to everything and that's not at all what you want because we need something realistic. We're not trying to, we have millions of dollars at stake, we have other people's money. We're not here to just take a gamble. So, looking at that and kind of what we've found success in is really the people that are in that five to 15,000-unit range, right? The 40,000 guys in too much, they don't care about you. The guys that are smaller, there's just a lot of them. You know this first-hand. There's a lot of back offices that need to happen for a successful property management company. Right. And so, we found that sweet spot seems to be that five to 15 and then to where there our portfolio is enough volume for them, right? That we kind of get that professional preferential treatment where needed and at the same time, right, they're developed enough to be able to, kind of take on and succeed with it.   James: Got It. Got It. Very interesting, very interesting. So, let me ask some question about more the personal side, right? So maybe each one of you can add in on your own site. So, what's, what do you think is the top three things that are the secret sauce, for the success that you guys have been having in terms of closing deals?   Ben Suttles: All right. Go for it man.   Feras Moussa: Partnerships and relationships, right? Most important, first and foremost, right? Being willing to partner with brokers, property managers, other partners, partners, right? On the GP. People that can help us, would the deal, right? Whether it's helping with construction, hel

James:  Hi audience will come to Achieve Wealth Podcast, a podcast where we focus on value add commercial real estate investing. Today we have Devin Elder from San Antonio, to be part of our guests today. Devin Elder is principal of DJE Texas Management Group. Since 2012, DJE has completed more than 200 plus investment transaction and has an ownership stake in more than 1000 units just in multifamily in central Texas. Devin, why not you, tell about yourself, whatever I've missed out.  Devin: Hey James, thanks for having me on, appreciate it. There are a lot of details in there, a lot of ups and downs and learning and all kinds of things that go into these deals. As you know, I started out in the single-family world, same as you and I never really left it. I mean, I've been doing single family since 2012 and then a few years ago, was able to find a really great partner, a younger guy with a construction background and I was getting busier in multifamily. So I said, rather than just kill off this revenue stream in a single family, I would just bring on a partner, have him run it. And I and obviously my company too and we still run it, so we still do a lot of single-family but me personally, I'm focused about 90% of my time on the multifamily business, it's what I do today.    James: Okay, good. And you are a native San Antonio, right? Have you lived there for forever?    Devin:  Yeah, more or less. I mean, there are some times throughout my life when I didn't live here, for a few years here and there, but yeah, for the most part, I grew up here. I graduated from the University of Texas in San Antonio, went to high school here, the whole thing and now I'm trying to buy as much of it as I can. And it's really funny because there are areas in San Antonio, I'm 40 years old, so I'm going, man, for 40 years, this area is not good and now all of a sudden, the hipsters want to live there or whatever. So we're like buying these houses and selling these houses in areas that are coming up for the first time in my lifetime. It's really interesting to see, and you know how much it's changing here. I mean, you've got to frost tower downtown, you've got the Pearl massive development there, you've got cranes in the sky and in downtown San Antonio for the first time in a long time. It's good to see.  James: Yeah. Yeah. I remember my time when I started in real estate.  I'm from Austin, San Antonio. It's like one to one and a half hour drive. I mean we've got northeast one and a half hour drive and it's crazy on the price difference between Austin and San Antonio and the demographic difference.  I remember someone telling me because I was looking at deals in Austin and at that time deals in Austin was like, you know, when I look at single family homes and it was like 100,000, 120, in downtown, it's busy. And at that time, I had a limited amount of money when I started out, I only had like 50,000. I thought, okay, maybe I can buy two deals here but I want to grow very quickly.   And I went to talk to someone, he said, why not buy in San Antonio? I said, I'm not driving there for one and a half hour then. And then, at that time it hit me like a brick because hey, I'm just being lazy not driving that to buy more deals. I mean, you want success in life, you have to take that drive or drive one and a half hours, nothing. Then I look at the prices in San Antonio and I realized the amount of equity that I can generate. By buying in San Anthony, I can buy like six to eight houses there compared to Austin, which is like two houses.  Just because it's a lot more cash flowing deals in San Antonio, there's not much of appreciation play with the now things have changed, but it's just a lot of houses at that point of time, its a much larger city, more cash, was a lot of diversity there and that's why I started driving to San Antonio almost every day, not every day. I think a lot of times on the weekend, after work, we used to drive to go see houses and start buying houses there. So what'd you like about San Antonio? You have been there and what do you see in San Antonio that     Devin: Yeah, yeah. I mean, I like it. I've got a family and it's a great city to raise a family in and there are lots of family activities from a real estate investment perspective. Historically, we've been fairly slow and steady, right? So we didn't really see a big upset in values in 2008, it just kind of went flat for a little while but historically we haven't seen a tremendous amount of appreciation either. Just kind of slow and steady is the name of the game. That's heating up a bit in the last few years and it's changed, but still relative to markets like Dallas, Austin, San Antonio is still relatively quiet, relatively lower costs and some of these assets, especially like the multifamily stuff so that's good. I like this market and investing here for just kind of the long haul, just kind of slow and steady increase.   Really, we've got some good fundamentals in terms of employment. We're not wholly dependent on the price of oil or one sector; we've got a lot of military here, we've got a lot of medical here for sure. San Antonio is trying to get our tech sector ramped up and there are some local entrepreneurs and some of the guys that were a part of Rackspace and left Rackspace, are really doing a great job building technology companies and software companies here. It's very early stages, but I think in the future that does really well for San Antonio when we can start to grow some more technology companies here. So all of that is I think, trending well for San Antonio. And then just looking at the net positive migration numbers, right? How many people are moving to San Antonio.   We're still kind of a workforce housing town. Just because people are moving here doesn't necessarily mean that they're the super high wage earners or whatever. But it's a good metric that you look at when a lot more folks are moving here than leaving. And in the space we play in, workforce housing B and C multifamily, those folks are going to continue to need housing and it's really impossible to build a 1980 200 unit apartment complex, the only stuff that gets built is brand new. So there's kind of a supply constraint there, which I think plays well with the business model.    James: Got It. So yeah, often to San Antonio corridor, it's a huge growth corridor up from what I see. I mean, Austin with the high tech and the high cost of living a lot of people are going in between, Austin, Kyle Buda, San Marcos, New Braunfels, and San Antonio So it's just expanding in a huge way. And if you look at San Antonio, I think that's the closest city to the border, to Mexico; closest biggest city if I'm not mistaken. And the I35 is considered the NAFTA highway, which is good because that's a lot of business going between the US and Mexico. So what are you focusing on right now in real estate? Can you tell me your real estate focus now and we can go into the details?    Devin: Yeah, so I mentioned I've got the single-family business, which is very active. We do flips and things like that. We're building some houses, different things like that going on. But really, as I mentioned, my focus is multifamily. And really, we've got a really good team for all the parts of the business that happens; underwriting and acquisitions and asset management and those kinds of things. Me, personally, I'm really focused on the equity side and putting together equity for the projects that we buy and then the acquisition side. So really going out there and looking at every deal, underwriting every deal, touring every deal. We're focused exclusively on San Antonio. I mean, I've looked at some stuff. I own a property in Seguin now, which is about 45 minutes outside of San Antonio.  We look at properties in New Braunfels or San Marcus. I don't get up to Austin just because I haven't seen how stuff is going to pencil on the acquisition side up there. But also we're really busy in San Antonio. I'm looking at as much stuff right now as I'm happy to be looking at and touring and underwriting just by focusing in this market. So really we're looking for stuff that's over 100 units, 150 plus units, that type of thing that we can buy and do some kind of capital improvements; four, five, six, $7,000 a door of capital improvements. And that kind of run the gamut from just deferred maintenance to sprucing up the outside of a property. Maybe there's a rebrand or maybe there's kind of a management or operations issue, we can go in and fix. Something that we can go in and create some kind of value. Because at the end of the day, it's all investor return driven. So when we look at deals really like the one thing I look at in our underwriting, it's what's the equity multiple over our whole period, you know, are we gonna be able to double people's money in five years? If not, then maybe that's something that we pass on. And then if you do that, if you look at the equity multiple of around two, then your IRR is typically going to be high teens and your cash on cash probably going to be somewhere in the seven to 10 range over the whole period. So the cash on cash numbers kind of work themselves out and the IRR, we're really just looking to see is there a way to add some value cut expenses, improve our rental income by making some improvements and so forth and just hold onto these things. We like a lot of sponsors, underwrite typically five-year-olds and just go in and execute the improvements over the first year or 18 months and then just kind of hang on to the properties and try and grow that portfolio.     James: Awesome. So what's your favorite value add strategy? I mean, I think you have given a lot of the value add deals, right? Why not you describe some of the few deep value-add deals that you guys have time done and we can go into a bit more details into that.   Devin: Yeah, yeah. There's a property right now that we're actually just kind of coming out of our cycle on, a pretty heavy lift and there was a lot of section eight in that property. And then there was also some weird units where they were calling them three bedrooms and four bedrooms, but it was really two one bedrooms on top of each other and they put a spiral staircase in between. And so that was kind of a weird deal where the property was originally built as a much larger property so we went and changed it back to the larger property, basically adding units and then changing it from an all bills paid property to none of the bills being paid by the property. And so that was a pretty drastic repositioning of that property where that's tough to do and there are a lot of moving parts. It's not like just going in and making some little improvements, it was like completely re-characterizing this property as a market property versus like a lot of sectioning that was in there.   So that part was definitely a challenge. Fortunately, we budgeted well for it upfront. A property like that you want to leave a nice fat contingency number in the budget because you can go through and get all your inspections done but we know in real estate, especially old stuff built in the 70s whatever it is, that there's just going to be stuff that comes up there. So you want to be well capitalized. Fortunately, I've been in construction for a lot of years on these single-family houses, I've seen absolutely everything you could imagine, where we just spent $100,000 renovating one house. So it's like we've seen and done everything and so none of this stuff really surprises me. It's just that on the apartments you gotta watch out for things like $100,000 plumbing bill that could come up if it's a really old property or different things where the rehab numbers just get bigger.  But yeah, as far as value-add strategies, I mean on that particular property there was a lot to do. The stuff we're looking at, it seems like lately more now it's really just about kind of doing some interior updates where you're putting in kind of the classic vinyl plank and two-tone paint and new fixtures and then doing what you have to do to the exterior. Or sometimes that's a rebrand. My favorite exterior thing is the solar screens because it might be like 10,000 bucks for a whole property and it like completely changed the look of the property. So I always want to put those on if a property doesn't already have them.    James: Yeah, that's interesting. I mean, I love the solar screen is just I've tried to kind of put it in my properties but haven't gotten a chance yet, but I know the money you spend, it really gives you the exterior look that is very nice, a very clean look, rather a very sharp look of the property.      Devin: Yeah, and then it hides the blinds and it hides all kind of covers a multitude of sins. So I like doing that where possible, it has a nice impact. And I think like aesthetically it has one of the biggest bangs for the buck. You know, if you try to go paint a whole building that's going to be like ridiculously expensive. And you know how much you can on that but it's tough sometimes.    James: Correct. So let's go back to that. A property where you have to do a country Gresham change, right? Because that's a major change, right? And changing from all bills to bills paid, that's another major change. And are you eliminating section eight people and getting into a conventional market as well?    Devin: Yes.  James: Okay. That's another big chase. So you're doing a lot of changes in that deal. So how long do you expect to turn around to stabilization?    Devin: Well, it took about a year to get it stabilized and we're there now, so that's changing the bills from all bills paid to nothing. And it was interesting because we didn't really factor in or underwrite like a big huge rent bump. Usually, sometimes you say, hey, we want to do $4,000 on the inside and that's going to be $100 rent premium and so I think that is like $1,200 a year divided by 4,000, you're getting a 30% ROI on your interior upgrade if you spend 4,000 and you get $100 rent from rent bump. That's kind of like a typical underwriting ROI exercise that you would do. On this property, we didn't see it on really the rent bumps. In fact, the rents didn't really change a whole lot. But we're taking about, something like $200,000 of utility expense off so it kind of almost doesn't matter whether you're raising rents are lowering expenses, it all drops to the NOI [16:09inaudible}    James: Correct. So you go into that building, let's say the broker takes you to the unit and how do you identify the opportunity?    Devin: Yes. So the opportunity on the utilities was just kind of at the first pass of the underwriting saying, hey, based on the location of the property and what we think we can spend and improve it and rebrand it that we can make this a market property. And then the opportunity to convert some units were actually on the first two or after like we'd done some underwriting and looked at it, and then we started seeing all these funky staircases. And first of all, they just look dangerous, right? I mean you don't see spiral staircases in properties and probably for a reason. And so once we figured out the original layout of the property and said, you know what, we're just going to take these out, add some units, it's going to be safer. We're going to change the unit mix because there'll be more one bedrooms on the property, but we're okay with that. And then a kind of underwrote that and said, hey, we've got a pretty low basis now if we're looking at it as 130 unit property and we're picking it up at this price then our basis is pretty low, we feel pretty good about going in and making those changes. But the conversion opportunity, we didn't discover it till we actually did some walk-throughs.    James: So what about the parking lots and parking spots because that can be a problem with the city, right? Because usually, they go by unit mix.    Devin: Yeah, for sure. Luckily the parking ratio was really very good, to begin with, because the property had originally been built as that higher unit count. So it wasn't like we were building new units on dirt and we're running in parking constraints, we're actually just kind of returning the property to its original setup. And so the parking ratio still is pretty good even with all those units.    James:  Okay. So the guy who you bought it from, he may be the one who had converted by making like, two one-bedrooms into two by twos, I guess?  He may have done that.    Devin: They had it for five or six years. I don't think it was them, it was some previous owner. Who knows how many times it's changed hands. I guess I could go look it all up, but it definitely wasn't the donor we bought from, who knows how long it had been in that state.   James: Okay. Okay. So that's very interesting. So what about on the interior side, is there are any unique value add strategy that you really liked to do that you think is the biggest bang for the buck?     Devin: Yeah. You know, you start to tour all these apartment units and see everything and it's like, man, do they start to all look the same, right? You got vinyl planks, two-tone paint, gray walls, updated fixtures and it's all kinda the same thing, resurfacing countertops so that's all kind of the same. One of my favorite things is those little metal pull bars, you can get them for like a dollar on Amazon. You order them a thousand at a time or whatever. Sometimes we'll re-phase cabinets, but usually, we'll just paint cabinets and instead of the little knob pulls, we'll do the pull bars; it costs slightly more but in the scheme of things, we're talking about a dollar per bar instead of maybe a quarter per knob and it just gives it a nice look. I really liked that look and it's really inexpensive. Another thing that we're doing in a property that we just bought is this stone back-splash and it basically just goes right on. So it's 3D, three dimensional, it looks really good, it looks expensive but it actually doesn't really cost us that much and we do it all in house. We use third-party property management, but the property just bought the stone cutter and they can just go in there and cut it and put it right on and it looks really sharp and that's a nice improvement versus like actually going in and putting in subway tile or something that's going to be a lot more costly.     James: Interesting. I've seen like where it comes in pieces, but are you talking about the whole thing coming together?  Devin: It comes in the 12 by 12 pieces, but it basically just sticks right on. So all they have to do is make the cuts.    James: Got it. Interesting, I need to check that out.     Devin: And I've seen like the mosaic tile stick on stuff, but I don't think that stuff's going to hold up for a while, this is more like stone and it goes right on.     James: Do you remember what's the name of it?     Devin: I don't, I could send it to you, but I don't remember off the top of my head.     James: And how much does that cost to do it?    Devin:  I think it should be costing us $150 to put in.     James: Yeah, that's really cheap, right? Just put it in at 150. A lot of people like the back-splash. And that's very interesting that we can put that in. And I know about the pull ball of the cabinet. That looks really nice as well.     Devin: Yeah, it's a nice easy upgrade.     James: Absolutely. Yeah. Got it. Got it. Got it. So is there any deal that you thought was not a good deal and you walked away and later you found out it's a good deal? And can you describe what you could have done to catch that opportunity?  Devin: You know, I feel that way all the time. You know, I underwrite a deal and then I maybe offer on it and the offer wasn't high enough and we lose the deal. And then I see a friend of mine buy it or something and I'm going, well, so they saw something in it, you know, I couldn't get it to work, but what did they see in it? Or like there was another deal that I was like way low on our offer price, I was like $2 million low on our offer price, which I was like, that's as high as I can get it to underwrite to. And then, I see it come out on crowd street and some firm California bought it and they were like super aggressive on their numbers.  And I'm going, man, this is a big firm, they have 5,000 units, I have to assume they know what they're doing and they're being really aggressive. And so, there's not a deal that I can point to, specifically, and say, oh, that was the one that got away because if we lose a deal, I just move on. I mean, we're looking at so many deals and touring so many deals that I don't really worry about it if we lose a deal, I mean, that's just the name of the game you're going to lose. My philosophy is you're going to lose most of the deals and that's okay. That's just the game. But I do see stuff that we look at and then somebody else buys it and sometimes I scratch my head and I wonder how they're making the numbers work.  So, a lot of that I think, unfortunately, is that we've just been in kind of this market where stuff's been appreciating. I mean, we see that a lot on the single family. Like we buy a project and then we rehab it and maybe we go over on the rehab budget, but in the six months it took us to buy to sell, there's been appreciation and it's like, wow, that's really good when it's working for you, but it's not always going to go in that direction. So I think we've seen a lot of that in multifamily and you have to be very cautious right now in this stage of how long we've seen asset prices increasing and just not assume that that's going to kind of continue forever.  James: Right. Yeah. So let's go to a bit more personal side. What do you think is your top three things that you have inside you that is your secret sauce in becoming a success in the business?     Devin: Yeah, I think early on, it was the absolute decision to make this a success. And by decision, you may have heard that the root word of 'decide' is to cut off, right? So it means to cut off any other alternatives. And I think looking back, it's easy to just say, oh yeah, I just made that decision but it's very extremely difficult in the beginning, getting started without really any money to get started or any knowledge or experience. It's not like my family has done this or I learned this from somebody that was close to me, it was really just going out and figuring it out.   So making the decision early on that this was going to be what I did and it was going to be a success and not being a dabbler. A lot of people want to kind of just try things out and I don't think that's the recipe for success in anything. Like it's more like a marriage. Like you commit to it forever. And so I committed to this early on and put everything I had into it in terms of my resources and my money and everything in it and it had to work right? And when it has to work, I think you find a way to make it work. So that the first one. And kind of the most important thing was just being very decisive about this being what I was going to end.....    James: When did you decide, was it when you were in school or when you're doing your W2 job?     Devin: Yeah. While I was doing my W2 job, I, I did my first couple of houses and I decided because I really wanted to get out of my W2 job and I didn't even know that real estate was going to be it, I just didn't want to work for somebody forever.     James: And do you have a triggering point that at that point where you decided, I'm going to do this full time?     Devin: Yeah. I was fortunate in my first career I worked at a really fantastic company and I had a great couple of years. And then after awhile, I started to get a little bit restless and I thought maybe there are better opportunities. And I started kind of moving to different companies, trying to find the next promotion or whatever. And then, I just kind of discovered after a few years of doing that, that it was the same everywhere I went, every company, it was just the same stuff I had to deal with. And somewhere along the lines I just really kind of discovered that I wasn't going to be happy unless I was an entrepreneur unless I was calling my own shots. So that was really the catalyst for me to say, I have to get out of here. My older brother is an entrepreneur, he has been his whole life and I have always appreciated the level of freedom he had, even if other things were crazy. Because as an entrepreneur, there's definitely some crazy stuff, like you have to be on board for that, but I'm definitely on board for, I think I'm just cut out to be an entrepreneur and now that I am an entrepreneur, I'm much happier. So it was finding that vehicle, I didn't know that it was going to be real estate, but I knew first I wanted to be an entrepreneur and then I figured out that real estate was going to be it.    James: Any other thing that you think is your secret sauce?   Devin: I think, finding people that are really good at things and giving them tasks. Because as an entrepreneur, you wear so many hats. It's really important for me to, once I figured out one little process that I give it to somebody else, right? Whether that's like editing my podcast or doing my underwriting, it's like I can do all these things but as a CEO of a company, I shouldn't be doing any of those, I should only be doing a handful of things. And I think it's very tempting for people to spend hours, let's say, underwriting a deal or pulling apart a financial statement on a T12 of a property. It's like, well, you can find really good people to do that, probably better than you, and then you can focus your time on other things.   So I'm very big on a dollar per hour activity and I keep spreadsheets and everything to track all this stuff of what are the highest dollar per hour activity, things that I can do and I need to find somebody else to handle all the other activities.     James: Awesome. Awesome. Is there any proud moment in your life where you think you are really proud of in real estate ventures?     Devin: Yeah, I mean, quitting my day job was a big one. I mean, I was very, very proud of that.     James: At the point of quitting or after a few years after quitting?    Devin:  No. Definitely just getting to the point where I had enough cash flow and everything to be able to quit my job. That was a very big step. I'm very proud of some of the renovation work we've done and this is like single-family and multifamily, but there are hundreds of properties in San Antonio that are like nice properties now because of the work we did, you know? And so we're not buying nice looking properties most of the time, we're buying properties and spending 1 million bucks on making them nicer. And so that's pretty cool to be able to do that. And that's having an impact, even a small impact, on the city that I live in and I love that.   And then now as I've been in business for a while, giving other people some opportunities, you know, whether that's some of the people that work in my business, giving them an opportunity through the company and giving investors an opportunity. So many of my investors you talked to, they didn't know they could put money into a deal like this and make this great return and not have to do any work. And it's like, people just don't even know that it's an option, you know? And so to be able to have people participate in that is really very rewarding. So I'm very proud of like the renovation work that we've done and we've raised and return millions of dollars of capital at this point and that it feels very good to be like a good steward of other people's money, I'm very, very proud of that piece, probably more than anything.     James: Absolutely. I think it's very fulfilling taking a distressed property and changing it. I mean we did a lot of single-family and now we're doing multifamily, but we remember one of the flips that we did, we bought like 42,000 if I remember correctly, and sold it for 140. But we also put like 40 to 50,000 into it but that was a complete change in the house and until now I can remember that house and how it was when we left it. And even when you're old, I'm sure I can drive by that place and say, you know, we flipped that house to look as nice as right now. So, yeah, it's very fulfilling.    Devin: Yeah, it is. I was driving around the other day and I was in this part of town called Beacon Hill, which is like this big up and coming area of San Antonio is kind of on a little bit northwest of downtown. And I don't remember what I was doing over there, I'd met somebody for lunch or something, but I said I'm going to drive down the street where I flipped a house and then I just drove by it, it was like two years later, oh, the house looks good. And I said, you know what, I flipped another one on the other street. And so I drove like four or five houses in that area that I flipped at some point over the last couple years. I said, hey, we did a lot of houses and you spent a lot of time and money and energy over here and it's cool.     James: Yeah. It gives you a lot of happiness inside you. I mean, what are the habits that you think that you have mastered or want to master that you think makes you a very successful entrepreneur?    Devin:  It's definitely systems. So I'm very naturally inclined towards putting together systems. So I like to figure out what a process is and cut it down, anything; whether it's the acquisition process on multifamily or any part of the business.  I like to figure it out, boil it down into stages and then within each stage, go down the steps. And then I like to really document the steps and to give them to other people. And that's really the key for me is I take a process, really spend time breaking it apart and then figure out every single little minute step. I have like a standard for creating training and that is I want to be able to take somebody who's walking down the street and pull them into the office, and if they can read and write, they'll be able to do the task the way that I'm training them, right? So very simple. And I think about McDonald's like as a good example, not that the food is anything great, but the systems are just tremendous, right?   Teenagers run McDonald's, right? It's a tremendously successful enterprise but the systems are so important. So I'm a big systems guy and that's kind of the thing that I'm always striving to do. Is anytime I'm doing something, I go, can I systematize this and automate this and give this to somebody else? And so, that's something that I'm focused on all the time. Now there are some things you can't, so like broker relationships, face to face time, things like that. Like there's no automating those things and that's okay but I want to automate and systematize everything else so that I spend my time, my very short time and energy on the most important things. So definitely just being disciplined about creating those systems and it's difficult but if you can be patient and create one little system or process and automate it and you extrapolate that towards the future of how many times this little task that takes me five minutes, if it's off my plate for the next thousand days, how much time is that going to save me? So I'm always kind of just trying to fine tune that and really segment all the pieces of the business and get them into the hands of people that are the right fit for whatever task or job it is.    James: Yeah. That's something that I'm learning to try to do as well. I mean, my wife and I, we are such a control freak in our business and we want to make everything perfect but it's basically impacting our lives. Because now we have to try to do everything. So as we grow big, right now we have like 30 employees. We recently hired people on the corporate side to help us and it is becoming much better now, but still, it does just take time to really give up that particular work to someone else. And the way to do it is to create systems and process and manuals and all that. So we are actually learning how to do that right now. So it is a very hard thing to do, especially when you grow from small to big. Unlike you go into a big organization, you already know everything is set up but now you're going from doing it yourself, but now you're to delegate to someone else and the understanding that the other person may not do it as how well you can do. And you have to understand that and live with it.    Devin: Yeah, it's a very tricky thing and that's business. It's tricky because you are an equity owner and you would do anything for the business. And then you've got somebody at $12 an hour that's just not going to, you know, if you gave them half the company, they'd work as hard as you but you're not giving them half the company. You can't give everybody half of the company equity that's not how it works. So the way I try to approach that is just creating really, really clear training. One of my assistants is overseas and it was very frustrating for me at first to work with her because I couldn't just like say, here's the problem, just deal with it. She just didn't have that skill sets and just fix it. But I started really creating very specific training on step by step, by step by step. And not only did that make it easier for me to understand the process, but it made it easier for her to understand and everybody was happier.   And so, we use something that a friend of mine turned me onto, it's called Loom and it's a browser extension and for recording little videos. And so there are hundreds of videos in my organization for how to do everything. And so that allows me to kind of give it away and if I sign a task to somebody or there's an automated task, it also includes a link to the training. So if they haven't done that task in a month, they get the task but Hey, there's also a link to a three-minute training, which anybody could learn for that little task.  And over time, instead of like building a operations manual, which to sit down and write would be murder, right? It would just be awful to sit down and write the whole thing. I basically have built the operations manual one tiny task at a time and put it all in a spreadsheet that's by the system, right? Whether it's the accounting system or the marketing system, whatever it is. And so there's this whole library of content basically to how to do just about anything in the business. And so it's been a hard process getting all that going. But, again, the freedom that comes from--it's still me dictating, this is exactly how I want this thing done; I set it up and then transferred over to somebody else, one little task at a time and just have transferred hundreds of tasks over a few years of doing that.   But yes, it's difficult because nobody's going to do it as well as an owner or cares as much as an owner, but there are just inherent limits there.     James:  Yeah, absolutely. Absolutely. Let's go to another one more topic. Let's say a Newbie who wants to walk your path and be very successful in real estate, single family flips and now into multifamily; what are the 3 to 5 advice that you would give them to get started in this hot market?     Devin: Yeah, it's definitely a hot market. I would say, the number one thing is don't try to do this yourself. Like all yourself, there's too much, right? I mean, this is a business like any other business and you wouldn't try to just go open up a dry cleaner and say, hey, I have zero experience in this business, but I'm going to go open a dry cleaner and it's going to make money, right? There are too many things you don't know.    So like in multifamily, the underwriting, the broker relationships, raising capital, asset management, renovations, all those things are like big topics, where there are lots of variables and you're not just going to learn that stuff overnight. So I think somebody who wants to get in, don't try to do it yourself, but you can partner with somebody that's done it and try to add value to them and be a part of a larger deal. That's kind of from where I sit now, what I wish I would've known kind of earlier on, that you can partner with somebody on a bigger deal in various ways. You've got to be able to add some kind of value to somebody that's further down the path. And if you can do that, then you can get on a larger deal, but you don't have all the responsibility on that project and then you can get in that world and start learning through doing. Because I think we really do learn through doing. And so, that's kind of what I would recommend is, don't assume you have to go out and do it all yourself because I think that's just a recipe for frustration and potentially, for disaster.    James:  Awesome. Awesome. If there any funny stories from residents or tenants that you want to share with the audience?     Devin: There are so many.     James: Choose the funniest one.     Devin: Ah, this is sad. Sad, but funny. So we're doing this project that was like, oh, crazy turnaround project, right? Like 15,000 a door renovation. Crazy. So there's something called a writ of possession and so when you evict somebody, you go to court. And I was actually doing this on this property. I use third-party management now, so I don't go to court and evict people, but I've done that over the years, I've done all of it. So we evicted this guy for nonpayment and that's just how it goes, you don't pay, you can't stay, it's not a charity we're running.    James:  This is Texas and it's landlord friendly.    Devin:  Very landlord friendly. So anyway, we go, we evict this guy, he doesn't move out, whatever and he's got stories. And so finally we get to sink all the writ of possession we filed, the bear county sheriff comes out and they stand outside for an hour. They don't touch anything, but they just stand there to make sure nothing like violent happens. And so we get the crew in and we start moving this guy's stuff. So they opened the door and the guy who'd been like completely combative and everything, he opens the door, the sheriff is there, he's got a neck brace on and he's like, Oh man, oh he can't, he's wearing this neck brace. And I'm like, I've never seen this guy in a neck brace. Right? So the guys move everything out on the lawn and as soon as the sheriff leaves, he walks out on the steps, pulls the neck brace off, starts smoking a cigarette, right? The neck brace was totally just a prop for sympathy. Who carries a neck brace around just to have it for sympathy? And I was like, ah, man!   There's a lot of stories like that. Like, we're buying properties that are, a lot of times, beat up but at the end of the day, you can't have any business' product for free if you're living somewhere, you need to pay for it and that's, how it goes. So a lot of stuff like that for sure.    James: Interesting. Interesting. Yeah. I think that's it, Devin. So why don't you tell about yourself and how can the audience reach you, in case they want to reach you and where to find you best.    Devin: Yeah. Yeah. So we've got all kinds of stuff online and content and stuff like that out there. The easiest way is through the main company website, which is djetexas.com. So that's Delta, Juliet, Echo, texas.com. And if you hit the website, you'll see links to everything else and in a way to if you want to schedule a 15 minute call with me and learn about this stuff or you want to take the next step in this career for yourself, whatever it is, I'm happy to chat with people. So that'd be the best way is the website.    James: Awesome. Thank you for joining us today, Devin, and for all the audience, thanks for joining us. You can always join us into our Facebook group. It's called Multifamily Investor's Group. It's like almost 700 people right now, within one month so join us. And there's a lot of very meaningful discussion happening about multifamily, and we'll talk about other business issues as well over there, but join us today and thanks for joining today for the podcast.     Devin: Thanks, James.    James:  Bye Bye. 

James: Hi listeners, welcome to Achieve Wealth Podcast. Achieve Wealth Podcast True Value in Real Estate Investing focuses on key players in valuable estate investing specifically on Commercial Real Estate asset class. Today we have Michael Becker who has done more than 7,200 units, primarily, I believe in the Dallas area, I know Michael can help me fix that. But you know, he has done a lot of deals in the past few years that he has been investing. Hey, Michael, welcome to the show.  Michael: Thanks for having me. Appreciate it.  James: Good, good. Can you tell the listeners about things that I missed out about your credentials? Michael: Yeah. So, Michael Becker, I'm based in Dallas, Texas and I'm a banker by profession. That's kind of how I got into the business was loaning money to other people and went out on my own about six years ago now, so about six years of experience. And as we talk right now, we're just closing up our 34th and 35th acquisition. So puts us about 70 to 100 units that we've done in our career. So far we going full cycle on 16 deals. So we refinanced three out, return some Capital still own and we sold 13 of them. So as we talk, we currently own about 5,000 apartment units, the vast majority of those are up here in Dallas Fort Worth, which is where I'm based. We have 400 units in Tyler and then we have 900 units in the Austin markets. So we're Texas-based focused, predominately on Dallas Fort Worth and Austin for where we look to buy. James: Awesome. Awesome. So rarely, I get to interview someone who has come from, you know, brokerage business and also the landing site, right? But I always wonder why Brokers and lenders who lend money and trade deals never really become the buyer or the owner of the assets, right? So what was your triggering Aha moment that you said, hey, I should better just, you know, go on the other side of the table here and start buying deals rather than lend money? Michael:  Yeah to be a banker, you have to have a certain like mindset and generally pretty conservative and if you start becoming successful like I was as a banker making a lot of loans, they try to tie you in the bank by giving you stock options and have more investing period so it's kind of the longer you wait, the harder it is to leave. But for me, I was 35 when I left the bank, I'm 40 now, and we're just like this little fork in the road, I felt that if I stuck around it was going to be that much harder to go. And really what I did was this all day every day was making loans to other people like yourself that would be a buyer, distress deal, renovate and sell it for big profits and I kind of realized I was on the wrong side of all those deals. It's better to be the borrower than a lender.  And you know a lot of great clients, a lot of them are friends, my friends still to this day, and I was looking at a lot of them and I was like thinking myself like if that guy can do it, I definitely could do it. You know, not that they're not smart. But what I like about the business it's a really, really simple business at its core; it's not always easy to execute but it's pretty simple to understand. So I had a lot of connections, had a lot of experience, you know, I underwrote deal after deal after deal, I knew everyone in Dallas Fort Worth, I was in the industry. I just wasn't doing anything about it.  So I met my business partner, Shawn, back when I was at the bank and he was helping people out of California buy properties in Texas. I made a loan to them. And so, he was kind of sick of working for his boss the broker and I was sick of working for my boss at the bank and so we kind of went out on our own. And like I said, we're probably the second or third most active B classifier in Dallas Fort Worth and the current market cycle. So we've been pretty active here in Dallas Forth Worth.  James: Got it. Got it. That's interesting. I always wonder, I mean, what do the Brokers and lenders see in themselves that they want to continue doing that rather than owning an asset? Michael:  You know, when you think about it though, like as a banker, you don't have any money at risk, you got other people's money at risk, you got your clients' money, you got the bank's money and you know for you to go tie up a deal, especially today, I mean, you posted up six figures in earnest money or God forbid, you know, well north of that hard earnest money day one and get all this like Risk and then you got to go out and raise, syndicate the capital. So to take that to do what we do for a living, you got to have a certain amount of guts to go out and do that because you know, you're taking a calculated risk along the way and you don't have a paycheck. So if you don't do business you don't get paid. So that's a certain minority of people in the world I can go on and take that type of risk on and thrive and if you go out setting cases up like I do, you just have to be comfortable taking that kind of risk. And on top of that, you know, most of the stuff is on recourse, where you still sign and carve out. Some bankers get pretty, pretty nervous about signing, you know, I have 4- 500 million in debt right now so I mean that's a lot of money, you know, and to try to take that mentality, it's just a different type of mindset for sure.  James: Yeah, I guess the entrepreneurship mindset and whether you want to do it, I mean, especially if you have gone through the last crash in 2008, you can be very scared.  Michael: That's right, for sure. James:  So let's come back to how did you scale up to this large portfolio, right? Because I used to listen to your podcast when I started in this multifamily investing in 2015. When I was listening, I know you had like, first year in[05:47unintelligible] you had like 1000 units and now you have like 7,000 units, right? I mean maybe now you own like 5,000 units, but what was the system's process if you put back yourself back into that time and I know you made mistakes from then until now but you know, what are the teams or what are the processes and who would you hire first to grow to this scale? Because now it seems like clockwork for you because you guys have been... Michael: Yeah, so we started out, it was pretty lean. So when we first started out, I did the first four deals, first 800 units. I still worked at the bank and then I kind of had enough scale that I felt like I could you know, keep going. I had enough credibility in the market place; you buy one deal, you get a lot of credibility. You buy four like quickly everyone in town knows you're out there buying it because like I mentioned, I had a lot of resources like from the standpoint like all I did, all day, was underwrite apartment loans. I had a lot of connections to a lot of people. What was holding me back was that everyone thought of Michael Becker as a banker, they didn't think of me as a principal so I had to kind of change the perception in the marketplace what I was from a banker to a principal. So once I did that, that changed it pretty quick and then from there, we sort of started to scale. And so it was my partner Sean and I and we had one employee when we started. We kind of did a little bit everything and we all do a little bit everything when you're that kind of small. And so, you know, we were just kind of guys who were doing deals and then all of a sudden we woke up. I think we had seven or eight deals and we had all this work on us and there was still just three guys out there doing deals. So we had to figure out how to systematize so we started out with someone that's got an IT project management background experience actually, so she came in and kind of did operation; we were disorganized with stuff everywhere. So like our Dropbox wasn't orderly, you know, just wasn't everything wasn't save down. We didn't have any documentation of processes and procedures. So she came in the systematically, you know by meeting with me for two hours at a time., she'll talk about whatever, interview me and systematically built out all our policies and procedures and organize everything. You know, our chaos for life got real organized over a six to a 12-month period from there. Then we added an analyst to kind of help on top of it. And then we started layering in an administrative help on top of that and then you know, we start getting Asset Management help, hired a professional asset manager and then you know, we hired transaction people to kind of help run process the escrow and things like that. So those are the types of teams, you know, we have a third-party management company. I think you're vertically integrated when you do management in-house.  So we're able to manage 5,000 units with nine people; basically my partner and I and seven employees. We've got ahead and taken the approach. So I want to hire really high-quality people, pay them a little bit more money, but just be a little bit leaner. So that's kind of the approach we've taken because I really don't like managing people. So the lesser quality people will take a lot more of my resources so I rather pay someone that's a killer really high salaries and trust they can go out and do the job. But you know, admin help is the first thing I think you need. Someone to make sure you get organized. You have a process, make sure you get an investor database. Be really helpful, if you do syndication dropboxes, so we use dropbox all the time.  You'll have internal chat systems. Those are things that kind of we can do quick little messaging, you know, all sorts of stuff like I talk about, about raising money more efficiently if you want to go down that path or if you want to talk about operation, we talked about that too. But just trying to use technology and work smarter not harder. And every time we do a deal, at the end of the deal, we always have a Post-mortem meeting where we go over the good and the bad and we take away lessons that were bad and then we take those and try to improve the process for the next deal.  And when we first started out, they were a lot of bigger issues and now, fortunately, the issues are really small and minor because we got the list of stuff you don't ever want to do again list, got really long pretty quick and try not to make the same mistake willingly twice. James: Yeah, so can you name like top three things that you have realized from that not to do list, can you share it with the listeners?  Michael: I mean around raising capital in particular, you know, we first started out, we had a database and I needed to raise a million. I remember I had to raise a million four for a deal, I think it was a million five something like that. And it took me about 20 25 people somewhere in that range to get a million five in, a hundred thousand minimum. We first started out I'd get a package. I need be able to an investor. I set up a call and have an hour-long call, 45 minutes to an hour long call and I had to do that 25 times. Now, what will do is we'll email the list, we hit schedule webinar and it's at, you know, seven o'clock Central Time on Wednesday. People that can attend Live, great. If not, we'll send them a recording of the webinar. And then they can watch the webinar when they want to and then I have a five-minute call with them if I need to resolve. So I presented all the materials of the deal so maybe a lot more efficient that way. Whereas, you start scaling up doing like webinars a lot more efficient way to present your opportunity than one on one calls. Because, for example, we just finish up with 24.6 million dollar equity raised and if I had to do that one call at a time like that is so huge, you can't do that. It's going to be 200 people basically invested to get 24.6 million. So, you know, you'd have to have 300 calls to get that and that just isn't an efficient way of doing it. So, that'd be one thing.  Another thing that's been official, as I said we got an investor database. So when you invest with us, you go to our database or portal up our website you fill your stuff in electronically and you electronically sign your documents. And that's a much easier way of going about it and getting the old school, paperwork out, that's kind of how we started. And then finally what was another good way to be able to work efficiently. You know, I think we got more efficient the way we've kind of work it and keep people in line and we clearly communicate what's expected of people and we're really consistent with it. So those are things you grow into, those aren't things you necessarily have money to do out the gate because we, you know, spent a couple of thousand bucks a month on our investor database. So if you have zero units to spend $24,000 a year on a database doesn't make sense. But you know, gotowebinar is certainly something you can do and you can use a Google sheet instead of a set of a database until you ultimately get enough revenue where you can afford some of the more technology tools that are available out there.  James: Yeah, yeah. In fact, I just launched my investor database yesterday, which was a lot of my investors love it. They just say it's so nice for them to see their dashboard, in terms of investment because a lot of them have multiple investments with me and it's just nice for them to see. And all the documents are in one place and they can just log in and get the report. They just love it. Michael: And it'll help you when it comes to tax time to track all your distribution in there, I'm sure and then you don't have to go recall your distributions at the end of the year to do your K1s. James: Got it. So coming to I mean you must have a good number size of passive investors. I mean, how do you select certain passive investors for certain deals? I mean is it first come first serve or how is that? Yeah, so we have, let's see, I did 900K1s last year. I think I had about 500 unique investors when we closed the year out. We just raised, I'm not quite sure what the stats are of how many are a repeat, how many are new but I probably have 600 unique investors who've literally invest with me at this point in time. And we're going to do 12-1300K1s  next year easily. So yeah, we generally will so we definitely have like a blacklist, right? So if we take your money and you're a pain, we'll make sure we don't take your money again. That's certainly the thing I think everyone should do that for sure.  On the front end if we think you're going to be a pain we'll generally kind of blacklist you as well, life's too short. Yeah, too many people, we don't have time to have a little distraction. But basically when we have an offering, we'll just go in the database and you'll get together like the MailChimp will send out a little, hey, coming soon email or save the date email, got a future opportunity coming up and then you just email the database and just generally first come, first serve.  Sometimes we have a couple of guys that we know that we have a special situation with that. They're like, hey, I have this money. I want to place it with you. Maybe we'll give them a little bit of a head start to deal from time to time. But generally, send it out first for people to pay attention, fill the paperwork out, get it all done, wire the money in, those are the ones that get into the deal. James: Yeah. I mean, I agree with some investors being a pain. I mean, it's just so hard to win. Especially sponsors like us. I mean, there's so much of moving parts and so much hard money in and on day one, I mean, so much money stuck on escrow and this has so many things going on in closing a deal. And there will be some people we just had to deal with it, right? Michael:  Yeah, so, you know, it wasn't the vast majority, people are great and but you know, one of the things that I was talking with one of my buddies, he's syndicating his first or second deal, yesterday, and he was getting a little frustrated, it wasn't going quicker and I'm like well just because you have a deal in escrow and you have a deadline and it's important to you, doesn't mean that it's not as important to investors, but they have other stuff going on their lives. So you got to be able to make sure you meet your deadlines. So you got to consistently communicate deadlines and be proactively reaching out to people and you know, you gotta push sometimes to get these people. Because if you don't stay in front of them, they're going to get distracted and something else in life is going to come up and they'll just simply forget that, you know read about your deal. They don't mean to and it's kind of like happens.   James: Yeah. Yeah, I always communicate as well to make sure that everybody knows the timeline and when do we expect things and keep on communicating to them because everybody's working on getting things done, the passive investor, the sponsors and all that. So that's important. And so the type of deal nowadays that you're doing because usually I mean, I'm not sure whether you know, I wrote a book called Passive Investing in Commercial Real Estate where I categorize three different types of deal, which one is core, the other ones are light value add the other ones a deep value add. So the type of deal that you're doing, can you describe those characteristics? Michael: Yeah. So when we first started out, we bought a whole lot of[16:37unintelligible] that's kind of generally where we started out that's where most people start out. So the first probably ten deals may be more raw 1960s 1970s vintage stuff and then about two years into the business, we started to transition more in the B-class. So Texas, things like the 1980s vintage. And then really the last two to three years the vast majority of what we have done had been kind of more B plus, A-minus. So things kind of like late 90s all the way to about 2008; that's kind of my most favorite part of the market, as we sit right now.  We have done a couple of brand new deals. We had some exchanged money, we sold a BDO and we just bought a brand-new 17:16unintelligible]  and then we bought a few deals a little bit older than the 90s. But generally speaking, if you ask me, A-minus is my favorite space and a couple of reasons for that. Now one, if you go back when I first I bought my first apartment 2013, I bought a brand new class A Deal in Dallas for about a 5 cap, a BDO was like six and a quarter six and a half cap and a CDO was like eight, eight and a half cap. Fast forward to today an ADO is like a 475, a BDO is like a 5 and the CDO like five and a quarter by five and a half, something like that, right? So what used to be a big gap is now really, really narrow.  So we have the ability to track larger amounts of capital. So it make as much sense to me to be on a risk-adjusted return basis to buy a 1970s piece of crap building if I can buy a 2004 vintage building for a similar cap rate. So that's kind of what we're focusing on. And the stuff that was built that's 15 years old, stuff kind of on the 2000s. Still, most of those have like white appliances and cheap light fixtures and you know, no backsplash and you know cheap cabinet fronts. You still do similar value add things like flooring, appliances, fixtures, backsplash, cabinet fronts and still push the rent lift up a hundred dollars or maybe more per unit by doing the work. So that's kind of my favorite part on the market and then just kind of we've been fortunate enough to have a couple of deals go full cycle and return a bunch of capital. So we have a lot of money in our database and so I can't simply go raise two or three million dollars, that's just too small, you know, we need to be raising, you know, nine ten million time minimum; it's just too small. So we're just trying to do a little bit of a larger deal. And that's kind of what we've been focused on and say light value add, A-minus that's the vast majority of what we do with a couple like more newer stabilized kind of deals then thrown them in if we do an exchange or we just think we're getting a good basis on a deal. James: Got it. Got it. And also the other thing that I mentioned the book is the passive investors will be, they would like to invest based on their preference or based on their investment cycle. So when you look at your passive investor demographic, do you see some differentiation in terms of these are the group of people that like to invest in my deal?  Michael: Yeah, I mean, listen with 700 different people that invested with us you get a little bit of everything, right? You know, but that's one of the things that we always try to make sure we stress is you know, hey, here's what to expect. You know, we're really explicit about what the projections are, the timing and amount and the timing of the cash flow and when you do a syndication, ultimately most of those things need to sell at some point. It's hard to keep a whole bunch of unrelated people to together for perpetuity; forever is not a good hold in a syndication environment. That's cool if it's like you or you and a partner or a really small group of people, but when you have, you know, a hundred unrelated people that's hard. So we want to make sure when we're communicating with them that--and they understand like, you know what to expect and I also let them know if we're going to sell it and it doesn't fit what your objectives are, then this isn't a good thing for you to invest in.  So we try to be really explicit. So we match expectations properly because what I don't want is a year down the road, for you to be upset because you thought you were investing in, you know, one thing and there's really something different so, you know trying to be explicitly and very clear to our investors is what we're trying to do.  James: Yeah, that's good. That's the best way to just make sure that everybody knows what they're getting into right? So with the market at the current cycle right now, I mean in DFW Austin, you know, the whole taxes or places where you're investing it's very hot right now so, where do you think we are right now and how your strategy has changed in terms of acquisition? Michael: Yeah, I mean. You know, this has been a hell of a run where we're nine years into this thing or something like that. I mean, it's been one hell of a run. You know, with that said, the more we focus on a predominately Austin which is where you live in Dallas which is where I live and if you look at the population projections about three weeks ago, I've done this with staff about three weeks ago. The Census Bureau came out and kind of have stats for the growth 2018. So Dallas, Fort Worth from 2010 through 2018 over an 8 year period, there are a million more people in here in 2018 that was in 2010. So, we went from that 6 and a half million people to about 7 and a half million people and their projections in Dallas Fort Worth are to grow from about 7 and a half million people to almost 10 somewhere between the next 12 to 15 years. So to put that in perspective that's about two and a half million more people coming to Dallas, Fort Worth if the projections are right. So that's the equivalent of like the entire metropolitan area of Charlotte or Orlando and then putting it on top of Dallas, Fort Worth today. And everything I just quoted to you about Dallas, if you take the percentages, it's even higher in Austin. So Austin is growing even faster on a percentage basis. If you feel like just driving around, there are just more cars, more people all that. So I don't know a whole lot, James, but I know if the equivalent of the entire metropolitan area, Charlotte is put on top of Dallas Fort Worth[22:50unintelligible] have to go higher right? They just have to go higher. So what we want to do is, you know, make sure that we're focusing on the right locations within the metropolitan area. You know, we're trying to buy away from these Supply the best we can. We're buying like Suburban multifamily deals in better school districts. We're trying to focus on basis. So we're trying not to pay Crazy Prices. One of the strategies we've done here recently is focused on properties that you can come buy and assume someone else's mortgage and you get this avoids having a large yield maintenance or the [23:24unintelligible] prepayment penalty. So you get a pass along a lower cost to you as a buyer. So that's a way to kind of counteract that a little bit.  What you give up as a buyer; you give up five years of interest only on the front end as you're assuming a mortgage that's most likely already amortizing so kind of hurt you up from yield. But if you save a million dollars or two million dollars in basis, you know, one day, that's going to burn down if you need to sell it or refinance it free and clear. So that's one strategy we've been doing. And then here's another thing. I mean you own a bunch of stuff to San Antonio like those we were talking about before we started recording. You know, this is one of the things I would say, it's completely unfair business, you know, a lot of it who you know, what you know, what chips you can trade. And you know, I own a lot of stuff in Dallas but I walk in the San Antonio, you know, you have more clout in San Antonio than I do, just because I don't own. So the Brokers are more apt to sell you something than someone that doesn't know that market. So we're at this point in the cycle doing 35 deals or some like that at this point, we know everybody, everyone knows us that our Brokers are players in town. So we get our unfair share deals. So, you know, we're looking at a lot of stuff and we're trying to be selective with it. It's also as far as strategy goes, you know, the lone assumption route has been something that's been successful for us. And then two, we put up a lot of hard money. That is the other thing that helps.  So you can put up a lot of hard money, get aggressive with your terms, you know, act quickly, you know, we got a deal in escrow that we officially never got to tour, you know, so we had to go shop it and then we never got to tour it and so we just basically got it in escrow went hard [25:10unintelligible]  without ever having an official tour and I can do that because I've done 30 something deals. You don't do that on your first deal. So I know what's up, I know what's going on and we did our due diligence and we didn't find anything that we didn't already expect. So we knew what to expect and that's what experience and repetition gives you a psyche. I got my 10,000 hours and I kind of know what's going on. I kept having to make better decisions, quicker with that level of experience.  James: Yeah and brokers love it too because for them is like you're a very easy buyer because you already know the submarket. You're not going to give a surprise and they have done deals with you. They just love it things to go much smoother. They make money as well. So they love the repeat buyers and the local players, as well. Michael: Yeah, that's right. And then we're all friends like we go and have drinks together we go to the baseball game together. We all become friends and you know people do business with people they know like and Trust so being local in the markets that we own and operate in. I was at lunch before this podcast and ran from the[26:17unintelligible] Brokers because of their office across the street from me. Walking down the street and you ended up having lunch in these just randomly. And as I was walking out, one of my competitors who own like 12,000 units whose office is around the corner for me walked across me in the hallway, you know, and on the sidewalk, I mean so this like being proximity and doing a lot of deals that stuff helps. James: Got it. Got it. So let's say nowadays, what's the process of your firm looking at a deal? So let's say today there's a deal coming. I mean, it's not on the market, the broker tells you, who looks at it first, how does it come to your eyesight before?  Michael: Yeah. The way we are set up, a deal comes in, say I get it, you know comes across my desk. You know, I basically kind of where's it located? You know, what's the basic price? Right? So I'll just kind of go to Google Map. Make sure you kind of know the location I'm in and I know whatever location that they are sending us. Like we know like the markets because we're in the market. So, you know, usually, most of the deals are like, no, it's the wrong location or no, you're prices are extremely insane. I'm not paying that price per unit for this type of product. And so usually a lot of people kind of get kicked out, but if it passes kind of that basic high-level test, then at that point usually we'll do like a real get the financial statements in from the seller. And then what we'll do like a real back of the envelope analysis.  We'll spend 20 to 30 minutes doing a real high-level underwriting just to make sure that it kind of passes the high-level test and usually a lot of those deals die right then. So, you know, the deal was just like, you know the match it doesn't work. It's just way too expensive or we don't think there's not much upside in the rinse. Just whatever it is. We kick a lot of deals out that way. Then if it passes that deal usually at that point, we'll do a full underwriting and that will take this like four hours. You know, we have a CFA that's our analysts. Our analyst will go underwrite the deal for four hours. Since it's my partner and I, then my partner will go through and kind of review the model. And once you review the model, it passes that, then, you know usually, most of the deals kind of die right there then they don't really work. But the deals that kind of pass that screening that's when you know, we'll kind of get down and get serious about it. And I think that point that's usually when I go tour. So that point, they pass all the tests so we set up a tour maybe put [28:34unintelligible]  in early kind of depends on the situation. And so, you know, we're looking at you know, 60 70 deals to get one that actually makes something like that. That's probably somewhere in that kind of General ratio is what we look at. And we just have like little series of check marks along the way that we gotta like, you know, but doesn't pass this one little test and let's just kill a deal and move on. I found on the biggest cost to have in my life anymore, stop tuning cost. So if I spent a lot of time on one thing it's at the expense of something else. So my time is precious. So just trying to make sure I get, you know, use that the most widely and don't chase these deals for you know weeks and weeks. I never had the opportunity of actually making it in a day. So that's hard to do when you're first starting out and that's a lot easier to do when you have some experience.  So when you start out, you got to learn these lessons sometimes the hard way. You got to underwrite this deal that if you would have just at the end of it just kind of be self-reflective like, you know, what could I have seen earlier on this deal that would have stopped me from wasting a week of my life on it? You know, you need to start that. I think that's what separates a better apartment owner, ownership syndication type groups from the less successful ones.  James: Yeah, I agree. I mean, I don't look at more than five parameters in any P&L to decide whether I want to dig deeper. So what's the ratio of deals that you look at verses you looking at and passing it to your analyst for the four hours underwriting? Michael:  I mean, it's probably pretty limited. So if it's called 60 deals to get one, I mean it's probably, at least half just get killed or your pricing is way too high or it's the wrong location or the deal too small or something physically about the deal I don't like. So that's probably half of them and the ones I've been going to like get a back-of-the-envelope, we probably kill, you know, the 30 that make it through on the 60 we're probably killing, you know, so that's 20 right there. Then we'll probably underwrite, you know, ten to get the one type of thing.  James: What do you look for in a location?  Michael: You know, yeah, so we're Suburban multi Family Guy. So good Suburban location that is in the better school districts, you know near major thoroughfares preferably to have access to Lifestyle and Retail amenities like, you know, like they are near a Starbucks, near a good grocery store, you know, retail restaurant, stuff that people want to live in. First and foremost, low-crime area too, I don't want to buy in the hood. So, you know, no low-crime area. Those are the things I look for and we're targeting, you know, preferably 200 plus unit, A-minus family deals, but that's kind of my perfect deals. An A-minus deal with more than 10% or an upside, you know it's well located, low crime, better School District, near employers, near retail and restaurant. That's kind of what I look for.   James: So, can we go a bit more deeper into the back of napkin underwriting? So, let's say there's a $10 million deal you know, 50 unit, maybe a 100-unit deal, how did you underwrite that? Back of the Napkin. Michael: I mean, so what is the first major metric is a, you know, one other [inaudible31:51} ransom what's our basic market survey say . So, pull a [inaudible] and look at the market rent. So then how much upside do we have in rent? So, I say, so, if there's only 5% upside in rents then it's probably not ideal for us, you know, we typically 10 plus percent in upside of rent to make the mass work. So, if I only have 5%, I know when I layer in my sponsorship compensation it's just not going to make sense. All right, so you know, like it's just not going to have no margin for us to be able to go attract capital. So, that's the first thing and then we'll then obviously go down and like other income or other income opportunities, then obviously look at the expenses as well. Michael: So, you know, one of the deals were we just got awarded, the payroll is by 1600 ,1650 a unit and it should be 1200, you know, so we can on day one, boom, take 450 out of payroll that certainly helps quite a bit. So, we're looking for things like that, that's kind of what it is. And you know, basically for maybe if you think about it at its simplest form, James, like, I need to do a deal I need to be able to deliver somewhere between 13 to 15% IRR today that's what takes me to attract capital. So if I can't get a deal layer in my compensation layer in whatever capital you need to do, um, you know, talk to the purchase price and I don't have enough upside of rents because at the end of the day, if I can't produce a 14% or 15% IRR over a five year hold period, my investors don't want to invest. So, I can't spend time on deals on can produce those types of returns. So, we're just trying to find, stuff that has enough upsides would be able to produce that. So, whatever that is, reducing expenses, increasing income, the two most common things, or is there some sort of way we can get a different type of debt quotes that may be kind of juices, some of these returns or whatever the specific situation is to that property. That's kind of what we're trying to get to the heart because, if I can't produce a 14 or 15% return, I need to shoot the deal and move on. James: Got It, got It. So, coming to 13,14% IRR is it to investors, or is it overall returns on ... Michael: Investors right. So, if it’s like 15 investors 17 and a half, 18 to the deal and you put a sponsor comp in there? So, it's got to be, I gross 8 total 18 they get up 15 and our structure or something, something like that. James: Got It, got It. Yeah. It's interesting on the debt code side, no, sorry, before I go there, how do you know that the seller is not taking some of your upside? Because nowadays that's what sellers do, right? They price it slightly higher; they give you upside, but they price it higher, which erases your upside. So how do you determine that? Michael: That's the whole thing why we don’t buy c class anymore because of the same catch, so yeah you know, that's the thing so I mean, all these deals that have a lot of upside have a lot more interest and so they can again, bit up and the cap rates are compressing. So, the trick is you got to overpay a little bit, but you can't overpay too much. Right. James: Right. Michael: And that's kind of like what you're doing. So, at the end of the day I got to, I, it's as simple as I deliver a 15 IRR and if I can't deliver, I can pay up to a certain price and then you start doing past out price and I can produce the returns I need. And that's kind of when we back off. James: Okay. Michael: So that's kind of how I think about it, so, every, most of the deals we'll work out at a price. So, we just kind of get to where this is the Max price what we can do to push to push out a 15 IRR for investors. And so that works up to 20 million and 20 million, 100,000 it doesn't work. So, you got to kind of draw the line in the sand and have a lot of arms in the fire. You get a whole bunch of deals working all at the same time. Usually, they start popping. James: Yes, yes, yes. The basis of my question is because they could be $150 or hundred dollars a rent bump potential, but the seller has priced it so much or we could have outbid-- Michael: Yes. James: --so much that it's not worth it, right. So, to do that because you might be just getting-- Michael: Yes, there's that. And then you get a little nervous for some of the less-- the newer people in the business, with little less experience like you're going to pay a five cap for 19 C class, 1917 deal. Okay, location and suburban St. Tonio or Dallas or whatever and then you're going to perform like a five and a half or five 75 extra cap. Five years down the road for a c class deal, maybe that, maybe that's the right cap rate, maybe it's not, it needs-- as you go and improve the property, you're able to increase rents and by extension, you value you’re in a why. But at the same time, the more upside you take out of these deals because your turnover, 50% units upgrade them, shrinks your buyer pool cause everyone wants value add. So, the more value you take out on the deal, your cap rate actually goes up. So, it's like a weird little dynamic you're in that you got to like, you got to factor in. It's like a 3-D puzzle you're doing because what's great because you're increasing, you're why. Because you're raising your rent, but at the same time you're also expanding your cap rate, as we sit in the same marketplace. So, it's interesting, complex puzzle, the marketplaces are right now. James: Yes, I was talking to a broker and you say hottest deal to sell nowadays it’s like deals where everything is done right, 90% is done. Michael: Yes. James: Nobody really wants it because everybody wants value add right? Michael: That's probably the opportunity to go buy a bunch of that stuff. Cause that's what today is. And then if you can get higher leverage loan, you get a 75% loan and get a good low-interest rate and get a bunch of I Own and go buy a deal that's turnkey. Maybe that's a better way of going, to be honest with you. And just kind of get a little bit more your return from current yield versus a big pop on the backend. That's thought about strategy, to be honest with you, it's a lot more safer than going and doing a bunch of work on a property-- James: Yes. Michael: --and paying a 475 cap for 1970 deal. I'd rather pay a six and a quarter cap for six and a half cap for a deal that's already done. James: Yes, because the backend is not certain. Right. Nobody knows what's going to happen-- Michael: Right. James: --at the [inaudible37:58] cap rate, so. Michael: That's right. James: So that brings to my next-- Michael: And then you do all the work, you might expand your cap rate anyways. And then you're doing all this work to only get half the payment. So, I think if I could go back in time, I would've bought every deal on a bridge loan. I would not have spent a single dollar in renovations and just operate it, wait five years and you sell it in today's environment for like a freaking 475 cap, that would have been a better decision with the benefit of hindsight. James: Yes, correct. Correct. So how would you-- sorry, in terms of cash flow vs. IRR vs. Equity multiply, right? So, what do you see, what is the most important number that-- for you, right, I know you're passive investors need to look at? Michael: Yes. You know, I think everyone, that everyone's different too. Like, all my investors have different things that are most important to them. I think, honestly at the end of the day, a pair of this investment, that investment, IRR is really kind of the driven. I'm not the biggest IRR in our store. We, I think the cash on cash certainly matters because I can't pay my bills on IRR, but I can with a check every month. So, I, that certainly protects it. But at the end of the day, really, we're focused kind of when we're-- comparing this, it's up to you in the next one, really kind of IRR. Because you know, if I'm able to come in this deal, I assume a mortgage and refinance in the third year or something like that and have a partial return of capital that pops my IRR pretty, pretty good. And I keep take some of this capital and return to my investors quickly. Two-year period, you know, 30% of their money back through a refi or something like that. That certainly is attractive. So, we'll, I think I kind of focused on IRR when I'm making the decisions on which deal, I want to buy, which deal I don't. And we've been, we like [inaudible39:54], we've been focused many deals about loan assumptions recently trying to get a lower basis. So, the first and foremost I'm focused on basis, making sure I buy a deal that's a relative value to everything else is trading right now. And I, cause I was only two things. You can't change on a property; you can't change your purchase price and you can't change location of it. Everything else you can kind of modify can always refinance it. I can always improve the property, but I can't change what price I paid or where it's located. So, we'll locate a deal with good prices, and I think everything else will kind of generally work itself out. James: Got It. And got it. How do you make decent between buy and hold for long term vs. buy and buy and refi? How do you decide? Michael: Yes, so if it's a syndicated deal, we've done a couple deals, especially when it first started out doing dentures where it's like what equity partner in us. Those deals we tend to hold longer. We bought a bunch of workforces, we sold them, we exchange, like A-minus or a product. So, we did a bunch of that. And then when it's a syndication people for like forever is not a good whole period if you're in syndication. Because people want, return on their money as well as return of their money and kind of the intermediate term. So, we're typically performing a five-year hold period. I think you'd be going much past seven. Most people kind of like, you know, shoot, I don't want to tie my money up for 10 years or 20 years. Now I kind of want to get my, I kind of want to see a return of my money as well as the return on my money. So, it kind of depends on the thing, but that's a heck of a lot of work buying and selling these things. So, it was just a lot easier just to kind of hold and it's kind of operate, especially the way we're set up with a third-party management company that does all day today. I, managing a bunch of thousands of apartment units. It's kind of like adult daycare. James: Yes, it's adult daycare, it's a good one to see. Michael: It's property management as a business of problems. I mean, there's always a problem, like every day, always, problems everywhere. So, if you have third-party management to kind of oversee that and we're set up and I have an asset manager that layered in between me and them. As a principal, the way we're set up, it's really not that bad on the day today. So, what we've been kind of focusing on is we're just selling the older stuff and buying newer, nicer stuff. Cause there's old stuff, I mean, not only, it was great, and we made a bunch of money, but you have asphalt parking lots and casts on sewers and t one 11 siding, Hardie. You go renovate a deal and two or three years later you've got to renovate the deal because the parking lot needs to be redone and you painted over wood. So, then you've got to have more wood of what, right? You got to go paint over again. And you can't cast, our sewers are collapsed in every time you turn around and get, dig it up and replaced sexting sewer pipe. So, you have all these like nonrecurring items that recurrent all the time. So, doesn't impact in a live per se, but it impacts your actual cash and the bottom line? So, I'm so I think the actual net cash you can pay out, it's not that different on a higher cap rate, older deal versus, or maybe a little bit lower cap rate, better quality deal if you're going to be in these deals for a long period of time. So, we've been just trying to get younger in our portfolio, so stuff I owned a day, I'd be much more likely to want to hold than the stuff I owned in 2014, 2013 cause those were just tougher, older, older deals. And I think that's what I've seen been kind of like the natural progression of most people that do what I do for a living. Just over time. One of the things, one of my mentors told me once when I first got in the business was, you own apartments in dog years, and every year of ownership feels like seven. So, like over time, you know that statement is very, very true. The older the property and the smaller the property, the more true that statement is. The bigger, nicer. It's just easy, just easier. So, I don't know if I answered your question,-- James: [inaudible43:42]. Michael: --but those are the-- between owning or selling a deal. James: Absolutely. Absolutely. And-- so let's go back to a bit more personal stuff, right? So, can you name like three things that you think is your secret sauce in, scaling up to this level? Michael: Yes, so, first and foremost, I mean I'm pretty tenacious and I had a lot of ambition, so, that was, that was a lot of it, right? I was like, I was willing to do what it takes to get to where I got. So, we had a lot of experience, background, and training and that certainly, so first and foremost, I just really, really, really wanted it. And like last weekend I flew to Jacksonville, not check, yes, Jacksonville, Florida, I'm sorry. Losing track of where I was. So, I was in Jacksonville for 21 hours. I spoke in front of 300 potential investors. I flew back home. I did that Saturday morning, came back Sunday morning and three weeks earlier I was in Newark, New Jersey, went to some hotel conference room on a Saturday, came back on Sunday. So, I'm willing to sacrifice a good chunk of my weekend to go out and get in front of investors so I can then do these larger deals. So, if you're not willing to put in the work and do what it takes and you're only, you're going to get a moderate your success for sure. Second thing was, I had a great background being a banker for over a decade and I just did deal after deal after deal. So, I've got a great education on my, on the bank Stein. So, most people don't have that. Cause then they're not bankers. Right. But, go get educated. That's the other thing I would, I would say get educated, higher from a reputable mentor. There's a lot of people out there put the time in. Become a student of your craft, go listen to this podcast, or listen to our podcasts, read books, do stuff like that. That’s a great way of learning. These podcasts are great. Like we host the Dole Capitol podcasts or your podcast. You're going to sit here and talk to me. So, it looks like about at least 45 minutes here- James: Yes. Michael: --at this point. And you get to your conversation from two guys that own almost 10,000 units collectively for 45 minutes for free. And there's a lot of wisdom and nuggets, but I think hopefully you can take out of that. Um, so, my background, my education was certainly it. And then really just a lot of its just relationships. You know what I mean? A lot of this is as simple as just don't be a jerk. That's, that's a lot of it, right? So, the brokers want to do business with people they know, like, and trust. They want you to be honest with them. They want you to be, do what you say you're going to do. And if you could just do that and be in a good guy and be friendly with them, man that goes a long way. It really does. So those are, those are three things I've done pretty well in this business. James: Got it, got it. And why do you do, what you do, I mean, where are you? Michael: I understood back, couple of things, right? To have a better life to be able to, the monetary if you'd have done well, the very rewarding monetarily. I sit back, so I got a couple of things happen, reflecting back on this, cause you know, we've done a lot in a short period of time. When I was 2010, so my mother passed away in 2010. So, I was like 32, I'm 32, 31, something like that at the time. And, so she was like 57 when at the time she passed away and then she-- her and my father sacrificed to save all their life to then be able to retire one day and then go have all those great traveling adventures in the sunlight and do stuff that was great in life and she didn't get to do that. She works to sacrificed and saved and I never got to-- the fruits of it. So, I kind of, that was a thing that kind of burned into my mind that I need to be able to do something young, unable to take a risk young. So, then I can then enjoy a lot of stuff in life. So shortly after, that's when I really first started was in 2011. I bought a bunch of rent houses in 2011. I [inaudible 47:28] my mom passed away and that's kind of really when I started like taking risks and doing stuff because being a banker, you're just naturally conservative. You're not really wanting to go take risks. But I started small and kind of got some confidence and then a transition in the multifamily. So that was one thing. And then, and then when I was about 34, 35, I was sitting at the bank and I worked for a large, large national bank and then, I was really successful, and they're kept trying to promote me. And, when I was looking at the bank and I looked at my boss and my boss's boss and his boss and thinking about what they do all day, it was kind of depressing, to be honest with you. Like I didn't want to do that. And I felt like a, it is a metaphorical thing, but it felt like a little fork in the road. Like I'm 34, 35 and if I don't go out and take a chance like right now, and I wait one more year, every year is, we made a little bit harder to go out and take this risk. But if I like go out right now, I saw the market, the market was right. Capital was blowing and the deals are so good. And I knew that because I was in the industry. So, I was like, if I go out and I fail I can always come back and be a banker because I was a really good banker and I can, y'all are going to need to be a banker. But if I go out and I succeed, then I can have a great life and get to go to Hawaii for three weeks. Like I'm going to this summer, I'm just going to pick up the family in Hawaii for three weeks. I'm just going to work from Hawaii for three weeks to sort of be in a hundred degrees in Dallas. Right. So that's what you, that's what I get to do today. And I get to pay for my sister and her family to go to Hawaii because we've taken the risk and been successful and those are-- that's kind of, I guess some of my whys right there. James: Yes. It's, it's interesting on how you're tenacious. I mean, whether its real estate or anything. And you can do this in anything, right to, you just have to be-- Michael: Yes. James: --persistent in doing it and know your why and just push it. And I can change your life. Right? So. Michael: In every transaction, there's always a problem, right. James: Yes. Michael: So that's the thing too. And that's what I always fall back on. Like there's always a problem. There's always stress, there's always, whatever. And you just got to like push through who's going to put your head down. You just got to push through. Just kind of will it, so do what you needed to do, you know? And not that every time I feel frustrated and you were not getting a deal, right? Like I've gone months and months on a deal, I just do more. Like, you know, I make more calls, I go do this, I'm proactive. I'm just like more always answer. So, we don't get what you want to do. More effort, not, that's usually, usually tends to work out pretty good for me. James: Good. Good. We're coming to the end. One more question. Do you have any like a daily habit or daily ritual that you do that contributes to your success or effectiveness in life? Michael: I'm not the most, I don't really read a lot of books. I don't really meditate on do any of that. So, what-- I, I do find myself from time to time, I'll go down the rabbit hole of doing something and like burn off 30 minutes by all my life around the internet or something like that in the middle of the day. And I always try to catch myself and say, okay, like I just need to prioritize. So, I have a hundred things to do every single day and I need to ensure I know what the most impactful thing is. And I focus my time on that. Cause, sometimes you let the tyranny of the urgent get in the way of the important. So just cause I have 40 emails on red, I need to go clear. It doesn't mean that's the most important thing for me to do right then. Even though that's like dinging on my screen in front of me. Sometimes I'll try to shut that out, focus on what are, what is the most important thing. And then I know when I, I'll schedule time to come back and clear my emails out an hour later down the road when I kind of get done the most important thing. Because, if you're in a Sproul, I'll leave you with, it's kind of, there's this whole thing that I've, I've definitely learned in this business, as a syndicator, as someone that does, find that puts together an apartment operators, apartment investment opportunities or any sort of opportunity like that. The best way you make, the way you make money in this business, you've got to find deals and find money. Going to find deals and find money and everything else is sort of noise. It’s all really important. You got to operate; you've got to do all their things right. But, that doesn't really, that's not driving revenue. So, if you want to focus on revenue, you've got to find deals or find money. So, I'm not talking to brokers, I'm not talking to my investors, you know, everything else is, not driving revenue. So, at the end of the day, I always try to remember that when I'm deciding, what do I spend my time on. Do I spend my time on this or that, that's always in the back of my mind? James: Got it. Got it. Is there anything else that you want to share in this podcast that you have not shared in hundreds of other podcasts that you have been? I should have [inaudible51:57]. Michael: I, I think, we do a pretty good job. So, I would, if you want to know more about me, I think really there's a couple of ways you can, the easiest way to find me, just get my company's website, which is a company spiadvisory, just go to our website www.spiadvisory.com. It's spi like spy advisory dot com. There's a contact us form, fill that out. I always happen to have in 10 or 15 minutes. A telephone call, listeners of the podcast. You guys are interested in maybe working with us or really the best way if you want to know more about me or if you listen to this podcast or [inaudible] or. So, you can listen to a dual capital podcast. So that's on iTunes or Stitcher or YouTube or anywhere you're probably listening to me right now. You can find the old capital real estate investing podcast. So, we have probably 300 episodes in the archive or more at this point. So, we do interviews with other people kind of similar to this format. As well as we do a little short one where my partner Paul interviews me and asked me one question a week and I answered about one specific topic. So, if you want to know anything about and just all-around apartment investing in your or some form or fashion. So you want to learn more about me, that's a good way to kind of-- I talk, I have a lot of stuff recorded that's out there that, but if you like this, you may, you may like that and hopefully can provide some, a little nub. It nuggets on different little talk topics, to listen to those. James: Yes. Yes. I learned a lot from you. I mean, listening to you from different, different podcasts throughout my apartment investing journey. So, I'm thankful for that. And I think that's it. Hopefully, all the audience and listeners got the value that they want to get or getting from Michael and myself. I think that's it. Thank you. Michael: All right. Thank you.  

  Transcription (was completed by automated process. Please ignore any speech-to-text errors) [00:00:00] Hi this is Caroline Springer and welcome to the next session of sellers calling you Beatty Carmichael Beatty is the CEO of Master grabber and the creator of agent dominator and one of the top marketing experts in the real estate field. Today we're gonna be talking on one of our radical faith calls and I'm going to pass it over to Beatty for our little disclaimer on just explaining what that is.   [00:00:23] Real simply this has nothing to do with real estate today. It has everything to do with Christ. So if you don't want to hear about Christ and this podcast that's pretty simple isn't it.   [00:00:34] Pretty simple.   [00:00:37] All right. Well I guess I'd call this meeting so I'll start the agenda. Actually I think Caroline has been a little while since we did the last radical faith call. So if I recall correctly the last one we're talking about is faith. So maybe less just a real quick recap on what is faith and not trying to put you on the spot. But if you if I were to ask you Caroline what is faith. What would you tell me.   [00:01:16] Well the first thing that come to mind is just like being sure of what we do not see and believing not just what meets the eye but what goes beyond that. So that's kind of my first thought that first from Hebrews immediately comes to mind. But I know it's definitely multi-dimensional and something that we walk through our lives processing with the words. But that's the first thought.   [00:01:43] Great. So first in Hebrews we're talking about Hebrews 11 1. Can you quote it.   [00:01:48] Do you remember it faces the assurance of what we do not see and nothing about it.   [00:02:03] It's about it's about what we do not see right.   [00:02:06] So Faith assurance of things hoped for the conviction of things not seen. And faith comes from where do we get that level of faith.   [00:02:18] It's a gift from God.   [00:02:20] It comes from Romans. Faith comes from hearing and hearing by the word of Christ and that word is actually the Greek word Rama. Now there are lots of uses for Rama. But in general you've got two words in the Greek so the New Testament was written in Greek and then it was translated ultimately into English. And there are two primary words in Greek use that's translated as word one word is logos logos I guess is how our logos logos and the others Ramo are EMEA. When we were talking last time we're talking about logos means primarily just talking about a concept or an idea. Rima is very specific Okay real simple explanation. I want to tell you about the Kingdom of God that's going to be logos but I'm going to say Caroline can you give me please give me that water. That's a Rima I'm directing you on something or I'm going to say Caroline. You're going to have another child in the next year. That would be arraignment if that were actually from God's word. So is something that's very clear specific and most importantly it's specific to you.   [00:03:48] Does that make sense. It does. Great explanation too.   [00:03:53] Yes.   [00:03:53] So faith is when you've had that word some revelation some word from God and it is now faces the conviction of things not seen in other words we it's not something that we have to work on believing it's intrinsic and within our being. And that's what faces faith is not something that we well up and try to belief. If you have to try to believe if you have to will yourself to believe that's not faith that's simply in the natural. That's what we'll call hope. We're just hoping it's really true. But you know we have to work on trying to make ourselves believe it. So this thing that we talked about last. Is is all about this. This alternate. Understanding of faith being a clear direction a clear revelation a clear truth from God to us and we act on it. That's kind of where we're talking and where I want to talk about today kind of the topics that we're going to move into now is taking this understanding of what faith is and starting to see how it's applied in our lives.   [00:05:21] And I call this topic stepping out of the boat or getting out of the boat and I remember I read a book I love the title I got a little bit of the book but I get more out of the title Jon Burge wrote a book. I'm sure you've never heard of it or you don't recall it. Do you recall a book that John Burge wrote.   [00:05:42] I do not.   [00:05:44] The title is real simple if you want to walk on water you've got to get out of the boat right. And so that's kind of where I want to take our call today if you want to walk on water if you want to do the most amazing things in God's work by his direction then you've got to be willing to step out of the boat. So also just to cover a couple of things I want to use the term sometimes radical faith. In reality there is only one faith. It's just faith. We kind of think of it as radical because for us as it's what I call normal Christians or Western Christians. Faith is well I believe in God and I pray and I go to church right. I'm sure you know some people like that don't you.   [00:06:38] Definitely in the south definitely in the south. Radical faith is when you go oh my gosh I can't believe you go do that. Well that's actually what Jesus expects of us.   [00:06:52] So let's see. One of the things that we came out with is a definition that radical faith or this true thing I call faith is choosing to step out on God's clearly defined will. His revelation or his direction for you in such a way that it's usually great personal risk or sacrifice. In other words when you walk by faith you're not walking by sight and therefore you have to step out in faith and trust that you can't see it. And it's at great personal risk in fact. Do you remember there a great example of this and I'll watch the movie in search of the Holy Grail not Monty Python. But this is Raiders of the Lost Ark. You remember when do you remember. I think it may have been the last the last part of that series. And they're searching for the Holy Grail. Did you ever watch that movie.   [00:07:57] I did. I'm sure my husband had toward the end of the last scene.   [00:08:03] Here's where they are. What's his name. Who's the main actor in that. The name escapes me. Harrison Ford thank you. Harrison Ford has just come to this. He's he's somewhere in the middle of nowhere in this cave or chasm and he comes to the edge and there's this great big chasm below him and across the way maybe a hundred feet or maybe two hundred feet is one of the nights of many years back story like a crusade or type of night.   [00:08:45] And there is the Holy Grail the goblet that Christ used at the Last Supper. And Harrison Ford has been walking been following all these clues and secrets on how to get here. And now he has to take a leap of faith. That's basically the next clue is a leap of faith. He looks down in this chasm and it's straight down for a thousand feet or whatever it is and this is sheer death. But he chooses to step out by faith and so he steps out.   [00:09:19] He can't see anything but yet his foot now lands on solid ground that he can't see. And he starts walking across this invisible bridge is basically what it is. That's kind of an idea of what faith is. You can't see it. You know it's there you trust is there and you trust is there because God said it is. That's God's word. And that's kind of what I mean by stepping out typically at great personal risk or sacrifice because if God doesn't show up in the way that he says he will then all is lost. And so I want to talk in terms of showing you how this applies from biblical things and start to apply to our lives.   [00:10:04] Do you have your Bible handy by chance. I can't.   [00:10:09] Okay. I want you to pull up Matthew 14 and let me know when you get there.   [00:10:18] And we're going to do Matthew 14. This is versus 28 and 29. And as you get there let me just kind of give everyone the background of what's going on. So Jesus has just the day before. Literally that afternoon before has fed 5000 people with five loaves and two fish. He sends the people away he sends his disciples back across the lake in a boat and then Jesus goes up to the mountain to pray. Now it is early dawn before the sun is risen and the disciples are rowing against the wind and they see Jesus walking on the water and they can just make him out and they all get afraid because they think it's a ghost. And Jesus says no it's it's me. And now that's where we picked up Matthew 14 versus 28 and 29 Can you read that.   [00:11:16] Yes. This is Peter. He says Lord if it's you Peter replied tell me to come to you on the water. He said Peter got down out of the boat and walked on the water and came towards Jesus.   [00:11:32] Okay.   [00:11:36] So Peter says Lord if you command me to come and Jesus has come and Peter gets out of the boat and walks on the water and comes toward Jesus. So here's a question when Peter stepped out of the boat and started walk on water. What happened.   [00:11:54] I didn't know you're asking me directly. Well he doubted. I mean he he took his eyes off of the word and saw the wind and fear.   [00:12:04] Hold on. Okay. Before that we're going gonna get to that before but when you get out of the boat at the very beginning what happens. Does he walk on water.   [00:12:13] Yes he walks on water. And how does he walk on water by faith by listening to the word of the Lord Jesus said Come on he's not gonna let me think.   [00:12:24] That's right. So here's a little truism that we start to see when we step out of our comfort zone because we stepped out by the Lord's direction. So Jesus Jesus's revelation if we want to use that term or his direction or his command if we want to use those terms to Peter was come and so Peter steps out of the boat. Great personal risk and sacrifice. If God doesn't show up he's sunk no pun intended. And guess what happened. God shows up. God does a miracle.   [00:12:59] Do you see the little equation that's starting to come up. We stepped out by God's clearly defined well for us. We have faith that God is going to perform because faith is the assurance of things hoped for. Now the word hoping that Sharon says things to hope for another translation gives it faith as the title deed is the absolute. You actually own the title to what has been promised. Is that confident. So that's what faith is. That's what Peter does. He steps out of that boat and when he does something happens and what happens is God shows up and does a miracle. Pretty cool and it really cool. So the question then is or the comment on this is when God acts the God showing up moments because this is what we want in our lives. How do you live this life of faith and what does it look like. This life of faith is when God constantly shows up and he either shows up miraculously like he did with Peter walking on the water or he shows up providential where he just kind of organizes and orchestrates all kinds of events.   [00:14:22] Now I want to talk in terms of these things. I think one of these I may have to fall back but does the name George Mueller ring a bell to you.   [00:14:34] He's an author right.   [00:14:36] Well he's written several books were maybe better spoken several books were written about him. He was actually a man of God back in the eighteen hundreds and early nineteen hundreds. He was in England in a town called Bristol England and he felt the Lord leading him to start an orphanage. And so he started an orphanage and within 10 or 20 years that orphanage was housing I think it's 20000 children. And he never once it was faith based people gave and contributed and supported the work and he never once asked anyone for money.   [00:15:26] And he later said in light that the reason he started at the orphanage was not because there was a great need. There was a great need. And it was not because he felt that this was his life's calling. He started the orphanage. He said to show people how to live by faith that he could by God's direction start an orphanage. Never ask anyone for money but trust God for all of the resources and God continue to provide more and more and more resources to start it and to grow it. And so a lot of the books have been written about George in terms of how do you get your prayers answered. How do you live by faith.   [00:16:07] And I want to share an example because this kind of talks in terms of what this stepping out by faith really means getting out of the boat. So because it is faith based ministry they never really had much money at any given time. They didn't have this great big bank account with lots of money to carry through months and months. They live basically day to day trust. It's like what Jesus says Lord give us this day our daily bread. And so I want to read you an excerpt from one thing that happened with George. So here's the extra one morning. So this is in an orphanage and they bring all the children together for breakfast one morning all the plates and cups and bowls on the table were empty. There was no food in the pantry and there was no money to buy food. The children were standing waiting for their morning meal just as they would always do. And Mueller said children you know we must be in time for school and then lifting up his hands. He prayed Dear Father we thank you for what you are going to give us to eat that pretty bowl.   [00:17:23] That's really all.   [00:17:26] I love it too. So then here's the rest of the story. There was a knock at the door. The Bakers stood there and said Mr. Mueller I couldn't sleep last night. Somehow I felt you didn't have bread for breakfast. And the Lord wanted me to send you some. So I got up at 2 o'clock this morning and baked some fresh bread and then brought it.   [00:17:47] And then Mr. Mueller thanked the baker and no sooner had the Baker left when there was a second knock at the door and there was a milkman he announced that his milk cart had broken down right in front the orphanage and he would like to give the children his cans of fresh milk so he could empty his wagon to repair it. So here's my question.   [00:18:09] Do you think that was orchestrated by the Lord.   [00:18:16] I do. I mean obviously if the Lord inspired those people spoke to them to do those things but I think it I think it can be inspired by the Lord. But I think also partners with his faith his willingness to say my husband lovingly says All right Jesus. Are you under the bus. You better show up. I'm just gonna put it out there. So I think it's kind of a partnership of both.   [00:18:45] It is. I think partnership.   [00:18:48] I think this is the key I think you hit it on the right word. It is a partnership because the Lord gives us a revelation gives us a promise like the promise he gave. Mueller was I'll meet all your needs. Mueller takes that promise at face value. And he says Lord thank you for giving us whatever you're to give us. Mueller had no doubt that the Lord was going to provide food. And yet here's the thing that's really interesting. When did the food arrive at the orphanage a long time before Mueller prayed a long time after he prayed or   [00:19:29] At the moment he prayed.   [00:19:35] You remember when you said at the moment he said Father thank you for what you're going to give us to eat. And then there was a knock at the door right after he prayed thanking by faith the Lord showed up. Does that make sense right.   [00:19:50] But now here's a bigger question. This is what's so fascinating about this. When did the Lord prepare everything to show up at that moment. Did he prepared at that moment or did he prepare it beforehand he prepared it beforehand for the baker. He got the baker up at 2:00 in the morning for the meal and he had the milkman leave at a certain time go through his route and all of sudden his car breaks down at that moment. So here's what's really fascinating and this is a hot topic for a whole nother discussion that we'll do. Is that faith actually operates outside of time.   [00:20:30] Think about this for a moment when Mueller thank the Lord. By faith all of these things were put in place prior to him thanking the Lord. Here here's a hypothetical question If Mueller never thanked the Lord by faith do you think those people would have showed up.   [00:20:52] That is a bigger question. I think that sometimes there is a grace over our actions and the Lord does show up but I think how much more soul or delight in our faith and our willingness to you know to believe and to step out and how much more fun is that for us to partner with it. I don't know.   [00:21:15] Good thing he's sovereign is sovereign. We don't know the answer entirely but let's say for a moment that Mueller was scared.   [00:21:27] He doubted that he doubted God's provision and therefore he really couldn't pray in faith and say Lord thank you for what you're going to give us to eat. If he was in that situation what do you think would have happened. Do you think the Baker would have shown up and do you think the milkman would've shown up.   [00:21:49] They might not have. I think in those months like I was saying I think there can be a grace that can happen and you can you're just blown away at God you're so faithful even when I'm not. But then I think also there are things that we missed out on. From not believing and not stepping out and taking a risk in faith with the Lord just even the way you just worded it I did envision I mean if you hadn't. They might not have shown up.   [00:22:18] So let me ask you a question because this is kind of the fascinating part with all of this. So let's look at when God moves when God shows up when God showed up with Peter and he walked on the water which was an absolute miracle. Was that. Any more of him showing up than him coordinating the baker and the milkman to providential show up at the same at the right time is walking on the water. Any greater an act of God than coordinating what appears to be human events.   [00:23:01] I don't think so. I mean I think that's the privilege of walking through life awake and aware of the Lord and how he works is that we're constantly in awe of every miracle he does whether it's walking on water or the provision in those moments of orchestrating all of that. So my my personal answer would be I think it's equally as beautiful and miraculous.   [00:23:29] I think you're right on that.   [00:23:31] I think you're right. Let me ask this question. Is it any harder for God for someone to walk on the water versus coordinating those events for them to show up.   [00:23:43] No I wouldn't think so.   [00:23:45] Is it any harder for God to heal someone from a cough versus heal them from multiple sclerosis and getting him out of a wheelchair. Is it any harder.   [00:23:55] No. No it's not.   [00:23:57] So when we look at things from God's perspective this is kind of tapping into where I'm going with this thing on faith. When we look at things from. God's perspective there is no level of difficulty greater than another and what we do in our lives whether we walk on the water or whether we bring some people to show up and bring bread and milk. It's all God acting he does it through different methods but it's all God showing up. Faith is actually seeing everything from God's perspective. This is if you go back to faith is the assurance that things hope for. It's a title deed to those things that God has said is the conviction of things that you cannot see what it actually is. In a broader scope in a more realistic scope. Faith is seeing things from God's perspective.   [00:24:54] And when you can see from God's perspective with Mueller God's perspective is I've got people bringing you stuff. So Mueller had no doubt from God's perspective with Peter on walk. Walking on the water. It was it was happening. It doesn't matter because God's perspective. God knows what's going on. And faith is when we operate from the perspective of God because we're operating from the Word of God and the word is absolute truth. I'm making some connections there. Does that make sense.   [00:25:30] It does. And what an honor. An amazing thing. Jesus made possible that we can see things through the lens of heaven and operate from that place because that's ultimately what it means to be a son or daughter is to operate with him and seeing things in the way that he does and walking in that kind of faith. Absolutely that makes sense.   [00:25:55] So then let's put it.   [00:25:57] Let's take this a step further because this is another truism we'll get into this a little bit more on another session but just to kind of open the door real quickly into this Jesus says Thy word is truth.   [00:26:10] Remember that I think it's John 17 and what Jesus is saying about the father's word is that it's true. And I'm gonna use the word truth with a capital T.   [00:26:26] Truth.   [00:26:28] Is not the same as reality. Reality is in the moment and reality can change. Truth is always absolute and always truth. Now when I'm talking in really deep terms for a moment. But are you following me kind of following at least generally the concept I'm trying to articulate.   [00:26:53] Yes.   [00:26:55] So now let's go back to Peter walking on the water. I'm gonna bring this up again a little bit later I think but go back to Matthew where you were and read where I stopped you from reading.   [00:27:09] Okay so let me let me catch this up 28 and 29 and you read from after that so catching up 28 29 as Peter says to Jesus Lord at that you command me to come on the water jesus gives Peter a command a word a word of truth come with that word of truth that command come is intrinsic within that the the truth that if he operates on that command then he's going to get what Peter asked for which is walking on the water so from that one word is encapsulated the truth of what's about to occur. Are you following me so far. Mm hmm mm hmm. Okay so it says Peter guy got out of the boat and walked on the water and came towards Jesus a miracle occurred as Peter operated by faith according to God's word according to the reign of Christ. Now pick up from there and tell me what it reads.   [00:28:13] So in verse 30 it says that when he saw the wind he was afraid and beginning to think he cried out. Lord save me right.   [00:28:22] And then what would Jesus do.   [00:28:26] Immediately Jesus reached out his hand and caught him a little face and said Why did you doubt.   [00:28:32] Perfect. Okay now here's something really cool. If you pray and God answers your prayer does that mean that you are righteous. Does that mean that you have great paper or does that mean that you're really special because God answers your prayer.   [00:28:54] Yeah. I was thinking about because I know there is the righteous the righteous man or the right to effective prayer for a righteous man accomplishes much.   [00:29:07] James Right. But generally speaking when most people think about a man or woman to praising God answers their prayer. Generally speaking do most people look at that person saying Oh a man or woman of God. Because God answers their prayers.   [00:29:25] All right.   [00:29:25] Well I guess generally speaking though generally speaking they think that way or generally speaking they don't think that way.   [00:29:33] They don't. They wouldn't think that. I guess I would think generally people would just think that might be normal. I don't know. Okay so books have been written about George Miller   [00:29:48] On how his prayers are consistently answered.   [00:29:52] Because it's been so unusual that someone can pray in their prayers answered. Does that make sense. Have you ever prayed and prayed and your prayers were not answered at least not answered the way you asked God to answer them.   [00:30:08] I think the Lord always when you release the control of what you believe or thought was supposed to be there was something that you're praying specifically into. You can usually go and we'll take you into a place where you can see his way. And so I don't know I don't I don't know that I feel like defeated thinking Oh I know because I trust the words ways are better.   [00:30:36] I guess I'm not saying you feel defeated. Have you ever asked Lord please do a and he doesn't do a. Have you ever had that happen. Yes. Have you ever asked the Lord please do be. And he does.   [00:30:52] Yes. Which one of those instances are you more enthused and delighted about.   [00:31:00] Well you're definitely worth doing what you pray for is answered. Okay. Okay.   [00:31:05] So that's where I'm going. Most people believe that when you pray and ask the Lord for something and he does what you've asked him to. There is an elation and there's a specialness to it because frequently we ask and we don't see the answer to the prayer that we've asked. I'm not making sense of that.   [00:31:25] You are. You are.   [00:31:26] Okay. So here we have Peter. He prays to the Lord and the Lord answers him exactly how he prays. It says Peter cried out to the Lord which is prayer. Lord save me. And it says Jesus reached out his hand and saved him.   [00:31:47] God answered Peter's prayer but here's the question is that good or bad. Let me go. Let me go where I'm going. Okay so often we're related because God answers our prayer. But answering our prayer is not necessarily God's highest and best of what he wanted for us. What was God's highest and best for Peter at that time. At that moment.   [00:32:24] To believe that he could walk into walk on the water and he lost the highest and best because of what now because of doubt and then he prayed in crisis and the Lord answered his prayer.   [00:32:45] And how many times do we pray for something far less than God's highest and best. He answers our prayer. We're elated but we have no real clue how much we've really lost out on what he wants us to have done something that does make sense.   [00:33:05] That's a great way to put it into perspective.   [00:33:09] But what happens then is Peter. So let's look at the sequence of events. Peter is given a word. A Rama from the Lord in some circles. We call it a revelation in some circles we'll call it a promise in whatever word you want to use. It's very clear to Peter that the Lord has given him a special direction.   [00:33:38] And so by absolute faith the assurance of things he could not see. He claimed the title deed.   [00:33:48] I can step out and he boldly steps out of the boat and starts to walk on the water and he's all excited and then his carnal mind gets in the way and starts to look at the circumstances and says oh my gosh this can't be happening. And instantly he goes from faith to doubt doubt is the opposite of faith. He immediately goes from operating from God's perspective   [00:34:25] To operating from man's perspective. He goes from operating from truth to operating from reality. And as soon as he goes from truth to reality what happens to his reality.   [00:34:43] It changes does it change.   [00:34:46] Here is the most amazing thing I've learned about faith. The most amazing but kind of the first of the many amazing things is you have truth which is God's word. Jesus says to his father and the High Priest I think they called the high priestly prayer. I think it's John 17. He's talking to the father praying all kinds of you know he's about to be turned over and then crucified. So this is the last stuff that he said. This is real important and one of the state statements he made his father die. Word is truth.   [00:35:26] Truth trumps reality. Truth modifies reality and look at what happened with Peter as long as Peter operated by truth. From the perspective of truth God's word by faith any claim that title deed then truth overcame natural laws and what should not have occurred did occur.   [00:35:56] Peter walks on the water as soon as Peter doubts in his heart instantly in a twinkling of an eye. If we want to use that term he transformed from operating by faith. To operating in the natural instantly just like that and instantly it says immediately he begins to sink. He loses the impact of truth and reality of his circumstances instantly changed. He goes from acting boldly upon God's word to sending up a prayer crisis.   [00:36:36] Lord help me and the Lord answers his prayer but the Lord would have preferred not to have to have intervened to answer that prayer. PAUL Peter lost the Lord's highest and best because he got his eyes off of Jesus and onto his circumstances and where you place your eyes is what you get is this kind of making some sense it is I think that's a really great way to put it and I think it's kind of a challenge for us to really think about like what we're asking the Lord for and to make sure that that is God and not settling racist.   [00:37:27] And he'll answer that.   [00:37:29] And it's not only based on what we're asking the Lord but what are we doing with what the Lord has directed us. Because often when the Lord directs us he directs us. Makes no sense in the natural. Do you think it made any sense to step out of the boat. Now keep in mind let me let me give you where this situation is. It says that they were rowing against the wind and had made very little progress to get to where they were going. By the time Jesus walked up to them. So that means you got all these strong men. They've lived on the on the on the sea for years. That was their livelihood being fishermen in a boat. They're rowing against the wind and they made very little headway. This is not calm water. This is a water that is very turbulent is very turbulent. They got a lot of things against them and it was in that situation that Jesus says stepped out of the boat and come walk with me. It's not going to be in an easy situation it's going to be one of those situations that is turbulent. Does that make sense. It does and it makes no sense in reality this is where the idea of faith really comes in stepping out. Let me look at my arm. I also make someone make a little point because I think it all kind of ties in a real simple point. Look at your phone for a moment and for those who are listening to this if you're driving you look at your steering wheel for a moment.   [00:39:24] Do you have faith that that telephone or that steering wheel exists.   [00:39:30] What about you. You have faith that it exists. Yes it's right here.   [00:39:36] Very good. So go back. And now I want you to read Hebrew see love in one for me.   [00:39:47] Ok.   [00:39:56] So now faces confidence and what we hope for an assurance about what we do not see.   [00:40:02] Stop. Do you see your phone. Yes. Can you have faith that it exists. I can't. I'm sorry. Something to speak to on me. I just said I can. Okay. Ready. Hebrew see love in one again.   [00:40:23] Now faces confidence and what we hope for and assurance about what we do not see.   [00:40:29] Assurance of things we do not see. But you can see your phone. Yes. You cannot have faith that your phone exists because you see it. Are you okay. Right. If you can see it. You do not have faith because faith by definition is the assurance of things not seen.   [00:40:57] And that's why it's so hard in the natural. We have to operate with our will use a very broad non-technical term. We have to operate with our spirit mind and our spirit eyes rather than our physical mind and our physical lives. And what happens is we're always pulled back our natural self wants to keep using our natural senses and our natural logic to tell us what reality is. That's what happened with Peter as soon as his naturalize left Jesus and went to the wind then at that point. Everything. Fell apart. And this is what happens in our lives too. Let me tell you a story is real interesting. This was 2003. To set the stage 2002 we we brought on this large account. We were making a lot of money. This one account was producing 2002 seventy five thousand dollars a month in profit a large account. And at that time we were giving a high percentage of what the Lord brought us back into the kingdom. And this account was scheduled to leave on I think it was June 1. We were holding nothing in reserves. By the way it was a lot of profit but it was all of the profit the company made. Without that account we would immediately be losing money because of our fixed expenses. So they were scheduled to leave on I think it was June 1 and we knew it. But we were saving nothing up in reserves and then they left and we immediately went from making a lot of profit to going upside down and we had no reserves to lean on because we'd given all the reserves away. And so that's where I found myself. And for the first month or two I was gung ho Lord's going to take care of us. Right. And operating what I thought was my faith but it kept going and we were borrowing money to survive.   [00:43:25] And all of a sudden I get scared and I shift and I start to batten down the hatches tell my business manager cut every expense put everyone down on reduced payroll. Now these are not bad things but they were things that I enacted out of fear.   [00:43:47] And so we batten everything down. Everyone took pay cuts. I took the biggest of all the pay cuts obviously since I owned the company and I was going to lead by example. And we're going to quote unquote weather the storm. And it kept going bad and bad and bad. And it was January. It was about January 25 2003. So we've been like this for six months seven months. And I was out on a what I call a day of prayer with the Lord just seeking Him going Lord of what's going on. And I was in a panic mode just like Peter Lord save me. And I remember asking the Lord Lord Quinn are you going to let up. And the Lord spoke to me in my heart this conversation we have in our spirit with the Lord so to speak. And he said Well do you really believe my word to take care of you. I said yes.   [00:44:50] And guess what the next question he asked me was any idea he believes that he'll take care of you and then can you see it make you pay for it almost.   [00:45:06] Pretty close he said. If you truly believed how would you act differently than you're acting right now.   [00:45:16] That's a great question to even ask ourselves. We say we're trusting the Lord we say we have faith that he's going to handle whatever we're going through. The question is if you really believed how would you operate different. And so I said well if I really believed I would put myself at full pay and I put all my people back at full pay.   [00:45:43] So you know what the Lord said to me what do I do. So I did. I called my office manager that moment I said my business manager I said put everyone back to full pay retroactive for January 1.   [00:46:03] So to put this in perspective we got paid twice a month on the 15th and on the 30th first and so on the 15th everyone was at the reduced pay amount. So what I told Walter was put everyone back to full pay for the month meaning let's say that month the full pay for selling was five thousand dollars but it reduced pay to thirty five hundred. So that means that that mid-month pay there were only going to get it paid about seventeen hundred instead of the normal twenty five hundred. Does that make sense. Because 17 is half of 35 right. So for the end of the month pay we're going to make up whatever is remaining to get them back to 5000. So that end of the month was a much bigger paycheck than it would have been if I just said start now. So we start at the first went back to the 1st of January to catch everyone up for that month. Well now that was only five days later. We lost that at that moment. We lost ten thousand dollars. We were ten thousand dollars in the hole by doing that but then the end of February. We had made ten thousand dollars profit.   [00:47:28] So there was a 20 thousand dollars swing in revenues not to get you lost with numbers. Twenty thousand dollar swing in revenues. And even to this day as I look at my profit and loss I cannot find where that money comes from. It wasn't that we had a lot more. Excuse me. Twenty thousand dollars swing in profit. It wasn't that we had more money that came in. It wasn't that we had fewer expenses. Literally I cannot find it. But here's the cool part. From that moment on for an extended period time we were making profit every month. The only thing that changed was operated by faith on God's promise to me rather than by sight with what I saw. And this is the whole idea of stepping out of the boat not being afraid to step off the boat because the word of God cannot fail God's promises can never fail. In fact it says I think in Luke 1 37 and 43 or something like that in the living Bible it says you believe God would do what he said. That is why he is giving you this wonderful blessing right. I think that says that God's promises cannot fail or something like that.   [00:48:59] And so when we at in that direction and when we act on God's word then what's happening is we're acting by truth not by reality and in some mysterious way God. God's truth alters reality because reality is variable. It changes all the time but God's truth is fixed and it is absolute is this kind of making sense.   [00:49:29] It is absolutely.   [00:49:30] So let's go back to the Mueller situation. He says Lord thank you for what you are about to give us to eat my question to you was if Mueller had doubted would the Baker and Hamilton have shown up.   [00:49:54] I understand.   [00:49:56] I love your question. Your answer was actually a little bit better than mine. Black and white.   [00:50:01] God's grace will still come into play at times even in the absence of us having faith. But if we look at the strictly strictly from a faith perspective. If Mueller had doubted then I think it's not near as likely. Except by only by God's grace and nothing more. Not near as likely that the food would have shown up because there's something about when you operate from a perspective of God's truth it changes reality. And when you operate from a perspective of the natural you don't get the truth reality. You get the natural reality and they are two different things.   [00:50:50] Kind of cool it it is something to feel like I'm going to do over some of this for a while because it is challenging in the best way for us to kind of even evaluate what we hear and how we act on it and just knowing what a vital role we get to play and be a part of it. It is I think a lot of this is going to stay on for a few days and I'm applying Yeah.   [00:51:22] So then let's talk about applying it because this is now at an academic level to a degree. We start to understand just a very shallow level of the truth about faith. ROMANS 10 17. Faith comes from hearing and hearing by the word of Christ. This is what we talked about last time. That word is the Greek word Rama and it means something very clear a very clear direction a promise a truth a quote unquote revelation something that's specific to you a rama. A lot of times is when you're reading God's word and something pops out of the page directly at you and you go oh this is God's word to me. Sometimes God speaks to you. Like that example where we're losing money and God said well if you really believed how would you act differently.   [00:52:14] You're right. Okay so you have that faith is rooted in God's word rooted by hearing God's word. It's rooted by hearing God's Word which is truth. And then Faith Hebrews love and one is the assurance of hope for the conviction of things not seen. Okay we start to understand that truth change is reality. Reality doesn't change truth. Truth change is reality and based on truth. Reality changes and based on the absence of truth I doubt you'd get the absence of truth. You get reality. This is what happened with Peter walking on the water soon as he doubted. Same situation two different outcomes right. One outcome God shows up another outcome. The natural consequence shows up. If we went back to Mueller one outcome by faith Lord thank you for what you're about to give us. God shows up he had already coordinated things to occur at that moment but in the absence of faith. Oh Lord please help us we have no food. I don't know how we're going to feed all these children. Help Lord God might have shown up but my guess is God would not and they would've gotten the natural consequence. Then you have.   [00:53:44] Let's see where was I going. God showing up.   [00:53:49] Then you have things like healing look at healing in the Bible. Jesus represents truth Jesus. In the beginning was the Word the Word was with God the Word was God thy word is truth. Jesus operates from the perspective of truth from the perspective of God. He walks up to someone and they're instantly healed demons are instantly cast out. He gives authority to his disciples to do the same thing. And a lot of the people who heal the demons are cast out but not all. There is an element the further away you get from truth. The further away you get from truthful modification of reality and you get to just natural consequence to tell you just one story is really interesting. So you're talking about West sometimes putting God under the bus and I know you don't put it on the bus but he commits God right. Also there's a story. One of the guys is out at a McDonald's. This guy's name is Judah by the way. And dude is at McDonald's and he sees there's a bunch of high school football players students on crutches with a broken leg and it hurts.   [00:55:08] And the guy walks up and says hey what's matter with your leg is is broken does it hurt you. Oh it hurts a lot. So would you like to heal it. I would love for him to. Great. And then Judah says he puts God under the bus so to speak. He yells out to the entire McDonald's restaurant. Hey guys come over here. You're going to see a miracle right now. God's going to heal this leg right now. And the guy says Well I don't believe it. I'm an atheist and you come up front and watch this. And he prays and God instantly heals that leg. For two reasons. Judah is operating from a position of faith.   [00:55:59] Absolute confidence in the unseen that God is about to heal that leg. And then because he operates from truth the leg gets healed. Have you ever known anyone that prays that they're sick and they've been praying and praying and praying and they're not healed ever had no people like that. Yeah. So for those who are listening so I actually go out with Caroline's husband yes once a month what we call straight ministry and literally just go out to Wal-Mart and say hey we're just praying for people anything I can pray for you. And frequently there are illnesses elements usually in the area of pain degenerative discs in the back.   [00:56:49] Major knee pain arthritis and blood clots and all kinds of things and they have their believers and they've been praying for healing and they've had this situation for years and nothing happens. I come up or w comes up or some of the folks with us will pray for that person and instantly they're healed. What happened. What's different is that it was simply God's timing now for them to be healed. Or do you think by God's grace a providential put the two of us together so that I could pray with a level of faith that hasn't been prayed for before for that person and because of my faith and what God's going to do. God heals or is it something different. There's something there.   [00:57:44] It's where I'm going. And when you operate from that perspective then truth overcomes reality. But here's the here's where I was kind of going. I was making a long circle around to get to this one point faces a choice think about it when Peter stepped out of the boat.   [00:58:08] He had a choice do I act on God's direction or do I not even once he got out of the boat.   [00:58:19] He had a choice. Do I look at Jesus and confidence in him or do I look at the wind and the waves and then he changed the choice.   [00:58:34] He chose the same thing happened with me with my business.   [00:58:40] I started into that unprofitable season when we lost that account by choice to trust the Lord and then because I couldn't see I could not see how is happening. Faith is the conviction of things not seen because I couldn't see what was going on or how God was going to take care of us. I became afraid and doubted James. I think it's James five says I'm not the man who doubts expect to receive anything from the Lord. That's kind of a paraphrased version of 2 3 versus all together. Actually I think it's James 1. It says For anyone who lacks wisdom let him ask of God but let him not down in his heart for the one who doubts ought not to expect to receive anything from the Lord. So I started it out. I started by fear. I started to go down and as soon as I changed and chose to act by faith everything changed. And this is the cool thing about faith. You choose to act by it. You don't act by it naturally. You choose to act on that word that the Lord has given you. You choose to believe it to be true. And then by believing it to be true you acting on it.   [01:00:05] That's when God starts to move. And I could tell you some more stories but I think that's probably got enough right now. We'll talk about some other stories later but it's kind of cool.   [01:00:21] I love it. And inspiring too. Food for thought.   [01:00:26] It is. So hopefully you take this and go look at these passages and ask the Lord What does this mean to me. The most important thing to be asking yourself is Lord if I really believe the promises you've given me. Faith is rooted in truth so it's not what you want to happen is what God has told you is going to happen. Lord if I really believed these promises you give me or really believed this direction. There is command that you told me how you want me to operate how would I act differently than I am acting right now.   [01:01:05] And if the way you would act differently is different then you're acting right now.   [01:01:11] Then that means you're acting in a natural not in the spiritual. You're acting by sight not by faith. You're acting by doubt not by faith and ultimately lead into this. If faith is the perspective of God would you agree that that's basically a decent definition of faith based on what the Bible says what faith is the perspective of God right.   [01:01:45] Right.   [01:01:45] Or how he sees things.   [01:01:49] I think it's operating by truth. If you operate in a way contrary to God what is that called.   [01:02:04] I guess that would be called doubt or disobedient.   [01:02:09] Right.   [01:02:10] And what is disobedience called sin.   [01:02:15] Huh. Okay. So now we're getting down to a deeper root. Faith is obeying God because faith comes from God's direction his truth.   [01:02:27] And it's believing God to be true believing his word to be true. Acting on that when you cannot see it that is complete obedience when you don't act in that direction you're doubting God's word to be true.   [01:02:44] Does that please God. No.   [01:02:48] That's right. Later in Hebrews it says Let not the one who doubts. Let's say what does it say. But act in faith for God has no pleasure in someone who doubts or something like that forget these phraseology. So when we do not act by faith if we do not act in a way that we would be acting if we absolutely believe God's word to be true then that ultimately means that how we're acting is in sin. When Peter took his eyes off of the Lord and put them on the waves. At that moment he disobeyed. He doubted God's word. He doubted Jesus and for him that is sin and he starts to get the consequence. He still praise the Lord saves him but he doesn't have God's highest and best God's highest and best is when we operate in total obedience with the Lord in total congruency with his direction for us in total faith in his word.   [01:03:55] Anything less than that is sin.   [01:04:00] And then we get into lots of degrees of sin. If we finish then. But surely there is a degree but that's where we're kind of moving. So just to throw that out that's a bonus. I like it.   [01:04:15] I'm thinking one of the one quote I love is obedience is actually obedience. That's right. That kind of reminded me of that. It's just like when we feel that prompting what you're saying from the Lord. Immediate obedience. That's what faith is. That's where that plays in. And what's holding us back from just jumping in. Because if there is anything holding us back that either out of fear or sin or ultimately that's just obedience. Even if it's just a slow obedience it's still disobedience. That's always been a convicting quote. It is here now to kind of just   [01:04:58] Speak philosophically or philosophically maybe fill out theology philosophically we sin because we feel it's better for us than following the Lord. Ultimately I mean it's a choice we send by choice and therefore we make a choice because we always make choices that we think are the right choices or make the choices that satisfy our desires. Imagine for a moment. Let me ask you you have said before is that correct.   [01:05:36] Yes. Okay right.   [01:05:39] Yep yep. So do you remember any time when you send when you kind of knew it was wrong but you did it anyway.   [01:05:49] Yeah I mean I feel like those kind of moments are few and far between.   [01:05:55] We're talking about any time. Do you recall any. Yeah.   [01:06:00] So let me ask you a simple question if at that moment you had a choice to send or not if you knew that if you resisted that said you you would be given a million dollars and have everything your heart's desired would occur if at that moment you knew what was going to occur. Would you have still chosen to send or do you think you would have had the will to say no.   [01:06:31] Yeah I would say that's some pretty powerful incentive. I'd probably have the will.   [01:06:37] I think we all would. So here's the issue. When we do not follow the Lord we know what he's telling us to do but we choose to go a different direction because we get afraid.   [01:06:50] Ultimately it's because we really don't understand how good the Lord is and what's in store for us. That's why we always sin when we sin is because we choose to satisfy our own desire based on what we think is maybe not best for us both what we really want but if we really understood what God has in store for us and any and every situation we would never sin. It's the lack of root truly understanding it. I think this is probably possibly where Paul talks about the renewing of your mind where he talks about in Romans 7. I do the things that I don't want to do but the sin in me that does it. And in Romans he talks about your mind the mindset on the spirit is life and peace in the mindset on the flesh of sin and death. The more we live by the spirit the more we live by the renewing of our mind the less we actually sin because the more we're conformed to Christ is therefore that obedience that conformity but also the more we realize how much the Lord has in store for us and we're willing to step out on his direction without really knowing the ultimate end of it. But we know who's leading us. Abraham stepped out went toward the promised land but he had no idea why he just followed the Lord. And so this kind of this great big cauldron of all of these spiritual truths kind of wrapping together but all pointing in the same direction. Anyway that's a freebie.   [01:08:27] I like the freebie so let's wrap up the call.   [01:08:31] I think we're about out of time on this one. I don't know if we have an official wrap up but here's the official wrap up if you like. Be sure to subscribe. We'll go get more radical faith love to share more if you have any questions on this you can email our support support at Master grabber dot com direct them to me if you have any questions on spiritual stuff and we'll either try to get there and try to answer them personally or maybe as a topic for another radical faith call as questions and answers from the field that might be a topic to try. Okay well you'll be blessed. Caroline thanks for being the sounding board on this one.   [01:09:16] Thank you for having me I really enjoyed it.   [01:09:18] All right have a great day.   P005

[fusion_builder_container hundred_percent="no" equal_height_columns="no" menu_anchor="" hide_on_mobile="small-visibility,medium-visibility,large-visibility" class="" id="" background_color="" background_image="" background_position="center center" background_repeat="no-repeat" fade="no" background_parallax="none" parallax_speed="0.3" video_mp4="" video_webm="" video_ogv="" video_url="" video_aspect_ratio="16:9" video_loop="yes" video_mute="yes" overlay_color="" video_preview_image="" border_size="" border_color="" border_style="solid" padding_top="" padding_bottom="" padding_left="" padding_right=""][fusion_builder_row][fusion_builder_column type="1_1" layout="1_1" background_position="left top" background_color="" border_size="" border_color="" border_style="solid" border_position="all" spacing="yes" background_image="" background_repeat="no-repeat" padding_top="" padding_right="" padding_bottom="" padding_left="" margin_top="0px" margin_bottom="0px" class="" id="" animation_type="" animation_speed="0.3" animation_direction="left" hide_on_mobile="small-visibility,medium-visibility,large-visibility" center_content="no" last="no" min_height="" hover_type="none" link=""][fusion_text] "Getting out of the boat" is one of my favorite Radical Faith topics because this is where I start to share what living by faith looks life in real life.  While I know there are no "mechanics" to living by faith (since faith is spiritual, not physical), if there were "mechanics" to it this topic is where you start to learn how to apply it. Listen via YouTube video below [/fusion_text][fusion_youtube id="https://youtu.be/T0518_n76PA" alignment="center" width="" height="" autoplay="false" api_params="&rel=0" hide_on_mobile="small-visibility,medium-visibility,large-visibility" class="" /][fusion_text] Transcription (was completed by automated process. Please ignore any speech-to-text errors) [00:00:00] Hi this is Caroline Springer and welcome to the next session of sellers calling you Beatty Carmichael Beatty is the CEO of Master grabber and the creator of agent dominator and one of the top marketing experts in the real estate field. Today we're gonna be talking on one of our radical faith calls and I'm going to pass it over to Beatty for our little disclaimer on just explaining what that is. [00:00:23] Real simply this has nothing to do with real estate today. It has everything to do with Christ. So if you don't want to hear about Christ and this podcast that's pretty simple isn't it. [00:00:34] Pretty simple. [00:00:37] All right. Well I guess I'd call this meeting so I'll start the agenda. Actually I think Caroline has been a little while since we did the last radical faith call. So if I recall correctly the last one we're talking about is faith. So maybe less just a real quick recap on what is faith and not trying to put you on the spot. But if you if I were to ask you Caroline what is faith. What would you tell me. [00:01:16] Well the first thing that come to mind is just like being sure of what we do not see and believing not just what meets the eye but what goes beyond that. So that's kind of my first thought that first from Hebrews immediately comes to mind. But I know it's definitely multi-dimensional and something that we walk through our lives processing with the words. But that's the first thought. [00:01:43] Great. So first in Hebrews we're talking about Hebrews 11 1. Can you quote it. [00:01:48] Do you remember it faces the assurance of what we do not see and nothing about it. [00:02:03] It's about it's about what we do not see right. [00:02:06] So Faith assurance of things hoped for the conviction of things not seen. And faith comes from where do we get that level of faith. [00:02:18] It's a gift from God. [00:02:20] It comes from Romans. Faith comes from hearing and hearing by the word of Christ and that word is actually the Greek word Rama. Now there are lots of uses for Rama. But in general you've got two words in the Greek so the New Testament was written in Greek and then it was translated ultimately into English. And there are two primary words in Greek use that's translated as word one word is logos logos I guess is how our logos logos and the others Ramo are EMEA. When we were talking last time we're talking about logos means primarily just talking about a concept or an idea. Rima is very specific Okay real simple explanation. I want to tell you about the Kingdom of God that's going to be logos but I'm going to say Caroline can you give me please give me that water. That's a Rima I'm directing you on something or I'm going to say Caroline. You're going to have another child in the next year. That would be arraignment if that were actually from God's word. So is something that's very clear specific and most importantly it's specific to you. [00:03:48] Does that make sense. It does. Great explanation too. [00:03:53] Yes. [00:03:53] So faith is when you've had that word some revelation some word from God and it is now faces the conviction of things not seen in other words we it's not something that we have to work on believing it's intrinsic and within our being. And that's what faces faith is not something that we well up and try to belief. If you have to try to believe if you have to will yourself to believe that's not faith that's simply in the natural. That's what we'll call hope. We're just hoping it's really true. But you know we have to work on trying to make ourselves believe it. So this thing that we talked about last. Is is all about this. This alternate. Understanding of faith being a clear direction a clear revelation a clear truth from God to us and we act on it. That's kind of where we're talking and where I want to talk about today kind of the topics that we're going to move into now is taking this understanding of what faith is and starting to see how it's applied in our lives. [00:05:21] And I call this topic stepping out of the boat or getting out of the boat and I remember I read a book I love the title I got a little bit of the book but I get more out of the title Jon Burge wrote a book. I'm sure you've never heard of it or you don't recall it. Do you recall a book that John Burge wrote. [00:05:42] I do not. [00:05:44] The title is real simple if you want to walk on water you've got to get out of the boat right. And so that's kind of where I want to take our call today if you want to walk on water if you want to do the most amazing things in God's work by his direction then you've got to be willing to step out of the boat. So also just to cover a couple of things I want to use the term sometimes radical faith. In reality there is only one faith. It's just faith. We kind of think of it as radical because for us as it's what I call normal Christians or Western Christians. Faith is well I believe in God and I pray and I go to church right. I'm sure you know some people like that don't you. [00:06:38] Definitely in the south definitely in the south. Radical faith is when you go oh my gosh I can't believe you go do that. Well that's actually what Jesus expects of us. [00:06:52] So let's see. One of the things that we came out with is a definition that radical faith or this true thing I call faith is choosing to step out on God's clearly defined will. His revelation or his direction for you in such a way that it's usually great personal risk or sacrifice. In other words when you walk by faith you're not walking by sight and therefore you have to step out in faith and trust that you can't see it. And it's at great personal risk in fact. Do you remember there a great example of this and I'll watch the movie in search of the Holy Grail not Monty Python. But this is Raiders of the Lost Ark. You remember when do you remember. I think it may have been the last the last part of that series. And they're searching for the Holy Grail. Did you ever watch that movie. [00:07:57] I did. I'm sure my husband had toward the end of the last scene. [00:08:03] Here's where they are. What's his name. Who's the main actor in that. The name escapes me. Harrison Ford thank you. Harrison Ford has just come to this. He's he's somewhere in the middle of nowhere in this cave or chasm and he comes to the edge and there's this great big chasm below him and across the way maybe a hundred feet or maybe two hundred feet is one of the nights of many years back story like a crusade or type of night. [00:08:45] And there is the Holy Grail the goblet that Christ used at the Last Supper. And Harrison Ford has been walking been following all these clues and secrets on how to get here. And now he has to take a leap of faith. That's basically the next clue is a leap of faith. He looks down in this chasm and it's straight down for a thousand feet or whatever it is and this is sheer death. But he chooses to step out by faith and so he steps out. [00:09:19] He can't see anything but yet his foot now lands on solid ground that he can't see. And he starts walking across this invisible bridge is basically what it is. That's kind of an idea of what faith is. You can't see it. You know it's there you trust is there and you trust is there because God said it is. That's God's word. And that's kind of what I mean by stepping out typically at great personal risk or sacrifice because if God doesn't show up in the way that he says he will then all is lost. And so I want to talk in terms of showing you how this applies from biblical things and start to apply to our lives. [00:10:04] Do you have your Bible handy by chance. I can't. [00:10:09] Okay. I want you to pull up Matthew 14 and let me know when you get there. [00:10:18] And we're going to do Matthew 14. This is versus 28 and 29. And as you get there let me just kind of give everyone the background of what's going on. So Jesus has just the day before. Literally that afternoon before has fed 5000 people with five loaves and two fish. He sends the people away he sends his disciples back across the lake in a boat and then Jesus goes up to the mountain to pray. Now it is early dawn before the sun is risen and the disciples are rowing against the wind and they see Jesus walking on the water and they can just make him out and they all get afraid because they think it's a ghost. And Jesus says no it's it's me. And now that's where we picked up Matthew 14 versus 28 and 29 Can you read that. [00:11:16] Yes. This is Peter. He says Lord if it's you Peter replied tell me to come to you on the water. He said Peter got down out of the boat and walked on the water and came towards Jesus. [00:11:32] Okay. [00:11:36] So Peter says Lord if you command me to come and Jesus has come and Peter gets out of the boat and walks on the water and comes toward Jesus. So here's a question when Peter stepped out of the boat and started walk on water. What happened. [00:11:54] I didn't know you're asking me directly. Well he doubted. I mean he he took his eyes off of the word and saw the wind and fear. [00:12:04] Hold on. Okay. Before that we're going gonna get to that before but when you get out of the boat at the very beginning what happens. Does he walk on water. [00:12:13] Yes he walks on water. And how does he walk on water by faith by listening to the word of the Lord Jesus said Come on he's not gonna let me think. [00:12:24] That's right. So here's a little truism that we start to see when we step out of our comfort zone because we stepped out by the Lord's direction. So Jesus Jesus's revelation if we want to use that term or his direction or his command if we want to use those terms to Peter was come and so Peter steps out of the boat. Great personal risk and sacrifice. If God doesn't show up he's sunk no pun intended. And guess what happened. God shows up. God does a miracle. [00:12:59] Do you see the little equation that's starting to come up. We stepped out by God's clearly defined well for us. We have faith that God is going to perform because faith is the assurance of things hoped for. Now the word hoping that Sharon says things to hope for another translation gives it faith as the title deed is the absolute. You actually own the title to what has been promised. Is that confident. So that's what faith is. That's what Peter does. He steps out of that boat and when he does something happens and what happens is God shows up and does a miracle. Pretty cool and it really cool. So the question then is or the comment on this is when God acts the God showing up moments because this is what we want in our lives. How do you live this life of faith and what does it look like. This life of faith is when God constantly shows up and he either shows up miraculously like he did with Peter walking on the water or he shows up providential where he just kind of organizes and orchestrates all kinds of events. [00:14:22] Now I want to talk in terms of these things. I think one of these I may have to fall back but does the name George Mueller ring a bell to you. [00:14:34] He's an author right. [00:14:36] Well he's written several books were maybe better spoken several books were written about him. He was actually a man of God back in the eighteen hundreds and early nineteen hundreds. He was in England in a town called Bristol England and he felt the Lord leading him to start an orphanage. And so he started an orphanage and within 10 or 20 years that orphanage was housing I think it's 20000 children. And he never once it was faith based people gave and contributed and supported the work and he never once asked anyone for money. [00:15:26] And he later said in light that the reason he started at the orphanage was not because there was a great need. There was a great need. And it was not because he felt that this was his life's calling. He started the orphanage. He said to show people how to live by faith that he could by God's direction start an orphanage. Never ask anyone for money but trust God for all of the resources and God continue to provide more and more and more resources to start it and to grow it. And so a lot of the books have been written about George in terms of how do you get your prayers answered. How do you live by faith. [00:16:07] And I want to share an example because this kind of talks in terms of what this stepping out by faith really means getting out of the boat. So because it is faith based ministry they never really had much money at any given time. They didn't have this great big bank account with lots of money to carry through months and months. They live basically day to day trust. It's like what Jesus says Lord give us this day our daily bread. And so I want to read you an excerpt from one thing that happened with George. So here's the extra one morning. So this is in an orphanage and they bring all the children together for breakfast one morning all the plates and cups and bowls on the table were empty. There was no food in the pantry and there was no money to buy food. The children were standing waiting for their morning meal just as they would always do. And Mueller said children you know we must be in time for school and then lifting up his hands. He prayed Dear Father we thank you for what you are going to give us to eat that pretty bowl. [00:17:23] That's really all. [00:17:26] I love it too. So then here's the rest of the story. There was a knock at the door. The Bakers stood there and said Mr. Mueller I couldn't sleep last night. Somehow I felt you didn't have bread for breakfast. And the Lord wanted me to send you some. So I got up at 2 o'clock this morning and baked some fresh bread and then brought it. [00:17:47] And then Mr. Mueller thanked the baker and no sooner had the Baker left when there was a second knock at the door and there was a milkman he announced that his milk cart had broken down right in front the orphanage and he would like to give the children his cans of fresh milk so he could empty his wagon to repair it. So here's my question. [00:18:09] Do you think that was orchestrated by the Lord. [00:18:16] I do. I mean obviously if the Lord inspired those people spoke to them to do those things but I think it I think it can be inspired by the Lord. But I think also partners with his faith his willingness to say my husband lovingly says All right Jesus. Are you under the bus. You better show up. I'm just gonna put it out there. So I think it's kind of a partnership of both. [00:18:45] It is. I think partnership. [00:18:48] I think this is the key I think you hit it on the right word. It is a partnership because the Lord gives us a revelation gives us a promise like the promise he gave. Mueller was I'll meet all your needs. Mueller takes that promise at face value. And he says Lord thank you for giving us whatever you're to give us. Mueller had no doubt that the Lord was going to provide food. And yet here's the thing that's really interesting. When did the food arrive at the orphanage a long time before Mueller prayed a long time after he prayed or [00:19:29] At the moment he prayed. [00:19:35] You remember when you said at the moment he said Father thank you for what you're going to give us to eat. And then there was a knock at the door right after he prayed thanking by faith the Lord showed up. Does that make sense right. [00:19:50] But now here's a bigger question. This is what's so fascinating about this. When did the Lord prepare everything to show up at that moment. Did he prepared at that moment or did he prepare it beforehand he prepared it beforehand for the baker. He got the baker up at 2:00 in the morning for the meal and he had the milkman leave at a certain time go through his route and all of sudden his car breaks down at that moment. So here's what's really fascinating and this is a hot topic for a whole nother discussion that we'll do. Is that faith actually operates outside of time. [00:20:30] Think about this for a moment when Mueller thank the Lord. By faith all of these things were put in place prior to him thanking the Lord. Here here's a hypothetical question If Mueller never thanked the Lord by faith do you think those people would have showed up. [00:20:52] That is a bigger question. I think that sometimes there is a grace over our actions and the Lord does show up but I think how much more soul or delight in our faith and our willingness to you know to believe and to step out and how much more fun is that for us to partner with it. I don't know. [00:21:15] Good thing he's sovereign is sovereign. We don't know the answer entirely but let's say for a moment that Mueller was scared. [00:21:27] He doubted that he doubted God's provision and therefore he really couldn't pray in faith and say Lord thank you for what you're going to give us to eat. If he was in that situation what do you think would have happened. Do you think the Baker would have shown up and do you think the milkman would've shown up. [00:21:49] They might not have. I think in those months like I was saying I think there can be a grace that can happen and you can you're just blown away at God you're so faithful even when I'm not. But then I think also there are things that we missed out on. From not believing and not stepping out and taking a risk in faith with the Lord just even the way you just worded it I did envision I mean if you hadn't. They might not have shown up. [00:22:18] So let me ask you a question because this is kind of the fascinating part with all of this. So let's look at when God moves when God shows up when God showed up with Peter and he walked on the water which was an absolute miracle. Was that. Any more of him showing up than him coordinating the baker and the milkman to providential show up at the same at the right time is walking on the water. Any greater an act of God than coordinating what appears to be human events. [00:23:01] I don't think so. I mean I think that's the privilege of walking through life awake and aware of the Lord and how he works is that we're constantly in awe of every miracle he does whether it's walking on water or the provision in those moments of orchestrating all of that. So my my personal answer would be I think it's equally as beautiful and miraculous. [00:23:29] I think you're right on that. [00:23:31] I think you're right. Let me ask this question. Is it any harder for God for someone to walk on the water versus coordinating those events for them to show up. [00:23:43] No I wouldn't think so. [00:23:45] Is it any harder for God to heal someone from a cough versus heal them from multiple sclerosis and getting him out of a wheelchair. Is it any harder. [00:23:55] No. No it's not. [00:23:57] So when we look at things from God's perspective this is kind of tapping into where I'm going with this thing on faith. When we look at things from. God's perspective there is no level of difficulty greater than another and what we do in our lives whether we walk on the water or whether we bring some people to show up and bring bread and milk. It's all God acting he does it through different methods but it's all God showing up. Faith is actually seeing everything from God's perspective. This is if you go back to faith is the assurance that things hope for. It's a title deed to those things that God has said is the conviction of things that you cannot see what it actually is. In a broader scope in a more realistic scope. Faith is seeing things from God's perspective. [00:24:54] And when you can see from God's perspective with Mueller God's perspective is I've got people bringing you stuff. So Mueller had no doubt from God's perspective with Peter on walk. Walking on the water. It was it was happening. It doesn't matter because God's perspective. God knows what's going on. And faith is when we operate from the perspective of God because we're operating from the Word of God and the word is absolute truth. I'm making some connections there. Does that make sense. [00:25:30] It does. And what an honor. An amazing thing. Jesus made possible that we can see things through the lens of heaven and operate from that place because that's ultimately what it means to be a son or daughter is to operate with him and seeing things in the way that he does and walking in that kind of faith. Absolutely that makes sense. [00:25:55] So then let's put it. [00:25:57] Let's take this a step further because this is another truism we'll get into this a little bit more on another session but just to kind of open the door real quickly into this Jesus says Thy word is truth. [00:26:10] Remember that I think it's John 17 and what Jesus is saying about the father's word is that it's true. And I'm gonna use the word truth with a capital T. [00:26:26] Truth. [00:26:28] Is not the same as reality. Reality is in the moment and reality can change. Truth is always absolute and always truth. Now when I'm talking in really deep terms for a moment. But are you following me kind of following at least generally the concept I'm trying to articulate. [00:26:53] Yes. [00:26:55] So now let's go back to Peter walking on the water. I'm gonna bring this up again a little bit later I think but go back to Matthew where you were and read where I stopped you from reading. [00:27:09] Okay so let me let me catch this up 28 and 29 and you read from after that so catching up 28 29 as Peter says to Jesus Lord at that you command me to come on the water jesus gives Peter a command a word a word of truth come with that word of truth that command come is intrinsic within that the the truth that if he operates on that command then he's going to get what Peter asked for which is walking on the water so from that one word is encapsulated the truth of what's about to occur. Are you following me so far. Mm hmm mm hmm. Okay so it says Peter guy got out of the boat and walked on the water and came towards Jesus a miracle occurred as Peter operated by faith according to God's word according to the reign of Christ. Now pick up from there and tell me what it reads. [00:28:13] So in verse 30 it says that when he saw the wind he was afraid and beginning to think he cried out. Lord save me right. [00:28:22] And then what would Jesus do. [00:28:26] Immediately Jesus reached out his hand and caught him a little face and said Why did you doubt. [00:28:32] Perfect. Okay now here's something really cool. If you pray and God answers your prayer does that mean that you are righteous. Does that mean that you have great paper or does that mean that you're really special because God answers your prayer. [00:28:54] Yeah. I was thinking about because I know there is the righteous the righteous man or the right to effective prayer for a righteous man accomplishes much. [00:29:07] James Right. But generally speaking when most people think about a man or woman to praising God answers their prayer. Generally speaking do most people look at that person saying Oh a man or woman of God. Because God answers their prayers. [00:29:25] All right. [00:29:25] Well I guess generally speaking though generally speaking they think that way or generally speaking they don't think that way. [00:29:33] They don't. They wouldn't think that. I guess I would think generally people would just think that might be normal. I don't know. Okay so books have been written about George Miller [00:29:48] On how his prayers are consistently answered. [00:29:52] Because it's been so unusual that someone can pray in their prayers answered. Does that make sense. Have you ever prayed and prayed and your prayers were not answered at least not answered the way you asked God to answer them. [00:30:08] I think the Lord always when you release the control of what you believe or thought was supposed to be there was something that you're praying specifically into. You can usually go and we'll take you into a place where you can see his way. And so I don't know I don't I don't know that I feel like defeated thinking Oh I know because I trust the words ways are better. [00:30:36] I guess I'm not saying you feel defeated. Have you ever asked Lord please do a and he doesn't do a. Have you ever had that happen. Yes. Have you ever asked the Lord please do be. And he does. [00:30:52] Yes. Which one of those instances are you more enthused and delighted about. [00:31:00] Well you're definitely worth doing what you pray for is answered. Okay. Okay. [00:31:05] So that's where I'm going. Most people believe that when you pray and ask the Lord for something and he does what you've asked him to. There is an elation and there's a specialness to it because frequently we ask and we don't see the answer to the prayer that we've asked. I'm not making sense of that. [00:31:25] You are. You are. [00:31:26] Okay. So here we have Peter. He prays to the Lord and the Lord answers him exactly how he prays. It says Peter cried out to the Lord which is prayer. Lord save me. And it says Jesus reached out his hand and saved him. [00:31:47] God answered Peter's prayer but here's the question is that good or bad. Let me go. Let me go where I'm going. Okay so often we're related because God answers our prayer. But answering our prayer is not necessarily God's highest and best of what he wanted for us. What was God's highest and best for Peter at that time. At that moment. [00:32:24] To believe that he could walk into walk on the water and he lost the highest and best because of what now because of doubt and then he prayed in crisis and the Lord answered his prayer. [00:32:45] And how many times do we pray for something far less than God's highest and best. He answers our prayer. We're elated but we have no real clue how much we've really lost out on what he wants us to have done something that does make sense. [00:33:05] That's a great way to put it into perspective. [00:33:09] But what happens then is Peter. So let's look at the sequence of events. Peter is given a word. A Rama from the Lord in some circles. We call it a revelation in some circles we'll call it a promise in whatever word you want to use. It's very clear to Peter that the Lord has given him a special direction. [00:33:38] And so by absolute faith the assurance of things he could not see. He claimed the title deed. [00:33:48] I can step out and he boldly steps out of the boat and starts to walk on the water and he's all excited and then his carnal mind gets in the way and starts to look at the circumstances and says oh my gosh this can't be happening. And instantly he goes from faith to doubt doubt is the opposite of faith. He immediately goes from operating from God's perspective [00:34:25] To operating from man's perspective. He goes from operating from truth to operating from reality. And as soon as he goes from truth to reality what happens to his reality. [00:34:43] It changes does it change. [00:34:46] Here is the most amazing thing I've learned about faith. The most amazing but kind of the first of the many amazing things is you have truth which is God's word. Jesus says to his father and the High Priest I think they called the high priestly prayer. I think it's John 17. He's talking to the father praying all kinds of you know he's about to be turned over and then crucified. So this is the last stuff that he said. This is real important and one of the state statements he made his father die. Word is truth. [00:35:26] Truth trumps reality. Truth modifies reality and look at what happened with Peter as long as Peter operated by truth. From the perspective of truth God's word by faith any claim that title deed then truth overcame natural laws and what should not have occurred did occur. [00:35:56] Peter walks on the water as soon as Peter doubts in his heart instantly in a twinkling of an eye. If we want to use that term he transformed from operating by faith. To operating in the natural instantly just like that and instantly it says immediately he begins to sink. He loses the impact of truth and reality of his circumstances instantly changed. He goes from acting boldly upon God's word to sending up a prayer crisis. [00:36:36] Lord help me and the Lord answers his prayer but the Lord would have preferred not to have to have intervened to answer that prayer. PAUL Peter lost the Lord's highest and best because he got his eyes off of Jesus and onto his circumstances and where you place your eyes is what you get is this kind of making some sense it is I think that's a really great way to put it and I think it's kind of a challenge for us to really think about like what we're asking the Lord for and to make sure that that is God and not settling racist. [00:37:27] And he'll answer that. [00:37:29] And it's not only based on what we're asking the Lord but what are we doing with what the Lord has directed us. Because often when the Lord directs us he directs us. Makes no sense in the natural. Do you think it made any sense to step out of the boat. Now keep in mind let me let me give you where this situation is. It says that they were rowing against the wind and had made very little progress to get to where they were going. By the time Jesus walked up to them. So that means you got all these strong men. They've lived on the on the on the sea for years. That was their livelihood being fishermen in a boat. They're rowing against the wind and they made very little headway. This is not calm water. This is a water that is very turbulent is very turbulent. They got a lot of things against them and it was in that situation that Jesus says stepped out of the boat and come walk with me. It's not going to be in an easy situation it's going to be one of those situations that is turbulent. Does that make sense. It does and it makes no sense in reality this is where the idea of faith really comes in stepping out. Let me look at my arm. I also make someone make a little point because I think it all kind of ties in a real simple point. Look at your phone for a moment and for those who are listening to this if you're driving you look at your steering wheel for a moment. [00:39:24] Do you have faith that that telephone or that steering wheel exists. [00:39:30] What about you. You have faith that it exists. Yes it's right here. [00:39:36] Very good. So go back. And now I want you to read Hebrew see love in one for me. [00:39:47] Ok. [00:39:56] So now faces confidence and what we hope for an assurance about what we do not see. [00:40:02] Stop. Do you see your phone. Yes. Can you have faith that it exists. I can't. I'm sorry. Something to speak to on me. I just said I can. Okay. Ready. Hebrew see love in one again. [00:40:23] Now faces confidence and what we hope for and assurance about what we do not see. [00:40:29] Assurance of things we do not see. But you can see your phone. Yes. You cannot have faith that your phone exists because you see it. Are you okay. Right. If you can see it. You do not have faith because faith by definition is the assurance of things not seen. [00:40:57] And that's why it's so hard in the natural. We have to operate with our will use a very broad non-technical term. We have to operate with our spirit mind and our spirit eyes rather than our physical mind and our physical lives. And what happens is we're always pulled back our natural self wants to keep using our natural senses and our natural logic to tell us what reality is. That's what happened with Peter as soon as his naturalize left Jesus and went to the wind then at that point. Everything. Fell apart. And this is what happens in our lives too. Let me tell you a story is real interesting. This was 2003. To set the stage 2002 we we brought on this large account. We were making a lot of money. This one account was producing 2002 seventy five thousand dollars a month in profit a large account. And at that time we were giving a high percentage of what the Lord brought us back into the kingdom. And this account was scheduled to leave on I think it was June 1. We were holding nothing in reserves. By the way it was a lot of profit but it was all of the profit the company made. Without that account we would immediately be losing money because of our fixed expenses. So they were scheduled to leave on I think it was June 1 and we knew it. But we were saving nothing up in reserves and then they left and we immediately went from making a lot of profit to going upside down and we had no reserves to lean on because we'd given all the reserves away. And so that's where I found myself. And for the first month or two I was gung ho Lord's going to take care of us. Right. And operating what I thought was my faith but it kept going and we were borrowing money to survive. [00:43:25] And all of a sudden I get scared and I shift and I start to batten down the hatches tell my business manager cut every expense put everyone down on reduced payroll. Now these are not bad things but they were things that I enacted out of fear. [00:43:47] And so we batten everything down. Everyone took pay cuts. I took the biggest of all the pay cuts obviously since I owned the company and I was going to lead by example. And we're going to quote unquote weather the storm. And it kept going bad and bad and bad. And it was January. It was about January 25 2003. So we've been like this for six months seven months. And I was out on a what I call a day of prayer with the Lord just seeking Him going Lord of what's going on. And I was in a panic mode just like Peter Lord save me. And I remember asking the Lord Lord Quinn are you going to let up. And the Lord spoke to me in my heart this conversation we have in our spirit with the Lord so to speak. And he said Well do you really believe my word to take care of you. I said yes. [00:44:50] And guess what the next question he asked me was any idea he believes that he'll take care of you and then can you see it make you pay for it almost. [00:45:06] Pretty close he said. If you truly believed how would you act differently than you're acting right now. [00:45:16] That's a great question to even ask ourselves. We say we're trusting the Lord we say we have faith that he's going to handle whatever we're going through. The question is if you really believed how would you operate different. And so I said well if I really believed I would put myself at full pay and I put all my people back at full pay. [00:45:43] So you know what the Lord said to me what do I do. So I did. I called my office manager that moment I said my business manager I said put everyone back to full pay retroactive for January 1. [00:46:03] So to put this in perspective we got paid twice a month on the 15th and on the 30th first and so on the 15th everyone was at the reduced pay amount. So what I told Walter was put everyone back to full pay for the month meaning let's say that month the full pay for selling was five thousand dollars but it reduced pay to thirty five hundred. So that means that that mid-month pay there were only going to get it paid about seventeen hundred instead of the normal twenty five hundred. Does that make sense. Because 17 is half of 35 right. So for the end of the month pay we're going to make up whatever is remaining to get them back to 5000. So that end of the month was a much bigger paycheck than it would have been if I just said start now. So we start at the first went back to the 1st of January to catch everyone up for that month. Well now that was only five days later. We lost that at that moment. We lost ten thousand dollars. We were ten thousand dollars in the hole by doing that but then the end of February. We had made ten thousand dollars profit. [00:47:28] So there was a 20 thousand dollars swing in revenues not to get you lost with numbers. Twenty thousand dollar swing in revenues. And even to this day as I look at my profit and loss I cannot find where that money comes from. It wasn't that we had a lot more. Excuse me. Twenty thousand dollars swing in profit. It wasn't that we had more money that came in. It wasn't that we had fewer expenses. Literally I cannot find it. But here's the cool part. From that moment on for an extended period time we were making profit every month. The only thing that changed was operated by faith on God's promise to me rather than by sight with what I saw. And this is the whole idea of stepping out of the boat not being afraid to step off the boat because the word of God cannot fail God's promises can never fail. In fact it says I think in Luke 1 37 and 43 or something like that in the living Bible it says you believe God would do what he said. That is why he is giving you this wonderful blessing right. I think that says that God's promises cannot fail or something like that. [00:48:59] And so when we at in that direction and when we act on God's word then what's happening is we're acting by truth not by reality and in some mysterious way God. God's truth alters reality because reality is variable. It changes all the time but God's truth is fixed and it is absolute is this kind of making sense. [00:49:29] It is absolutely. [00:49:30] So let's go back to the Mueller situation. He says Lord thank you for what you are about to give us to eat my question to you was if Mueller had doubted would the Baker and Hamilton have shown up. [00:49:54] I understand. [00:49:56] I love your question. Your answer was actually a little bit better than mine. Black and white. [00:50:01] God's grace will still come into play at times even in the absence of us having faith. But if we look at the strictly strictly from a faith perspective. If Mueller had doubted then I think it's not near as likely. Except by only by God's grace and nothing more. Not near as likely that the food would have shown up because there's something about when you operate from a perspective of God's truth it changes reality. And when you operate from a perspective of the natural you don't get the truth reality. You get the natural reality and they are two different things. [00:50:50] Kind of cool it it is something to feel like I'm going to do over some of this for a while because it is challenging in the best way for us to kind of even evaluate what we hear and how we act on it and just knowing what a vital role we get to play and be a part of it. It is I think a lot of this is going to stay on for a few days and I'm applying Yeah. [00:51:22] So then let's talk about applying it because this is now at an academic level to a degree. We start to understand just a very shallow level of the truth about faith. ROMANS 10 17. Faith comes from hearing and hearing by the word of Christ. This is what we talked about last time. That word is the Greek word Rama and it means something very clear a very clear direction a promise a truth a quote unquote revelation something that's specific to you a rama. A lot of times is when you're reading God's word and something pops out of the page directly at you and you go oh this is God's word to me. Sometimes God speaks to you. Like that example where we're losing money and God said well if you really believed how would you act differently. [00:52:14] You're right. Okay so you have that faith is rooted in God's word rooted by hearing God's word. It's rooted by hearing God's Word which is truth. And then Faith Hebrews love and one is the assurance of hope for the conviction of things not seen. Okay we start to understand that truth change is reality. Reality doesn't change truth. Truth change is reality and based on truth. Reality changes and based on the absence of truth I doubt you'd get the absence of truth. You get reality. This is what happened with Peter walking on the water soon as he doubted. Same situation two different outcomes right. One outcome God shows up another outcome. The natural consequence shows up. If we went back to Mueller one outcome by faith Lord thank you for what you're about to give us. God shows up he had already coordinated things to occur at that moment but in the absence of faith. Oh Lord please help us we have no food. I don't know how we're going to feed all these children. Help Lord God might have shown up but my guess is God would not and they would've gotten the natural consequence. Then you have. [00:53:44] Let's see where was I going. God showing up. [00:53:49] Then you have things like healing look at healing in the Bible. Jesus represents truth Jesus. In the beginning was the Word the Word was with God the Word was God thy word is truth. Jesus operates from the perspective of truth from the perspective of God. He walks up to someone and they're instantly healed demons are instantly cast out. He gives authority to his disciples to do the same thing. And a lot of the people who heal the demons are cast out but not all. There is an element the further away you get from truth. The further away you get from truthful modification of reality and you get to just natural consequence to tell you just one story is really interesting. So you're talking about West sometimes putting God under the bus and I know you don't put it on the bus but he commits God right. Also there's a story. One of the guys is out at a McDonald's. This guy's name is Judah by the way. And dude is at McDonald's and he sees there's a bunch of high school football players students on crutches with a broken leg and it hurts. [00:55:08] And the guy walks up and says hey what's matter with your leg is is broken does it hurt you. Oh it hurts a lot. So would you like to heal it. I would love for him to. Great. And then Judah says he puts God under the bus so to speak. He yells out to the entire McDonald's restaurant. Hey guys come over here. You're going to see a miracle right now. God's going to heal this leg right now. And the guy says Well I don't believe it. I'm an atheist and you come up front and watch this. And he prays and God instantly heals that leg. For two reasons. Judah is operating from a position of faith. [00:55:59] Absolute confidence in the unseen that God is about to heal that leg. And then because he operates from truth the leg gets healed. Have you ever known anyone that prays that they're sick and they've been praying and praying and praying and they're not healed ever had no people like that. Yeah. So for those who are listening so I actually go out with Caroline's husband yes once a month what we call straight ministry and literally just go out to Wal-Mart and say hey we're just praying for people anything I can pray for you. And frequently there are illnesses elements usually in the area of pain degenerative discs in the back. [00:56:49] Major knee pain arthritis and blood clots and all kinds of things and they have their believers and they've been praying for healing and they've had this situation for years and nothing happens. I come up or w comes up or some of the folks with us will pray for that person and instantly they're healed. What happened. What's different is that it was simply God's timing now for them to be healed. Or do you think by God's grace a providential put the two of us together so that I could pray with a level of faith that hasn't been prayed for before for that person and because of my faith and what God's going to do. God heals or is it something different. There's something there. [00:57:44] It's where I'm going. And when you operate from that perspective then truth overcomes reality. But here's the here's where I was kind of going. I was making a long circle around to get to this one point faces a choice think about it when Peter stepped out of the boat. [00:58:08] He had a choice do I act on God's direction or do I not even once he got out of the boat. [00:58:19] He had a choice. Do I look at Jesus and confidence in him or do I look at the wind and the waves and then he changed the choice. [00:58:34] He chose the same thing happened with me with my business. [00:58:40] I started into that unprofitable season when we lost that account by choice to trust the Lord and then because I couldn't see I could not see how is happening. Faith is the conviction of things not seen because I couldn't see what was going on or how God was going to take care of us. I became afraid and doubted James. I think it's James five says I'm not the man who doubts expect to receive anything from the Lord. That's kind of a paraphrased version of 2 3 versus all together. Actually I think it's James 1. It says For anyone who lacks wisdom let him ask of God but let him not down in his heart for the one who doubts ought not to expect to receive anything from the Lord. So I started it out. I started by fear. I started to go down and as soon as I changed and chose to act by faith everything changed. And this is the cool thing about faith. You choose to act by it. You don't act by it naturally. You choose to act on that word that the Lord has given you. You choose to believe it to be true. And then by believing it to be true you acting on it. [01:00:05] That's when God starts to move. And I could tell you some more stories but I think that's probably got enough right now. We'll talk about some other stories later but it's kind of cool. [01:00:21] I love it. And inspiring too. Food for thought. [01:00:26] It is. So hopefully you take this and go look at these passages and ask the Lord What does this mean to me. The most important thing to be asking yourself is Lord if I really believe the promises you've given me. Faith is rooted in truth so it's not what you want to happen is what God has told you is going to happen. Lord if I really believed these promises you give me or really believed this direction. There is command that you told me how you want me to operate how would I act differently than I am acting right now. [01:01:05] And if the way you would act differently is different then you're acting right now. [01:01:11] Then that means you're acting in a natural not in the spiritual. You're acting by sight not by faith. You're acting by doubt not by faith and ultimately lead into this. If faith is the perspective of God would you agree that that's basically a decent definition of faith based on what the Bible says what faith is the perspective of God right. [01:01:45] Right. [01:01:45] Or how he sees things. [01:01:49] I think it's operating by truth. If you operate in a way contrary to God what is that called. [01:02:04] I guess that would be called doubt or disobedient. [01:02:09] Right. [01:02:10] And what is disobedience called sin. [01:02:15] Huh. Okay. So now we're getting down to a deeper root. Faith is obeying God because faith comes from God's direction his truth. [01:02:27] And it's believing God to be true believing his word to be true. Acting on that when you cannot see it that is complete obedience when you don't act in that direction you're doubting God's word to be true. [01:02:44] Does that please God. No. [01:02:48] That's right. Later in Hebrews it says Let not the one who doubts. Let's say what does it say. But act in faith for God has no pleasure in someone who doubts or something like that forget these phraseology. So when we do not act by faith if we do not act in a way that we would be acting if we absolutely believe God's word to be true then that ultimately means that how we're acting is in sin. When Peter took his eyes off of the Lord and put them on the waves. At that moment he disobeyed. He doubted God's word. He doubted Jesus and for him that is sin and he starts to get the consequence. He still praise the Lord saves him but he doesn't have God's highest and best God's highest and best is when we operate in total obedience with the Lord in total congruency with his direction for us in total faith in his word. [01:03:55] Anything less than that is sin. [01:04:00] And then we get into lots of degrees of sin. If we finish then. But surely there is a degree but that's where we're kind of moving. So just to throw that out that's a bonus. I like it. [01:04:15] I'm thinking one of the one quote I love is obedience is actually obedience. That's right. That kind of reminded me of that. It's just like when we feel that prompting what you're saying from the Lord. Immediate obedience. That's what faith is. That's where that plays in. And what's holding us back from just jumping in. Because if there is anything holding us back that either out of fear or sin or ultimately that's just obedience. Even if it's just a slow obedience it's still disobedience. That's always been a convicting quote. It is here now to kind of just [01:04:58] Speak philosophically or philosophically maybe fill out theology philosophically we sin because we feel it's better for us than following the Lord. Ultimately I mean it's a choice we send by choice and therefore we make a choice because we always make choices that we think are the right choices or make the choices that satisfy our desires. Imagine for a moment. Let me ask you you have said before is that correct. [01:05:36] Yes. Okay right. [01:05:39] Yep yep. So do you remember any time when you send when you kind of knew it was wrong but you did it anyway. [01:05:49] Yeah I mean I feel like those kind of moments are few and far between. [01:05:55] We're talking about any time. Do you recall any. Yeah. [01:06:00] So let me ask you a simple question if at that moment you had a choice to send or not if you knew that if you resisted that said you you would be given a million dollars and have everything your heart's desired would occur if at that moment you knew what was going to occur. Would you have still chosen to send or do you think you would have had the will to say no. [01:06:31] Yeah I would say that's some pretty powerful incentive. I'd probably have the will. [01:06:37] I think we all would. So here's the issue. When we do not follow the Lord we know what he's telling us to do but we choose to go a different direction because we get afraid. [01:06:50] Ultimately it's because we really don't understand how good the Lord is and what's in store for us. That's why we always sin when we sin is because we choose to satisfy our own desire based on what we think is maybe not best for us both what we really want but if we really understood what God has in store for us and any and every situation we would never sin. It's the lack of root truly understanding it. I think this is probably possibly where Paul talks about the renewing of your mind where he talks about in Romans 7. I do the things that I don't want to do but the sin in me that does it. And in Romans he talks about your mind the mindset on the spirit is life and peace in the mindset on the flesh of sin and death. The more we live by the spirit the more we live by the renewing of our mind the less we actually sin because the more we're conformed to Christ is therefore that obedience that conformity but also the more we realize how much the Lord has in store for us and we're willing to step out on his direction without really knowing the ultimate end of it. But we know who's leading us. Abraham stepped out went toward the promised land but he had no idea why he just followed the Lord. And so this kind of this great big cauldron of all of these spiritual truths kind of wrapping together but all pointing in the same direction. Anyway that's a freebie. [01:08:27] I like the freebie so let's wrap up the call. [01:08:31] I think we're about out of time on this one. I don't know if we have an official wrap up but here's the official wrap up if you like. Be sure to subscribe. We'll go get more radical faith love to share more if you have any questions on this you can email our support support at Master grabber dot com direct them to me if you have any questions on spiritual stuff and we'll either try to get there and try to answer them personally or maybe as a topic for another radical faith call as questions and answers from the field that might be a topic to try. Okay well you'll be blessed. Caroline thanks for being the sounding board on this one. [/fusion_text][/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]

Click here to get James' new book, What the Quran Really Teaches About Jesus. Gary Myers: Hi, my name is Gary Myers. Joe Fontenot: And I am Joe Fontenot. Gary: We're the hosts of the Answering the Call Podcast. Joe: This is the podcast where we talk to people who are answering God's call. Gary: Today our guest is James Walker. Joe Fontenot: James has a new book out on the Quran but specifically on using the Quran to show that Jesus is who Jesus is- Gary: Wow. Joe: Yeah, it's very interesting. Marilyn interviewed him in this one and I sat in and listened and I really can't wait to read this book because the Quran essentially says Jesus is God without saying Jesus is God, and if you read carefully you can use it as its own apologetic for Christianity. Gary: That's great. I caught his evening session at Defend and he spoke about the book there and it's an exciting book. Can't wait to read it. Joe: Yeah. And he's also got an atheist Christian book club which he talks about, which I thought was pretty interesting as well. Gary: Very interesting. Well, let's hear from James. Marilyn Stewart: James, you are involved in some very interesting ministries and I want to talk to you about two of those. You do spend a lot of time talking to Muslims and also to atheists, but you have a brand new book What the Quran Really Teaches about Jesus prophet of Allah or Savior of the world. So, I want to start there and give you a chance to tell us a little bit about that book. But the title says the Quran Teaches about Jesus. I suspect that many Christians don't realize this. So, what does it say about Jesus? James Walker: Well, it is a surprise that the Quran has a lot to say about Jesus even more than Mohammed, and there are some things that actually that we would agree with that it agrees with the Bible in some places. Now, I think it's important to understand that it's not the same Jesus that we're talking about. But for one thing, the Quran affirms that Jesus was born of a virgin and no other Prophet, according to Islam was ever born of a virgin. Marilyn: And there are a lot of profits that Islam recognizes. James: They recognize any prophet of God. So, the prophets mentioned in the Bible, Isaiah, Ezekiel, talk about King David and Abraham. Yeah, all these are prophets, and Jesus also was one of the prophets. That's another affirmation that you have. In the book I have the transcript of a debate I did with a Muslim apologist Khalil Meek, and that's where the subtitle of the book comes from Prophet of Allah or Savior of the World. So, basically we started off in the debate with the point of agreement. We're both religions, both scriptures, the Bible and the Quran, both affirm Jesus as being a prophet. Now, we're I took it from there is you have to ask the question, what did Jesus prophesy? There is not one prophecy of Jesus recorded in the Quran. Marilyn: I believe you mentioned this when you were speaking at Defend about a Muslim who went to other authorities to check. Tell us a little bit about that. James: Yeah, one of the things that I'm trying to do in the book is encourage Christians to just engage. You'd be surprised most Christians if they think about it a while, they know a Muslim. It could be their doctor, or it could be a pharmacist, it could be a classmate at the university, it could be a convenience store clerk, a neighbor, but they know someone who's a Muslim. And there's, I think we have this kind of built in fear. I don't maybe want to start a conversation. What if they ask a difficult question, or maybe they would be offended if I ask a question about that. So, What I'm trying to do and what the Quran really teaches about Jesus is in the book, be able to have some great questions to ask or a verse in the Quran that you can ask them to explain to you and kind of start this gospel conversation. So, this particular example I gave, I was at a coffee shop and this guy comes in and I had seen him before but not really talked with him anything, but I noticed this time when he came in he actually had an Islamic dictionary in his hand. And I thought, "Okay, I know ... he's Muslim, but he also, I noticed there was only one seat open in the entire coffee shop. So, basically when I saw him headed toward my seat, I had been reading on my tablet, I'd been reading the Bible, but I just switched to the Quran. So, he sat down next to me and I didn't say anything but I thought this might happen. He must have looked over because he taps me on the shoulder he's big smile and he says, "Oh, you're reading Quran?" I said, "Yes I am." He said, "Oh, you must be Muslim." And I said, No, I'm actually Christian. He said, "huh." And it was like, it was a little bit disorienting to him. He didn't know what to make of it, but I said, "Listen, I'm a Christian, but I want to understand other religions and I want to know what the differences are, and I recognize if 1.8 billion people believe the Quran, this is an important book that I should be able to know. And I was reading in the Quran and I was having difficulty understanding a passage." He said, "I'm Muslim, let me help you." And so I showed him Surah 350 where the Quran ... Jesus is speaking actually. Here's another thing you have the saying of Jesus and Jesus says that you must fear Allah and obey me. So, you fear God, but you also have to obey Jesus. And he said, "But that's true, my friend, you must obey Jesus." I said, "Well, here's my question. I cannot anywhere in the Quran, find the commands of Jesus. If we're to obey Him, where can we find His commands?" Well, that ended up being like several conversations like that one and like two more times were talking about this and he was unable to find any of the commands of Jesus and so I said, "Well, this obviously you can only find them in the gospels like Matthew, Mark, Luke and John." He was a little bit hesitant to go that way but I finally convinced him if he would read Matthew's Gospel with me and see if we can find anything. He would say, "Oh, but the Gospels have been corrupted." I said, "But is there anything remaining of value there?" Well, he hadn't thought. "Well, there could still be something good let's go look and see." So, this is again, a way that just knowing a little bit about the Quran maybe a good verse, know the right kind of questions to ask. Yeah. And it ended up being for better part of probably six or eight months, we had off and on conversations. Marilyn: Now, so, he didn't know any commands in the Quran from Jesus and also prophecies? There were no prophesies in the Quran? James: Yeah, you can take the same approach with the prophecies. Nowhere in the New Testament. In my debate with Khalil Meek, when we both agreed at the very outset, okay premise one, is Jesus a prophet of God? Both affirm. So, my question which is a good question to ask any Muslim, what did Jesus prophesy? Marilyn: What do they say when- James: Well, they assume he must have prophesied what the Quran teachers. There's the idea that in Jesus' original writings that may be he must have taught Islam. Now, we don't have any of these writings because you don't find any of that in the four gospels or in the New Testament or anything like that, but there's this assumption, well, he must have taught the five pillars of Islam. Like any good Muslim and so I asked Khalil on that, "Can you show me the documents?" Now, when I'm going to say that Jesus made a prophecy I'm going to point to ancient documents very close to the time that Jesus lived. The best he could do was to say that those were corrupted and need to be superseded by the Quran. Marilyn: ... Now, that's interesting. So, let me make sure I'm understanding this correctly. Because the Quran does not list any commands or prophecies of Jesus, that presents a problem, but they can't feel comfortable accepting the Bible because they feel the New Testament is corrupted. James: Well, it's what Jesus prophesied. He prophesied that He would be crucified, that He would die, that He would rise three days later from the grave. These are things that not only are not in the Quran, the Quran mentions them and says that they're not true. Marilyn: Yes. Okay. James: But you don't have a prophecy of Jesus saying this. So, if someone is going to be a prophet, is he a true prophet or a false prophet? Of course, I mentioned in the book that, and the Muslim apologist Shabir Ally complains that the New Testament is not trustworthy because the Gospels may have been written several decades after the events they describe. Well, that doesn't mean they're not true, but ironically he's complaining about several decades when the Quran is trying to comment on something 600 years later, 800 miles away. Marilyn: Interesting. So, they then do say some at least that this corruption that took place with the New Testament they assume that these five pillars that's what's been taken out. James: Right. So, he must have taught Shahada, he must have taught everything that we find. So, it's kind of like the ultimate conspiracy theory is the idea that all of Jesus' original disciples were all Muslim, Jesus was Muslim, all his disciples are Muslim. They believe Islam, they believe what you now can find in the Quran and they wrote them down in what they call the Injil, the gospel, but none of the copies remain. Every copy that we have, very early copies that we have match what we have in our New Testament. So, one of the examples was that in the, there's a fragment of John's gospel, the Ryland P52 fragment, which is the oldest extent part of the New Testament that we have. It dates traditionally between 100 and 150 AD. Way before Mohammed. Ironically that little piece of fragment is actually citing a prophecy where Jesus speaks of his death and his resurrection. Marilyn: Yeah, the manuscript evidence for the New Testament just in Greek is around 5,000 manuscripts. And then of course we have other copies and other languages. So, we do have good evidence how the New Testament came to us. James: Right, and if you want to claim that there was another earlier uncorrupted New Testament, I mean, that's an interesting theory but I'd like to see some documents. Where's any proof on this? Marilyn: Sure. Let's go back to where else the Quran says some things about Jesus that we could affirm that do match up with what the New Testament says. James: Well, that Jesus was a prophet of God. We mentioned that His birth, His coming was predicted by the other prophets. They even say in the Quran that Jesus is Messiah. Now, they mean something very different by that than what we do. So, they're not trying to say Jesus was Christ or savior. That is not what they believe. But they do have the title Messiah. So, that would be something that we would affirm. To me, one of the most remarkable affirmations though is that the Quran teaches that Jesus was born of a virgin. And there's a whole chapter about Mary and about the virgin birth of Jesus in the Quran. I'd like to say, in fact, it's kind of the opposite of the Gospels. The Gospels is, 80% of it deals with Jesus' life and then rather, 20%, 25% and then the vast majority deals with those last two weeks. While in the Quran it talks a lot about Jesus but the vast majority talks about His birth and the early years and not so much about the later part of his ministry. But yeah, there's a passage in the Quran where it says that we honor and believe all of the prophets of God. And it lists several, including Jesus, and we make no differentiation between them. A great question to ask a Muslim is, "Hey, we have something in common. You believe in the virgin birth and that's what our scripture says, that Jesus was born of a virgin. Here's the question, tell me what other prophets were born of a virgin?" Marilyn: That's a good question. James: Well, there has been no other prophet. Not Abraham, not Ishmael or Isaac, or they would talk a lot about King David, none of them. So, even Mohammed. Mohammed was not born of a virgin. Marilyn: So, Jesus had this miraculous birth that no other prophet in the Quran has had. James: Yes. And would you have to agree with me then that Jesus is unique among the prophets if no other prophet has this kind of birth. Marilyn: Now, how is it that they see Jesus differently? Where do we disagree on Jesus? James: Well, unfortunately the disagreement on the essentials of Christian faith and the very core of the gospel. So, they're first of all going to say that while Jesus was a prophet He was not the Son of God. In Islamic thinking, and in the Quran actually, is pretty clear on this. The idea of God having a son is reprehensible to them because it implies if you're the Son of God that ... and I would agree it does. Some level, there's a quality there. You're the same type of being the father and the son. And in Islamic monotheism, only one person can be God, Allah and not any other person. If you ascribe the attributes of God to any other person, even Jesus, it is tantamount to the unpardonable sin. It's what they call the sin of shirk. Marilyn: And this is unforgivable, unpardonable, it is a major problem for Muslims. James: Yeah there's some Muslim folklore that's not explicitly said certainly in the Quran and not even really explicitly taught in the Hadith, but the idea is if you're a Muslim on the day of judgment and your bad deeds outweigh your good deeds, the Muslims all agree, you go to hell. But there's a caveat there, this idea that if you did not commit shirk and you were Muslim, that you potentially can get out of hell later. Marilyn: Okay. So, there's a way out. James: Again, that's not in the Quran. I asked a friend, one of my Muslim friends I was talking to, "I cannot find anywhere in the Quran where you get out of hell tell me where this comes from." And he, "Oh, it's not in the Quran it's in the Hadith." And I say, "Well, you know my Imam friend told me that Hadith is not totally reliable." And he's, "Well, it's not totally reliable." What if the part about getting out of hell is in the unreliable part? Marilyn: Gosh, that would be a bad situation. James: It would. Marilyn: Now, the Hadith, explain what that is and how it's different from the Quran. Just a brief explanation. James: Well, when Mohammed dies, and this is actually like a century or two after the death of Mohammed. The collection of the Hadith begins. And this is where you're trying to gather together a corpus of data on what Mohammed did and said, is extremely important in Islam because Islam is very much focused on orthopraxy, doing things the right way. I mean, everything. Every aspect of life, there's a right way to do it. It's based on the pattern of what Mohammed did. Well, that's based on Hadith. So in Hadith what they're doing is, they're trying to gather these statements, these sayings or deeds and they're trying to build a chain of custody on them. So, you have this saying, the story, and how do we know it happened? Well, this particular person said that he talked with someone who was one of the Friends of a companion of Mohammed. And so, they they connect the dots, try to get it back to the life of Mohammed, and there are several collections of Hadith. Many, many volumes of work. So, the idea is the Muslims will try to weigh how reliable that Hadith is. Is it highly reliable, is it somewhat reliable, and they base that on that chain of Custody. But I would say in a practical sense that what Islam is today is based at least as much if not more on Hadith than it is on Quran. Marilyn: Oh, is that right? James: Yes. Marilyn: And so, this shows some, it shows how important their thinking is on following a certain, I don't know if works is the right way to say it, but there is a path laid out for them that they must follow. James: Yeah, even the five pillars you don't find it at all clearly in the Quran. There's implication and stuff, but that you're to pray five times not six or seven, that's Hadith, you don't get that in the Quran. Marilyn: Very precise. James: Exactly. And so that's, on a practical level, extremely important in day to day Islamic life. Marilyn: So, it lays out a step by step thing that they must do in order to be right with Allah. James: Yes. Marilyn: So, there is no savior in Islam, is that correct? James: Yeah, and that was, we included as a chapter the entire transcript of my most recent debate with Khalil Meek and the title Jesus Christ prophet of Allah our Savior of the World, and Khalil is adamant that Jesus is not the Savior. But one of the debate issues that came up, if Jesus is not the Savior, who is? Who's the Savior then? And the tragic part of Islamic theology is, it's not just that Jesus isn't the Savior, there is no savior. Marilyn: Do they realize that they need a savior? Do you find that longing in their heart to this understanding that they are not quite good enough, that they haven't followed that path as closely as they need to? Do you get the sense that they have that desire to have a savior? James: I think not so much initially. Part of what I'm trying to do is get that Muslim friend with me into the Bible. So, I'm going to start with the Quran, but I'm trying to shift over, "Can we see what the gospel say about this." And try to get them to hear the stories of Jesus and you get a very different picture of God in the New Testament. You get a God who so loved the world that He gave His only begotten Son. Well, in Islam Jesus can't be the begotten son. It says in the Quran, "Allah neither begets nor has he begotten, but even more disturbing you don't have a God that's love. You have a God, Allah is merciful, but there's a big difference between merciful and loving. In the same way the God in Islam cannot partner with or share His attributes with, He can't have a son or He can't be a son. This idea imply that He can't have that love relationship either because he's separate and distinct and totally apart from creation. Marilyn: And so, they do not think of God as a heavenly father as Christians see Him? James: Not father at all that's anathema to call Jesus father. And even in the doctrine of the Trinity, there are several places in the Quran where it says, stop saying, seize saying God is three. And in parentheses Trinity, sometimes they'll put the parenthetical in case you don't know what we're talking about. We don't believe in the Trinity doctrine. So, technically, is a monotheistic religion and it does cause confusion with Christians. We hear from our news media, we hear from some of our politicians even. Oh well, Christianity and Islam they're both monotheistic religions, they are both religions of Abraham, they put their roots back in Abraham. So, they believe in one God, they believe in the same God. Well, I would beg to differ on that. The believe in one God doesn't mean that we're talking about the same God. I've never met any Muslim, any Imam, any cleric, any even rank-and-file Muslim who would ever say that God is the father of Jesus Christ, you can't say that. Marilyn: So, we do worship different gods. James: I would say so. Marilyn: And we can start with the things that we do affirm about Jesus but it is important to lead them to the Gospels and finding out who Jesus really is. James: I do find some parallels ain how the Apostle Paul dealt with the Epicurean and Stoic philosophers. So, the Areopagus, and Athens, and Mars Hill. When He is talking to them and when he's confronted by them and he's trying to explain the gospel, it's interesting he never quotes any scripture. If he had quoted it, those guys wouldn't have known what he was talking about anyway. He does elsewhere quote their philosophers. And so what he does is he finds a point in common. There was a shrine to this unknown God. And I think, Paul, thinks, "Hey, I don't believe in Greek mythology, but this is too easy to use. Even they've acknowledged there might be a God they don't know about. This is the one I want to tell them about." Marilyn: And this is why your book is so helpful because you pull out some passages from the Quran that is a great place for Christians to start as they're talking to a Muslim. Some of those passages about Jesus and how He is, the things they agree with about Jesus and where it is different. So, your book came out this year? James: Well, late last year, it's already a new year now. Marilyn: Well, that's true. We're in 2019. James: Less than a year ago. We can say it that way. It seems like, and I tell you, I do not really embrace and enjoy the writing process. I do it. I am not happy to write, I'm happy to have written. Marilyn: And you are a good writer. It's very clear. James: Well, thanks. But it's, sometimes I think that writing a book is the closest a man can ever know to what it's like to give birth. So, it's like the labor pain. Marilyn: No, giving birth is worse. James: You've done both so you would know, but yeah, I don't enjoy the process but I'm glad that it's done. I like the product, had a lot of people helping me. I had our editor at Watchman Fellowship at my ministry did a lot of work to help, and then at Harvest House, the senior editor there, Steve, he's just so good at what he does. Marilyn: Excellent. Before we leave Islam, I want to give you a chance to talk about tips. You've mentioned a couple of things, but for Christians that want to make a friend of a Muslim and lead that Muslim to Jesus, to a loving God, you mentioned several tips at Defend, and I know you use the word task that this is our task, I just wanted to give you a chance to explain that to us, give us any other tips for getting to know Muslims, how we get to know them, how we approach them, anything like that you'd like to say. James: Yeah, I would just say just in general, and this is not just Muslim, this is really trying to build relationship with anyone for the gospel. I have a Mormon back, I used to be Mormon before I became a Christian, and when I first became a Christian I kind of did it all wrong with my Mormon friends. I could prove them wrong and I have all this evidence I want to hit them over the head with and looking back on it I should have known better because nobody responds well to when somebody says, I can prove you're wrong 10 different ways or something like that. So, over time, what I, here's what I've learned. It's really all about relationship. What did they say. No one cares what you know till they know that you care. And so, on the building on the back of relationship, you earn the right ... first of all, you know the person and you spent time with them that they can see that there's something different about you. They can see Christ in you, hopefully. And also you earn the right to ask the question. And there's a feeling of safety that, they know that I'm going to be their friend whether they're Muslim or not. And so it's not about if you convert to Christianity, then we can be friends. No, we're friends. If you convert to Christianity, I'd be thrilled. But we're friends either way. Marilyn: That's a good point. James: And building that relationship. So, it's all about that and asking the right questions. At the end of most of the chapters, we have a series of good questions that would help further that gospel conversation and gospel discussion. The other thing I would encourage people to do, I thought, many, many years ago, I had been dealing with reaching Jehovah's Witnesses, reaching people involved in the occult and I'll put in this Muslim thing. It's just like, I have this kind of fear. If I start talking to the Muslim, they're going to say, "I'm Muslim, I'm not interested" or something. And I found the exact opposite. What I found was, "I'm Muslim. I'm very interested." Marilyn: And this is fascinating. I think a lot of Americans felt that way, still feel that way. A little afraid to speak to a Muslim. James: Well, you know, we were the generation that lived through 911 and we see the terrorism and it's connected with radical Islam and sometimes there's an actual fear, every Muslim that you see, is there a bomb involved or something like that. I'm not going to minimize that that's not a bad problem. The vast majority of Muslims do not interpret the sword versus, when the Quran says that you're to smite the infidel and strike their necks and stuff, my friend Khalil that I did the debate with, he would tell me, "James, when it says to kill the infidel it's about the infidels on the Arabian Peninsula during the time of Mohammed and the warfare that was going on. It doesn't mean kill all infidels everywhere all times. It's a specific." He'd make a comparison to the Canaanites and the Exodus. Marilyn: In the old testament. James: It doesn't mean we're to go conquer every land and kill all the inhabitants and drive them out. So, if that's what most Muslims believe it's probably not my best strategy to talk them out of that. "Oh, no, right here you're supposed to smite infidel, that's me, you're supposed." No. If that's what they interpreted, it is what it is. There are Muslims that do interpreted it in a terroristic fashion. So, I'm so appreciative of our military, our first responders, and those politicians who make the right decisions to help protect us from all dangers, foreign and domestic, including religious terrorism, but my job as a Christian, I'm not the Air Force or the army, I'm not Homeland Defense, I'm part of the church. So, I feel like my job is the gospel, not so much to be involved in military or political solution. I really kind of feel we may be beyond, on the case of radical Islam, we may be beyond a political or military solution at this point. The only real solution I think might be the gospel of Jesus Christ. Marilyn: And it is a great opportunity. We say we are people of the Great Commission and God does seem to be bringing the nation's to us even from nations that we can't get into as missionaries. So, this is great. James: I've noticed a lot of pushback from people who, they're disturbed by there's so many Muslims moved to America in a 10 year period according to our most recent census, Islam is growing by 160% in just 10 years in America. But we have to say, well, you look at the other side, these people, a lot of them are coming from countries where it is illegal to share the gospel. Now that the Muslim is your next door neighbor or is your classmate at school at the college or something, you don't have to get on an airplane, you don't have to go through the red tape, is a mission field that comes to us let's see if we can take advantage of that. Marilyn: So, what are the things that we have in common with Muslims in terms of, they are people that love their families, love their children. And in terms of developing relationships, surely they are things like that, that we can connect to. What would you say to that? James: Well, one of the things, you're dealing a little differently if you're dealing with a Muslim, from Saudi Arabia, or even from Pakistan or Indonesia, Muslim country, Sharia law, you're dealing with a little bit different mindset when they come to America versus an American Muslim, but just understand that a lot of Muslims are confused when they get here because they assume that America is a Christian nation and everything that they see, everything that they see on the internet, everything that they see on TV and the movies, they think, "Oh,, this is Christianity." And to help them to see that not everything American means Christian. A great question to ask is, when you've built that relationship with the Muslim is say, "Let me ask you my friend, have you ever came to the place where I share with you how I became a Christian?" And sometimes there's this confused look, "Well, you were born in America." Marilyn: Sure. James: "Well, yes I was, but to be born in America makes you an American, but to become a Christian you have to be born a second time." And it's almost like John chapter three. Is usually like, "What do you mean to be born again?" It's just like, they've never heard this before. Marilyn: That's great. James: And this was my life before you should be able to do this in 90 seconds, but I wanted to please God, but I was concerned that perhaps I had sinned against God and there may be a day of judgment where I would stand before God and what if I fail what would happen to me? and I realized at a point in my life I needed help, I needed a savior. And that's when I realized that Jesus was more than a prophet. That He actually came to be my substitute, to offer me eternal life. Just that little kind of communication and it's almost you can see, I can remember vividly seeing it's like childlike like, this is they've never heard this story before. Marilyn: Interesting. Well, the gospel of course is a great message and He is a God of love so I could see where this could draw Muslim very easily if we are genuine in our faith and in our walk. I do want to change the subject now and kind of shift gears and go to something that you do that is also very fascinating. That's the Atheist Book Club. So, how in the world did you get into an Atheistic Book Club? What does that look like? And whose idea was that? James: Not mine. The actual title is the Atheist Christian Book Club. So, it's atheistschristianbookclub.com, and this is something an atheist friend of mine kept bugging me to do. It's a long story how I got invited to this atheist gathering that they have like a fellowship. And just out of curiosity I went and they were actually kind of really nice and had a lot of questions. And I would try to go at least maybe once a month or something. And we got into all kinds of great discussions about everything from, Big Bang cosmology to the source of ethics, and intelligent design, and the Dallas Cowboys and I mean, all kinds of things, but over time I-

In this episode of the Houston Home Talk, Mike Wall of Love Ohio Living and James talk about the detailed roadmap for changing business over to EXP, consistency, and branding.Quotes : " If we do get somebody to say yes, then we got a shot at a six-figure income."" You'll get what you want if you can help other people get what they want. "Mentions:Website: http://loveohioliving.comShownotes: 1:04: Response from other people to the interviews2:07 Mike started real state business04:45 Mike talking about consistency08:45 - Mike talks about branding 19:24 - Team Structure 20: 48 - Mike's favorite books and podcasts.Full Transcript:[00:03] INTRO: Welcome to Houston home talk featuring all things real estate in the Houston area. We'll interview real estate professionals, local business owners, and special guests from right here in the Houston community. This is where you get the inside scoop about what's new in real estate, new community openings and business openings and much more. The Houston Home Talk Show starts right now.[00:32] JAMES: All right guys welcome. What's up? This is James J. Welcome to Houston Home Talk. I am excited today to have my man Mike Wall from Dayton, Ohio. What's up Mike? How are you today?[00:43] MIKE: Yes sir. Baby, I'm so happy to be here, man. I'm so happy to help. We'll be able to drop some value on your audience today, brother.[00:50] JAMES: Yeah. Listen, I have been watching you now for several months as you have been doing a lot of interviews with a lot of the new people that have been moving over to EXP Realty. I want to say thank you because a lot of the content that you've been providing, I know I've used, I forwarded it to people and I know that the value that you're providing is helpful to a lot of people. You and I met in New Orleans last month. I've been watching you for several months. As soon as we met, there was several people that came up to you and said, hey, thanks Mike. I know you're reaching people. [01:21] MIKE: Yeah.[01:22] JAMES: You're helping people because a lot of people can't do what you're doing in the way that you do it so thank you for that. I wanted to ask you so I want to just start, so you've been doing a lot of these interviews, a lot of Facebook Live interviews. I want to get people introduced you. I want to ask you real quick, what's been the response from other people to the interviews that you've been doing with the new people that have joining EXP?[01:42] MIKE: Yeah. No, it's a great question man. It's really been overwhelming more than I even thought and really the whole reason if I back up and just telling you the reason why I started doing the podcast… [01:52] JAMES: Right.[01:53] MIKE:…is because I knew that we were building something special. I also knew that changes is big. Change is big for everybody involved and especially the for those people who are team leaders in running a business. I wanted to give those people a platform to be able to share their unique story with the world and in hopes that somebody out there might identify with them and be able to make an intelligent decision about where their business went and then also providing a detailed roadmap for change if they decided to move their business over to EXP. Then also kind of lastly is just to provide insight on people curious about learning more about EXP.[02:34] JAMES: Right? Yeah. Let's get to know a little bit about you because I know you have been in the business. You've been licensed for about 16 years or so. You started full time…was it 2014 when you were officially started full time? [02:45] MIKE: I did it. I got a unique story. I've had my license since 2002. I actually got into the business just as a buyer specialist for one of the top agents here in our marketplace. A guy named Phil Herman who worked for Remax is a big deal man. The guy was selling like 300 properties back like when nobody knew about teams. When I got into the business I just thought, man, I don't want to try to learn all this on my own. What I'll do is I'll take a little bit less of a commission split to go under somebody who actually has all the knowledge for what I want to do, right? I worked with Phil 2002 to 2009 and we all know what happened in 2008-2009. The market just completely crashed.I actually got out of real estate. I kept my license but I went to work back in corporate America and I did that for five years. I was working for a company that was based out of Blue Ash, which is a suburb of Cincinnati and I was selling copiers, man. It is a grind doing that. I did that for five years. I knew I wouldn't do that long term and I knew I would get into real estate. [03:43] JAMES: Right. [03:44] MIKE: In 2013 in about October, I started calling the expires in 2013. In 2014 May I had 44 listings and I went to my wife and I said, honey, it's costing me more to be at my corporate job than it is to be here in real estate. She said, you know what? She said, do your thing man. That first year went out and sold 57 houses. Second year in the business, sold 104 houses, third year sold 187 houses and then fourth year I sold 309 houses. I just haven't looked back, man. There's so much obviously that goes in between there because now you know, I'm operating as a team. I've got some great team members. I got a great business partner now. We've opened up a whole world with investing and so forth.[04:30] JAMES: Now let me touch on this because it seems pretty simple. One of the things that I love about you is the consistency. I know you've been doing a lot of live coaching calls. Obviously you've been doing this for several years, calling the expires. [04:41] MIKE: Yup.[04:43] JAMES: One of the things that I tell a lot of new agents is what you think, because everybody just assumes everybody's calling the expires. I've heard you mentioned this in the video, a lot of people will stop calling after the fourth time or even a third time in a lot of cases. Obviously you were consistent. What made you focus on the expires? Because as a new agent, that's one of the things that I always tell people to do. Focus on expires. You can get that information and just keep consistent, stay consistent with it. What made you start? What was the thing that kind of got you to focus on the expires when you first started?[05:17] MIKE: Yeah. No man. That's a legitimate question because if you think about it, I mean everybody's good at something, right? Everybody can always make up the excuse that I'm not good at something and typically it's because they either don't have the experience or they're just not willing to try. For me, when I moved here, I went to high school and was raised mostly in to Dallas, Fort Worth area. I moved to Ohio and went to college at Ohio State. Go Bucks. I met my wife there and my wife was from this small town, which is a Northern Cincinnati, Southern Dayton suburb called Springboro. I didn't have a personal network. I didn't have a lot of people that I could tap into. I just thought, well, what is the next best thing? I knew I could grind it out on the phones because I had done in B to B sales selling copiers, right?[06:03] JAMES: Right. [06:05] MIKE: There's no science behind it, man. I just did it. You talked about consistency and that's, that's really what it was. It's just doing it. It's repetitions in the gym, right? It's like every day you show up. You put in your reps. You work hard, and then the magic starts to happen, man.[06:20] JAMES: Right. Yeah. That consistency thing is very difficult, especially for us because there's no one to tell us to do anything.[06:27] MIKE: Right.[06:29] JAMES: Everyone wants to get in the business, but then lacking the discipline to do what you did for three years and still continue to do to this day with the Expires. It's something tells you is you have a schedule and you got to work. It's hard to do. It is hard because stuff comes up. It's hard to stay consistent. If you really want to make it and you're a prime example, everybody that's calling these Expires, they're not doing it consistently. They just don't. I know it. In Houston, it's the same thing. We've got 30,000 agents here. We've got a lot of expires but of that 30,000 there's only a handful of people that are actually consistent with it. As a matter of fact you knew that and you stuck with it and clearly it works.[07:09] MIKE: I want your audience to understand something too James is that the great thing about calling the Expires is not everyone's is going to say yes, right? We are fortunate enough to work in an industry where the margins, if you do get a yes, are very large, and I always tell my team this, right? We live in a market in southwest Ohio here where the average price point is not really high, right? Our team average sale price is $178,000. Our market. Average sale price is $130,000 but you can still make a six figure income here if you just get one yes, every week because our agents average commission check is 25.50 and if you take 25.50 and divide that out over 50 weeks, you've got a nice income, right?[07:48] JAMES: Absolutely, yeah.[07:50] MIKE: Really we just focus…we have our team focus on that one yes per week, right? We understand when we pick up the phone that the odds are against us, right? We understand that most people are not going to answer the phone and if they answer, most people are not going to set an appointment. We understand also that if we do get somebody to answer it, if we do get somebody to say yes, then we got a shot at a six figure income.[08:10] JAMES: Absolutely. Yeah, and you know there's a couple of books I've got but the go for no is one. Darren Hardy, I love Darren Hardy. December is going to be here tomorrow and I bring this up because his book talks about the format. There's this habit, habit, habit, habit and what he used to do when he was in real estate back in the day, he would just look for no's. The more no's you get, you're just closer to that yes. At some point somebody is going to say yes and I'm a huge Darren…the compound effect. That's what that's saying in the book, compound effect. I love that book. Usually we'll bring it up every single year around this time of year and I go through it and I'll operates during the year because it's a great book about the discipline of habits. In this business. it is key to everything is self-discipline to be able to, to continue to do that. Props to you on that. Now I wanted to ask you, so I heard in the interview that you had mentioned that you had back when you started full time back '04, 2014-2015. I guess a couple of years into it. You switch from the wall group over to love Ohio living, LOL team.[09:05] MIKE: I did. I did.[09:07] JAMES: Explain why did you did that? I think I know the answer. I wanted my audience to understand why did you do that? Why did you think that was important to get your name off the brand and brand it to level high live in which you did.[09:18] MIKE: Yeah. No, that's a great question. There's arguments for both sides.For me personally, I thought it was more sustainable to build a business that didn't have my name on it. I didn't think people would sustainably work to build my business. I thought that together, if we formed something that we could all believe in and all row the same direction, that didn't have my name on it. In another words, it's like a football team, right? If you think of the Dallas cowboys, right? Who did beat the Saints last night which…[09:50] JAMES: Yes, they did. Yeah.[09:51] MIKE: if you think of the Dallas Cowboys, they're not called the Jerry Jones, right? They're called the Dallas Cowboys. Jerry Jones owns the cowboys, but everybody has their respective position for the Dallas cowboys. When they come together, they make a team, right? I wanted to do is I wanted to take the level how living team and I wanted to galvanize everybody around that.What that stood for was elite level agents being able to plug their businesses in to our tool systems and resources to go out and sell as many houses as they want. Not, they plugged into Mike Wall and just took every, all my leftovers, right? Because there is a team model that works that way and I just don't believe it's sustainable. The statistics show, I mean, the shelf life on those type of a team, the shelf life of the agent is much lower, right? Because what happens is they come in, in most cases and they build them up and then those agents, they want to go do the same thing whereas now we have an agent on our team. It's like Natalie Rose, right? Is an agent on our team? It's Natalie Rose with the level higher living team at a power broker by EXP Realty, right? Her name goes on the sign. We just have our LOL logo. Frankly, it's not that I would ever sell my business, but if you think of it like this, James who's going to buy Mike Wall real estate without Mike Wall.[11:09] JAMES: Yeah. [11:10] MIKE: You know what I mean? [11:11] JAMES: Now you're, you're right on. That's a key when we talk about marketing branding because I f struggled with that as well earlier and having my name. I agree with you completely. I think the buy in from your team is much more when you have LOL Level Higher Living. I love that you did that. That's a key. That's a nugget for people to really look at that because like you say there's arguments both ways. I'm actually on board with you as far as the branding and not having your name attached to it for the long term, long term that's a great idea. Good information there. Let me ask you, so from all the interviews that you've been doing with a lot of the EXP Agents that have been mourning, it's been absolutely crazy the growth that we've had. You joined back, was it February of this year is when you guys moved over? [11:55] MIKE: Yes sir, it'd be a year. [11:58] JAMES: Montel Williams, you moved over. What's been the best or the most surprising thing, specifically from the people that you have interviewed? Because I don't know if you've got to off the top of your head how many people you've interviewed since you started the show.[12:10] MIKE: Probably around 20, 25 at this point.[12:13] JAMES: Okay. Okay. What's been maybe one of the biggest surprises or maybe common similarities? Because everybody's story's a little different. I probably have watched virtually every video interview that you've done. Everybody's story just a little bit different. What have you found that maybe something that's maybe been similar from a lot of the people that you've spoken to? [12:30] MIKE: Yeah. I have them. Something instantly pops to mind and because it really not only has it surprised me that this is what I've learned from them. It is something that we never expected when we came over. I'm learning now when I talked to people in those interviews is that it's the same thing for them, right? What I'm learning is that the community. It's the community that we've created. It's the people that now we're able to tap into, right? Because like Jay Kinder and Mike Reese, the NEA group, right? They used to run this mastermind that was like a $25,000 buy in, right? Now they're doing that mastermind for free. [13:09] JAMES: Yeah. [13:10] MIKE: Right? We're talking about Kinder was the number one, number two guy for COA banker in the world at one time, right? He's one of the smartest guys in real estate. When you're able to plug in to those guys like I could shoot him a text right now and get a response from him, right? The same thing with Kyle Whistle, the same thing with Dan Beer. I mean we're talking about some of the biggest real estate teams and smartest real estate minds in the business.For me that was the biggest surprise man, is the fact that now we've created this fantastic community of learning and sharing and just growth and excitement, man. That's an easy answer for me. [13:50] JAMES: Yeah, you and I, we've got a lot of similar circles as far as NEA. I've been with NEA probably since 2011. Actually, back then it was just Kinder-Reese. I've been following Jay for years. He's one of the nicest guys you'll ever meet. Yes, I also coached with them him well. You're right. When now you've gotten to exponential growth summit back in the day. [14:06] MIKE: I never did go to that believe it or not. Yeah, I never went.[14:12] JAMES: Okay.[14:13] MIKE: I coached with NEA. I didn't exponential growth. [14:17] JAMES: Right. The funny thing now is that with EXP, with all these big name ages moving over, and you're right, the community and the collaboration. I know we keep using these words over. It's true. When you're in it and you and I were here where we both are at EXPN. We've been able to see it. The fact that you're right that I could call Jay right now. I've paid thousands and thousands of dollars to Jay to coach me. Now that same information, I could still get it and get access to him with literally just picking up the phone right now. That's been one of the biggest, pleasant things that I've seen as well. For a lot of people that are not, or maybe looking at the opportunity right now other than the collaboration, what else is maybe been one of the things that's been a plus for you? [15:03] MIKE: What I want to add to that real quick is that I don't want people to take that for granted because a lot of people I think represent EXP the wrong way. You're trying to get people, you're calling people that you don't know and you're trying to get them to move for revenue share or stock. That's not enough to get people to move. It's like you need to figure out what if we understand at the end of the day, right? That map is more valuable than the treasure. Then you understand that that knowledge that you can get through collaboration, that's where the treasure is, right?That's the map to the treasure. To be able to collaborate with those guys in a mastermind group. These guys are doing stuff at a level that we just haven't thought of or haven't gotten to in our businesses yet. For that person out there who's doing $10 million or $20 million a year that wants to get to 20 million or 40 million or a 100 million, right. The difference between them, where they're at right now and where they want to be is that roadmap, right? When you join EXP, you're able to tap into that right away, right, through the collaboration and relationships that you'll build here. I wanted to make sure that your audience was crystal clear on that because although revenue share is fantastic and the opportunity to be an owner through stock is fantastic. It's not the only reason you should join EXP, right?[16:28] JAMES: Yeah. No question about it. Yeah. I think the excitement around it is just because it hasn't been done this way before. [16:33] MIKE: Yeah. [16:37] JAMES: You start looking at the opportunity down the road. I could not agree with you more, Mike. That component of EXP has gotten a lot of publicity. I think as far as representing EXP, a lot of people would probably get a little turned off because everybody's talking about the revenue shift. You are right. That's not really for me the number one reason. It is the fact that you get to collaborate. You and I would not be talking right now. We aren't talking right now if it wasn’t for EXP. I wouldn't be able to call collar or anybody for that matter. It's genuine. When we went to the EXP con last month it's genuine. People are just really willing to help you with whatever because it does benefit us all when we all succeed. Where it used to be you have freinemies and you interviewed with Tammy yesterday?[17:25] MIKE: Tammy was day before. You're talking about Mary Simons Malone. I love them so much. Yes, she was frienemies with Kyle Whistle, right? They worked at competing brokerages in San Diego. She talked about that too with the collaboration now with Dan and Kyle who were formerly her biggest competition, right?[17:44] JAMES: Yeah, Yeah. Huge, huge, huge, huge. That's awesome. Couple more questions for you Mike, before I let you get on out of here. Again, you said the response from people because I saw people coming up to you and we're at the EXP last month which is pretty cool. As we were in the middle of talking,[17:59] MIKE: Let me one more thing James before because I know you asked me and I'll try not to be too long winded here. I want to make sure that people understand the value of what the model at EXP has to offer no matter where you're at in your business because you asked also what was another thing that I had learned or what was another reason that we moved and what we learned through our move, and I'm hearing back from obviously a lot of these team leaders in our interviews is the fact that I had a decision to make personally when I moved. We were opening up our own market center. We had approval through KWRI. We were opening. In fact, that market center has now opened without me. Right? [18:34] JAMES: Okay. [18:35] MIKE: Some other person or group came in and took my place. I was supposed to be an owner at that market center and EXP was put into my lap, right? We had a decision to make right away and that decision was, do I move forward with my plans with Keller Williams to open this market center, right? Or do I move my team to EXP? I'll tell you what it came down to. It came down to what was better for my team, right? Ultimately the reason why EXP want one out is because the move to Keller Williams would have been a lateral move. Actually it would have been a worst move for them because the CAP was going up at the new office. It would have only been a win for me, right? I could have been an owner at that office and that would have been great, right? Our Ego loves that, right? I'm an owner. Ultimately if I knew I wanted it to be successful through my team. That's what I want and ultimately to be able to provide them the best platform for success, right? I knew that I had to make the decision to move to EXP because now I can offer them things that I never could before. That is through revenue share and that is through who stocks, right? Now, they can become owners. They have a vested interest after three years. They have two exceptional wealth building tools that they never had access to before.[19:46] JAMES: Absolutely, yeah. That same message as I go around talking with agents in my market, same message. My team is definitely not structured because your team structure right now is, consists of what? How is your team set up right now?[19:57] MIKE: We serve two markets. We serve Dayton-Ohio market and also the Cincinnati-Ohio market. [20:02] JAMES: Okay. [20:03] MIKE: We have 25 agents. We also have a listing manager and a contract manager and then an office manager as well. [20:10] JAMES: Right. [20:11] MIKE: I have Director of operations/ co-owner and a guy named Jump Welski.[20:16] JAMES: Yeah. You've got a pretty big a machine going up there and a lot of people being affected by your decision, all tweets and make that move over to the EXP, which is not something to be taken lightly by any means. I've spoken to a lot of other agents. I don't know. I've watched a lot of your interviews with people. It's a tough decision because it's not just you that you're affecting here. It's a ton of people that are affected by your decision, good or bad one way or the other. I don't think there's really any downside to EXP. I'm going to be a little biased, but the other revenue models or other revenue streams that we have available is great. The fact that we can collaborate with people all over the country at this point and soon it'd be international, 2019-2020 which is a pretty exciting where the company's. I compare what we're doing now with EXP and how Glenn has set this up and the fact that you are not going to have a conversation. You and I could talk to each day. Three quick questions I want to ask you. First question is what are you reading right now? I know you're always seeking knowledge. I know. Are you reading anything right now that…[21:20] MIKE: Let me make it up for you man. I'll tell you right now. I usually have a couple of different books going on. I do love to read and I do love to listen to podcasts. I'm listening to… this is not a business book but its called sleep smart. I don't do fitness coaching, but I have a fitness coach too. He sends me books. I'm also listening to the Perfect Day Formula and that's by Craig Valentine. I'm listening to it another book called The Swerve. That's a good book. It's funny man, because if you do a lot of reading or if you listen to podcasts, you always get ideas about books from other people, right? It seems like one book leads to another write. One book mentions another and then you pop that in audible and you read that. I think one really good nugget and you and your audience should write this down if you haven't heard it already is listen to that recent, the most recent Maxout podcast with Ed Mylett, where he talks to you. UOP baseball team. That is so good, man. It is so powerful. I've shared that with my entire team. I listened to it probably every other morning because it just so resonates with me, especially as you transitioned into 2019. If you need something to get you up and light a fire under your butt and it is great, great material, man. [22:26] JAMES: Yeah, I have my last. He's awesome. He is awesome. That's the beauty of a podcast is or an audio book for that matter just to be able to listen to it at any point of your day, at any time. It really doesn't matter where you're at nowadays. You can just pop that in and listen to us. I have not heard that one. I will make sure that I listened to it. I'm actually post the links so people can get just click where and go right into it. [22:46] MIKE: Awesome. [22:47] JAMES: I'm an avid, avid reader as well. There's always something that I pick up. The knowledge that it's that compound effect. One compounds on top of you, the next thing. Another last, last two questions here. What's your favorite quote? Favorite quote.[23:02] MIKE: Man, that's a good one. I think it's probably changed throughout time. I think my favorite quote is probably really cliché at this point, but it just so resonates with me is the old Zig Ziglar quote is that "you'll get what you want. If you can help enough other people get what they want." That has not always been true for me. I've grown in my business, I've learned that my success will ultimately be a product of the success that I help others have.[23:28] JAMES: Yeah, no, that's awesome. Zig Ziglar Fan, goodness gracious as well. I one that was one of my favorite of course. The other one is then you're going to be a meaningful specific or a wandering generality. It's huge and especially for realtors because most realtors are not meaningful specifics.[23:45] MIKE: Right. Right. We know that.[23:46] JAMES: Great, great quote there. The last thing I want to ask you, so what's something that you want to do in 2019 that you've never done before? Whether it be business related obviously EXP is an explosion in growth mode right now. What's something that maybe you've got want to do a 2019 that you've never done before?[24:04] MIKE: That question comes at a really opportune time for me because we're actually in the middle of opening up our own mortgage company, the P and L model. I'm actually really excited to play around with that a little bit. I think there's a huge opportunity, not only to add more money to the bottom line but to also provide a level of service that most of the real estate agents can't provide because this is going to be set ups just so especially at first just so this person is servicing our team.[24:29] JAMES: That's great. I've had a sin as a, as a loan officer. There's no better mortgage advisor like yourself because you are on that side and you speak to what your clients are really wanting and really be able to direct if it's going to be your mortgage company or whoever you're working or partnering with on the mortgage side to really provide a really, really good value for people because I know you've experienced it. I've experienced it with a mortgage companies that it amazes me that some of these mortgage companies exist or lenders should I say. I've had people just completely disappear during the process. This is amazing to me. It's amazing. That's a great opportunity and I think with your background there's no way that you would not be successful with that or anything else that you do. [25:19] MIKE: Thank you sir.[25:20] JAMES: That'd be great. Again, I am a huge fan. I admire everything you've been doing. You're one of those people when you meet him, you just like of like literally I met you. We shook hands on. My God, I just liked this guy. [25:29] MIKE: Likewise my man, likewise.[25:34] JAMES: I've got to get up to and actually one more thing we got to talk about real quick, the most important thing will Ohio State be in the playoffs or not.[25:42] MIKE: Man, at this point, does it even matter? It's whoever's going to play Bama and lose, right?[25:45] JAMES: Right. Right. That’s true. [25:50] MIKE: I love my Buck guys I'm also a realist man. [25:52] JAMES: Yeah, absolutely. Yeah, it's got to be quiet if you you say well. Anyway, when I appreciate your time, Mike. Thank you so much man. Thank you. Thank you. Keep doing what you're doing. I will continue to promote you as much as I can. If there's anything I can help you with, let me know and appreciate your time, man. You have a great one and we'll catch up. [26:07] MIKE: Likewise and if anybody's interested in that free coaching that you mentioned they could go to liverealestatecoaching.com and sign up there. I'd be happy to take on anybody for 30 to 40 minutes and just really dive deep into any area of your business you're looking to improve. [26:24] JAMES: I will post the link on the podcast. Actually let me put it on here so people can get that link and access what you're offering there. Yeah, can't go wrong. Free strategy call with Mike, reach out to them. He's an awesome agent, great example a lot of consistency and professionalism. I really appreciate what you do on Mike, We'll catch up soon brother. You take care.[26:43] MIKE: All right man. Thanks so much, James. I appreciate it. [26:46] JAMES: Okay. All right, bye-bye.[26:47] MIKE: Good luck.If you like this episode of the Houston Home Talk podcast, please don't forget to like, share, and comment! We appreciate your support and feedback! See acast.com/privacy for privacy and opt-out information.

In this episode of the Houston Home Talk, Cindy West from NRL Mortgage and James talks about the process of getting a mortgage loan, interest rates, NRL Mortgage loan programs you can apply to and other things such as Cindy’s career trajectory and how her knowledge in forensic accounting helped her in her role as a mortgage loan officer. QUOTES“You have to make sure that the house is not listed for sale, because that’s a red flag in mortgage, before you cash out.”“The buying power of people changes significantly as those rates go up.”MENTIONSContact Cindy:Phone: 832-370-7373Website: https://cindywest.nrlmortgage.com/SHOW NOTES[0:02:10.9] How Cindy got into mortgage lending[0:03:32.4] How forensic accounting works[0:08:02.3] NRL Mortgage loan programs[0:14:25.1] James and Cindy talk about interest rates[0:21:04.4] The difference between pre-approval and pre-qualification[0:32:24.5] Get in touch with Cindy!Full Transcript: [00:03] INTRO: Welcome to Houston home tall, featuring all things real estate in the Houston area. We'll interview real estate professionals, local business owners, and special guests from right here in the Houston community. This is where you get the inside scoop about what's new in real estate, new community openings and business openings, and much more. The Houston home talk show starts right now.[00:33] JAMES: All right, welcome guys. This is James with Houston home talk and I am joined today by my good friend, Cindy West in our El mortgage. Um, how are you doing this morning, Cindy?[00:45] CINDY: Hey James. I'm great.[00:48] JAMES: Awesome. I'm doing great. It's a little chilly for us here in Houston at a blistering 70 degrees. Now, just joking. People in the Midwest laugh at us when it gets too 40s. [01:00] CINDY: Yeah. Yeah. [01:02] JAMES: It is cold for us but I am glad to have you on. It has been an interesting ride as far as interest rates and a lot of things going on specifically this year. You have been in the business for a few years now. You've done really well and I appreciate all your insight. Just to kind of set the table for everybody, so sending and I have known each other for about three years. We've been working together. You came to visit me when I worked for a home builder and you were one of very few, really probably the only one person that really would come visit me because everybody else was scared to come see me working for a home builder because they just assumed that they could get no business from a home builders onsite salesperson which was not the case. [01:52] CINDY: No. [01:52] JAMES: I'm glad that you've been very tenacious and the way you work and I admire your work of it. I see you on Saturdays, Sundays. I see everywhere. You have gotten a lot of knowledge and your work ethic is been very, very admirable. What I want you to do is just kind of introduced yourself. You've got a very interesting background. Introduce yourself to the audience and tell us a little bit about your background and how you got into the mortgage.[02:22] CINDY: Okay. Sure. Yeah. I've been in the business three years ago and I'm like, my background started with auditing and taxes. I did that for several years and then I relocated to Los Angeles and I became a forensic accountants, which is very interesting. [02:39] JAMES: Okay. [02:42] CINDY: Pretty much what I would do is I worked with people getting in divorce, determining child support, alimony, division of assets and valuing businesses. Pretty much I would find the money and determine what the individual's cash flow was for child support and alimony. Then after that, and I relocated here with my family. [03:04] JAMES: Okay. [03:05] CINDY: That's where I met Chad Freeman and he is a manager for Nations Reliable Lending. Tell me about the job. My personality and my background was the perfect fit and my daughter is going into school so I thought, it's a great time to get back into the workforce full time. I took the test and passed it and then I'm on my way ever since.[03:32] JAMES: The forensic, you got to give me a…tell us back a little bit more. The last time I hear forensic, I usually think, CSI and one of these criminal shows when I hear forensics. Break that down a little bit more as far as what you did with that that as forensic accounting?[03:55] CINDY: Yeah, so pretty much, I mean it has to do with documentation. [03:57] JAMES: Okay. [03:58] CINDY: Thing at paperwork, a little bit differently and people represent themselves based on the tax return. I only make $25,000 a year when you're living in a half million dollar house and you drive a Mercedes and I could see all the charges on your credit card for limousines and things of that nature. I would pretty much hunt down the money. [04:21] JAMES: Got it. [04:21] CINDY: Figure out what the true cash flow is because people have businesses, they write off all their personal expenses, cellphones, cable bill, I'm 100 percent of their auto. All those things are not true. Business expenses, personnel. They drained the company, and they want the write offs. They pay as much taxes. From a divorced stamp, that's now your cash flow. We add back all this personal offenses as perquisite come up with somebody's true cash flow. Then that's how we figured out how child support and alimony.[05:00] JAMES: Okay. I see. Then the connection with that and the connection to the mortgage side of the business because a lot of what you were doing and that career really translates into you being a mortgage lender because a lot of the details that come along with, especially, specifically you brought up self-employed because those are the biggest challenges when it comes to the mortgage. [05:24] CINDY: Yes. Yeah. [05:26] JAMES: How does that background, how did that help you on the mortgage side because like I said, I know you've only been three years but you've been…you've been very, very successful and the time that had been a mortgage lender. How has that helped you in being successful in what you're doing now?[05:42] CINDY: Definitely the tax knowledge and the attention to detail and I'm looking at paperwork a little bit differently. Very detail oriented, which in mortgage you have be, when you looked at the paperwork upfront for a year under contract and kind of figure everything out ahead of time instead of having issues under contract that who I wish I would've seen this or looked at it closer than. Definitely the tax return and the tax knowledge has helped me with understanding the actual tax return for the self-employed borrowers. [06:18] JAMES: Right. [06:18] CINDY: You can have a schedule C which is on your 1040 where you can have 1065, which is a partnership returns, that's corporations or your 11 languages are C corps. Understanding how somebody gets paid out of each one of those is quite really friendly. You can get paid out of distribution. You can get paid through salaries and wages or dividends depending on what X return you're filing. That's definitely given me an edge on a fast track and dealing with more sophisticated buyers would complex tax returns. The attention to detail, I'm looking at paperwork and just knowing. I've seen all these documents who I've been working with them for years. It's definitely helped.[07:08] JAMES: No. That definitely explains a lot because I've had a brief stint as a mortgage lender as well, so I understand the level of these. I don’t think a lot of people understand it and unless you've done it. There was no way. As a realtor, most realtors, all we care about is the loan approved. [07:29] CINDY: Right. [07:30] JAMES: Always funded. Those are the words that kind of care is, are we funded. Okay. When you're behind the scenes, the level of detail. There're so many moving parts. There's so many moving parts. I appreciate you guys more because I've had a boost said joining and kind of understand now that there's so much that goes on behind the scenes. Someone like yourself with that background and being very detailed. It's so important. It really is. Now, I know you guys have a program because one of the things that I work a lot with, I work a lot with home buyers will still be sellers who have a home to sell before they purchased their next home.I do a lot of new construction and so typically, we have a contingency to where the only way they can purchase the new house is if they sell the current house and multiple cases. I know you guys have a product that's kind of design and you don't have to go into a whole lot of detail, but I know that's something that I wanted you to share a little bit about because I think it's important for people to know that, that you guys have that product. I've dealt with a lot of lenders. I don't know anyone that has a program like this. I might be wrong. I know anybody that has that program. Tell us a little bit about that. A little bit about that program.[08:53] CINDY: It's a fantastic program because people that are looking to buy and I say new construction, it doesn't have to be new construction. It can be anything, but who this product would best serve. Somebody that finds a house that they fall in love with. That they really want. It could be through a builder. They might find a lot, the perfect lot and I called a stack or on a green belt with backyard. Let's say water way or anything specific that they might lose if we wait to sell their house. [09:32] JAMES: Right. [09:32] CINDY: That's the emotional side of this product is somebody that's motivated to move forward, doesn't want to wait. I think this product also is more beneficial to people in the higher price points a significant equity. Pretty much in order for this product work, you have to have at least 30 percent equity, the partying residence, and you need 20 percent down payment to move forward on the purchase.Now, you can obtain gift funds for the 20 percent. However, you do have to have at least 5 percent of your own friends. That would mean 25 percent now. You can get the Gift Front Lens of 20. You bring 5 percent. The 30 percent equity, if you have your house paid off or have significant equity, meaning like 30 percent or more and you don't have the cash in bank, you can do a cash out refi, pull out 20 percent as long as you leave 30 percent equity in the parting residence. You can pull out money to use that on the down payment for the purchase side, [10:43] JAMES: Got it. [10:45] CINDY: Yeah, you have to make sure the house is not listed for sale because that's a red flag and mortgage, so before you get a cash out. It's a purchase just like any other purchase, but we are eliminating that just from the ratio. You actually will have two mortgage payments until the house is sold. The only stipulation is that their house has to be listed for sale prior to the purchase of the new residents. That's it. [11:10] JAMES: Okay. [11:11] CINDY: That's something where if you're building builder relationships, that's a good thing to have because the builder that's going to identify that and it's going to call you, you're marketing this product and lease the house for sale. That's the key is you're, as a realtor, you're getting the leasing and hopefully, the buy side as well, because you're going to get a walk in client that falls in love, has a house to sell and that builders not going to wait, want to wait three to six months for the house to sell or probably does not want the contingency offer because if it's in a higher price point, we might take a little bit longer. Or if it's a flooded house that you have for sale, who knows how long going to take it so. It's a great product that allows people to move forward without waiting for the house to sell and then they don't lose equity. They don't have to half the price. They just have to afford the two payments[12:07] JAMES: Right. There're a lot of people that are in that position to be able to do it especially like you said, in a higher price point. This helps them not lose out because I've seen it on several occasions where they probably could qualify for both financially, but this product, like I said, this product wasn't around. I knew I have no knowledge of that product a few years ago. It's a great option for people that are…that are looking to buy another hall or build either one. I'll make sure I post your information because there're people out there that want to reach out to you and get a little bit. I know there's probably a little bit more detail, which you probably just speak with somebody in person. Speaks somebody over the phone to get a little bit more detail about their situation and how the product help, but I know it's a great product and it can help a lot of people.[13:05] CINDY: Yeah. Builders love it. I'm not competing with Mortgage Company. They're in house lender to add on to their business, to help it grow. I'm not looking to compete with them. I usually can't let their incentives. [13:17] JAMES: Right, yeah. [13:18] CINDY: This can eliminate the contingency offer and it's very attractive to builders and playing lots of calls and emails from builders I've ever even met before clients. Again, it's a great…it's a great marketing tool to get connected, to build a relationship and help builder build business and great for realtors to use that as well.[13:45] JAMES: I know a lot of builders are work with a ton of them in a new construction kind of what I specialize in more than anything. Having worked for a few builders myself personally. I will make sure they all know about this. Like I said, anybody is working for builders that might be watching this. I'll make sure they get you a contact because the onsite…where the onsite, salespeople or about getting…they don’t get paid to do loans. They get paid to close homes. [14:14] CINDY: That's right. [14:14] JAMES: Having you as a resource and in those situations is a great, great thing to have a speaker. I'm speaking from experience. I know one of the big things and challenges that I've seen so far this year are the interest rate. Rates have slowly just crept up and I back in January and February, I was telling people that rates are going to increase and unfortunately they have. Now we're now almost to the end of the year and so one, I guess, what are we looking now. FHA, I know everything obviously based on credit scores, but what kind of averages are we saying on FHA, conventional, and then what are we looking at? Maybe first part of 2019 that you kind of thing, well what may happen, which rates come from that first quarter?[15:09] CINDY: Well, definitely rates have slowly increased. They're in the fines, so again, to then plan your LTB FICA score, debt information, that I've seen. ORS, donate them five again. Sometimes they come with the discount, to the rate of that. Rates are still great. There's still near historic. Still a great time to buy. Do not wait to buy a house. The rates are going to go down. Of course I don't have a crystal ball. That's my said, good judgment indicates that I think are going to probably stay or climb a little bit. The interest rates a tight to this, excuse me, the 10 year treasury. [15:53] JAMES: Right? [15:53] CINDY: Usually when the Fed announces the direction of interest rates, they going to use some hikes, the market has a tendency to accelerate that. If they're going to say an increase in December, market goes higher before that. It's stable. It's still…they're still near historic low and they're in the five and would not wait 1 percent increase in the interest rate. Will make it 13 percent increase in your payment. [16:22] JAMES: Absolutely. [16:23] CINDY: A thousand dollar monthly payment. Your payment will go off to a 103 or extra $130 a month. That's pretty significant. People always talk about the score and want to increase it. I tell them, I said, you time you increase your score, you're going to be offset by the higher rate.[16:43] JAMES: Right. [16:44] CINDY: It's a lot. [16:46] JAMES: Yeah. That could take somebody from qualifying to not qualify. The bump in the rate and for people and for some people that might be borderline or maybe close anyway and you wait. You're not really winning and a lot of cases. You're not winning by waiting a. I try to encourage people, if you find…if you find a home that you're interested in now, don't wait because literally, half of point or all the point can make a significant difference. It can't really be the difference when you qualified or not in some cases. [17:19] CINDY: Yeah. Yeah. Or you have to drop the purchase price or have to come up with no money down to offset that. For every $10,000 you put down in a house, your monthly payment will change by $20,000. [17:32] JAMES: Right. [17:32] CINDY: $20,000 will only make $100 a month difference in your payment. That's not a lot of movement with significant $20,000 down payment. You're better off to do it now because rates in the fives are fantastic. I know people go back to the past and threes and fours and the confused I've seen. Ladies and gentlemen, that was history. You make three for a lifetime. [18:06] JAMES: Yeah, that's just… that's with sales. [18:04] CINDY: Gosh, yes. [18:04] JAMES: You've set the sale that made you want it. [18:08] CINDY: Right. [18:08] JAMES: It's funny when people started talking about the rates now, how they're going up and I tell people, before the crash, it just rates are in the 60s. [18:18] CINDY: Yes. [18:19] JAMES: My parents, when they bought their houses, they were in double digit. It's just perspective but if you didn't own a home before '07, '08 and maybe you just, you started looking into it after 2008. Basically the last 10 years, it won't be spoiled. [18:39] CINDY: Yes, absolutely. It means accidentally. [18:43] JAMES: It wasn't on purpose. They were spoiling. There's either the Katas or they're hard. [18:47] CINDY: I know, right?[18:48] JAMES: They were doing it to encourage people to go by because everything had kind of tanked. '08, '09 that's why those race was so insanely low, it was encouraged people to go out and own. Obviously, as the economy starts to get better, it's just a matter of time before those rates start creeping back up and that's where we are right now. [19:09] CINDY: Yes. Yeah. [19:12] JAMES: I laugh when people started talking about, oh my goodness, my rate's 4.8 and it's like…[19:19] CINDY: I know. [19:20] JAMES: Five [19:21] CINDY: Right. [19:22] JAMES: Rates are still very, very low. Yeah. Historically speaking, if your history is only six years ago. [19:31] CINDY: I know, right. Yeah. [19:34] JAMES: It’s a difficult… [19:34] CINDY: First house too that we bought was back in 2006 and it was 6 percent. I remember high fiving in the kitchen and using hands like, everybody was paying 10 and 11 percent, and I get 6 percent. That was a great rate. Six percent so great rate. [19:54] JAMES: Yeah, wise. [19:54] CINDY: It is good. [19:56] JAMES: Yeah. Absolutely was, yeah. I find it funny when people started talking about it, but we can't control it. Home ownership is still a better way to go. [20:09] CINDY: Yes. [20:10] JAMES: Paying a 5 percent interest or half or whatever it is and whatever it ends up being in 2019. It's still a better option than renting and in most cases. We'll continue to encourage people to go on. The sooner the better because rates, from what I see, and you can speak on that. For what I see, it seems like it's going to…the experts are saying that 2019, of course again, there's no crystal ball. Yeah, we're going to maybe be in that consistently in the 5 percent range. Who knows for, but that's what I see and that's what I've read. [20:51] CINDY: Yeah. Definitely would agree with that. Yeah.[20:53] JAMES: Yeah. The buying power for people, it changes significantly as those raised a lot. Yeah. If you guys are looking at a owning a home call, call Cindy. [21:04] CINDY: Yes. [21:04] JAMES: One more thing that I want to ask you. I want you to distinguish between pre-approval versus pre-qualification because I get this question a lot. I know what the difference is. [21:16] CINDY: Right. [21:16] JAMES: They are a big difference. I want you to speak on that a little bit so people really understand the difference and when, as a realtor, if you're making an offer on one of my listing with the prequalification letter, I'm not feeling that comfortable about it quite honestly. [21:32] CINDY: Yeah. [21:33] JAMES: Yeah, speak on that a little bit and tell the people the differences are. [21:39] CINDY: Sure. Okay. Definitely pre-qualification and pre-approval. The underwriter, there's a couple differences. The underwriter does the pre-approval, so that's when it actually goes into underwriting. [21:53] JAMES: Yeah. [21:53] CINDY: There're levels of prequalification letters that have stronger credibility than others. That's pretty much the documentation. [22:05] JAMES: Yes. [22:05] CINDY: When that consumer fills out a credit application and we call them. We go over the 10 on 3 with them. We pull their [inaudible] with score, input their liabilities and the application, make sure their debt to income ratio is right and sure. The LTV is right. Run interest rate pricing and make sure we get automated underwriting system approval, which is the automated scientific version of what an underwriter does. When we get an approved eligible, that triggers us to give a prequalification letter. [22:41] JAMES: Right. [22:42] CINDY: On that letter thought, if we want to take it to, I always say, I want to upgrades your prequalification letter, just to upgrade its which means I'm going to now look at your source document. [22:53] JAMES: Right. [22:54] CINDY: Source documents are your tax returns to your tax returns, early day pay stubs. That's the critical part because we really want to look at the tax returns to see what are you writing off. If you're a W2 employee, to write off, [inaudible] 106 expenses, with your salary reimbursed expenses. Because if so, we may and I say may, have to charge that as debt because those are business expenses that you're claiming. There are different programs where you may be able to skirt around that like a W2 only program if you don't own any real estate, you might be able to eliminate that. The point is, is that we need to look at the documentation that will uncover potential issues and can give us a better direction of which way we want to take the financing. [23:50] JAMES: Right. [23:50] CINDY: Yeah, it's pretty much, it’s a prequalification letter. It's just reviewing the documentation or not. That, if you're realtor, that's one of the things that you should look at is the documentation. [24:04] JAMES: Yes. Yeah. Because I mean, the prequalification, and yeah, you spoke on. That you can go online and fill out some information and get a prequalification spit out. [24:13] CINDY: Yes. [24:13] JAMES: With no verification of anything, which is why I love the fact that you take it a step further. For all of us that are involved in the transaction. From realtor to lender, we wanted to be strong. Nobody wants to waste time going through contracts and inspections and everything kind of like that. [24:37] CINDY: No. You can raise so much money. Like you wait to you inspection fee, your option fee. [24:42] JAMES: For sure. [24:42] CINDY: Even lose your earnest money, appraisal. You talk in $3,000. [24:47] JAMES: Yeah. [24:48] CINDY: I always…the realtors that I work with, I always train them, teach their clients in the beginning because you're the front contact. Let's see, pair them with need and it's very easy to your tax returns to your W2's, a 30 day pay stubs, two month bank statements, and even the bank statements are pretty significant. Even ID, I mean we've uncovered…we don't look at the beginning and then things happen that's expired and they don't have time to go get it renewed or there's always something. Really, I always tell borrower. I said, it is a lot of extra work. There is no benefit to them, the consumer if they don't provide that upfront. [25:29] JAMES: Yup. [25:32] CINDY: Good realtors prepare their clients for that right in the beginning. When I come in and talk to them, they've already heard it from you, another hearing it a second time. Again I pushed for that. I can't make them do anything. I tell them what's that risk? If they don’t get those documents and they usually, I've never had a problem with anybody complying with that. [25:59] JAMES: Right. Yeah. I think you said it. Yeah, setting that expectation from my end before they ever really talked in and most of the time, not all the time, but most of the time, it's going to start with the agent. That is so important to set that expectation. [26:12] CINDY: Yeah. You're really the point of contact. This is your lead. [26:17] JAMES: Right. [26:17] CINDY: The relationship in some way. Either from a referral or somebody that's coming to you to buy a home and I'm just the support behind the scenes. You lay the groundwork. You're going to have more credibility because you know what you're doing because this isn't your first rodeo. Then when I get them, they've already heard it before. It's really the call about preparing them and making it easier for them.[26:43] JAMES: Absolutely. [26:43] CINDY: The financing process can be, we asked for lots of documents throughout the process from start to finish and consumers will always say, is this all you need? I tell them, I'm like, well this is all I need today. [26:57] JAMES: Right. That's right.[26:58] CINDY: I'm going to back up really people behind me that are going to look at your file in a completely different way than I do. The underwriter is going to ask for conditions that need to be cleared. The processor's going to ask for documentation, my production partner, and then we might ask you for the same document again because you might not be exactly what we need. We can ask for documents up until a week or less than a week before closing. You can prepare your borrowers for that and if that doesn't happen, then it's even better.[27:33] JAMES: Yeah, supplies. [27:35] CINDY: Yeah. [27:35] JAMES: Absolutely, yeah. Now I try and said that explanations for all my clients, so yeah. It could go up to the day or the week before. [27:46] CINDY: Yeah. [27:47] JAMES: Just prepare for it. If it happens, then you know. You knew it was a possibility and I think that just makes people feel so much better because…and it's not a difficult thing just to let people know. This is not. There's a lot. It's not a straight. It might go like this. [28:06] CINDY: Yeah. [28:07] JAMES: With the close. It's not just a straight…a straight. There're a lot of things that happened. A lot of adjustments that get made, kind of like flying a plane. We never really feel it for the most part, but there're a million adjustments that these pilots are making over in a plane. Out of my analogy when it comes to a mortgage loan, because it's the same thing. It starts off one way and eventually you'll get to your destination which is closing. It's not always just a smooth process and a pupil, so frustrated with it. [28:39] CINDY: When I'm there along the way, every step of the way, I tell my followers, you can follow me after 5:00 and you can call me on the weekends. There's going to a lot of stuff that it's going to be thrown at you and especially that first time home buyers, I'm here to help you to translate what somebody else is asking. I might not be specifically asking you, but somebody else has requested that non-certain. That's part of my job. There is service court, which is mortgage lenders like myself, local small lenders. That one of the benefits is the service and being available and for the realtor as well to call and know that every time they call me, I answered the phone and I can get my voicemail. You're going to get me. [29:30] JAMES: Yes. [29:30] CINDY: You can ask the questions and I'm going to give you a straight up answer or I'm going to find out the answer if I don't know. Figure it out because you're left on a, on a ship that with the captain.[29:44] JAMES: I had that happen. I know there're a lot of realtors, its happened. Lender just do this but I know I'm working with you for the past three years. You are truly aware. You do answer the phone. Whether it's good or not, you're not the lender who just takes off and which is amazing that it happens, but it does.[30:06] CINDY: Bringing bad news to people is not easy. There's nobody on the planet would like to do that. Especially, the largest purchase of your life and that would not be a good thing and I try to stay clear of that, meaning I don't have bad situations at my peak that I qualify either solid and if they're not which means there are some weaknesses in their credit profile, which there could be that prepare them for that. I can say, this is what we're…this is the plan, and I give them the option. Your ratios are super high. You've got these collections that could be an issue. Here's what you risk. Your option money, your inspection fee, your appraisal fee. I will tell them that its a weaker profile and let them make a decision if I want to move forward or not. It also tell my realtor that too, so that they can be prepared if I have to make that call and say we, there was a hurdle that we just couldn't overcome. Blindsided like, well, why didn't you tell me this? Because yeah, I haven't run into that yet, but I will and I would. That's how I would approach that there wasn’t a paper lending. [31:29] JAMES: Yeah. There's a lot of stuff that happens that we just, again we don’t have control over what this, what the transaction is. So many people involved with so many things that happened. It's just the nature of what we signed up for this. [31:46] CINDY: That's right. [31:46] JAMES: We have this business but we love what we do. We all do because it's…it can be a crazy, crazy business. It really can. You are really good at what you do. I will excel the builder, all my builder partners that I know of. They are looking for a dependable vender. You are definitely a… [32:11] CINDY: Thank you. [32:13] JAMES: I'm speaking from personal experience, so not mean I've worked with you and I've seen what you do. How can people get a hold of you? Website, phone number? What's the best way? I'm going to post your information as throughout but…[32:30] CINDY: Okay. [32:30] JAMES: Go ahead and give…what's the website and in your phone number where to reached for you. [32:34] CINDY: My phone number is the best way. [32:36] JAMES: Okay. [32:37] CINDY: 832-370-7373, that's the best way. [32:42] JAMES: Okay. [32:43] CINDY: Yeah. [32:44] JAMES: Got it. [32:45] CINDY: My phone and now we will…you can go from there. Apply online. I get a direct portal website for online applications. [32:53] JAMES: Right. [32:54] CINDY: Get notification when it started. Application started and I get a notification when it's completed through email. What I usually do is I call the borrower right away. Introduce myself. Go over the 103 with. [33:08] JAMES: Okay. [33:08] CINDY: My link to apply online is cindywest.nrlmortgage.com.[33:17] JAMES: Okay, say that on more time. Cindy West just one word.[33:18] CINDY: Cindy West one word dot NRL mortgage.com. [33:24] JAMES: Got It. Okay, I'll make sure I'll post that on so people can have that and say if there's…if someone just got some questions about that, that special program that you guys have because there's probably a lot more detail that you can speak with and that…or just any loan. You have it take conventional or Cindy does it all. [33:41] CINDY: That's right. Okay. [33:42] JAMES: She could help you guys and she will get you to the finish line. I promise you. She's really good at it and I appreciate your time Cindy. [33:52] CINDY: Thanks James. [33:53] JAMES: We will do this again. [33:55] CINDY: Yes. [33:55] JAMES: Now we're about to head and get into the holiday season here the next week or so. We'll make sure we do this again. We can sit here and talk for hours about this. There's so much talk about. [34:09] CINDY: There is. [34:10] JAMES: We'll do this again. I appreciate your time. [34:13] CINDY: Okay, thanks. [34:14] JAMES: We will do this again. Thank you so much Cindy. [34:17] CINDY: Okay James. [34:17] JAMES: You take care.[34:18] CINDY: Thank you. [34:19] JAMES: All right. [34:19] CINDY: All right. Bye. [34:20] JAMES: Bye-bye. If you like this episode of the Houston Home Talk podcast, please don't forget to like, share, and comment! We appreciate your support and feedback! See acast.com/privacy for privacy and opt-out information.

Welcome to the very first episode of the Houston Home Talk podcast! For our first episode, we have Willie Adolph from The Adolph Group, a company dedicated to educating others about their credit, and he’s going to talk about how we can manage our credit scores to how credit can affect the overall quality of your life.Want to learn more? Give this episode a listen! QUOTES“A lot of people feel that cash is king but credit can actually take you further.”“Credit is like reputation; It doesn’t matter all the good that you’ve done, but that one thing that you did wrong, people will spread that so fast.”“If you work with the system, the system will work for you”“When somebody takes a look at your report (credit score) it’s basically a reflection of what you’ve done, it’s not a reflection of who you are but it’s a reflection of what you’ve done”MENTIONSWillie Adolph (FB)The Adolph GroupContact Willie!Website: www.myfes.net/wadolphPhone: 281 451 7087SHOW NOTES[0:01:34.1] How to use leverage with credit[0:05:15.4] Credit Inquiries[0:06:16.7] Soft Pull VS Hard Pull[0:07:15.9] Case Study: Credit Karma[0:10:14.8] How co-signing can affect you[0:11:06.5] Credit restoration[0:14:03.5] Building/Maintaining your credit score[0:16:19.0] Which credit affect your score the most[0:18:25.7] How your credit is calculated[0:18:53.4] Models for credit scoring[0:20:40.0] What The Adolph Group does[0:22:47.4] How your credit will affect your overall quality of life[0:26:08.1] The advantages and disadvantages of having/not having a specialist assist you[0:32:49.0] A program that can help you have a better credit score[0:36:39.0] Contact Willie!Full Transcript: [00:03] Intro: Welcome Houston home talk, featuring all things real estate in the Houston area. We'll interview real estate professionals, local business owners, and special guests from right here in the Houston community. This is where you get the inside scoop about what's new in real estate, new community openings and business openings and much more. The Houston home talk show starts right now. [00:34] James: Yeah. You go ahead and introduce yourself, introduce your company and what we'll start there.[00:40] Willie: Okay. My name is Willie Adolph. I'm with MBS. I have a team called Adolf group. Basically what we do, we're here to help others educate them with about their credit. A lot of people feel that cash is king, but credit actually can take your whole lot farther because you can…you can use leverage with credit. A lot of people have a miss conception about credit. Everybody saying seven years in the final law. That's a myth. [01:08] James: Yeah, talk a little bit and more about that. Because I've heard that for years, seven years, seven years, seven years and a lot of people, it'll keep them from buying a house because they just, without contacting a professional like yourself to really know that hey, there's ways and that's seven year thing is a myth. Yeah, talk a little bit more about how that really works and how people can understand that meant, because I've heard it for year or two.[01:37] Willie: Right? Before I got into this, other place like, because I've been doing introducing credit since 2003. I've been messing around with the credit stuff for a long time because I started with the mortgage side. [01:49] James: Okay. [01:49] Willie: When I started with the mortgages, I had to kind of understand credit to help the clients that I had and then as I continue my career, I started learning more inter credit. When I dove deep into just learning about credit, it was around 2006, 2007 when that crash was coming. [02:09] James: Right. [02:10] Willie: Once they crash, it gave me more insight because it affected my family personally with. [02:16] James: Absolutely. [02:16] Willie: With the repossessions, foreclosures, things like that that was on my credit. Seven years, a lot of people say, well, with these seven years, they follow us off. Basically it's obsolete. You have a statute of limitation that it's on. [02:33] James: Right. [02:35] Willie: The problem is with a lot of people think that, so it's just like, I'm going to tell a company, 'Hey, I'm reporting this person later.' [02:44] James: Right. [02:45] Willie: I'm reporting it to the credit bureau. The person that the credit gear is not going to sit there and say it's seven years. 'Hey, guess what? We need to go ahead and take that off.' Technically, it has to be requested off because it can stay on your credit report for our life. It just doesn't fall off. It's just like home purchasing when they have the PMI is supposed to fall off, you get 20%. [03:10] James: You read my mind. Because that's where I was going. That's exactly what I was going to say. Go ahead. I'll let you continue.[03:16] Willie: Yeah. Technically, the mortgages company going try to ride and as long as they can but it wants you to realize, hey, I got 100% equity in my home. You have to contact the mortgage company, they request it off. [03:31] James: Absolutely. [03:30] Willie: There're a lot of things and with credit, a lot of people here, it's a law that was passed that anything negative on your credit report, you're allowed to…you'd be allowed to investigate. [03:44] James: Right. Right. [03:45] Willie: When a lot of people fail to understand that we're credit repair, it's not saying it's not your debt, but what it is saying that what's on there has to be accurate. It has to be verifiable and it can't be too old. Out of those three things, if it's one of those three, it has to be deleted. A lot of people don't know that if they're off by $100, $5, it has to be deleted because it's called inaccurate information.Even for like repossessions, a lot of people fall on hard times. With the repossession, you could have put a lot of money down and the car may still have a little value. Let's say for instance you owe $5,000 and they take the car back or you give it back. Voluntary repossession is still repossession. Majority of the time, if they repossessed the car, what they're going to try to do to it, if it's still in good condition, they're going to try to sell it. When you turned it in, it was $5,000 but what if they sold it for 40,000, will you own the 5,000? No.[04:50] James: No, definitely. [04:51] Willie: Now you only owe 1,000. They're supposed to contact you and let you know that hey, your car was sold and you're supposed to…there is the difference of what it is. It's the bill of sale. A lot of people don't understand the leverage that that credit has. Nowadays, rental history, before they pull your background, they looking at your credit.[05:13] James: Yeah. It's crazy. Because I mean, honestly, you can speak on this because it affects almost everything right now. I am a huge fan of the Dave Ramsey. [05:24] Willie: Yes. [05:25] James: I do. I like Dave Ramsey. As far as I haven't any credit, I mean honestly it affects job situations. It's his job. The employers check credit now. I'm not digging that all of them but I know I will check credit. Insurance, I mean it's virtually everything but its close. It's real close. Yeah, you can go ahead and you can kind of expand on that a little bit more. It's basically affect there. [05:51] Willie: Credit has so much to do with your down payment. Credit has so much to do with your interest rate and all you have some insurance company they say well it doesn't matter what your credit ain't doing what they call a soft core. [06:02] James: Right. [06:03] Willie: When they do a soft pull, they're looking at your credit history and basically your credit history is like your car telling you what you've been doing within the past few years of your financial life.[06:16] James: Yeah. Explain a sophomore versus a heart and so people understand the difference. Because I mean know the…yeah, people may not understand the difference between them, so again, explain that a little bit about the sophomore versus a parting firing.[06:27] Willie: Okay. Well that sounds cool is when a company, say for instance, sometimes like a light company. They can do, it's like a snapshot of your credit. [06:39] James: Right. [06:40] Willie: What they do is they look at it and they kind of judge and see if you have anything that's basically, do you owe them? Yeah. When you do a hardcore, they're contacting the bureaus…[06:54] James: Right? [06:54] Willie: They're getting all the information from all three bureaus or depending on if you're pulling a car, they only pulled from certain bureaus. When you're doing a home, they pulled it from all three bureaus. That's what you consider a harp pool and harp pools does affect your credit.[07:11] James: Yes. Then that's another differentiating factor too because a lot of people think, and I definitely want you to talk about this. There're so many resources out there for people to go get their credit. Get their…[07:21] Willie: Right. [07:23] James: What I get a lot is, people will tell me, they'll call me and want to, you know, they want to, are they looking, they're buying the house and they'll say, 'Hey, we're now pulled by credit, three weeks ago, three months ago. I have an 80.' I'm like, okay, well listen, and you guys…yeah, I want you to talk about this because the difference between like Credit Karma or all these other resources that people have versus them getting a mortgage. I know a mortgage, when you get any mortgage credit qualified a mortgage, it's the most thorough reports you're going to get even more so than a car already anything in my opinion. Yeah. Talk a little bit about that like the hard, like kind of the differences there.[08:07] Willie: What we've noticed over the past years, Credit Karma, they give you more of a snapshot of what your credit. [08:17] James: Right? [08:16] Willie: They give you free credit analysis. [08:21] James: Yes. [08:21] Willie: What I've seen in the past is that the numbers are off because they don't actually pull directly from the credit bureaus updated file. Perfect example, I have a client right now that she called me and she was like, 'Hey, I just need to get my scores up to a 680. I just checked on Credit Karma. I'm at a 622.' We was like, okay. Let's do it. We're glad to go through the process of eliminating this and that and see what we can do. When we actually, I said, well matter of fact, go talk to my friend that works at the mortgage company. Let's see where we stand so we can actually do a real hard pool and come to find out she was at may have fives.[09:13] James: Yeah. I've seen about that. [09:16] Willie: That's a big difference. If you're at a 622, and you're now at the mid of 5, that's like 60 some points and one point can actually kill any kind of deal and depending on what company you're going through. When you go with Credit Karma, it gives you a snapshot. They can't, they offer a lot of stuff to you to try to be more aware of your credit. To be accurate about your credit, you have to be more mindful of what's going on when you coast time for somebody. If they mess up, it falls on YouTube. A lot of people think that, well that's not mine. No. It is. It's, I'm sorry to say and you can't just call them and say, look, take my name off. No, because you're the reason why they got it.[10:04] James: Right, right. Yes. This means is that you too, I'm like you're supposed to have. I go sign and you might as well be the top signer because it really doesn't matter to get one of the names. It counts the same. [10:20] Willie: Yes. [10:20] James: That co-signer to get, I mean I've seen people get just completely get there, kind of ruined by it. My co-signer for somebody. [10:28] Willie: Right. [10:29] James: People not to, uh, whenever, you know, whenever looking to own a home because yeah, especially when…yeah, I see that all the time too, if somebody's is full stop and maybe that one debt is really keeping there for what. They got to go look at maybe trying to refine and other way, it's really [inaudible] [00:10:48] and so we finance it. There's no other way, like you said, kangaroo take, you know, take my name off of it. Yeah. That's definitely, I see that all the time. I'm like when I talked to people about credit, I don't like to use credit rest of that. For some credit repair has a negative connotation. I don't know why but for real estate, the bottom line is we need to, we need to move from here to here. [11:18] Willie: Right. [11:20] James: I call it. For you guys, I know there's not a one size fits all because everybody's situation is different. If you're working with somebody, do you guys give them a, I guess is it just based on situation to say base on what I see here, I think let's say two months, three months or how do you guys break that down when people come to you for to look at that. [11:43] Willie: Technically what it is everybody, like you said, it's a case by case scenario. [11:48] James: Right? Yeah. [11:49] Willie: Nobody can guarantee you anything. Basically everything is computer generated and it, but it's calculated as well. We're looking at the credit, the good thing about what we have to offer to the clients is that we have a similar what if scenario. What happens is, what a what if scenario? What if I pay this down, this down, this down, or pay this off, this off this off. It gives you a calculation. If you do this, you have an opportunity to get this score from where you're at now. Now is it 100% on point? No. [12:25] James: Right. [12:25] Willie: It gives you a snapshot of, hey, if you do this, you would be in that ballpark figure. It's just, it's hard for me to eyeball it and say, but what I do know if you're late, you hurt yourself.A lot of people also don't know. So let's say for instance, March has 31 days in that, right? You have a payment due on the 1st of March. Some people say, 'Oh man, I made the payment on the 15. I'm late.' Okay, you're late with the company, but you're not late with the credit. [13:02] James: Right, right. [13:02] Willie: Because you have to be a certain amount of days, which is 30. Now, some people will say, okay, well I'm going to make my payment at the end of March, which is the 31st. Guess what? You are late now. Even though you paid in March. [13:17] James: Right. [13:17] Willie: Because that is a perceptive, well I still pay on March. Yeah, but you paid on the 31st, that's past 30 days. You have to realize 30 days is 30 days. We have 28 days. You really technically anything after the 2nd of March, now you're late unless you get that leap year. There're a whole lot of things, a whole lot of variables that a lot of people don't think. They look at, well, I paid in March, it's March. No, it's the days. Then you also have to look at your calculations. You have to realize, you have to probably even call your company and ask when do they report to the credit bureaus? [13:57] James: Right. [13:57] Willie: Because your credit cards are not all reporting at the same time. Now the way to build your credit is to keep your maximum balance up on the 30%. You can charge you whatever, but you have to realize once you charge over 30% regardless if you're making that payment on time, you're going to get hit because you're overextending yourself. You're spending your…what they say you're living on other people's money and and you get deemed for that at the beginning.[14:31] James: Yeah. No. Yeah, and I use it. That's the rule I give everybody. I always say 30% I'm not real sure where the game for a while, so probably sometime long, long ago somebody mentioned that to me. I was going to ask you about that because that's what I, that's kind of the advice I'd give people when they're looking at because that's probably, yeah, I want you to talk about like the way that these girls put on a mortgage credit card versus maybe not necessarily specific percentages, but I'd rather different weight for different things. I stop my loans and mortgages so forth.[15:07] Willie: Your biggest weight is your payments. That's 30% of how everything is graded on your credit. A lot of people look at it the wrong way for the simple fact is that they feel that, okay, if I make my payments on time, my scores are going to boost up tremendously. [15:30] James: Right? [15:30] Willie: What they fail to understand, yeah, your scores are going to go up as long as you keep that balance low. [15:37] James: Right. [15:37: Willie: They're going to go up. The problem is, I look at it like it's almost like somebody's reputation and you look at it like this, it doesn't matter all the good that you've done that one thing, that one thing that you did wrong, people will sprint that so fast and your credit is the same way. You make that one late payment. Guess what? Your scores can drop anywhere from 20 to 70 points off of one late payment.[16:10] James: That doesn't matter whether it's a credit card, a car, honestly, I know a mortgage payment, you probably take the biggest skin if you're, if you have ever had like a late or…[16:21] Willie: Mortgage? Yeah, mortgage and cars take the biggest hit, but also the credit cards take a big hit is what the mortgage take I think the biggest hit for the simple fact, if you try to purchase another home…[16:38] James: Right. [16:38] Willie: The first thing they, the mortgage, another mortgage company is looking at is your mortgage history. Rental history, whatever history is where you live and what they look at is that, I have a, I have a client right now is that we're disputing their late pay. [16:54] James: Right. [16:54] Willie: You can actually get that negative off of there because at the same time they have to verify how were you late the days and the thing is, is that it's going through the credit bureaus that fight these for you. A lot of people think that you go straight to the creditor, sometimes you can work a deal out with them, but a lot of times you're going to lose that battle because they're in it for the money. You're not in it for the people there any for that bottom line.[17:23] James: No, that makes sense, man. When people are looking at getting a mortgage, it's, there's a lot of stuff that people do and what they don’t know, for me, I found that it's usually when they're looking at buying a house is when a lot of stuff comes up. That they just didn't work for. [17:41] Willie: Right. [17:43] James: If you're buying a car, you're trying to get a credit card. It never really comes. There's a lot of you can get away with just buying a car. The car that you go recently is a, what it can. It's just different but while you get it, while you back in the mortgage for example is just I felt like all of the stuff you didn’t know about your credit pass also come up. Never faills. [18:04] Willie: Exactly. [18:13] James: When it felt back and I'm getting more of it, so. [18:08] Willie: Yeah, I forgot about that. [18:10] James: I have this all the time. Yeah, all the time. All right, well…[18:14] Willie: Well James, they give you…they give you a little better percentage. You got the way that your credit is calculated, 35% of your payment history, 30% of your year amount use 15% of the length of your credit, 10% is your new credit and 10% is the type of credit that is used. Yeah. Basically all of that is calculated into what your scores are as of today, every vendor is supposed to pull from the credit bureaus. All of them don't.[18:52] James: Yeah. It's frustrating too because all the bureaus, and we could speak on this a little bit too, because you got Equifax, Transunion, and Experian. [19:02] Willie: Experian. [19:03] James: They don't all necessarily treat everything It's frustrating for me because they all do stuff different that's through scores. Yeah, maybe you talked a little bit about why that is. I don't know if you'd have to know what the why is or why they do that. I don't know if it's…cause you're getting a mortgage. Of course they look at all three scores and then they take the middle. [19:27] Willie: Right. [19:28] James: That's the fair way to do it because they all have different models.[19:33] Willie: Correct. The way that the model work, I didn't mean to cut you off. The calculations are the same. [19:40] James: Right. [19:41] Willie: It's the reporting. Everybody doesn't report to the bureaus they're saying.[19:46] James: Okay.[19:49] Willie: I may report to Transunion but not report to Equifax.[19:51] James: I made the report there also.[19:53] Wilile: No, see a lot of people think that the government, that the, the bureaus are governmental rule. They're not. That's a myth. They're not governed by the government. This is an independent source. They're making billions of dollars. They're not governed…they're not regulated by the government. It's crazy that they have…those three numbers have so much power over what you can do with your life, what you could do with purchasing and things like that. And a lot of people just really don't understand the power of credit. When you work with me are, our company. We not just only give you the opportunity to restore your credit, we educate you on your credit. You get your own private portal to where you have a snapshot of what's going on with your credit at all times.You can wake up at two o'clock in the morning and say, Hey, what's going on? We have what they call a progress report but a lot of people…we live in a microwave society. What I mean by that, we put in the microwave. We hit the popcorn button and guess what happens. It's done. We don't…we're not old school where you have to warm up the oil, put the popcorn in, shake it around and take its time. We want everything. I paid this and this should go to…no it takes time. Negative stuff does spread faster than pot the thing.[21:31] James: I'm glad you said that cause I'd rather browse…to say, it's funny because when you screw up trying to fix it now. If the creditor makes the mistake though, it's like pulling teeth trying to get them to fix it. Now visually to stay on it, you'll get it fixed. A lot of people just don't have the patience to deal with it. That's where you can come in and help people that are in that situation. Yeah, when you screw up it's like Bam, they hit you a hard real quick but trying to fix a mistake from a quick, it's just the opposite. It's not a microwave fix when it comes to them screwing up but when you do it is the microwave[22:12] Willie: It's like bam. We got you. We got you. A lot of people…[22:17] James: You have some people like it is what it is. These are the rules. This is the sandbox we're in. It's their rules. If you want to play in their sandbox, this is what you got to do. That's not cool. If you just don't…If you want to try and go through life without credit at all? I guess you can. That's what Dave Ramsey advocates. It makes it challenging in a lot of situations when you're trying to, look I'd say even just from applying for job or getting…[22:48] Willie: Like a mortgage Insurer…[22:50] James: Brad was insured for that matter. Literally everything gets checked. Even if it's a cell phone, it's still having an effect because they can say no.[22:58] Willie: Even for cell phones. Okay. So here's another thing. When you look at credit, okay, you have to have credit to get into this apartment, to get into this house, whatever which ones. Guess what? You have to have lights. What do they do? They pull credit. Not saying they're going to deny you buy you may have to pay a deposit. [23:21] James: Exactly, yeah.[23:23] Willie: You may have to…when you do your gas, when you do cable, internet, anything that you do nowadays, they pull credit. I've always thought different. It's like, okay, well if I got bad credit, why are you making my payments so harder. If I'm struggling now with these payments, how are you going to give me a higher? It's one of them lessons you have learn. If you want good things, you have to treat things good.With us, we involve our clients with every step of the way. We make sure that they are involved in it. A lot of people say, well, why didn't you do that? Well, if you put skin into the game, you're going to be more involved with it. You're going to make sure that I'm not messing it up? I'm not going to let nobody mess it up and things like that. We're here to educate. It's not we're going to fix it. No, we're going to educate you during the whole process. It's not fixing anything. It's restoring it and making sure. Can you do this yourself? You can. You definitely can. That just like when you go to court, you don't have to have a lawyer. You can represent yourself. There's so many ins and outs that you may not know. [24:37] James: That’s right.[24:36] Willie: I always say, can you change your own oil? Sure you can. Do you really want to go through that hassle? If you want it…[24:45] James: thank them for us. I'm a realtor. Yeah, you could sell your home on your own.[24:49] Willie: Right.[24:50] James: A lot of times they're the same thing. There's so much stuff that goes into it that you may not know when it comes to contracts and stuff that comes along with title. Maybe you roll on the dice. eah, could you do it? Yeah, you could. Why not pay an extra for having the expert that knows exactly what they're doing. They're going to save you a whole lot of time and in the case of real estate, most of the time having in Asia people will actually get more money when they…versus them selling. I don't know. A lot of people would think it's flipped. There might be a case by case situation where that's not true. For the most part I say to them to get an expert.Yeah, you can figure out anything you want. Just go to YouTube. everything is YouTube. People got a lot of stuff going on. The credit thing for me, I'm like, man, you need, I can get an expert because it is. It's not something like you say, it's not a microwave. You know what you're doing. Yes, people could figure it out. Consistency and staying on top of these boroughs before you see change. Most people in my experience, they don't have the -- they don't have the patience to do that and so you guys are what you do for people. It's great.[26:04] Willie: I appreciate that. For what you guys do, a lot of people say, well all you're doing is opening the house and showing the house. It's a lot more. It's a whole lot more behind that. You guys have to take on the liability of making sure that perfect example, if a house is flooded and somebody comes in there and paint the house and cover everything up it's your fiduciary to make sure that that client is taken care of, that they're not stepping into a mold trap or stepping into things that's going to hurt them later down the line. You guys do a great job of helping out the clients as well. It's a hand in hand thing that what we do. A lot of people said we don't work fast enough.here's the thing.Here's the thing. It's not that we don't work fast enough. You just destroyed your credit faster than we can repair it. Paying your bills, taking care of it, being responsible. Don't get me wrong. Life happens. Things happen in life. There's uncontrollable things that I've been there. I've had repossessions. I've had foreclosures. At the same time with credit restoration, there had been mistakes reported incorrectly that was able to be deleted and removed off of my credit report. That's our thing is that we are here to help. Are we going to sit here and say it's going to be fixed right away? No, we can't promise that that first round that we do is going to be taken care of. I'm never going to tell…I set expectations. You're going to take three months. You're going to see some improvement. [27:47] James: Right.[27:48] Willie: Six months is when you're going to see great improvement. At the same time, your improvement and my improvement is totally different. You have people out there that says, in 30 days your score's going to go up. Guess what? They're not lying if and go, if you had a 500 and you go to 501.[28:07] James: Yup. Exactly, that’s right. It went up.[28:11] Willie: It went up.[28:10] James: It's funny. I just referred to the day. It's a guarantee we're going to get you to, I think it was like 720 and I'm just laughing like how are you making this guarantee because everybody, there was no one person and I don't do credit restoration. I've been around a lot of it to know everybody. There is no one situation that repeats itself exactly the same way. I'd probably be doing this. There's probably nobody that's like, exactly the same.[28:40] Willie: No. You might have some similarities. When people say, we can raise your scores guaranteed. The problem with that is I'm going to tell you my guarantee is satisfaction guarantee. If you work the system, the system will work for you. I'm not going to guarantee because he was another thing that I've run across my years. Even easing at that as of last month, I still run through this thing. People say, it doesn't work. You know why it doesn't work? Because you don't allow it to work. What I mean by that, if we do remove some negativity your scores will go up a little bit. Perfect example, I have client. We removed six items. Scores went up 52 points, great job. They missed paying a bill and then scores dropped 65 points. Then they're down what? so that’s 13 what? 13 points under from where we started.They got…they was like, hey, you said my scores will go…it did go up. When you didn't make this payment. You got to stay with it. You understand? No, I don't understand. You know that this is this. This is that. I do understand times do come where we have to pick and choose or what, what's going to happen. Here's another thing. A lot of people don't know that if you have a collection…I will use a cable company and they're coming after their debt. Of course, they sold it to a collection company and now they're trying to fight. You can't have two people coming after the same day. [30:24] James: Right. Right.[30:25] Willie: that's against the law. Some people don't know that. We have to remove that. We also clean up your history of where you live of addresses because sometimes there's a typo O because you may have 6502 but then on your credit report it says 6520. A bank is going to say why is this like that?This is where we can remove things like that. Phone numbers, employment history, misspell of your name, nicknames. A lot of times that we do come across, like for instance, my dad is a senior. I'm a junior so when you say Willy Adolf, they can have all my dad's information on there. It may not be good that I need that because it's not accurate information and vice versa. They might have been some bills that I didn't take care of and my dad be like son, you need to get this taken care of. We are very diligent on making sure that when somebody looks at your report, it's a really a reflection of, of what you've done. It's not a reflection of who you are. It's a reflection of what you've done.We try to make sure that when creditors and vendors look at your credit report, we try to make sure that it is clean as it possible. We want to make sure that all the I's are dotted and the T's are crossed. Do we get everything off? No. Why? Because some stuff is reported correctly, is reported accurately, and it's still within that timeframe of statute of limitation where it has to be on there. We're not here to say we can get everything off because nobody can just get everything off. You got to be careful of who you let put stuff on your credit because it's technically illegal to do that. It's credit fraud. There are things that you can add to it. We have what we say credit rent. Basically what credit rent is, this is good for people who have lack of trade lines.They need some more to help boost their scores. How many times had you pulled somebody or seen somebody's credit and their rental history is on there? You don't see that? Guess what? Miss that payment and it'd be on there. We offer programs that's legal that you can actually go back two years and put that positive trade line on there and that helps with their spores. That helps with their rental history. We also offer secure credit cards because here's the funny thing, you go to a bank and tell them I want a secure credit card. That means I want to give you my money to open up a line of credit. Guess what's the first thing they do? Pull your credit. [33:17] James: Yeah. I'm giving you my money [33:22] Willie: Guess what happens? I don't like what your credit look like. You're denied. You're denying me for me to give you my money to put on this card to spin and yes they will. We offer services to that. Now, the thing is, is that now once you put your money on there, how are you going to treat that car? This is what the credit bureaus now look at. Even though it's your money and you give your credit card, $300 that doesn't mean you have $300 of spent. That means you're showing the three bureaus, hey, let me show you what, how I can manage this money because after x amount of time, you can graduate and then it goes to unsecure and then that means now you're trusted with somebody else's money. [34:05] James: It's almost like having a debit card, but you get to use it to build up your score. Actually, obviously a debit transaction report. Essentially it's a debit card that gets reported to the credit bureaus in essence is what it is.It's important for a lot of people, especially people that don't have any credit or just people that may have just had some stuff come up in the past where it's just, you know, they had a bad situation. That's kind of like I said, like everybody's problem at this at some point. I've dealt with it before. Yeah, that's secure credit card. I did not know that. That's actually a nugget because I didn't know that you could get denied for secure credit card. I didn't even know that. [34:46] Willie: Yes, I ran across that many and many a times and it still baffles me that how can you get denied. There's several banks out there, I'm not mentioning them, but there are several banks out there that will deny. You just got to make sure. Another thing that we offer with our service is on top of the education, on top of showing you how you can do debt, get to your…clear your debt, how you can pay your debt, how you can pay your house off, or how you could pay your car loan or how can pay your credit card off.We have so many tools. We have credit protection. We offer life lock part of our program. Because every two seconds somebody that identity is getting stolen. Somebody's identity just got stolen. Now you're getting alerts of what's going on. We offer credit monitoring. All of this is part of it. We say for instance, now we're going into the tough times up. We have stuff that we can prove that is inaccurate or unverifiable but the creditor is being real stubborn about it. Part of the service is we have created attorneys on staff to help fight that. Another thing, you get those phone calls on your job at home, our credited attorneys take care of that as well to stop the harassing calls for the simple fact is that we get that taken care of for you because you're not allowed to be harassed.[36:15] James: Right. That's awesome man. Lots to go man. Listen, tell people first of all, how did you get to get in touch with you guys? Would it be website, social media, whatever it is. Let people know how they can reach out to you guys, their knee if they've just got questions about anything. We just talked about anything else often they want to maybe address to you personally? How to get a hold you.[36:38] Willie: To get a hold of me, you can always call me or text me at (281) 451-7087, If you want to go to my website and just check out everything that we offer and what we have, you can go to www.myfes.net//wadolph. That’s W-A-D-O-L-P-H. On their it has so many opportunities[37:09] James: I'll add that on here so people can easily just click there and access it. Let me ask you one last question. You're based in Houston. It doesn't really matter where people are, right?[37:16] Willie: No, I'm, I'm actually bonded under the company. I'm bonded and licensed in all 50 states. [37:22] James: Awesome. That’s great to know. [37:26] Willie: Everybody can call me. Call for Will because you know, if you have, will you have a way. I am Will,[37:33] James: I appreciate your time. Listen, we will do this again because this is one of those things that you can't just touch. This is something I would see it for what I do and I know your wife she's a realtor as well. All of us. This is something we will definitely, I will have you on again and we'll talk some more about this but I appreciate your time man[37:52] Willie: I appreciate you, and think about this for all the realtors out there. If this is something that you're interested in, how can you learn about it? Reach out to me because you can do the same thing. You can help your pipeline out, help grow, add value to your service anywhere instead of sending it somewhere off to someone, you can give them the same information. Just reach me. (281) 451-7087.[38:25] James: Sounds good man. I will get that out. Like I said, I'll post that website as. well. Again, I appreciate your time and, yeah, you guys you got to have questions. Give Willy a call or reach out to him on his website and we will have you on again brother, I appreciate your time.[38:40] Willie: Hey, I appreciate you having me on. I really appreciate it. Thank you very much.[38:42] James: All right Willy. All right, man. You take care. Have a good evening. [38:46] Willie: All right. You too. Thanks.If you like this episode of the Houston Home Talk podcast, please don't forget to like, share, and comment! We appreciate your support and feedback! See acast.com/privacy for privacy and opt-out information.

Beverly Langston from Bath Fitter joins us this week on the podcast, and we’re going to be talking about bathroom remodeling and renovations, and what sets them apart from the competition.Bath Fitter is an international company know for their state-of-the-art product line that includes acrylic bathtubs and shower liners, free standing bathtub and shower bases, acrylic seamless walls, domed ceilings, tub and shower doors, accessories and wainscoting.Know more about their services and products here! QUOTES“We are very versed in safety because bathrooms are very dangerous places no matter who you are. They’re slippery. So we have lots of different options for safety like grab bars, different types of grab bars, and we really work with our customers to make sure they’re getting everything they need so that everything is safe and secure, and usable and accessible for them.”MENTIONSBath FitterContact Beverly at:Office: 713-691-4110 orMobile: 281-636-3560Email: blangston@bathfitter.comSHOW NOTES[0:01:22.2] Bath Fitter: Who they are and what they do[0:04:11.2] Issues usually encountered when remodeling the bathroom[0:05:29.2] Converting the tub into a standing shower[0:06:56.0] Renovating and remodeling for investment properties[0:09:02.1] The origins of Bath Fitters, showrooms in Houston[0:10:54.1] ADA Compliance[0:12:06.7] Create your own custom bathroom on their site![0:13:17.6] Contact Beverly, Bath Fitter office hours[0:14:39.6] What happens during the consultation phaseFull Transcript:[00:03] INTRO: Welcome to Houston Home Talk featuring all things real estate in the Houston area. We'll interview real estate professionals, local business owners, and special guests from right here in the Houston community. This is where you get the inside scoop about what's new in real estate, new community openings and business openings and much more the Houston home talk show starts right now.[00:33] JAMES: All right. Welcome guys. Welcome to Houston Home Talk. My name is James and I am excited today I am joined by Beverly Langston from bath fitter and Beverly and I met just actually just not even a week ago at the sip and stroll and Katie and it was great getting a chance to meet you. How are you doing about really?[00:55] BEVERLY: I'm great. How are you?[00:57] JAMES: I'm doing great. Great. I wanted to have you on. SO as soon as I saw you in the booth, I wanted to have you guys come on and talk about what you do because I am a…in addition to roadster. I'm an investor as well and I think what you guys do can help anybody, but I was very intrigued by it and wanted to have you on. Thank you for coming on the show.[01:21] BEVERLY: Thanks for having. We're excited.[01:22] JAMES: Yeah, it's pretty cool. Why don't you tell, tell us a little bit about what it is that you guys do, how you got into it, a little bit more about bath fitter and I think it's pretty interesting what you guys do. I really do. Why don't we just start there and you introduce yourself to the audience.[01:40] BEVERLY: Sure. I'm Beverly Langston. I'm the event manager for Bath Fitter here in Houston. We are actually an international company. We're in Canada and the United States all over North America or United States. Our corporate office is right outside of Nashville, Tennessee. I've been here for about a year. I do mostly events and marketing and it's just a really amazing company, quite a unique product. It was started and the mid-80s about my [inaudible], four to be exact by three brothers, the Cotton Brothers. It started because one of them had had a baby and his wife said, I don't want to bath my baby in disgusting bathtub. He trying to figure out an economical way to repair the bathtub and make it look better and for it to be cleaner so that his wife would be happy because happy wife, happy life, right?[02:32] JAMES: Absolutely, yeah.[02:33] BEVERLY: They developed this system. The product is made out of acrylic which is really great for bathrooms because the bathrooms firmly are made…you have lots of tile, lots of grout, those kinds of things and they're porous which means they absorb the water. That's why you get all that mold and mildew in your bathroom which nobody likes and you can never ever get rid of. The acrylic is not porous. It will not ever mold and mildew ever.[03:01] JAMES: Okay. [03:02] BEVERLY: Very, very easy to keep clean. There's no scrubbing involved. Basically it's a spray cleaner if you have hard water, you either squeegee it or wipe it off with a cloth and that's it. That’s it. It's super easy to maintain as well which is a wonderful thing. Bath Fitters philosophy is we want everybody to walk into the bathroom and smile and be happy. We want to give you joy. We should all love our homes and our spaces so much and unfortunately the bathroom isn't one of those places where a lot of people are like, I just really hate it because of things like mold or mildew or maybe things are not updated so that's where the product, you know, it's great. It's a great solution for construction too because what we're most known for is our tub over tub system, which is where we can create a brand new bathtub that goes directly right over your existing bathtub. There's no like tear outs which is wonderful. Even if we do take out a product, it's still also a one day install. It's a very short timeframe.[04:06] JAMES: If you guys are going over the top of existing are there situations where maybe you're not able to just go over top or fruit for most bathrooms, I guess you guys have the ability to be able to really literally just go over top of everything that exiting. Is there any situation where maybe… [04:27] BEVERLY: There are. Sometimes there are plumbing issues that we might we have to people get. Most of the times we cannot go over fiberglass tub because the structure of them is weaker.[04:36] JAMES: Okay.[04:37] JAMES: We still have solutions for that. We can actually just remove those tubs that don't work and put in a brand new bathtub. Still with the product, still the great acrylic. Another thing that we do, we do showers as well the same way. We have a wall system that will go right over your tile. One of the greatest things about our wall system and we're the only company that does it, is it's seamless. There's in the corners is to bang on the material. There's no caulking or grout. It's not going to mold or mildew,[05:11] JAMES: That’s awesome. [05:13] JAMES: That’s is awesome. Literally there is no seam. I'm assuming then the corner is it rounded or --[05:16] BEVERLY: It depends on the material. We actually bend onsite. People always say to me, well, you're not going to get it through my door. Yeah, we will. You'd be surprised. You think you have a small doorway. We will get through it. The other thing that we do that's really, really popular now for a plethora of reasons is we take the tub out and turn it into a standing shower using the same footprint as that tub. You've got a long shower. I think a lot of people are in a point where they're not really taking baths like they used to like it's a waste of space. A lot of people also want to change it because of mobility issues, getting up and over the top. If you're older and if your short, it's very difficult so removing the tub and not having that 18 inches to get up and over is very, very popular. [06:07] JAMES: It's funny that you bring that up because a lot of people, when I sell homes or when I'm listing homes as a realtor, a lot of people for some odd reason they still ask for Tub. Most people don't use it.[06:20] BEVERLY: Yeah, yeah.[06:21] JAMES: Is baffling to me. It really is. I have a home in San Antonio where we actually built it with no tub. For some reason when we tried to sell it, like that came up at certain points, but I think now and that was I was eight, nine years ago. Now I think a lot has changed because of, like you said, the mobility for a lot of people as we start to mature, I'll use that word. Yeah, the tub. I have a tub. I never use it even now. My kids use it. That's awesome that you guys do that.Now do you guys have more like you, I guess your typical client. I don't know if you really have a typical client. I'm assuming you guys have people that are just looking to renovate, remodel, maybe investors. Maybe I could see that part of your product being awesome for a lot of people that may do an investment property where they don't have to come in and rip out. You guys don't have to come rip everything out. You could go over the exist and that's a big time saver because I've done some remodels and it can be expensive if I'm having to rip everything out[07:30] BEVERLY: Exactly, especially if you have an investment property where you have a tenants that leaving and you need to make a repair. It's pretty quick repair. The tub actually whether the shower whatever you're using has to get manufactured because it's all custom done so it's manufactured for you. Once the install happens it's a one day and the great thing is that with construction where there's a lot of dust and debris and dirt and it's sort of a messy process. We're not like that at all. The bathroom probably will be cleaner than when they walked into it. You've got a fresh, clean bathroom ready to show to your next tenant, which is wonderful. For residential, the product has a lifetime guarantee on it. For a rental facilities that's considered commercial. It doesn't have that lifetime guarantee, but I will tell you it really will last a very long time especially because in tenant situations people don't clean them as if was their property. That’s okay because the product is so sturdy and hold up so well to that. That is okay. I've talked with people that have had a rental property and the tub and the wall has been in there 30 years. Other than having to replace the caulk every few years it's been fine. [08:39] JAMES: Got it.[08:40] BEVERLY: We also do a lot of properties like hotels and apartment complexes, dormitories, lots of dormitories because kids.[08:50] JAMES: Okay. That’s makes a lot of sense.[08:51] BEVERLY: Yeah. Yeah, college students destroy things. They get in product for this. [80:59] JAMES: Absolutely. [09:00] BEVERLY: Yeah.[09:01] JAMES: Now you guys have locations. You said it started andI did not realize that you guys have been around for that long. You said the eighties. Where did this, I guess where the company originate and then where are you guys located in the Houston area? Because we're in the Houston Area. Where are you guys located? Where did things originate.[09:20] BEVERLY: It originated in Canada. That’s where the Cotton Brothers are from. Got some branches out in Canada, some stuff mostly with people who are buying in the franchises. There are some franchises store out there, but mostly they're all corporately owned stores. It is a US based company now though because our headquarters are in Springfield, Tennessee, which is right in [00:09:43] in Nashville.[09:43] JAMES: Okay. Yeah. Got it.[09:44] BEVERLY: It's manufactured here in the U.S. We manufacturer on acrylic. Everybody that works on it or all Bath Fitter employees. We never have third party. From the person that answers your phone call to the person who installs it. We are all Bath Fitter employees. We're behind our company. For Houston we are actually in the Garden Oaks District of the Heights, right off of Shepherd and Crosstimbers. We have a show room. We are welcome for people to come in and see the showroom and you have to that. If they're interested we'll send a consultant out to you and they have a mobile showroom they can bring you. If you are around and you wanted to come say hi, we love it. We love having people in here. We can give some more information here and let you see all the different models. We have garden tubs in our shower. We have the standard tub type of the tub. We have tub to shower. We also can change your shower into a bathtub, both ways. Really. Anything you want to do with your tub or shower, we can handle[10:52] JAMES: Got it. You guys can…not only just replace what is existing. You can actually do the remodeling more or less instead of ripping the tub complete out and just make it into a full shower?[11:05] BEVERLY: Yeah. We can. Yeah. Yeah. There's different color [inaudible], wall options as far style and things that people like. We even do showers for those who are wheelchair bound, who need an ADA shower.[11:20] JAMES: Yeah. I was just about to ask you about that because that's a big thing. I was about to ask you about ADA, being ADA compliant because I get a lot of clients that are looking for that so that is something that you guys have the ability to do as well.[11:32] BEVERLY: You can [inaudible] too as far the type of thresholds that we have with them or seat option. We are very, very verse also in the safety because bathrooms are very dangerous places no matter who you are. They're slippery. We have lots of different options for safety, like grab bars, different types of grab bars and we really work with our customers to make sure that they're getting everything they need so that everything is safe and secure and usable and accessible for them.[11:59] JAMES: That is awesome. In Houston that is the only location that you guys physically have here in the Houston. Go ahead…how can people look if they want to look on the website. What is the website? Go ahead and I'll post the website as well for people to be able to go and look and see what you guys have to offer. what is the website?[12:18] BEVERLY: Sure. The website is www.bathfitter.com.[12:22] JAMES: Okay.[12:23] BEVERLY: The website has got a great tool as well. You can watch some videos on how the process works. It also got a build your bathroom tool that you can imagine what you like, would it look like?[12:36] JAMES: that's awesome. That is awesome. Is it almost like a preview of what your bathroom would look like if you chose this or this --[12:47] BEVERLY: It's a virtual room to build your bathroom. [12:50] JAMES: Right[12:51] BEVERLY: On the computer so it's not going to look like it does in reality. It will show you how things will fit in certain ways. A lot of times when our design consultants go out, they use that tool as well on there. They always bring an iPad with them so that people can see and imagine it because sometimes when you actually see it put together, you're like I really don't like that soap dish. I want to be bigger. You could play around with it and see what you like.[13:18] JAMES: Got It. Got it. That is awesome. If anybody wants to reach out to you to have either email, phone number and I'll post that as well so people can reach out to you. I've got a lot of people that I work with but a lot of investors and a lot of clients that are looking for remodeling. I think you guys are very cost effective way of doing it which is really, really was intrigued when I saw what you guys did. Do you have like either a direct phone number for yourself or a… [13:44] BEVERLY: Sure. My office number is 713-691-4110. I also have a company cell phone and you can call me anytime on that which is 281-636-3560 You could e-mail me at blangstonatbathfitter.com. You're welcome to come by the store which is 356 Garden Oaks Boulevard.[14:08] JAMES: Awesome. What are your hours? What are your hours, Monday to Friday. Saturday. Tell us so we'll know what that is as well.[14:14] BEVERLY: We are Monday through Thursday. There's somebody here at 7:00 p.m. On Fridays we're open until 4:00 and on Saturdays there's somebody here from 10:00 to 2:00. Like I said we can bring everything to you. Our sales staff is great. Our consultants are great. If you can't make it in during those hours, we can come to you and we do have evening and Saturday hours or you book appointment for our consultants to come out.[14:39] JAMES: Awesome. Awesome. On the consultant, when they come out, I know you said everything was custom made so they look at the customer. Once they it out like is there…I'm assuming it's probably obviously case by case as far as how long it takes, Do you have… [14:59] BEVERLY: The process is really for us to give anybody a pricing we have … just like any home construction we've got to come out and take a look at what's going on in a bathroom.[15:05] JAMES: Sure. Sure.[15:08] BEVERLY: They'll come out. The first thing they generally do if they go into your bathroom and take out a lot of measurements because those measurements are what gets sent in when you decide to purchase. [15:18] JAMES: Right.[15:20] BEVERLY: They'll sit down with you and go over all options and all the colors and if there's any underlying problems with the bathtub or the bathroom, what those solutions would be. We do have a master plumber on staff. If there's some drainage problem or a leak somewhere, we can definitely get that fixed because we don't want to put a band aide on a problem. We want to make sure everything fits perfectly. The design consultants are really amazing people. We do understand sometimes we need to leave you with the estimate and let you think about it and they're not ever going to pressure anybody. When you decide that you want to purchase it, all of that goes to our plant in Tennessee. The product actually gets manufactured to fit your specifications. For instance, if Joseph Smith ordered a tub, it will have Joe Smith's name on it throughout the entire process up until it's actually put into their bathroom because that is Joe Smith's bathtub.[16:17] JAMES: Yeah. Awesome. Once you get it back, the actual installation, once it's put together, the actual installation process is about basically a day.[16:26] BEVERLY: It's one day, one day, unless we come across some problem. There are issues just like any construction. Sometimes you up a wall or whatever. For instance, we did a tub to shower renovation, we pulled that tub out and there was a tree root growing up underneath it[16:43] JAMES: Yeah.[16:44] BEVERLY: Our sales guy really tried to take care of that or installer trying to take care of it himself, but then he was worried he was going to damage the foundation. We stopped what we were doing. We made sure to have a professional…we met with the homeowner. They had somebody come out to fix that issue. We came back and finished it. The goal was one day but occasionally things happen.[17:08] JAMES: Yeah, it's amazing what happens behind walls. The reality is nobody really knows until there's a problem[17:18] BEVERLY: Yeah, unfortunately my guy – there's the times where I thought they're not going to finish it today and they always be like I was with a woman, very sweet lady. She'd had a knee and a hip replacement maybe six weeks out of surgery and decided she didn't want the bathtub. She wanted to shower and we took the tub out and there was this huge amount of concrete coming up from the foundation. We had to go run a Jack Hammer and it's still not done in one day. All done in one day.[17:44] JAMES: Yeah. It's amazing what happens. Unfortunately when these houses are being constructed whether it's new construction or 10 years or 15 or 20 years. The stuff that happens, it's amazing. I've seen a lot. I've been working for a few builders that I've worked for in the past and seen what happens as homes are being constructed. Yeah, it's amazing what can happen. So that's …[18:08] BEVERLY: Yeah. There had a been a ton of these structural support for the original tub that was there which was not the best option. That’s what happened. Our installers worked very hard to try to get everything done within that one day timeframe. I have done actual construction of a bathroom prior to me working here and not without a bathroom for a couple of weeks. That's not fun. We don't our customers to experience that.[18:34] JAMES: Yeah. No, I've, I've had to do the same thing. Yeah, it is a big hassle. Yeah. We like our bathrooms. We like our bathrooms and when were disrupted from being able to use one is it is definitely it disrupts my whole household. That's awesome that you guys…[18:52]BEVERLY: That’s what the construction does disrupt because there's so much dust and debris everywhere. Yeah.[18:57] JAMES: Awesome. Alright, I will post your website. Give me the website one more time Beverly.[19:03] BEVERLY: www.bathfitter.com.[19:06] JAMES: Okay. I will post that and then I'll also put your contact information. You guys share, reach out to Beverly. The service is, it's amazing. As soon as I saw it, I wanted to have you come on and talk about this because I think it's a really, really great way for people to save if they're looking to remodel or if someone's got an investment property. I think is a great alternative to ripping something completely out and investors like to save money. Actually we all like to save money. It's not even just for that matter who it is and I just think what you guys offer is a great alternative.[19:42] BEVERLY: It's great way to do it. Not have to redo it again in a few years. In the long run really cost effective.[19:51] JAMES: Yes, very, very important. I will post all that contact information there Beverly. Thank you so much. I appreciate you. It was a pleasure meeting you guys. [Inaudible] has been barely a week. That's how I'm sure what you guys l with you guys. We had a long conversation the other day. Thank you for coming on and you guys reach out. If you have questions, reach out to Beverly, www.bathfitter. That's FITTER dot com, correct?[20:19] BEVERLY: Correct.[20:20] JAMES: Got it. All right guys. Thank you. Thank you Beverly. I appreciate your time.[20:25] BEVERLY: Thank you[20:26] JAMES: All right. Take care.[20:27] BEVERLY: Take care. All right, bye-bye.If you like this episode of the Houston Home Talk podcast, please don't forget to like, share, and comment! We appreciate your support and feedback! See acast.com/privacy for privacy and opt-out information.

Change is scary, and yes price trends do matter in the online marketplace, particularly if you are in the market for buying or selling a business. Today we're discussing the frightening possibility of tighter margins, particularly for Amazon businesses, as a result of the most recent US government tariffs on Chinese products. Here at Quiet Light, we get a lot of questions from buyers regarding what we can expect from the Amazon marketplace now and in the future. The reality is that entrepreneurs need to learn to see these changes as par for the course as well as opportunities for growth. The internet today is so much different than it was 11 years ago when we started Quiet Light Brokerage. In fact, we started the same year the first Iphone came out  – to give some perspective on just how much things can change! When it comes to the geopolitical nature of e-commerce, specifically as it relates to the US, who better to bring in than a Canadian? Today's guest, James Thomson, is a Partner for BuyBox Experts, a managed services agency specializing in marketplace management for brands, manufacturers, and resellers. He was formerly head of Amazon Services, the division of Amazon responsible for recruiting tens of thousands of sellers annually to the Amazon marketplace. He's crazy knowledgeable about everything Amazon. We're talking all about the tariffs and their potential impact on the e-commerce marketplace. Episode Highlights: What tariffs are coming out and what tariff trends are going to affect business? Impact on first party sellers. Ways to work with and around these tariffs. How the manufacturers in China will see that they can suffer too. The length and scope of the tariffs' impact will have a lasting effect over time. Parallel imports may happen eventually, creating retail arbitrage. The foreseen impact for third party sellers. How the tariffs are creating more incentive for Chinese manufacturers to become sellers and sell products directly to customers in the United States. We discuss the consequences for Amazon sellers holding inventory. How Amazon monitors expected sell through rates to deflect inventory increases. Things sellers should keep in mind in order to keep their buy box percentages up. Indicators that there may be opportunities for competitors like Target to swoop in in certain spaces as early as the end of this quarter. If the tariffs prevail, one year from now will be the time when the retail increases will  show. What countries might be viable alternatives to China as suppliers and when to start investigating those avenues. The people who end up capitalizing and doing well in situations like these are the ones that look at these problems as opportunities. Transcription: Joe: So Mark I just launched a listing a couple of weeks ago. It's under contract already, multiple offers, it went very quickly. Actually, it's a re-launch because when we launched last year it didn't sell because of flat trends on the top side, slightly down on the bottom side and we pulled it. And the owner of the business implemented all the growth opportunities that he wrote about and now business is up 27% so it went under contract very quickly. So for those people that are listening that don't think that trends matter they definitely do because eight months ago no one wanted to buy this. Eight months later it's under contract in what was literally like four days. And I can't say the price of course but the thing that I wanted to touch about in regards to that is that he's importing products from China and the potential tariffs have changed since we last listed the business. And so we addressed that in the client interview. We're trying to stay current with it and he has a person through his manufacturer that helped him with the proper coding of the brands. And there was a slight increase in terms of the landed cost of goods sold but it was so minute it really had no impact on the discretionary earnings or profit. And I think that this is a topic that we need to address more and focus on in our client interviews and make sure that the sort of scary possibility of tighter margins is really looked into because not everything is going to have an increase and those that do it may be so small that is a very tiny percentage of that landed cost of goods sold. Now you just had an expert on to talk about it, our old friend James Thomson, right? Mark: Yeah absolutely when it comes to US issues and the geo political nature of e-commerce specifically as [inaudible 00:02:27.4] the US who better bring in than a Canadian? So, James Thomson, he is the first account manager within Amazon's marketplace. He's the co-founder of Prosper Show. He's a principal owner over at Buy Box Experts. The guy … I mean he's crazy knowledgeable about everything Amazon. And so we've been getting a lot of questions from buyers both on deals that are under offer right now and also from people just kind of trying to understand the landscape, what are we looking at here with Amazon in the future. So I thought let's go ahead and bring somebody on. Let's talk about it. Let's kind of dissect this. And he said a couple of things which are really really important about this and I'm not going to give all of it away because I need to tease of course so that people can actually listen to the entire interview but a couple of things. One, the nature of business is always changing. I mean the Internet today is way different than what it was when we started Quiet Light Brokerage. I'm actually just … I'm putting together a presentation right now for Ungagged coming up here soon early November and I'm taking a look back to when I started Quiet Light Brokerage. We started Quiet Light Brokerage the same year that the iPhone first came out so … I mean that's how much things have changed in just 11 years. Joe: Wow. Mark: I know right. So I say that this Quiet Light Brokerage was the biggest event of 2007 followed shortly after by the iPhone of course. Anyway let's get into the point here, James and I talk a lot about why are the tariffs in place, what is going on with these tariffs, what is the future of it look like, how is it going to impact e-commerce business owners, what's the hope of the US government with these tariffs. And I'll cut to the chase there the hope is that people start buying from other countries and most importantly what should you be doing about it. And on one thing that I'm just going to say here, I reiterate this at the end of this discussion with James. These sort of changes need to be looked at as opportunities among people who own businesses, among entrepreneurs. I've been an entrepreneur for 20 plus years now and the nature of the internet is constantly changing. Those who are looking at these changes and saying there is opportunity here, I have a great opportunity here to be able to adjust to the changes, find a new problem and solve that problem they do really really well. They're the ones that are absolutely killing it. Those who take a look at stuff like this and get all scared they end up leaving and not continuing onto the world of the Internet, their entrepreneurial career. So this is an interesting topic, very relevant to our time right now. Definitely, take a listen to it and then James also offered an email address if you have any questions for him to be able to speak about it. He's got a couple of really practical solutions that you can implement right away to be able to absorb some of these costs both in working with the factories and manufacturers in China but also just some very simple things that you can do on your side with your product launches and your products coming out to be able to pass this cost on. I'll say one more thing and I know I've talked a ton here; I'm kind of all around the place here. And I think it's really important to understand that everybody is facing these problems. When your costs go up 10% it's not just you, it's all of your competitors are seeing the exact same things. So it's a matter of how do you absorb those costs, how do you plan to be able to compete with that, how do you address your Amazon account so that you're not getting … losing your buy box share so on and so forth. Pretty simple stuff but you do need to have a plan. Joe: Yeah and I think you and I have been around long enough that we know it's not the end of the world, it's just another hurdle that an entrepreneur needs to get over. Get over the hurdle. And knowledge is power. If you learn about it, focus on it, and if and when you decide to sell your business you'll have that knowledge and you'll be able to address and tell people how you addressed it. And for buyers, same thing learn about it. Not every category is going to have an increase in tariffs and increase in cost of goods sold. So James is very bright, one of the smartest guys in most of the rooms he's in so I am looking forward to listening to this myself. Mark: James welcome back to the Quiet Light Podcast. James: Thanks for having me, Mark. Mark: All right so let's start off with just a quick introduction as to who you are. You have been on the podcast once before. I'm going to let you introduce yourself as far as your background … especially your background with Amazon and Prosper Show and Buy Box Experts. James: Right. Well, I'm James Thomson. People may know me as one of the co-founders of Prosper Show which is an educational event for large sophisticated third party sellers on Amazon. I am also the partner for Buy Box Experts which is an advisory and account management company at sports brands on Amazon. And I spent almost six years at Amazon doing a number of third party related responsibilities including running Amazon services and being Amazon's first FBA account manager many many many years ago. So thanks for having me back on again. I'm looking forward to talking about the ever increasing challenges of being a successful seller on Amazon. Mark: Well, I'm going to admit this is a show that I have been sort of dreading to do. James: Yeah. Mark: But it's really necessary and I know we've been starting to see more and more questions on the whole issue of tariffs. Before we jump into it real quick I am just going to give a shout out to Prosper Show. We go to a lot of shows at Quiet Light, Prosper show is awesome. If you're selling on Amazon and you're looking for a show where you can actually learn things and make good connections check it out, Prosper Show, what we're going to be there next March probably with all the booth and all that so. James: Thanks Mark, thanks. Mark: The thing is I'll make it for you because it's worth making. And also I don't want to talk about tariffs but let's talk about tariffs. And as everybody knows we've had one round of tariffs slapped on a lot of products coming from China, 10%. There is a threat of more tariffs coming out in January. And I'm going to fess up publicly to everybody to say I've really been kind of putting my fingers in my ears and saying I don't want to know about this, please make it go away. Let's get everybody up to speed on this as far as the tariffs that are coming out and what the general political landscape is that we need to be aware of in moving forward. James: So just to be clear I'm Canadian. I don't vote in the United States. I don't get to decide who does or doesn't make decisions around the tariffs that are going to be charged. But for folks that haven't been paying attention Mr. Trump is dealing … or has decided to enter into a tariff war with the Chinese around basically what dozens and now hundreds of products that are manufactured in China will be slapped with rather significant tariffs when they're imported into the United States. As many the people listening in today will know these private label sellers gosh we have a lot of stuff made in China that ends up being consumed and sold here in the US. So I work a lot with private label sellers who are saying gosh I thought I had the opportunity to make some decent margin being a private label seller but now that my products that are coming in from China with this extra 10%, 15%, and possibly 25% tariff depending on what specific type of product you happen to make, gosh that's an awful lot of money and I can't really absorb that long term without it destroying my financial situation. So what do I do? I think to tackle this problem we should split it into two parts. There are going to be those companies that wholesale products to Amazon. We'll call that the vendor central relationship and then there's all of the companies that are using seller central to sell those products themselves; two very different situations. Let's start with the … either one is really very easy but let's start with the vendor central situation. If you are a brand and you are bringing products in from China and you're turning around your wholesaling to Amazon … not surprisingly Amazon doesn't buy price increases and they don't really care about your profitability. That's your problem and so if you're now faced with an extra 10 to 25% COGS … 10 to 25% of higher COGS, absorbing that amount unless you're making insane margins most of us can't absorb that kind of money. And so the question then becomes A. can you get your manufacturer receipts absorbed? Some of that in cost reductions and we've definitely seen some situations where some of the overseas manufacturers are willing to make certain price concessions, especially if the North American sellers are buying the inventory in time to be able to avoid some of that initial tariff. So if you're prepared to load up on some of your inventories, if you load up on your inventory now then next year are the first lot of x-tiles and units your Chinese manufacturer may absorb some of that extra cost. Because the reality is the Chinese manufacturers they're also going to suffer through this. It's not just the American brands, it's Chinese manufacturers that also recognize that there isn't going to be as much demand unless they absorb some of this cost. Mark: Yeah and let me just make a point here real quick. I mean the goal of this and the Trump administration has been pretty clear, the goal of this is to get China to change some of their policies towards the US. And so they're literally trying to disincentivize business owners importing from China you know a lot of these 1P and 3P as you put it, the vendor central and the other people selling through Amazon to buy from other countries. And so they're going to make … through these tariffs they're just making business more expensive for everybody. And ideally, there is going to be this internal pressure from the Chinese manufacturers on their government to be able to change some of the policies of the US. That's kind of big picture. James: The problem is … and I speak anecdotal experience, I live close to the harbor in Seattle and I see all the used tanker ships come in and more than half of them come in from China. So if I think of all this product that comes in that we consume here in the United States is being manufactured overseas if more than half of that's being created in China the reality is our overall cost of buying stuff, whatever it is … plastic stuff, apparel, whatever … it's coming from China. And so unless some of these other countries can very very quickly not only ramp up production but more importantly identify themselves to companies here in the United States that otherwise buy from China, unless they can do that and find a way to say hey come and make your products over here instead of in China, the reality is this is going to take a while and some of this pain around higher costs is going to affect both the manufacturers in China, companies here in the United States, and of course consumers in the United States if in fact some of those costs overruns or pass through as higher resale prices. Mark: Right and just to be clear I'm not a geopolitical expert by any means but China has been pouring money in subsidizing their manufacturers for a really long time to be able to ramp up production levels that can provide basically manufacturing services to the entire world. That's why their economy has really been juiced up to where it is today. So for people to look elsewhere to other countries it's going to be darn near impossible for somebody to find prices that can be matched in other countries that may be seeing this as an opportunity. And even if a country does pop up for a particular industry it's going to take years for the capacity to be able to grow up to the level where we really need it to grow up to. James: Yes. Mark: So this is a problem. Let me ask you a question on this real quick and I want to get into specifically how Amazon is treating this as well. You started to get into it. I think it's going to be an interesting conversation but isn't this going to affect everybody the same way? And at the end of the day I mean it's the consumers that you would think are going to be left on in vague. If there's a 10% tariff on Blue Widgets, all the Blue Widget sellers have to pay that 10% tariff. James: Yes. Mark: So eventually their cost is up so they're going to have to raise the prices as well. Is this really going to impact the businesses themselves in that way since they could in theory pass that cost on? James: So there are a couple of things here, and different people go to market on Amazon with very different distribution approaches. So if you are buying product overseas, bringing it in into the United States and turning around and trying to wholesale it to Amazon through a vendor central account, Amazon has made it clear they do not accept price increases. This is your problem Mr. Brand; you need to figure out how to absorb this. So what I see happening is some brands will say gosh this is inconvenient right before Q4 our biggest time of the year. Some of these brands will say you know what, as much as we hate to do this we will suck it up and we will absorb this cost. And so many of these manufacturers will end up with much much smaller margins while Amazon continues to have the product at the same price that it had and some consumers won't see a price increase on those items. Unfortunately … and that's fine short term but long term these manufacturers are going to say unless I can find cheaper sources of manufacturing elsewhere I'm no longer going to carry these products or I'm no longer going to sell them to Amazon 1P or I'm actually no longer going to sell them anywhere on Amazon; that's one option. There is another type of distribution model that's very common on Amazon which is the product diverter, and I'm not passing judgment on the product diverter, the reality is there's a lot of product diverters on Amazon; companies that gray market source products. And so the opportunity for companies to go and proactively can parallel import and bring in products from let's say Europe that came in from China nut they're now coming in from Europe … I see an, potentially in some categories there will be a significant increase in parallel imports because somebody can buy that product in another country and to the extent, they're not necessarily answering all the questions correctly about where these products are manufactured there will be more opportunity and more incentive for companies to do parallel imports. Again so as to be able to bring products in at a cheaper price than what they would otherwise be paying if they bought directly from China. Mark: Is that illegal or do you literally have to be lying on your forms in order to be doing this parallel importing? James: Oh please deter, I'm not suggesting that anybody does this. I'm just saying I fully anticipate this is going to happen. Mark: Sure. James: And so if the other thing is if the tax … if you can ensure the tax has already been paid at least once there may be opportunity for you to capitalize on nonetheless being able to re-import it back in and be able to source it. Brands don't like product diversion and so knowing in there will be an issue there for brands long term having their products … basically, people capitalizing on retail arbitrage across borders and getting cheaper prices in one place so as to capitalize on that. What is more likely is if there is a price discrepancy in another country and you can buy the same item in Europe for 10% less than you can here in the US, some folks may decide to … depending on the math, it may decide to start buying stuff indirectly just because they can capitalize on price discrepancies in order to make things work. The logistics are more complicated but in the end, they still need to make some money and they're prepared to take on these extra logistic steps just so they can make some money. All of this is short term because in the long run if a brand wants to continue to wholesale on Amazon they have to make money. That's what … it's why we're all here. And so what I anticipate happening is some brands are going to stop supplying certain products and they're either going to go and find production in other countries or they're going to find completely different products that don't involve China at all. And so that will mean that some products that we as consumers rely on … and I think for example all the Q4 toys that get sold in this country, the vast majority of them are made overseas and a huge proportion of those are made in China. And so it will be interesting to see specifically in the toy category what happens because with Toys R Us going out of business this year, there's been a lot of discussions that some of the other brick and mortar retailers are going to be very aggressively going after Amazon. If Amazon for some reason in most of the toys that Amazon gets come from 1P, if those manufacturers for some reason say you know what we can't make any money selling you these products we're not going to sell it to you because you're not prepared to take a price increase, we may have a situation where Amazon actually runs out of stock on an awful lot of top selling toys. Which is bad, bad, bad for Amazon. So I think the toy category of all categories is the one that may push Amazon short term to accept the fact that it is going to have to absorb some higher costs in order to have inventory on absolutely critical selection in Q4. Mark: Interesting, so let's move over to the 3P and I have also some questions maybe about competition to Amazon which hopefully we can get to but let's move over to the 3P. What's the impact that you see and I know we're all crystal ball in here but what's the impact that you see for 3P sellers? And 3P for anyone that doesn't know this would be FBA merchant fulfilled, anybody that is not selling vendor central but still selling through [inaudible 00:18:43.2]. James: I'm going to separate 3P into two groups there's the resellers and there are the private label sellers. If I'm a private label seller and buying stuff from China I make the decisions myself on what pricing should look like. So if I have to raise my prices 10% to maintain my margins I can choose to absorb some of that for competitive purposes. But I always have the flexibility of saying I'm going to raise my prices. An important … a very tactical issue, let's say that you're selling your product for $25 today on Amazon and you added list price information into the Amazon catalog, you can't just raise your price from $25 to $30 to cover your extra price. You need to also increase your list price because otherwise, Amazon's going to flag you in selling products significantly above the list price and also press your Buy Box. So you've got to make both of those adjustments at once. As it relates to resellers the question becomes if you're buying from a distributor or a brand here in the United States that you're then turning around and reselling who's splitting the cost increases there? And that's going to differ widely on brand by brand. Some brands may already have a lot of inventory here in the US and they say well we're just going to ride this out and hope this tariffs disappear sometime in Q1 or Q2 in which case they're willing to … you know if they're using some kind of a lifo … I'm sorry a phyto model of inventory there may not be any price increases at all for wholesale pricing. And so the retailer can turn around and continue to sell the product at the same price. The problem is all you need is one competitor in the same space on Amazon the whole price is tight and not move prices up and if they've got lower prices and they're still doing the right thing with organic search and driving traffic they may end up with a higher proportion of total traffic on their products. Granted it's very low margined traffic but it is nonetheless higher traffic. And so the question is how long is any particular reseller prepared to take lower margins for the benefit of higher traffic which isn't necessarily high quality business. Mark: I mean in defense here we see this happen anyways where we have people come in and try to break into a market and will purposely go low margin just to be able to break into that market. But this is kind of who could hold off the longest with the higher prices. James: So there's been a very important development this week with Mr. Trump getting out of the postal shipping rate agreement with China. There was a significant subsidy that the United States was paying for overseas companies to ship products one order at a time into the United States. A lot of these individual orders today don't clear customs with any customs payments. And so if you got a 25% tax for example on those products, if they're brought in bulk but there's no tax on the individual orders, you don't also want to create a situation where there's that much more incentive for example for Chinese sellers to send products one at a time in the United States by removing some of these price subsidies on the shipping costs that will help to balance things a little bit. But you still have a situation where a Chinese seller can send an individual order into the United States and realistically most of those orders are going to get through without customs being applied on those on off envelopes and boxes. So in many ways, the tariff only creates more incentive for Chinese manufacturers to become sellers and to sell products one at a time in the United States. And so that continues to be a challenge. Mark: Let me ask you about a tactic that I've seen sellers employ here in trying to get ahead of potentially … I know there's threats of an additional tariff being imposed here coming January so possibly increasing the tariffs even more. And I've seen some sellers bulking up on inventory because of that; trying to get ahead of that. It has kind of a cascading effect though from what I understand if you're a 3P and especially using Amazon's fulfillment services. Does Amazon look closely at the amount of inventory that you're keeping with them and are there consequences for maybe having inventory sit on their shelves longer? James: No it was early this year Amazon evolved the way that they designed how much FBA capacity every seller has. And it has to do with the sell through rate of each individual skew that they choose to put into FBA. If you're selling a product that sells a thousand units a day, Amazon will let you put as much of that in as you want. If you're selling a product that sells one unit a month you can't load up five years of inventory. Amazon actually won't let you put that in the FBA all at once. And so as much as a seller wants to ramp up their level of interest they hold in FBA, Amazon will cap it based on their expected sell through rates. So if you happen to sell products that sell fast enough you're not going to be putting more than six months of product into FBA, great you may load up a little bit more. But if you start bringing in pallets and pallets more than you'll ever sell in the next six months, Amazon's going to put the kybosh on that. And you're going to have to figure out where to hold that inventory. So I think it's a system that basically corrects itself. I think it's worth a seller today if they're planning on doing this in the next four to five weeks they should create an FBA shipment right now to see if Amazon even allows them to put whatever level of incremental inventory into FBA. They may well say sorry we don't have that space because your expected sell through rate doesn't by any means justify the load of inventory. Mark: And I know a lot of sellers are using even a 3PL of sorts just to store Amazon inventory that they are eventually going to ship off to Amazon and that's … if you're not doing that and you store inventory for anywhere longer than a few months I think because of the storage rates you can get much better storage rates elsewhere but that's something to look at. James: So to that point if you do have to bring in an awful lot more inventory and hold the inventory so as to bypass the expected additional duties that come likely in January, one thing we may see is an increase in the number of sellers that decide to start using seller for full prime. And that's a mixed bag in terms of whether it's a good thing for sellers, in some situations they may be able to use the higher shipping costs that come with seller for full prime that may be adequately smaller to offset the expected cost of having to pay another 15% in a tax on imports. But you know we may see some … in certain categories we may see more sellers deciding to use seller for full prime in part because Amazon says you can't send that much stuff into FBA but you know we'll have to have to see what happens. My view is I don't see this tax staying in place indefinitely. I see this is a game of chicken between two countries. And quite frankly I think the United States has more to lose than the Chinese do because the Chinese low cost production capabilities in China will continue to be there even if those costs are a little bit higher now that there's tax added to it. And so reality is we Americans, we like cheap stuff and so if you go to the source of cheap stuff … and so I suspect at some point that there will be some counterbalancing that happens and it's a matter of how long can people hold on without going out of business. Mark: Yeah. Let's talk about the Buy Box a little bit. You touched on this earlier about things that you may want to watch out for if … when your changing prices on your site. What are some things people should keep in mind if they do decide to pass on some of those costs to the eventual customers at the end of the day? What are the things that they should watch out for so they don't lose their Buy Box percentages? James: Well the first one is you still … when you offer your product you want to make sure that it's at or below the list price. So if you're having to increase your price over whatever the current list price is today then you want to make sure that you can update the list price information. If you are a reseller of someone else's products and they haven't updated the list price then you're going to be in trouble because you can't sell that $30 item for $35 when the list price is 30. And if the manufacturer controls the list price or you as the reseller don't have brand registry ability to go in and update the list price you're going to be in a situation where you don't have the buy box because you've had to sell the product in a price above the list price. So start that conversation now if you don't have the ability to change the list price on a product you resell have that conversation now because you need to get that information updated. Otherwise, the brand is going to lose out to any other brand that has the ability to update their list prices. So even if the brand you're reselling doesn't want to do this you need to explain to them listen if you don't do this everybody that sells your product is going to be in a situation where they can't win the buy box which means the consideration of your brand or other brands is going to be significantly hampered. Mark: That's good advice. Let's move on to Amazon and their adjustments that they might be making on their side and also possible competitors. And I'm thinking Wal-Mart here who has been pretty aggressive in trying to eat in Amazon's market share. I don't know how successful they've been with their two day shipping on anything, no membership fees everything else. You've already described how Amazon is right now at least probably pretty unforgiving as far as price increases on them [inaudible 00:27:44.9] side. James: Yeah. Mark: Do you see any opportunity here for some of these competitors and even if it's not one competitor maybe that fragmentation of Home Depot taking care of their pit space and actually increasing their presence target doing the same, Wal-Mart doing the same, and have you seen any indication of this yet? James: Well what I have seen … I go back to the toy example, what I've seen is that both Target and Walmart are aggressively looking for ways that they can win in the toy space this Q4. And it only takes one or two of the big toy companies to tell Amazon 1P that they're not prepared to send any shipments unless there is some modification to the pricing. Unless that happens … oh, I'm sorry if that does happen then I think it could be a very painful Q4 for Amazon in a category that they actually absolutely need to win. But the problem with Amazon is they usually win anyways. The reality is if they can't get it directly from the distributor or the manufacturer they find a secondary source. They go and find a distributor that will unload a product at low margin, Or they will do parallel imports. So I think if these duties remain in to place for 12 months it's going to be next November or December that the pain is really felt by brands. Because right now a lot of them already have inventory, they already brought in to the United States. While they may have paid 10% extra duty it's not 25% duty but at the time you have long term 25% duty that absolutely is going to impact what their retail prices look like. So as bad as it may be coming out of this December if that tax remains in place for another 12 months that's when companies are going to have to say okay we're going to have to discontinue certain skews. We're going to have to launch new versions of the existing skews under different UPCs so that we can have new list prices on these items. I've seen situations already with some companies where they're already loading the 2019 version of an item with very slightly modified packaging but that's the product that's going to replenish the 2018 version that they're very soon going to run out of and have no plans on ever replenishing as long as the tax is in place; i.e 2019 version cost 25% more retail because everybody has to continue to make money doing this. Mark: Okay one of the things that we've been trying to educate people on especially in this e-commerce space there's a lot of people out there that want to find a couple of evergreen products that are just constantly bringing in cash. And then there's always the question of well how do you handle competition? When we brought it up time and time again now on this podcast where look good product based companies come out with new products on a regular basis and so that's actually … it's something I haven't heard before. That's a great way to be able to address this is come up with a 2019 version or a slightly different model version which your cost can absorb that new price and be able to work it out to the price that self. Last thing I want to talk about, let's assume that this does last for a while, you know a year or more. The intended effect is for US importers and retailers to move and look for other countries. So what are some of the countries maybe that people can start looking into. And I know it's going to vary industry by industry but what countries might be viable alternatives to China if people want to start looking at and look for manufacturers in different places that could possibly replace their current supply? James: I don't know how much I knew I can add to this. I mean a lot of the companies I know they look in Thailand and Vietnam today. Some of them look in Laos. I know the Southeast Asian countries, a lot of them have low cost production but they're not necessarily known for the sophistication of bringing together manufacturers the way, for example, Canton Fair does. And so I see an opportunity here for … let's say I'm the business development government organization in Thailand or Vietnam to the extent of they can put together a major event that will attract thousands of manufacturers and thousands of overseas buyers, I mean I see that as being rather significant. If you can spin up a Canton Fair like event or even a very small verison of that in one of these other Southeast Asian countries. Part of the challenge here is visibility. There already is an Alibaba that helps people find every Chinese manufacturer. Is there a similar concept in Vietnam and Thailand? To this point, it's nowhere near as visible and so it becomes something that basically has to be centrally organized either by large associations of manufacturers in country or potentially the government. And so if one of those countries is able to step up and do something like this and create visibility that will help. But let's be honest even if I said to you your product can be made in another country basically the same way starting today you're still looking at six months of testing and small minimum order quantities to verify and make sure that you have got the right payment structures in place. And so I would challenge everybody who's listening today if we're looking at a 12 month or a long term situation with this tax being in place you've got to start these conversations in January figuring out where is my alternative source going to come from. Because it's going to take time to work through and figure out am I really getting the same quality? Am I really getting the same delivery promises and so on from my overseas manufacturers that are now coming out of a different country? Mark: Yeah. So I've been an entrepreneur now for going on 20 years and the way … I would just like to close out here because some people might be hearing this and saying oh my gosh this is so incredibly scary. And what I want to say is this, these things happen. These things happen in business. The conditions change all the time and the people who end up capitalizing and doing really well are the ones who look at these problems as the opportunities that they are and figure out the way to make it work. There will be people who drop out. There will be people who do not pay enough attention to this and don't make the right moves. And so when we see these things rather than getting all scared and actually ironically enough this episode is probably going to air right around Halloween. I think we're going to publish it the day before Halloween and do our email newsletter advisory the day after … so you know a good timing for that. But to understand that there is definitely opportunity here. I think there's a couple of really good tactics. I think James you brought up just one simple one was just bringing up a new version of products that have and make them a 2019 version. That's a really simple type that we can have to see what's going to happen. And then also just have your ear to the ground as to where you can also find other products. So this has been really really enlightening. James, thank you so much for coming on. Where can people reach you if they have questions about this or honestly your work for consulting with Amazon sellers is unparalleled so if they have other questions even unrelated to this where can they reach you? James: I can be reached at info@buyboxexperts.com. All those emails go directly to me. And I appreciate your time today Mark. Mark: Yeah, absolutely. Thank you so much for coming on. Again James is one of the best in the business by far. Prosper Show check it out and then if you have questions feel free to reach out to me and I can do an intro or [inaudible 00:34:40.8] James. Thanks again for coming on. James: Thank you, Mark.   Links and Resources: Email James BuyBox Website Prospershow James's LinkedIn James's Book on Amazon

Michael: Hello everyone. This is Michael Gross of OptionSellers.com here with head trader James Cordier here for your April Option Sellers Video Podcast. Well, James, we didn’t see any abatement in the volatility in the stock market this month. In fact, Fed chairman Jerome Powell last week coming out, maybe spooking investors, talking about asset prices and maybe even financial markets being overvalued here… a little ghost of 2007. What do you think is going on here? James: Michael, it’s interesting... for the first time since quantitative easing was first announced practically a decade ago, investors and money managers now actually will have an option of not just pouring money into long stocks but fixed income is going to now be some of the talk. The tenure is approaching 3%. With what Jerome Powell said this past week, we will be reaching 3%, possibly 3.25 and 3.5 coming up over the next 6-12 months. With that in place, does the stock market have now still a free ride to the upside? Investors are going to be putting some of their money into fixed income and for the first time in practically a decade there’s an alternative from just being long the stock market. Michael: Obviously at this point, a lot of investors, especially high net-worth investors, are always looking to diversify into alternative asset classes. Physical commodities as hard assets always seem to have an appeal in any type of environment really but especially in this type where you have a lot of the jitters about paper assets. James: There’s probably more jitters now than I can think of over the last decade. As you know, we have investors contacting us on a daily basis, I think, just for that reason. Investors wanting to diversify right now from the stock market, I think, is hitting a really great stride right now. Wanting to get into markets that are uncorrelated to what the DOW does and what the S&P does is not only really popular right now but a lot of the real investors, you know, the people with millions of dollars under management, they are looking for alternatives now and I think they’re going to find some, not only in yield bearing accounts like fixed income but certainly in commodities like what we do, as well. Michael: Of course, we are in springtime now in the commodities markets. That means there’s a lot of things that happen in a lot of the physical commodities in the springtime, especially the agriculture markets and energy markets. We have some great seasonal tendencies, as well, in the spring. James: We do. Needless to say, a lot of people look at commodities and they think about the weather. Over the next 90 days the weather will be a really big factor. Quite often, end users for soybeans, corn, and wheat, they need to get insurance and make sure that they’re going to have these products for what they do and basically for animal feed. Of course in the United States, the largest producer of corn and soybeans, the weather is key. Often, they build in a certain premium during the months of May, June, and July just in case the farmers in the United States don’t do exactly what they would have hoped each year. Of course, later on in the year, once again the U.S. farmers are the best in the world and the spring rallies that often happen normally are just great sales for doing what we do. Michael: Speaking of those rallies or markets, we have a couple we’re going to feature this month that are maybe a little ahead of themselves. Now we have some of that inflated call premium. If you are one of those investors, it’s just learning how to sell options or learning how to sell options on commodities, these are two markets we think are really going to help you... Good opportunities, actually markets we are taking advantage of now in our management portfolios. We are going to cover those for you here in just a minute. Thank you. Michael: Okay everyone, we are back with our Market Segment for this month’s podcast. The first market we’re going to discuss this month is the soybean market. Soybeans have been in a strong rally the past couple of months primarily as a result of some things going on down in South America. James, do you want to talk a little bit about that and what’s driving prices right now? James: Michael, corn, soybeans, and wheat are all about the weather. The third largest producer in the world is Argentina. They’ve had a very dry growing season this year. For that reason, they do have reduced yields and we’re going to have a little bit of tightness out of that South American country. They are the third largest producer in the world and basically the U.S. weather is normally the big catalyst for the market moving up or down. This year, Argentina, which of course they have the opposite season here in the United States, their summers/our winter of course, and while there’s not much to talk about in the United States, traders look elsewhere. In South America, especially in Argentina, they had a really dry season. For that reason, the soybean prices have been bumping up to nearly 12-month highs over the last couple weeks. Michael: Yeah, we have seen some reduced yield expectations right now. We were at 60 million metric tons out of Argentina just a couple of years ago, now we are hearing it might be down as low as 40 million… it’s not reflected yet here. I guess that has been driving prices substantially higher, but we’re nearing the end of that growing season there now, aren’t we? James: We really are. Quite often, traders and investors will price on the worst-case scenario, so then once the corn and soybeans are actually harvested, often the weather wasn’t as bad as people thought and then the market readjusts to the current level of the production it actually turns out to be. Michael: So what you’re saying is although we’ve had some problems out of Argentina, they do about 50% of the production done in the U.S. or Brazil. From what I’m hearing, they’re thinking that production out of Brazil may make up some of those losses out of Argentina already. Is that correct? James: Unlike Argentina, just to the south of Brazil, Brazil has had just wonderful growing conditions for cocoa, coffee, soybeans, orange juice, sugar. Brazil is just a wonderful garden right now for growing soybeans. I think the Brazilian harvest will be larger than expected and that will make up probably a quarter and a half of what we’re going to be losing out of Argentina this year. Michael: Of course, as South American harvest is under way, we get started with planting here in the United States. The market probably starts focusing on what’s going on with the U.S. crop here pretty soon. If they do, the United States has some pretty big supplies heading into the planting season this year. James: We’re certainly going to have harvest pressure probably starting September-October of this year, and the Argentinean drought it probably going to be a forgone memory at that point. Supplies are going to be more than plentiful in the United States, and of course the U.S. is going to be the supplier to the world because of our ending stocks here in the United States, which is something I know we want to talk about as well. Michael: Starting off the year, we have the second highest ending stocks in the last 30 years and the highest in over a decade, so we’re already starting off the year with big supply. Now, the planting intentions, which we’ll know more for sure the 29th of March when that report comes out, but right now estimates are we’re going to have at least as many acres planted as last year, 90 million with estimates now at 90-92 million, so if we even have average yields we could be looking at all-time record ending stocks for next year. Like you said, that harvest pressure coming in… if they’re harvesting that size of a crop you’ll get some pretty substantial harvest pressure. So, the trade you’re recommending here right now, you’re thinking that this rally is probably going to fizzle and we’re going to see steadier lower prices. What are you looking at to trade here? James: Michael, we think that come October-November, soybean prices will probably be below $10 a bushel. We’re trading around $10.40-$10.50 right now. Basically, on the dry conditions in Argentina, we’re thinking that soybeans have a little bit of a chance to rally another 20-30 cents. They could get to the mid-upper dollar region. We love the idea of selling soybeans at the $13 level, so we’re going to be recommending soybean calls at $13 and $13.25 thinking that while soybeans might have a big of a rally going into May and June, we love the idea of being short in fall. So kind of like football, we’re not exactly throwing the ball to where we think the market is right now, but we’re selling options to where we think the runner’s going to be, and the runner being a huge harvest in the United States come September and October. $13 level for soybeans, you’ve got to bet on something, and boy we don’t see that happening nowhere being near that price. Michael: Yeah, that’s a pretty big cushion there to be wrong. The USDA itself has average on-farm price this year at $9.25, which is down here. So, that seems like a pretty safe bet. Let’s go ahead and move on to our next market right now, and that would be the cocoa market. Michael: James, cocoa is another one of these markets that has had a pretty good run here over the last several weeks. What’s going on here with prices? James: You know, similar to soybeans that we just talked about, one of the main producers of cocoa is the Ivory Coast. They are the largest producer in the world. They’ve had dry conditions this past year and, while those dry conditions certainly will reduce some of the pods yielding this year, we have what’s estimated to be 2% less cocoa being produced worldwide in 2018; however, a 2% drop in production has now caused and created a 30% increase in price. The balance doesn’t quite weigh out but we do have speculators buying, we have commercials buying on the idea that the Ivory Coast crop is going to be smaller, and it is certainly trading above what we think is going to be fair value in price later this year, probably be a couple hundred dollars a ton. Michael: So, while this west African crop got hit somewhat, you’re saying global production is probably going to make up for a lot of that? James: It is. A lot is always made at the Ivory Coast because they are the largest producer. Sometimes they have political turmoil. Sometimes they have the weather that’s not quite right. 2018 and 2019 there’s supposed to be a world production surplus for cocoa. So, all this discussion about the Ivory Coast being too dry is eventually going to take the back seat to the fact that the world does have enough cocoa. It’s not as tight in supply as a lot of people think. Rallying from $2,100-$2,200 a ton all the way up to $2,600 a ton, we think that the rally is overblown and probably, starting in August and September, we’re going to be quite a bit lower than where we are right now. Michael: There’s the numbers you were talking about. That’s the latest from the ICO (International Cocoa Organization) and it’s showing only 2.3%, so that’s a pretty good rally for the bigger picture short fall. James: It’s interesting. Commodities do have a reputation for overshooting on the downside and overshooting on the upside, and I think cocoa is a prime example of that here in 2018. Let’s say the cocoa production falls off 2.5-3%... we’ve had a nearly 30% increase in price and I think things will come into equilibrium the 3rd and 4th quarter of this year. Michael: So, how do you recommend that option sellers at home take advantage of this? James: You know, like we’re looking at on the chart here, $3,000 a ton, $3,100 a ton, yet a large leap above where we are right now, those options right now are fetching $500, $600, $700 each. We think those are a great sale. The market, needless to say, is still in an uptrend. It could still go slightly higher, but as harvest around the world starts taking place we will have harvest pressure again and a lot of the commercial and speculative buying will probably back off. We expect cocoa to probably be around $2,300-$2,400 later this year. If we’re short from $3,100 by selling those calls at $3,000 and higher, we think that’s going to be a really good way to position in this market. Michael: Yeah, especially I see the speed this moved up… probably really goosed those option premiums up there. Maybe just like the market, they’re probably overpriced too now at this point. James: Michael, it’s interesting. As you know, we follow 10 commodities. We don’t trade all 10 all the time. Cocoa is on our radar screen. It is one of the markets we follow extremely closely. When you have extremes in this market, cocoa is an absolute necessity to many households and many consumers around the world. Cocoa is not so much an exotic. It is a market that everyone is in touch with and the fact that we’ve had that large increase in a very short period of time, those options now open up to large premium and, we think, we’re going to be taking advantage of those in a very good way over the next 30 days. Michael: I know for me chocolate is a necessity, so I know how those people feel. Okay, let’s go ahead and move into our Q&A session now and answer some of our questions from readers. Michael: We’re back with out Q&A with the Trader section and, James, our first question this month comes from Orson Falck of Manchester, New Hampshire. Orson asks, “Dear James, I noticed when you talk about positioning an account, you say you keep a large cash reserve for your client accounts – fifty percent I believe. Are your published results based on the entire amount in the account, including the non-invested cash, or is it based on the amount you have invested?” James: Orson, that’s a good question. If you’ve been following our materials over the last period of time, we follow 8-10 commodities. We rarely find opportunities in all of them at one time. Therefore, Orson, what we do, for example, we want to keep our margin levels at 50% or lower so that when we do have an opportunity in cocoa or soybeans or coffee positions that we don’t currently hold, we have dry powder in which to take advantage of them. Even when we are fully positioned and we are in 2 energies, 2 metals, 2 foods, and 2 grains, we still don’t raise our margin level to much more than 50%. There’s not a right way or a wrong way to do this. For us, that’s been the sweet spot for margin and leverage. I know how we did last year, I know how our returns were last year, and that was on less than 50% margin. Our client is never going to receive a margin call, we’re never getting shaken out of the market because one market or another market moved a certain level. We like the comfort of that. That allows us to make the yield curve as flat as possible so that we have smaller equity swings in people’s accounts that have invested with us. To answer your second question, the published results last year and years prior is on the total amount of money invested, not just the amount of money that is put up as margin. It is the 100% of exactly what the client invested. Michael: Very good. I get that question a lot. People, especially stock investors, that aren’t used to how those margin fluctuations, they aren’t used to that big cash cushion, and knowing how to use leverage in commodities is really one of the biggest keys to being successful in it. This is how you use leverage properly, by keeping that cushion there. James: Absolutely. There’s no reason to push this type of investment product. I know how we’ve done the last several years, being invested less than 50%, I know what the results were, and I don’t feel the need to really push that envelope. I like the ability to be nimble in the market. If we have something on that we need to add to, we have extra cushion to do that. If a market moves against us slightly it doesn’t really mess up a portfolio to any great extent, and that is why we utilize the 50% rule. We rarely are going to be invested above that. Michael: Let’s go to our second question. Our second question this month comes from Harold W. Corson. Harold is writing in from Monterey, California. Harold asks, “Dear James, Thank you for your outstanding book that introduced me to selling options on commodities contracts. So far, I’ve sold options in oil, gold, and just started out in wheat. So far, so good. I’ve noticed some commodities don’t have much trading volume. How many commodities do you typically recommend trading in an option selling account?” James: The four sectors that we follow are energies, metals, foods, and grains. Generally, we’re watching about 8 or 9. We are often in 5 or 6 of these commodities, as I mentioned in the last question. Rarely are we in all 8 or 9 at a time. I like being in all 4 sectors. We definitely want to be in the grain market, that is the main staples, of course, in the world. Precious metals, energies are extremely high-volume trades. Great liquidity there, very large premiums generally, and in the foods, as well. Basically, volume is going to be mostly in these 8 commodities. We don’t like straying outside of them. Liquidity and volume is very important. Basically, you want to look at the round strikes. For example, if you’re managing your own portfolio and you’re looking at crude oil you’re going to be looking at the $70 strike. Don’t look at the $71. In gold, don’t look at the $1,825 option, look at the $1,800 or the $1,900 option. Easy tricks like that to find the volume in the open interest will help you get in and out of the market if you choose to do this on your own. Michael: Yeah, I mean, it’s a great point you make that, again, going back to stock traders and stock option sellers, they’ve got 2,000 or more stocks they can pick from. We’ve got 10-12 commodities we watched and maybe 6-8 you’re trading at any given time. So, there’s not a big universe there. You focus on the ones with the highest volume. Obviously, there are markets like lumber and aluminum or what have you that there’s really no volume there for option sellers, so you don’t have to bother with them. James: Right. The 8 or 10 that we follow are just absolute staples of life both here in the United States and abroad. They have excellent volume and excellent open interest, for the most part, and that’s where you want to be. The exotics so much, you know, every once in a while there’s an opportunity there, but having liquidity for our clients is of the utmost importance and it should be for you, as well. Michael: A couple resources if you are interested in learning more about selling options on commodities… obviously our book, The Complete Guide to Option Selling. You can get it on our website at a discount to where you’ll get it at the bookstore or Amazon. That link is www.optionsellers.com/book. If you’re not yet a subscriber to our newsletter, you can get a free copy by going to www.optionsellers.com/newsletter and get some of these trades we’ve been talking about and also more answers to option selling questions. That does it for our Q&A section for this month. We’re going to go ahead and move into our final section of the podcast. Michael: Thank you for joining us for the April podcast. We hope you’ve enjoyed what you saw here today. Next month, we’re going into May and we have even more seasonals coming up. James, some of your favorite markets come into some major seasonals next month. James: We will look at an active calendar starting in May, certainly. Soybeans and corn are probably the main feature. We’re selling options and call options during the next 60 days. Of course, cocoa is on our radar screen right now with 2% smaller production and an increase of 30% in the last several months. We’ve got a lot of activity going on in the next May, June, and July it really looks like. Michael: We also have the energy markets coming into play, as well, so there’ll be a lot to talk about next month. We’ll probably continue talking about some of these great seasonals that happen during the spring and how you can take advantage of them here. For those of you that are interested in how the accounts work here or may be interested in becoming a client of OptionSellers.com, we do recommend you get our free Discovery kit. That’s an information pack for investors. It’ll tell you all about our accounts and how you can invest directly with OptionSellers.com in a managed option selling account. If you’d like to get that, the website link is www.optionsellers.com/Discovery. Speaking with Rosie, we do have all our April consultations booked, so there is no further availability for them; however, we do have consultations still available in May. If you’re interested in discussing an account with OptionSellers.com, you can call Rosemary at the main office. That’s 800-346-1949 or Internationally at 813-472-5760. Depending on availability, Rosemary can get you scheduled with a consultation. As a reminder, our minimum account level did go up this month. The minimum account level is now $500,000. James, thanks for all of your insights this month. James: My pleasure, Michael. Always fun and very insightful to help our viewers and listeners out with this. Michael: We’ll talk to you right here in 30 days. Thank you.

Michael: Hello everybody. This is Michael Gross of OptionSellers.com here with head trader James Cordier. We’re here with your March OptionSellers.com video podcast. James, as we head in to March here, what’s on everyone’s mind is the obviously the big development we had here in February. Big stock sell-off, it’s on everyone’s mind right now… stock investors are busy brushing themselves off, wondering what’s next. Over here in commodities, we didn’t really see a lot of movement in the markets themselves, but we had some developments in the option and option volatility. Why don’t we start off this month by maybe just talking a little bit about what happened in stocks themselves. James: Michael, it’s interesting, a couple of years ago we had BREXIT. We had Switzerland leaving the European Union, we also had the election outcome a year and a half ago. All these events didn’t really change fundamentals on a long-term basis, but what they did do is they injected a lot of volatility. The 3,000 point drop in the Dow Jones here just a couple weeks ago did exactly that. It turns out that there’s something called the volatility index in stocks. There was an instrument that was built for people to go short or long on it. It seems as though everyone was way short volatility. In the stock market, that got unwound, it developed a 3,000 point drop in the Dow Jones, and now we’ve got to the stock market recouping quite well. It’s probably going to continue to rally everything as far as we can tell. The U.S. economy looks good, the global economy looks good, stock profits look excellent right now. Volatility spiked in a dramatic way. For ourselves selling options on commodities, we saw volatility index spike as well. Precious metals, energies, and some of the foods did have a spike. In many cases, a lot of the positions we had did increase in value during this large increase in volatility. It’s not always fun when this happens, but it is absolutely a key ingredient in option selling. It allows us to sell options, as you know, 40-50% out-of-the-money. Without that creation that happens every 6-12 months in the volatility index in commodities and in stocks, we wouldn’t be able to do what we do. It’s a key ingredient and it did happen this past month. We’re very excited about the opportunities that it has now in selling options. Michael: It was kind of ironic, James, because you and I were watching this unfold, we were watching the stock market take a nose-dive, and we’re watching our commodities boards and basically nothing is going on. We have gold and silver prices staying silver, the grains and foods were business as usual, crude took a little bit of a sell-off, tied into stocks, but that was really the only one. Over in natural we had to sell off, but that was really already under way. It didn’t have much to do with stocks. Yet, you saw option volatility spill over from that stocks and it increased the value of those options temporarily, but now you’re seeing that come off a little bit. Is that right? James: It is. The volatility index in the stock market is practically to the same level as it was prior to the 3,000 point sell-off. In commodities, it has now come back about 75% of the level that it was at. The fundamentals never really changed at all, especially in commodities, and I think it sets up a great landscape for doing what we do. We’ll find out relatively soon. Michael: You know, a lot of people, they want to get diversified from stocks. That’s one reason why they’re interested in selling commodities options in the first place. You know, it was interesting… on CNBC they had an article about on the biggest day down in the Dow it was down, what…1,075 points or something like that? They ran an article that there was only 7 stocks higher that day and 2 of them were cereal and tobacco. It was Kellogg and one of the tobacco companies- I forget which one. CNBC’s analysis of that was, “well, even when stocks are down, people will still eat and they’ll still smoke”. That’s a point we make constantly is that no matter what’s going on, people still need to eat, they still need to drink coffee, and they still need to put gas in their tanks. James: The breakaway from the correlation from the stock market was very evident on that day. Gasoline and crude oil and soybeans and coffee… business as usual. That’s why a lot of our clients like being diversified away from the stock market. On that occasion, we did see the volatility index increase options on commodities, as well, and that’s just a key ingredient for us doing the business that we do. They did increase while we were in them. We just see, going forward, just a great opportunity to use that additional premium to position clients. Michael: So, we got a little bit of a surge in volatility, that pushed premiums up, and now that’s coming off. The premium is coming back down a little bit, but now we’ll have that historical volatility in the market. One thing you and I have talked about is now that opens up opportunities for us to do some strategies that maybe we weren’t able to do before. James: Right. In 2017, we saw volatility come down steadily the entire year, which really produced a great return for a lot of option sellers last year. Chapter 10 in the Third Edition of our book, we talk extensively about credit spreads. We haven’t had the opportunity to do that the last year or two because volatility has been low. The influx of volatility that happened over the last 30 days now allows us to do this. It is probably the most safe, sound option strategy there is. With the additional premium now, we’re looking forward to positioning in that fashion the next 6 months or so. Michael: Okay. One observation we were making as well is when volatility is up in options, obviously that’s when we want to sell them, but when the volatility is higher there can actually be less risk in selling the options because you’ve already had that surge in volatility. So, often times the path of least resistance is to come back off that volatility after you sold them. James: We saw that the months after the BREXIT, we saw that months after the Trump win during the election of 2016, and, boy, we did quite well right after that period. We expect that to happen again this year. We’ll see if that’s how it plays out. Michael: All right. As we head into March, we’re going to show you a couple ways maybe you can do just that. We’re going to move on to our feature markets segment and we will cover that in just a couple minutes. Thank you. Michael: All right. So, we’re back with our markets segment this month. The first market we’re going to talk about this month is the natural gas market, a market that’s near and dear to our hearts. Natural gas, if you’re unfamiliar with commodities, it’s a great market for selling options. There’s a ton of liquidity there and also you can sell options very far out-of-the-money, so it’s one of the core markets you want to focus on if you’re building an option selling portfolio. One of the first fundamentals that we look at when we look at markets like natural gas is going to be the seasonal tendency. As we know, seasonal tendency charts are not guaranteed by any means, but they do give you an average of what prices have tended to do in past years at different times of year. What we find is there are underlying fundamentals that tend to drive these every year. We’re going to take a look at the ones in natural gas right now. James, do you want to talk about that and why we see this type of movement in gas prices often in the past? James: It’s interesting, Michael. Often, suppliers want to bulk up for seasonal demand in winter, and everyone is basically building supplies going into December, January, and February. If the winter, especially in the Northeast, falls just a little bit shy of expectations or it’s 5 degrees cooler or warmer than normal, the supply actually is more than ample and prices usually start coming down in January and February as we see that we’re going to have enough natural gas and we’re not going to be running out. Again, here in the United States, we’ve had an extremely mild winter. Philadelphia, New York, and Boston, it has been some 10-15 degrees warmer this year than normal, and prices have come down just like seasonally they do. Supplies of natural gas this year are surprisingly low. Right now, we are approximately 23% below the supply of last year. We’re 19% below the 5-year average. That is because we’ve been exporting natural gas, something brand new to the exporting ability right now here in the United States. It’s setting up really nicely for the seasonal rally that we’re expecting. Natural gas right now is near it’s 12-month low here as we end February, often where it is this time of the year. Seasonally, what then happens is suppliers start building supplies then for summer cooling needs, which is like May, June, and July, and that often will give us a price spike starting in March and April. Michael: So, what you’re saying is this is really a factor of distributors accumulating that inventory, driving demand at that wholesale level, which is really what’s pulling prices higher… at least it has in the past. James: Exactly right. If we get through the winter, and it looks like we are again this year, prices usually come down because we are more than well supplied this time of the year. What wholesalers do for summer demand for cooling needs, especially in the Northeast, is they start building supplies and that demand boosts the prices starting in March, April, and May, and it’s setting up quite well to do that again this year. Michael: You know, it’s interesting, James, we talked about stock prices coming down earlier and a lot of people noticed a correlation and said, “oh, natural gas prices came down with stock.” That price really had nothing to do with that move in stocks. Natural gas prices were already coming down as a result of just normal seasonal tendencies. Wouldn’t you agree with that? James: Right. The natural gas market is so liquid. It takes no cues from any other market. The price of Apple stock has absolutely nothing to do with the supply of natural gas, the demand, or the price. It was in a downtrend here in the last few weeks just as the seasonal entails, and it was again this year. Natural gas definitely uncorrelated from the stock market and this year proved it as well. Michael: Let’s take a look at some of the fundamentals of where we find ourselves right now at the end of February, as far as supply goes. First of all, we’re going to take a look at the current chart, which looks a lot like that seasonal one. It looks like we may be at a low right now, technically looks like we’re a little bit set up for a rally here. Is that what you would expect it to look like this time of year? James: Michael, we could almost overlay the seasonal that we were just looking at and it lines up extremely well with this year’s pattern. The market is oversold right now, as the stochastic on the bottom of the chart describes. We really like the idea of the fundamentals being slightly bullish right now. We have nearly 20% below the 5-year average on supplies here in the United States. We’re going to be exporting more natural gas this year than ever before. As we get into the spring and summer cooling season, we do expect a nice bump up in natural gas prices, setting up, what we think, is a very good put sale for new option traders. Michael: Okay, good. That supply situation James was referring to, this shows the last 4 years. You’ll notice this line here is indicating this year where supply levels are. We are, as James mentioned, about 19% below the 5-year average as far as supplies go. So, this is where we are now. It sets up a fairly bullish fundamental supply picture, as you mentioned, James. There’s another side to that equation and that’s also the demand side. Why don’t you talk a little bit about that? James: The country is trying to get away from coal - electric power plants. We’re switching off into more cleaner utilization. Natural gas is going to be a big winner with that. Starting this year, having more so in the coming 3 or 4 years, but we are looking at record demand here in the United States for natural gas, combined with the fact that we are some 20% under the 5 year average on supplies sets up a nice bullish situation here for the next 3-6 months. Michael: I noticed, too, when we were looking at this bump for projected record demand in 2018, that came evenly from both residential and industrial demand sides… possibly speaking to a stronger economy, tax cuts, what have you, that are maybe at least partially driving that in addition to what you mentioned with coal fired plants switching over to electricity. James: Right. Definitely a push for greener production of energy here in the United States, and I think this chart shows it really well. Michael: Let’s take a look at a trading strategy here for those of you that are watching this. You put together a strategy here for, and obviously we’re doing a number of different things in our portfolios, but for the person watching at home that maybe wants to try it out or at least just see how it works… this is the strategy you suggested. James: We like the idea of selling September natural gas puts at approximately the $2.25 level. You can see where we’re trading right now. Often, with a seasonal rally that may or may not take place, we think it will this year, I think it’s set up quite well, natural gas is probably going to head up towards $3… maybe $3.10 or $3.20 this summer. We’re going to be some 30-40% above this strike price. We should have very fast decay in selling the $2.25 put. The market should stay a long ways away from it. The whole idea about trading seasonalities or trading fundamentals using short options is look at the variance you have in the market. This is a very large window for the market to stay above. If we have strong fundamentals and if we have a strong seasonality, can natural gas fall below $2.25? Of course it can; however, we really like the odds of this position going forward over the next several months. Fundamentally, natural gas should not fall below this level. Seasonally, natural gas shouldn’t fall below this level and we have record demand this year. It’s definitely a trade that we like going forward. I think it’s a great investment. Michael: So, what you’re saying for those viewing this at home, yes everything looks bullish here. That doesn’t mean it still can’t come down in the meantime to here, here, or here. That’s why you sell the option in the first place. You’re not trying to pick the bottom, you’re just saying it’s not coming here. So, we can go down here and it doesn’t matter what it does, even if we’re a little early or late on the trade, you still win at the end of the day if it stays above that strike. James: All investors know that timing the market is practically impossible. Trying to pick these small swings in the market are very difficult. All we’re simply doing is saying the market’s not going to fall below this level. As long as natural gas stays here, here, or higher, these natural gas puts expire worthless. Of course, as a seller, we get to keep the premium. Michael: Very good. Let’s go ahead and move into our next market, which will be the cotton market. Michael: Okay, we’re back with our second market this month, which is going to be the cotton market. Before we talk about cotton, there’s something I wanted to point out form our last segment in natural gas and the cotton market. These strikes we’re talking about right now have been made available by that last burst of volatility we got from the stock market. These strikes we are looking at probably weren’t available a couple weeks ago. When we’re looking at them now they are. So, this is kind of the fruits that option sellers can benefit from, from these little inputs of volatility into the market. So, let’s talk about cotton. It’s our next market for this month. The first thing we’re going to look at is the seasonal tendency for cotton. Obviously, we tend to see a rally up through the springtime months and then we see a sharp drop off. James, do you want to explain that or why that has tended to happen historically? James: Michael, this chart you can almost mirror over the grains of the United States. Basically, corn, soybeans, and wheat often planted in the spring and then harvested in summer and fall, and as the angst of the weather problems subside, so does the price. Cotton is planted in the south and, of course, it’s planted early in the year. So, as we’re planting in February, March, and April, there’s possible excitement about not exactly perfect weather. Users want to get insurance and they want to purchase cotton prior to planting season. As we reach April and May, we have a very good idea about how much cotton we’re going to be producing that year. End users get to stay off as far as needing to get a lot of cotton around them. So normally, once the commercial buying stops, the market usually starts coming down in May, June, and July. Interestingly, this formation so far has mirrored almost perfectly with what’s going on so far in 2018. We have a really nice setup looking just like this with a decent rally that started about 3 months ago. It’s starting to look like this already. Michael: Similar to that natural gas trade where you have the seasonal pattern tending to line up very closely with what we’re seeing in the actual price chart this year. Let’s take a look at where our fundamentals are this year as we look at the cotton market. The big story, ending stocks, stock/usage ratio… looks like they’re pretty healthy levels this year, James. James: They are. Cotton supplies in the United States are going to probably be exceeding the 10-year level that we had. In other words, we have cotton stocks that are going to be highest since 2007. Supplies look more than plentiful. We’ve planted just a great deal of cottonseeds so far this year in the south, and we’re probably going to have a bumper crop, the weather looks ideal, and planting went extremely well. With supplies in the United States at a 10-year high, the chance for a large rally going into harvest seems quite low. We really like the idea of selling calls. Michael: Yeah, that stocks/usage ratio at 30%... if you’re unfamiliar with the importance of these 2 figures, ending socks and stocks/usage ratio in agricultural commodities, we do have a piece on that on our website. It’s a tutorial. It’s at www.OptionSellers.com/agriculture. There’s just a brief video but it shows you the importance of these 2 figures. They’re the core measurements of supply and demand. They’re both baked into these things. With the highest in 10 years and, James, you alluded to it, next year, if they harvest all the acres they’re planning on putting in the ground this year, we could see these numbers even climb more. Outlook for cotton is somewhat bearish fundamentally, lining up well with that seasonal. Let’s go to the strategy we’re talking about this month. You’re recommending a call selling strategy. Do you want to talk a little bit about that? James: We are. We have cotton trading in the middle 70’s right now as planning season starts wrapping up. We’re probably looking at price pressure in the 3rd and 4th quarter. We really like the idea of selling cotton as high as the $0.90 level. The fact that we’re going to have practically a record supply and a record production this year at a time when supplies are nearing a 10-year high, the chance for approximately 20-25% rally going into harvest seems quite small. Cotton can fall, it can stay the same, it can actually rally quite a bit between now and harvest season. It has certainly a long way to go before we get to our strike price. This option at the $0.90 call strike price is trading around $700-$800. We think that is a very low hanging fruit for later this year and we think that we’ll probably be covering that position around $100 well before option expiration. The decay on that option looks terrific and the odds of cotton reaching that level is quite miniscule. Michael: Excellent. Part of the benefit if you’re using seasonals when you’re deciding which option to sell, these 2 things are almost perfectly matched because seasonals are not a perfect recipe. For right now, the seasonal tendency for cotton, it may not start declining until March or April, if it does at all. Even if you’re here and even if it does rally a little bit more and you’re not right at the beginning, that’s okay because, as James is saying, your strike is way up there at the $0.90 level and you’ve got plenty of wiggle room here to be wrong for a while, so to speak. James: That’s exactly right. That’s why we sell options on commodities and we don’t try and predict the small moves, just based on fundamentals, levels that the market cannot reach and will likely not reach. We’re not correct all the time. Every once in a while, the market might move in that direction, but selling options that far out-of-the-money using the fundamentals is a very good long-term strategy. Michael: If you’d like to read more about our research pieces on these 2 markets, of course they’ll be available on the blog. You’ll also want to make sure you get this month’s Option Seller Newsletter. That should be out at the end of this week, which would be March 2nd. The newsletter will go in the mail and that’s when the e-copy will go out. We will be featuring the natural gas market and trade strategies there. The cotton market will be on the blog, so if you want to read more about those be sure to get them. Let’s go ahead and move into our Q and A section and we’ll answer some questions for our viewers. Michael: We’re back with our Q and A session for this month. Our first question comes from Rob Reirick of Ithaca, New York. Rob asks, “ Dear James, you refer often to credit spreads in your book; however, I rarely hear you mention them in your market segments. Do you still recommend option credit spreads and, if so, why not features on them?” James: That’s a very good question. The layout and the description of our trading philosophy in our book is very detailed. When we’re giving examples for option sales in crude oil or cotton or anything else, we’re basically just laying out primary examples of where we think the market probably won’t reach. We often don’t talk about a more elaborate trade, which is a credit spread. We feel that credit spreads are probably the most opportune way to take advantage of high premiums and, at the same time, have a very conservative position where it locks in certain types of risk as involved with not just being a naked put or a naked call. We are looking at the next 5-10 years of utilizing credit spreads. We don’t talk about them a lot. They are something we’re going to be utilizing a lot in the future. Basically, when we’re talking about examples for option selling, we’re basically talking about straight fundamentals and levels that the market won’t reach. We are absolutely huge proponents of credit spreads and for our clients we will be doing those often now and in the future. Michael: This isn’t the only letter we got on this, James. Because you may want to read more about credit spreads and see examples, maybe we will start incorporating some of those into some of our examples in the future and showing you, the viewer or the reader, how to actually do it. James: As our viewership gets more further along with understanding option selling, I think that’d be a very good idea to elaborate a little more on the actual positioning that we do at home for our clients. Michael: Let’s get to our next question here. This is from Kevin Woo over Cupertino, California. Kevin asks, “Dear James, with the outlook for inflation growing, do you see a favorable outlook for commodities ahead?” James: Good question. As a basket of commodities for 2018 and 2019, we do see it in uptrend in primary prices. Basically, picking out a particular one that might outpace the other ones, I think that’s difficult to do. We’re looking presently at some of the best demand for raw commodities that we’ve seen for probably the last 10 years… from China, from Europe, from the United States. Of course, there’s some infrastructure spending ideas that are coming down the pike here in the United States. We do see commodity prices probably increasing this year anywhere from 5-15%. That might be led by precious metals, that might be led by energies, but, as a whole basket, we do like commodities going forward in the next 12-24 months. Of course, as option sellers, it doesn’t really matter if the market has inflationary factors that do increase commodity prices; however, if we do see that developing and we do see that on the horizon, we simply change our slant to a slightly more bullish factor as opposed to selling calls that are going to be out-of-the-money that are probably not going to be reached. We might utilize more 60% of our option selling as a bullish structure. In other words, selling puts under what we think might be a slightly higher commodities market in 2018 and 2019. I think that’s a great question and we are somewhat favorable on commodities. As a general theme, we do see the market going slightly higher this year and next year. Michael: That’s a great point you made there as well, James. I’m glad you addressed this, because this is a question we get often… “What do you think commodities will do? Is it a good time to be investing in commodities?” The point you made is as option sellers it doesn’t really matter if it’s a bullish or bearish year for commodities. We’ve had some of our best years in bear markets. James: Absolutely. Michael: It kind of goes back to one of those points we’re always making about diversifying your assets. If you have some of your assets in equities, real estate, or what have you, most people invest by buying assets hoping for appreciation. It goes back to that importance of diversification, not only of asset class into that commodity asset class, but also diversification of strategy, where as in what you described, you can benefit even if prices are moving lower, so you have a strategy equipped even in a bear market and you can potentially benefit from that. The importance of diversification is strategy. James: As option writers, you can be diversified to where part of your portfolio is looking for a slight uptick in prices while other markets that, whether you’re in stocks or commodities, and then other commodities might have bearish fundamentals and you might take a slightly bearish stance to those 2 or 3 markets. The idea of being diversified and having a portfolio that doesn’t necessarily need the stock market to rally, the commodities market doesn’t have to rally, this really gives a lot of versatility for a client or ourselves to diversify a client and have them be profitable, whether the stock market or commodities market goes up, down, or sideways. Often the market does go sideways. Right now, we have a very strong stock market, but over the last 10 years it normally doesn’t do that. In commodities, we normally have 1 or 2 really banner years out of 10 but, for the most part, commodity prices realize fair value, and selling puts and calls far above those markets can be very fruitful as we found out. Michael: Of course, if you want to learn more about the entire option selling strategy, you’ll want to read our book The Complete Guide to Option Selling. It’s now in its Third Edition through McGraw Hill. If you want to get a copy at a discount, or you get it at Amazon or in bookstores, you can buy it through our website… that’s www.OptionSellers.com/book. Thanks for watching our Q and A session, and we’ll now wrap up our podcast for the month. Michael: We hope you’ve enjoyed this month’s OptionSellers.com Podcast. James, we have in March, coming up, possibly our first interest rate hike. Do you have any comments on that or things investors might want to watch out for in the upcoming month? James: I think the realization of interest rates going up is going to really hit home. In March, we’re going to have the first rise of interest rates in 2018. There’s a lot of debate whether it’s 3 rate hikes or 4 rate hikes. It’s not going to matter that much. The dollar should be on more firm footing after the 1st hike, and then we’ll see where it goes from there. Higher interest rates are in the future and, we think, the U.S. economy and economies around the world are probably very well ready for that to actually take place. We think that’s going to create more opportunities in some of the strategies that we’re implementing. We’ll see. Michael: For those of you that are considering managed option selling accounts with OptionSellers.com, you probably saw the announcements over the month that as of May 1st, we will be raising account minimums to $500,000 for new accounts only. So, if you currently have an account under that level it’s quite all right. You’ll be grandfathered in, but as of May 1st, all new accounts will have to have $500,000 as the minimum. We are almost fully booked through April, so if you want to grab one of those last consultations through April to try and get in ahead of that minimum change, you can call Rosemary at the office. The number is 800-346-1949. If you are calling from overseas it’s 813-472-5760. Of course, you can always send an e-mail as well to office@optionsellers.com. If you’re watching our podcast today and you like what you read, be sure to subscribe to our YouTube channel. You can also get us on iTunes and, of course, you can subscribe to our mailing list on our website at www.OptionSellers.com. If you request any of our free materials there you’ll automatically get on our list and we’ll send you a notification any time we have new videos or podcasts. Thank you for joining us this month. James, thank you for your analysis on the markets this month. James: Likewise, Michael. Always happy to. Michael: … and we will talk to all of you in a month. Thank you.

Michael: Hello everyone. This is Michael Gross of OptionSellers.com. I’m here with head trader James Cordier. Welcome to your first OptionSellers.com Podcast of 2018. You’ll notice we are doing this in video format this year and we’re hoping we can use some video accompaniments to help you understand some of the concepts we’re talking about. We still will be doing some audios throughout the year, but we hope you’ll like the new format. Here we are in 2018. Stock markets are raging. Global economies are doing pretty well right now. So, we have a lot of global growth going on right now. We’re going to talk about, starting off, what that might mean for commodities. James, maybe you want to lead into that a little bit. What do you see for commodities going on this year? James: Michael, it’s interesting. Over the last several years, quantitative easing, here in the United States and across all of Europe, was thought to eventually make economies stronger. A lot of people were kind of not so hot on that idea, but certainly that has turned the corner. European economies are doing extremely well. China is bolstering once again. Here in the United States, along with some tax implications, the sky is the limit right now on economies worldwide. Of course, the stock market is doing great. Demand now for raw commodities look like it has finally turned the corner. There has always been too much supply. Needless to say, we had the Chinese economic boom of infrastructure spending several years ago. Basically, the market just came down from that and it has been waiting for real demand to finally develop and now we’re here. Copper prices, crude oil prices, some of the energies are making 2-3 year highs based on stronger economic growth throughout the globe right now. Chances for a weaker dollar look pretty special right now for 2018. All systems go right now for commodity prices, probably trending higher maybe throughout the year. Michael: Okay. So, you see this as, at least partially, a demand-led type strength possibly into commodities as a whole in possibly 2018. I know you’ve been talking recently about inflation creeping back in to the conversation here. Let’s talk a little bit about that. What role do you see that playing in 2018 and how might that affect commodities? James: Michael, 2% inflation has been the unachievable mark for several years now. Janet Yellen was trying to produce that. We’re finally there. A lot of some of the most brilliant people who do the bean counting for us for inflation are looking now at 2-½% inflation for 2018. The price of crude oil is such a dramatic input for different price costs throughout the world. A barrel of oil goes into grains and clothing and manufacturing. The price of crude oil has increased some 35-40% recently. That is going to start showing up in the inflation rate. We expect to see that probably the 1st and 2nd quarter of 2018, but investors are getting ahead of that right now. They’re not necessarily waiting for this 2.5, 2.75 inflation number to come out. They see it already and investors and traders want to get involved with it before the “white of their eyes”, they used to say. Michael: Okay. So, many of the people watching this show are interested in option selling or selling options on commodities. Obviously, inflation doesn’t necessarily mean every single commodity is going to be rising in price in 2018, the core fundamentals are really going to be the determinative of that, but it is a supportive factor and something to keep in mind. As an option seller, as somebody that sells commodity options, or you’re thinking about selling commodity options, how does inflation, the possibility of maybe the index as a whole being a little stronger, what affect does that have for commodities option sellers? James: Commodity option sellers can get into a market that has already taken off. For example, the price of oil was recently at 50 and it’s up at 65. A lot of investors are going to say, “Well, how do I get involved with oil? It has already made quite a move.” That’s the beauty of option selling. A person or an investor can still sell a $50 crude oil put just as though their break even was $50 where this bull market in oil started. That is one way an option seller can take advantage of a market that’s already moving… already left the station. With $50 oil right now, everyone would love to have that back. The writing was on the wall with OPEC production cuts… the more demand here in the United States and abroad. Basically, as an option seller, you can get in on that ground floor price that so many people missed out on. The price of gold recently has rallied $100. Do you want to buy gold here at $1,375 an ounce? Maybe, maybe not. We just rallied $100. By being involved with option selling, you can sell puts at the $1,100 mark, so you have nearly a $300 cushion for the market to do a variance. As the market goes higher, if in fact it does, option selling allows people to get in on what was the ground floor, but you get to wait to find out and see if it actually develops or not. The gold market has been trending higher, the crude oil market has been trending higher, a lot of the foods have, and some of these markets you can sell options 30-40% below the current price… A great way to still participate in inflation hedge for investors the rest of the year. Michael: Then you have the other side of the market, too, where often times when markets are rallying they get in the news crude. Perfect example. The general public wants to get in on it and what’s their favorite strategy? They want to buy the calls. So, all of a sudden demand for the calls goes up and people start rushing in and those premiums start going up, and there can be opportunities on both sides of the market. James: Exactly right. So often, the market will overshoot because of hedge funds that are pushing the market up. Then, of course, the public wants to get in and they don’t’ want to trade futures contracts so they want to buy call options. What that winds up doing is pushing call prices way about the fair value of where the market is likely going to reach. Basically, it sets up the perfect strangle, something that we’ve talked about often in our books and some of our material that our readers enjoy so much, I think. Michael: So, overall for 2018, what’s your take on commodities? Do you see this as a favorable environment for selling options? James: Michael, over the last 3 or 4 years, we’ve been involved with option selling on commodities without the volatility, without the public’s participation, without hedge funds participation, so the premiums on both the call and put sides have been slightly tight over the last 2-3 years. That’s about to change. We’re going to see inflated premiums on both sides. Explaining why put premiums inflated in a market heading higher is a little difficult for the laymen, but basically it is blowing up the volatility. It allows you to sell puts at a much greater value than normally you would, but the thing is, as the public comes into commodities, as investors come into commodities, often they want to be involved with the options, and often they want to be involved with the call options. So, while we do see an up market in oil this year and in gold and silver this year, the levels that the public and investors are willing to pay, we’d be happy to take the other side. We’re probably going to see options on commodities inflate to the tune of 30-40% this year, so not only are you picking levels that the market is likely not going to reach, but now we’re going to add just that much frosting to this cake as far as being able to sell options, I think. Michael: If any of you are interested in reading some of our research on some of the markets James is talking about, you’ll want to catch our upcoming edition of the Option Seller Newsletter. That will come out on February 1st. If you’re not already a subscriber, you can get a sample edition at OptionSellers.com/newsletter. James, we’re going to go ahead and move into our next section now and talk to you about some of the markets James is referring to right now and show you some strikes we are looking at. Michael: We are back with the markets segment of the podcast this month, and what we’re going to do is talk about a couple markets that you can follow at home. These are real markets we are looking at for our managed portfolios right now and we are going to talk about some things you can possibly do if you want to try some of these on your own or just maybe get an idea of how we do it when we’re looking at a possible trade. The first market we’re going to look at this month is the wheat market. This is really just a straight-ahead play here this month. It’s a bread and butter market. We’re looking at a market with clear cut fundamentals, discernable seasonal tendencies, we’re not looking for any big moves in the market, we’re just looking for the market to keep doing what it’s doing. Let’s take a look at the fundamentals first. When we look at it right now we are looking at World Wheat Ending Stocks. If you don’t know the importance of ending stocks or stocks to usage ratio in grains, I encourage you to go on our blog and look at our seminar on this… it is OptionSellers.com/agriculture. Ending stocks really measure the supply at the end of the crop year after all the demand has been taken out. It has a really big influence on price. 2017-2018 is expected to be an all-time high in World Wheat Ending Stocks. We’re also at a record level on stocks/usage ratio from a global basis. So, what this tells you is supplies for 2018 look to be very burdensome for wheat for the major part of the year, so that’s a key fundamental you need to keep in mind because what you want to look at is supply and demand and this is telling you that this is going to be weighing on the market all year long. James, you follow this quite a bit. What do you think about the supply this year? James: Michael, it really seems difficult to fathom a really large rally in the wheat market. What’s so interesting about different commodities is copper is produced in Chili, and oranges are produced in Florida, and coffee is produced in Vietnam. Wheat is produced in so many regions of the world and, generally speaking, when they’re all doing extremely well for production it’s very difficult for one crop in a certain country to really shape that idea. Wheat is grown practically in so many different nations around the world. Very large producers are Russia right now is just doing extremely well with their wheat production, here in the United States a lot of production here is winter wheat. Quite often, there’s a lot of grain movements in spring and summer with hot dry weather in Iowa or Illinois. Here in the United States, a big portion of the wheat is produced throughout the entire year. Basically, it is winter wheat. If you look at the other countries around the world that are big producers, another bumper crop again coming up chances are with World Ending Stocks at the level that they are, a little rally in wheat certainly could happen, but the 25-30% increase in prices does not look like it’s in the cards for this year. Michael: Especially with what we’re going to look at next here, which is the seasonal tendency for wheat prices. Now, anyone who follows us knows we do follow the seasonal tendencies closely. These are not guaranteed. What this really is is just a historical snapshot of what prices have tended to do over different parts of the year. It’s not guaranteed it’s going to do it this year; however, in looking at this, what this chart tells us is prices tend to start declining at the beginning of the year and decline through the fall. James, do you want to talk a little bit about why that has tended to happen historically? James: Generally speaking, Michael, the wheat market might have some favorable ideas. People might be looking at possible weather conditions or something like that. Generally, that’s in the winter of the year. It is winter wheat here in the United States, so based on how cold it might be or how much snow they might get, there’s worries about that. So, that does build in a slight premium in the months of January and February. As we go through the winter season where they’re not going to have an incredible amount of harsh cold, the conditions for winter wheat production starts abating. As we see how much wheat we’re going to produce, as we see us getting through this critical of time, the premium comes out for insurance buyers that are making sure that we’re going to have a big enough wheat crop will come March, April, and May. We know what the wheat crop is going to be. Here in the United States, we know that come March, April, and May the crop is basically made, there’s not going to be any weather conditions like there are with some of the other grains, like soybeans and corn. Come March, April, and May, we know how big the crop is and this year it’s probably going to be one of the record crops here in the United States, in addition to what we’re looking at as far as global supplies. As we get into the summer and fall of the year, basically wheat is looking for a home. It has a lot of competition around the world, and that’s generally when prices are at the low in the 3rd and 4th quarter of the year, and I think this chart on seasonalities diagrams it extremely well. The seasonality is extremely bearish as we go throughout the rest of the year. Michael: So, what you’re saying is a majority of the crop is coming in in the spring because it’s winter wheat and in the summer time when corn and soybeans sometimes rally, most of the wheat is already in the barn. James: Right. Whether it’s in the barn or whether we know it’s going to be harvested in a very large crop, we know that in April and May and at that time, then we’re looking for competition from many different areas. The bidders for wheat come July, August, and September few and far between because there is so much of it. In 2018, once again, we’re going to have much more wheat than the world needs and as we get later into the year, as harvest is full blown here in the United States, of course the prices are at their lowest when the crop is the biggest, and at harvest time is when it really has the pressure. It looks like we might get that again in 2018. Michael: Let’s take a look at a strategy here. We’re looking at December 2018 Wheat. James, these are strikes you’ve been looking at, but do you want to talk a little bit about this strike or why you like that strike? James: We do. The wheat market trading just north or south of $5 right now, we’re looking at a slight rally, possibly, in either February or March. If we get a small rally in wheat, we’re going to be looking at selling the $6 calls for December wheat. The chances of a 20-25% rally under these conditions seem quite slim to us. Of course, there’s a large variance. We’re not trying to pick these small moves in the market. Here’s where the current price is. If we do get a small rally, we like selling the calls at $6 and $6.20. It just gives us a huge variance of space for us to be right. Even if the market rallies a little bit, it’s just a far cry from the $6 call strike price. We’re looking at putting this on, possibly, in the month of February or March on a slight rally in the market. We always get gyrations in the market. As you can see, the $6 strike price is very attractive is we get an opportunity to sell those, and I think we will. Michael: If you’re at home and you’re trying to figure out this trade, you still have a $6 call. Prices can do a whole lot of things as long as they stay below that $6 mark. That option is going to expire and you keep the premium as the seller. That’s what we want. Prices don’t necessarily have to go down; in fact, we don’t necessarily think they will. We’re looking at fundamentals right now. We think prices are low and they’ll probably stay low. It can fluctuate a little bit either way, but we think they’ll probably stay low. The right strategy for that is selling deep out-of-the-money calls. A lot of people talk about volatility. Volatility in wheat isn’t extremely high right now, but, at the same time, if you can sell calls up there that’s a fundamentally based trade. You don’t need that volatility. You can still sell the call way above the last summer highs. That was kind of an aberration last year when we saw that rally, but it can still happen. Nonetheless, still below that strike, even in a weather scare. It’s something to keep in mind. Let’s go ahead and move on to our next market, which is the crude oil market. Our next market is one of our favorite markets: The crude oil market. It’s a great market for selling option premium. It’s one we like to trade all year long. The story this year, at least in 2017, was OPEC production cuts. James, those have been having quite an impact on the market here the last several months. James: Michael, it’s interesting… OPEC was really losing a lot of its great reputation that it had back in the 70’s and 80’s. When OPEC spoke, the market moved. When they cut production, the prices went up. They really lost that savvy in the early 2000’s. Here in 2017, this past year, and 2018, someone sat the group down, locked the door, and said, “Listen, guys. If we cut production 2-3%, we can have a 40% increase in prices.” Someone got their calculator out and said, “That makes sense.” We actually have a great deal of compliance right now with OPEC nations. The compliance is thought to be as high as 95-96% going into 2018. That has taken 2 million barrels out of the market recently. The fact that right now we have a great deal of demand for oil because of the stronger economies, that small decrease in production has really ramped up prices. A lot of people are looking at the domestic production here in the United States as likely going to keep up with and then balance the market and take care of those 2 million barrels that OPEC has stopped producing; however, that hasn’t taken hold yet. It does appear that the oil market is on very firm footing. It has increased some $15 a barrel recently for the spot price. It’s up practically $20 a barrel recently. That is setting up opportunities in selling options right now on crude oil, both puts and calls, as well as volatility, which has been missing in the crude oil market for years, is back and back in a big way right now. Michael: When you’re talking about the Sheikhs vs. Shale debate when it comes down to ebb and flow of the crude market, U.S. producers aren’t replacing all of that yet. As you said, they’re not quite there yet, but they are making a dent in it. When we look at U.S. crude oil experts, we had a big surge here at the end of the year, James. That has been a major new development in crude. James: The missing piece to oil rallying, especially here in the United States, has been the fact that the U.S. has not been an exporter of oil for years. Practically a half a century, the U.S. was allowed to sell 50,000 barrels a year and export them outside the country. In 2017, that was lifted. Now, the United States is able to export as much oil as they care to. With the $6 discount to world oil, or the Brent grade, everyone wants U.S. oil. They get a $6 discount, it costs about $1-$1.50 to ship it, that’s a $5 savings for a country that want to import U.S. oil. What always used to happen was the oil market in the United States would increase in summer. Fall and winter, as demand peak takes off to the downside in October, November, and December, this past year in 2017 and possibly again now in 2018, that’s no longer a problem. Driving season, big demand here in the United States. October, November, and December, when demand is less here in the United States, we just export the oil. The seasonality in other countries does not line up with the seasonality here in the United States. There’s a chance now, with oil supplies here in the United States at a 2-year low, we now have that balanced market that so many people have been talking about recently. Something OPEC has been trying to achieve for years, we’re now there. As long as oil doesn’t get too high over the next several months, right now we’re in the mid 60’s for the spot price, demand can keep up as long as prices don’t spike. We don’t’ see that happening mainly because the United States will be producing almost 11 million barrels a day coming up here in the United States. That should keep a lid on prices. Volatility coming in the market right now is tremendous, both on the puts and the calls. We see crude oil, probably, blending in to kind of a sideways market here with about a $5 trading range, probably in the low to mid 60’s. Volatility blowing out on both puts and calls, setting up a great opportunity for strangles, selling puts $20 below the market, selling calls $25 above the market. We’ll see how that plays out, but in March and April that looks like it’s going to be an extremely good position to take on. Michael: Yeah, you’re talking about the crude oil stocks. This is really starting to take a bite out of where we were just last year with the supplies at burdensome levels. Now, we have OPEC shutting the faucet, that’s taking supplies back down towards 5-year averages, which is what James is talking about… bringing that market back to equilibrium. We’re looking at U.S. production here. We’re up over 1 million barrels in just a year. We could be up another million barrels this year. Like you were saying, James, between possibly 10 and 11 million barrels a year. So, it’s not there yet, it’s starting to catch up, it is bringing he market back into some form of equilibrium, we think. James was talking about the seasonal and let’s go back just a second, James, because we were talking about that export ban being lifted. Do you think that may have altered the seasonal for crude oil? Do you want to talk about that? James: Michael, it definitely has. Prior to 2017, crude oil prices would often have a peek in June and July as we enter driving season. The market usually has this large fall-off as we get into shoulder season… November, December, January. That has changed the landscape of seasonality trading for oil for us and for anyone else watching the market. We’re going to now have more of a balanced market throughout the year as far as a seasonality goes. The large drop-off in the 4th quarter is probably going to be lessened now, but the fact that the United States is able to export oil, we probably still will have the highest prices in June and July, but the steep sell-off in the 4th quarter may be history for a while… at least for the next few years as far as we can see. Of course, we’ll look at fundamentals and how they shape up after that. Right now, the large decline in our prices for oil in the 4th quarter, that’s going to take a back seat to the fact that the U.S. is now able to export oil. As long as there’s a $5 discount to Brent, a lot of countries around the world are going to want our oil for sure. Michael: Let’s talk about a strategy here. James, we mentioned the strategy he was considering. James just kind of puts it into graphical format. Do you want to explain your thinking here and what the trader is going to be looking for in a trade like this? James: Certainly. Here has been the sideways pattern that oil has been in for quite some time. It’s about a $10 difference between summer demand and winter slacking in demand. That’s really changed as the U.S. has started exporting oil. The supply here in the United States isn’t that great. OPEC has bit off a big chunk of the additional barrels by reducing production, and that’s what this move is right here. We expect this trading channel to now develop here. With the U.S. now about to produce somewhere between 10.5-11 million barrels a day, why is that important that the U.S. produces that much? Well, we’re the 1st largest consumer in the world. We’re about to go 2nd to China, but regardless of that, the barrels are needed here, we’re going to have them here, and that should prevent oil from taking off to $75 or $80. Being short that level and being long from this level, we think, is going to be an ideal window for the market to stay in. Less oil out of OPEC, better demand. We’re basically going to take this sideways trading pattern and put it here, and then we really enjoy being long the market from this level, we’re really going to enjoy being short in this price. A strangle right now in crude oil looks ideal in 2018 going forward. We’ll have to wait and see. We’re going to adjust these strikes slightly going forward; however, a $35-40 strangle around oil, I think, is going to capture the majority of price swings over the next year or two. With the volatility just coming into the market, premiums are very large on both puts and calls. I think we’ll be able to take advantage of that for the next several months. Michael: So, it doesn’t really matter when you’re in a strangle which way prices are moving on a net basis, as long as they’re staying in that range. The balancing affect, too, of the strangle, where if it’s moving down, maybe your put is moving against you but your call is making up most of that in profits and vice versa if it’s moving up. Strangles are a very versatile strategy, and for a market you expect to be range bound, it is pretty much ideal. What kind of premiums are traders expecting if you sell something like that? James: Both puts and calls right now are trading around $600-$700 each. Prior to the spike in prices, a lot of the options were $400-$500. They’ve increased some 25% on this new volatility in the market. Volatility is kind of a 2-edge sword. You enjoy volatility when you’re selling options, that’s what we got recently, and I think the new 25%-30% increase in options is going to be a boom for us and anyone who is logically selling options on oil over the next probably 12-18 months. Michael: If you want more information on our managed portfolios where we are doing trades exactly like this, similar to this, and in a variety of markets, feel free to go on our website and request our free Discovery Kit. That’s OptionSellers.com/Discovery. You’ll get all the information about our accounts, how you can invest, and that sort of thing. Let’s go ahead and move into our final segment this month and that will be our Q and A with the trader. Michael: We’re going to do our Q and A section this month. This is where we take letters from you, our readers and viewers, if you’ve read our book we get a lot of emails and letters here in the office, so we’d like to take some time and answer them here. The first one starts, “Dear James, I’m looking 6 months out, as you suggest, but can’t find the premiums you are suggesting. What do you recommend when there are no commodities to trade? Jim Oakes, Bakersfield, California.” James, how would you answer Jim’s question? James: Well, Jim, basically there is so many parameters that we follow when trying to identify the best possible opportunities for selling options. Generally speaking, seasonalities will have a shorter duration. In other words, if it is coming up on a weather market in summer or cold conditions in the winter, generally that trade or that opportunity will last maybe from 3-6 months. The fact that it’s going to be a shorter duration means that something’s going on in the market, which causes premiums to build up dramatically because of possible weather in June and July for grains, something along those lines, and investors are willing to pay up large premiums for a relatively short period of time. So, generally speaking, a 3-6 month investment on opportunities in short options will develop from a weather market. For example, a seasonal opportunity is normally going to be about a 6 month sell in premium on options. Generally, when you’re strictly trading on fundamentals, in oil or gold or coffee or sugar, we’ll often go out as far as 9-12 months, which gives us much further out-of-the-money, if you will. We are willing to and more than happy to look at options much further out in time and much further out in price. The fundamentals of the market really don’t change very often. Sometimes they’ll change just slightly. The market will often get a 5% rally or a 5% fall in oil or gold or silver or coffee, and some of the experts will come on the talking shows in the financial community and say, “This market’s going to the moon. This market’s falling out of bed”, and generally they’re really not. That is the reason why we’re willing to go further out in time and further out in price. Usually that’s just noise, usually the market isn’t going to the moon and usually it’s not going to zero. Generally speaking, if you’re too short in time, the market will make a sharp abrupt move, knock you out of your position, and, of course, 30 days later the market is doing exactly what your fundamental analysis thought it would do, except now you don’t have your option and you don’t have your cash. We don’t mind going 9-12 months out. A lot of investors will say, “James, that gives you a long time for us to be wrong.” I look at it as it gives us a long time to be right. Fundamentally the markets move very slowly, technically they move very fast and we don’t want to be involved with those large technical moves up and down that investors get all excited about. Michael: I’m not sure if Jim’s question was that he can’t find options at all or he just can’t find the premiums he’s looking for. If he’s trading in the commodities that we’re talking about, the 10 or 12 we’ve mentioned, there’s tons of open interest. Maybe Jim wasn’t happy with the premium 6 months out, but what you’re saying is sometimes there’s 3-6 month premiums that only come about as a result of a weather market and that’s why we’re often going further out in time to get those bigger premiums. So, Jim, that’s one thing you could look to do if you’re not getting the premiums where if you’re looking 3-6 months out. The other thing is, that I would answer to this question, is it could be the platform you’re using, too, because I’ve heard a lot of complaints about, I don’t want to mention any by name because they’re all good platforms, Think or Swim, Interactive Brokers, they’re good platforms, but some of those, TD Ameritrade, I don’t even know if they do commodities, but some of them don’t go all the way. They only offer you a few months. So, if you really want to see where these things are trading and see the contract months that go all the way out, you should probably be working with a dedicated futures platform. We use CQG, which is outstanding. That’s something you may want to look into. James: Michael, great point. To follow up and expand on that slightly, the fact that we are selling options in so much large volume, we’re selling for hundreds of millions of dollars worth of equity that we manage, we are able to actually contact market makers. The market makers are going to give us bid-asks on options and strikes that might not be available on some of the platforms that you’re referring to. I think that’s the big difference. If you’re trying to sell 10 contracts of a particular strike, it may not appear to be available, but if you’re selling 10,000 contracts in that strike, banks around the world want to do business with us. That might be the difference, as well. We’ll have to see. Michael: That’s one benefit of going managed. If you don’t want to do it yourself anymore, you want someone else to handle it for you, it is one of the benefits you do get if you go with a managed program. We’re managing a large amount of money and some benefits come with that. Let’s move to our next question here. This comes from Paul McDonald of Hempstead, Texas. I believe that’s down in the Houston area. “Most of your examples, you base your trade on being held to expiration. With stock options, I can buy out of them early if they are showing profit. Can you do this with commodities?” James: That’s a great question. Often, we discuss options expire worthless this percentage of the time or that percentage of the time. As money managers, on selling option premium portfolios, we look at a 90% gain as a great time to buy back out of an option. We were just discussing selling option premium further out in time. The sweet spot of decay, after selling probably a million options on commodities, I have found to be further out in time than a lot of the books write about. So, if we’re targeting an option value of $600-$700 each, possibly as far as 12 months out, as we’ve been discussing, when that option has reached a 90% decay factor, in other words, it’s trading at 10% of the value that we originally sold it at, it doesn’t matter if there’s 3 months left on that option, 4 months left on that option, and so on… we will then buy it back. We think that’s a great strategy that you’re utilizing and we do the same thing when managing portfolios. We do buy back out early, we do close out, get rid of the risk, free up the margin, and move on to probably selling the same option and the same strike 6 months further out and do it all over again. Michael: The buy backs are just as easy in commodities as they are in stocks. In fact, that can be a favorable strategy, one James uses often and recommends. There’s no reason not to do that. It eliminates risk, and once you get to a certain point with an option there is very little to gain but you’re still holding that risk. You doing those early buy backs eliminates the risk, you re-deploy your capital, just an efficient way to manage your capital. Good question, Paul. I hope we gave you a good answer. If you’re looking for more answers on strategies and ways you can apply option selling, we do recommend our book, the latest edition of The Complete Guide to Option Selling. That is available on our website at OptionSellers.com/Book. You will get it at a discount there, than where you’ll get it at Amazon or bookstores. Michael: Everyone, we hope you enjoyed the podcast this month and hope you got some valuable tips out of it for making yourself either a better option seller or learning if managed option selling might be a right fit for you. Going into February, we have the Super Bowl coming up. James, do you have a pick for the Super Bowl? James: Michael, as a quarterback in high school, all I ever wanted to go up and down the side line and yell at my linemen for not blocking and not tackling. The fact that we were like 1 in 8, I really didn’t want to yell at them too much. Watching Tom Brady go up and down the sideline and yell at his players and get them pumped up, that just gets me excited about football. Next year, if they start selling options on football games, I’m going to sell puts on New England each time next year. So, I’m a Tom Brady fan. I’m from Green Bay, but I appreciate great football and he’s my guy for the Super Bowl game, so I’m rooting for definitely the New England Patriots. Michael: You better be careful. A lot of people out there aren’t big Patriots fans. I think if there’s any team out there that can give them a run for their money it’s Philadelphia Eagles. They surprised everyone. I’m sorry, if I have to make a pick I have to go with the past, too. We’ll see what happens. James: Michael, I’m a real football enthusiast and during the Super Bowl I just root for a great game and hopefully that’s what we’ll have. I hope the Eagles can bring that. Michael: Me too. I hope so. If you are considering talking to us about an account this month, the announcement this month is we are now booked out into March for consultations for new accounts. If you are interested in talking about a new account, you’ll want to call Rosemary here at the office. 800-346-1949. She will schedule you for our first available consultations that we have. If you’re calling from overseas, the number is 813-472-5760. Also, in this month’s newsletter, we have a major announcement regarding our new accounts. If you do get the newsletter, whether online or a hard copy, you’ll want to take a look at that. This will affect you if you are considering opening an account over the next several months. James, thanks for your great insights this month. James: My pleasure, Michael. It’s always great and fun to do. Michael: Everyone, we appreciate you watching our podcast. If you liked what you saw here, be sure to subscribe to us on YouTube or iTunes. We will see you again in 30 days. Thank you. James: Thank you.

Michael: Hello, everyone. This is Michael Gross at OptionSellers.com. We are here with your monthly podcast for August 25th, 2017. I’m here with James Cordier. James, welcome to the show. James: Thank you, Michael. I’m always glad to be here and share our knowledge and wisdom. Michael: Excellent. Well, we are here in the last week of August and we are heading into Labor Day weekend and right around the corner is, of course, September. A lot of people come back from vacation, a lot of traders come back into the fold, and often times we find out where we really stand in a lot of markets that may have drifted one way or the other during the summer. Right now, as we look at stocks, kind of off a little bit. From the beginning of August we’re down, although up a little bit early in the week here at time of recording. We’ve had a little push downwards and, James, I know you addressed this in your bi-monthly address to clients on video, but do you want to talk a little bit about what might be going on right now in equities? James: Yes, Michael. The equities market, as everyone knows, has been hitting all-time highs throughout the first 6 months or so of the year; however, just recently, a bit of a speed bump with just absolute chaotic times right now in Washington D.C. A lot of the Trump ideas that helped get him elected, which propelled the stock market recently, are in question. Tax relief and de-regulation and 0% interest rates all might be influx right now, and, certainly, a lot of the reasons why people were buying stocks over the last several months were these very business-friendly ideas. I wouldn’t say that they’re gone and out for sure, but certainly they’ve taken a back seat to just simply getting Washington squared away. Hopefully these ideas will come back because they definitely are business friendly. While we’re not in the stock market, we certainly do root it on, because I’m sure a lot of our listeners and a lot of our clients do have stock holdings, so we’re always rooting for it. It has taken a little pause here for certain reasons, and a lot of them are some of the goings-on right now in Washington D.C. Hopefully it’ll get straightened out before too long. Michael: Yes, obviously this market is still in a bull market. There has been no bottom falling out and there may still be some reasons to buy the stock market. Just some interesting stats I saw was that as of earlier in the week here, on the whole year the S&P was up about 9%- not too bad, but certainly off the highs. Interesting note, James, the Russell was even on the year- no gain at all. James: Right. I noticed that, and a lot of the ideas of deregulation and, you know, lower taxation, that should be helping the small caps. The Russell being basically even on the year really does bring into the question is “How broad is this rally?” Certainly, the Dow Jones, basically we cherry-pick 30 stocks and the ones we like we put in there and the ones we don’t like we take out. Certainly, the Dow Jones has done extremely well, but some of the larger gauges of the stock market, like you said, are unchanged or up a percent for the year, and I think that was an eye opener to a lot of investors that saw that in the news here recently. I know it was to me, as well. Michael: Well, I’m just glad, James, that you and I don’t have to forecast the stock market because that’s certainly too many moving parts there for me. I know you feel the same way. James: Likewise. I really enjoy investing our client’s money and talking to our listeners today based on fundamentals of 10 commodities that have been around here forever and will likely be consumed for years and years to come. Michael: On that note, why don’t we talk about something we do know quite a bit about and that would be autumn seasonals, which is the topic of our podcast this month. We’re going to talk about a couple commodities here that we do study very closely and maybe do have some insights into. As far as talking about seasonals to begin with, if you’re a listener or have been listening to us for a long time or you read our book, you’re certainly aware of seasonal price tendencies in commodities. It is something that we follow very closely. They are not the buy-all and end-all of price forecasting, but they can certainly be a very big factor and something that can help you tremendously as an option seller. James, I know we were talking quite a bit about grain seasonals this summer and how they often sell off into the fall. Lo and behold, that seems to be exactly what happened across the board. James: Boy, it really is. Grain stockpiles around the world are at extremely ample levels. We did have quite a weather rally in the month of July and, Michael, it always seems to be too hot or too wet or too cold or something, then the market rallies. Come fall season, generally, some of the greatest producers of the world of grains are here in the United States and, lo and behold, we’re going to have quite a bit of a bumper crop in corn, wheat, and soybeans. When you add that to carry-overs from all the other production in the world, lo and behold, prices come back down to earth and they’re doing again this year. We’re not even through August yet and we’re making quite a push to seasonal lows here probably over the next 30 days. We have corn, wheat, and soybeans testing 12-month lows. It wasn’t that long ago, just a month ago, they were testing 12-month highs. Certainly, there’s a bit of a whipsaw action this year, like most years, and as we get into September and October we think prices will probably be quite heavy because of seasonal factors. Michael: Yeah, the seasonal tendency is not always perfect, as you and I know. At the same time, grains this year seem to follow it to a tee. They start declining oftentimes into harvest, the market starts anticipating that harvest, starts anticipating that excess supply coming on the market, and prices tend to start going. That’s exactly what they’ve done this year, especially now that we’re past the pivotal parts of potting and pollination in corn and soybeans. So, it’s just an example. If you’re listening at home and following grains, this is an example of what seasonals can do and how they can help. It’s not always perfect, but it certainly can help. That’s what we’re going to talk about now as we come into autumn. It’s a key time of year for a lot of commodity seasonals. The seasons are changing, there’s a lot of things going on fundamentally, and the first market we’re going to talk about of course, James, is one of your favorite markets, which is the crude oil market. This is the key time of year for crude oil, as well. Maybe you want to talk a little bit about the seasonal there and what tends to happen this time of year? James: You know, Michael, you mentioned something really interesting. The seasonals aren’t the end-all to commodity trading; however, it certainly is a tool that we enjoy using. It’s not spot on every year, but what we like to do, as you know, is we gauge the fundamentals going into a seasonal time frame. If they coincide with the seasonal factors, that is certainly something we like getting involved with. The energy market coming up again is one of these. As you know, Libya, Nigeria, and west Texas are producing some 20-30% above what they were expected to produce as far as reference to oil production. If you take west Texas, Libyan and Nigerian extra barrels that they are now producing in excess of what people were expecting, it is going to come extremely close to what the OPEC production cuts were. So, Michael, if you look at it that way, the production cuts that were creating quite a bull stare in the market this summer, that seems to be coming to an end based on the fact that production is going to equal out with the extra barrels coming from those other locations. Michael: The media really hit that hard and talked about the OPEC cuts and the bulls came out of the woodwork. It didn’t seem to have much of an effect, and now you’re saying that it may have no effect on supply whatsoever, being made up elsewhere. So, as we head into fall, we’ve already taken away one of those big bullish bullets, so to speak, is what they were hanging their hat on. If we look at a seasonal chart, which if you are getting the upcoming newsletter we do have this featured prominently in there, but James, we see crude oil going into the 5-year seasonal average here, and it tends to start falling pretty dramatically in September. Now, we talked about fundamentals and underlying fundamentals driving the seasonal, but what are the fundamentals that tend to happen this year that tend to cause that price decline? James: Michael, that’s a really good question, and a lot of our listeners and clients probably have the same question. It’s basically we are looking at a balanced to over-balanced oil market; however, in the months in June, July, and August, the United States, which is the largest consumer of energy in the world, heads out for driving. It is driving season and if you think that that’s just a saying, it truly does matter. When you have some 300 million people that have vacation ideas versus stay-home ideas, that makes an enormous difference to the consumption of gasoline in the United States. In July and the first half of August, the United States set all-time records for consumption of gasoline. That is what has propelled the market here for the last 4-8 weeks that got us out of the 40’s. It got us up to $50 a barrel in crude oil. However, the magic is, starting in September and then October, all those driving ideas and all those vacations are now pictures in albums, or should I say pictures in people’s Apple iPhones. People are sitting at home and they’re digging in for school and fall, and that makes a huge difference. We think that seasonal is setting up practically perfectly again this year. Michael: So, you’re somewhat bearish as we head into fall, here. I know you’re going to be doing an interview with Bloomberg in New York next week in-studio, and you’ll probably be talking about at least partially about the crude oil market, so this is something that our listeners want to hear now is to not only what we think it’s going to do but why we think it’s going to do it. You’ve already covered a couple aspects of that. Let’s just talk about supply here briefly. We’ve talked about the seasonal, we’ve talked about OPEC, which is kind of a non-factor right now in your opinion. What about U.S. supply? What are we looking at there? James: The U.S. supply usually comes down during these large driving season months, and it has done that. We are some 3-4% below all-time record levels that we had earlier this year and late in 2016. So, the supplies have come down. Generally, that’s a very seasonal pattern. We’re not producing any extra oil or gasoline during the summer months. It basically stays pretty constant throughout the year. The seasonal factor then is the less driving that happens in September, October, and November – they call it the shoulder season. Basically, it’s after driving season and before winter hits. That is when the U.S. supplies will start increasing again and whether they hit a new time record this fall, or not, we’re going to be pushing at levels that is way more than what the U.S. needs. Of course, you have OPEC nations that will likely be scrambling and probably fudging a bit on the compliance with their production cuts that a lot of people talked about. What’s so important to know about oil is a lot of these countries, OPEC nations in particular, they have a specific amount of income that they need from their oil production. When oil is sitting at $50, it is pretty constant; however, if we start getting in down to 42, 40, possibly below 40 later this fall, they’re still needing the same amount of income from oil production. That is where it could get a little bit of a slippery slope for oil prices this fall when countries like Iran, Nigeria, Libya, and Saudi Arabia need to produce a certain income for their country and for their needs, and yet oil might be at 10-15% below the price. Then, the barrels start to flow and that’s what’s going to get probably interesting here on the downside here in the months of October and November. Michael: James, that’s a great point. You talked about OPEC and addressed it earlier that OPEC’s potentially cheating. A figure I know that we discussed a few weeks back was although OPEC is still “supposedly” under the restraints of the cuts, exports of oil out of OPEC nations hit a record in July- 26.11 million barrels a day. So, maybe they’re pumping a little bit less, but they certainly haven’t stopped selling it any more slowly, have they? James: Well, Michael, that’s the exact thing. Certainly their storage facilities and producing nations, as well, not just here in the United States, and that’s basically a way to get around the quota. They’re keeping oil flowing through export channels and, yes, lightly reducing production; however, what does that mean? That means the world is supplied, in some cases over-supplied, with oil. It’s interesting, later this fall and early this winter we could have millions of barrels more than what the world needs. Yet, if the world is producing just one extra barrel the price goes down. So, we do have some interesting times coming up in oil. We really like the idea of selling calls above this market for the next 6-month time frame. As you know, there are never any sure things, but we really like the idea of selling oil calls some 20-30% above the peak that they hit in summer as we go into the fall low-demand season. Michael: Okay. Yeah, a lot of people that listen to this or maybe watch some of our things think that to sell this we have to have oil prices go down to make money. While we think that possibly could happen, that doesn’t necessarily have to happen for an option selling strategy to be successful. James, just one more thing I wanted to throw out here, you were talking about supply levels and I pulled up some stats here while we were talking. You made a good point that supplies you’re down this year over last year, about 5.3% below where they were last year at this time, but we were at record levels last year. Even at current supply, we’re still 22% above the 5-year average. We’re certainly still in a burdensome supply situation as far as that goes. As we head into the winter months here, you’re talking about particular strategies, do you like selling naked here? When you look at it, is there a strategy that you could put together for a spread? I know we do a number of different things in our managed accounts, but maybe just for the individual investor listening… any advice for those guys? James: You know, Michael, I think some of our listeners actually take positions on our discussion, and other listeners are probably learning about selling options possibly on their own for the first time. Just as a pure speculative position for a listener is to simply take a look at selling calls, and I would say naked calls yes. Certainly we do have spread analysis we do as well in positions that we take that are covered. With oil trading around 48 and, in my opinion, probably going down to the low 40’s over the next 2-3 months, I would sell calls in the $64, $65, $66 level going out, say, 6-9 months or so. The conversation about selling naked options, I think they use that word for a reason to scare people away from doing it, but people who take a short position on oil at 48, they may have to sit with that position for a while and it may jostle around above and below their entry level. Selling calls at $65 is some 30-35% above the summer highs that we’re hitting. We’re doing it using timing, using seasonal factors, when oil will likely get down to the low 40’s, and think of how far out-of-the-money you are at that point. I would simply sell mid-60 crude oil calls and put a stop-loss on it that you’re comfortable with. Something tells me that somewhere between Thanksgiving and the holiday season that option is going to be worth about 10% of what you sold it for. We’ll have to wait and see, that’s what makes a market. That’s how we would invest in crude oil going through the rest of the year. Michael: Okay. That naked term, I think, scares a lot of stock options sellers, too, because they’re used to selling 1 and 2 strikes out-of-the-money. Of course, in commodities, we can sell much deeper out-of-the-money. We’re going to talk a little bit deeper about that later. What you’re talking about is we’re taking a position above where the price was at the highest demand point in the year and we’re taking that position heading into the lowest demand point of the year. So, those are certainly the type of odds you look for and, hopefully, if you’re listening you picked up on what James was saying and how you might go about that. If you would like to learn more and get a little bit more analysis of the crude oil market, we will be featuring in our upcoming September Option Seller Newsletter. That comes out on or around September 1st. You’ll get that in your e-mail box and, of course, a hard copy as well if you’re on our subscriber list. If you’re not a subscriber and you’re a high net-worth investor, you can subscribe on our website – optionsellers.com/newsletter. James, why don’t’ we go ahead and move into our second market here. Something you featured earlier in the month but it’s an ongoing opportunity, we feel, and that’s the coffee market. We’re rapping up the Brazilian harvest. Of course, Brazil, the largest producer of coffee in the world, and thus events in that country can have a major impact on prices. I know you’ve been following this pretty closely, James. Do you want to give kind of a summary of what’s going on in the ground of Brazil? James: Michael, some of the most ideal growing and weather conditions are happening right now in the southern hemisphere. Brazil, of course, was basically one large forest. Whether some people like it or not, the forest was cut down and coffee, sugar, cocoa, and soybeans were all planted in their place. That rainforest is just one incredible farm that feeds the world. What’s happening right now in Brazil is practically ideal conditions for productions of, especially, coffee. Coffee acreage is absolutely giant in Brazil. It’s a very large portion, especially of their mountainous regions. We have 2 cycles in coffee. One is an off-cycle and one is an on. The off-cycle obviously produces slightly less coffee than does the on-cycle. It’s basically the tree taking a rest for 12 months and then it produces the large amount again. Basically, the world is absolutely full of coffee at this point, both in Vietnam and Brazil and here in the United States. The U.S. has the largest green coffee stocks ever since they’ve been counting coffee stocks here in the United States. Also at a time when weather conditions in Brazil are absolutely ideal, we’re looking at practically perfect growing conditions for coffee in Brazil. We’re going into flowering season, which is going to start in September and go through November. If, in fact, the precipitation that has been going extremely well in Brazil is expected to continue through the rest of the year, we’re probably going to be seeing record crop production for coffee beans in Brazil next year. Basically, that entails all the fundamentals that we need to know for the entire year. Consumption stays the same- it’s always up about 1% a year. Production the next year is going to be a large surplus. It’s setting up absolutely ideal in selling options for coffee. Michael: Yeah, I saw some of the estimates. The market looks forward here- we are in 2017 but these are the futures markets. Futures look into the future. These markets are now starting to price the new crop, the crop that beans will be on the market in 2018. For 2018, as you mentioned, James, it’s a potentially record harvest. I know we had discussed there are some estimates- 58-62 million bags of coffee, which would just be gigantic. That would be an all-time record. As the market prices that, we could be in for some lower prices. I know you’re certainly looking for some prices to mitigate here as we head into our winter. Let’s talk a little bit about the seasonal since we are talking about seasonals this month. We’re pretty much at the end of the Brazilian harvest for 2017 the crop. I think as of August 1st we were about 80% done. I’m sure we’re closer to that now. What tends to happen with the seasonal price? I see we go down a little bit into the fall, then there’s a little rally in October, and after October it seems to just really fall off. What happens then? James: Michael, I think what seems to happen is investors, both speculating in coffee and users, otherwise known as commercials, they will take long positions going into flowering season. So, basically it’s not exactly a tree that coffee grows on, it’s more of a very large bush. What happens starting in October is the bush is expecting rain to develop, and then it flowers, and each flower, of course, turns into a cherry. If we have steady rainfall starting in September, a bush will flower some 3-4 times, which makes a huge difference during this time frame as opposed to if we have very small amounts of rain and then the bush only flowers possibly 2 times. Simply doing the math, you can see how important this time frame is. That is why the coffee market will start rallying in October as investors and end users want to guarantee themselves coffee prices at a certain level. Should precipitation then be ample through October, November, and the beginning of December, basically the fundamental analysis for the entire year at that point is over. So unlike waiting for monthly reports or quarterly reports out of a company that sells widgets, the production of coffee is then set in gear for the next 9 months, waiting for harvest to begin again. So, we have a rally that starts in September, it goes on through flowering season, as the weather cooperates, and all models right now are showing me that it will again this year, the price goes back down. The seasonal factors are the market falls in September. As we have harvest pressure, then we start getting a rally in September, October, and November, and then we look to sell probably very expensive call options in coffee, once again. We are bearish on the price of coffee, we are record supplies in the United States, we are going to have record supplies in Brazil, and anyone who is wondering what 60 million bags means, 6 times what is produced in the country of Columbia is what 60 million bags turns out to be. Certainly there’s no shortage of coffee over the next year or two. Michael: That’ll be good news for those of our listeners that enjoy a cup in the morning. James: Absolutely. Michael: Now James, you’ve been a proponent of selling calls in coffee most of the year now. We’ve made no secret of that. You’ve had several articles, you’ve talked to Reuters, and the whole time you’ve been moderate to bearish, but just thinking it’s continuing to sell calls is a great way to pull income out of this market, and that’s because it simply has some strong fundamentals. We don’t know if it’s going up or down tomorrow, but overall we feel there should be a price cap on prices that keeps it under certain levels. As a call seller, that’s all you really need. Now, I know you’ve been selling these and have been talking about selling them in your articles. Do you think that we’re at a point right now where you sell them or do you think since we’re heading into flowering season the better opportunity may be a few weeks or months down the road? James: Michael, as they say on TV, “That’s an excellent question”. We’ve been selling coffee calls practically all year. The coffee market has recently fallen some 15-20 cents over the last week or two, which has basically cut our calls in half in a very short period of time. I would hold off on any additional sales. We’re going to look at taking profits on our positions over the next 4 weeks or so. As listeners and people who follow along, one of the best things that could possibly happen is have a bit of a dry weather concern in the month of October. That could get prices back up another 10-20 cents that they had given back recently. I would then look to lay out coffee calls with both hands. The really interesting part about dry conditions in Brazil, if it’s just slightly drier than the farmers there would like, it’s going to likely make a difference of 1-2 million bags. When you’re talking about a 60 or 62 million bag crop that is just a drop in the bucket. Hopefully we have a little bit of weather concerns at the beginning of flowering season, get about a 15-20 cent rally on coffee, and I would be back to putting on my tuxedo and jumping back in on the short side. Michael: For those of you that would like to read more about how you can use seasonals or apply them in commodity option selling, I do recommend out book The Complete Guide to Option Selling: Third Edition. That will really lay it out for you and give you some of the key markets and key seasonals you can use in these markets. If you don’t have a copy yet, you can get it at a discount on our website – that’s optionsellers.com/book. James, we’re going to go into our lesson right now and I’m sure this is probably something anyone who has been reading or listening to us for any period of time is familiar with, but it never gets old. It’s something that bears repeating over and over. It’s something we call going deep, which is really a reference to selling deep, deep out-of-the-money calls. It’s done with a little more time on them and it’s a strategy that you’ve adhered to for some time. The common wisdom is when you’re selling options you sell them for 30 days out because you get the fastest decay, but you subscribe to the opposite theory. I think we’ve both found that when you’re trading fundamentally or seasonally, as we’ve discussed now, it’s almost optimally designed for that. Can you talk a little bit about the benefits of selling that far out and what we have to do to get there? James: Michael, it is so interesting. When you and I first discovered writing premium as an investment for clients, we were subscribing to the same ideas… 30, 60, 90 days out- that’s where the large decay is, that’s where the large curve is. Certainly, we had success doing that; however, in this day and age of computer driven buying and computer driven selling, against what the fundamentals might dictate that prices should do, we do sell options in commodities 6, 9, and even 12 months out. People who have sold options on their own would say to themselves or write the question to us, “That certainly gives you a lot of time for the market to be wrong”. My really easy answer is that it gives us a lot of time for our prediction to be right. Basically, technical factors can move the market for 30 or 60 days, whether the fundamentals had changed in that favor or not. What fundamentals won’t allow the market to do is make a 40, 50, or 60% move. So, the investors that are trading, selling options on a 30-60 day idea, and certainly they might be very successful in doing that, what we don’t want to have happen is have a technical move in a market with no fundamental market change and us get stopped out. We are paid to wait. Most investors have a very difficult time doing that. When you know what the fundamentals are, waiting is quite easy and, as a matter of fact, waiting is fun because you’ll see technical buying or selling in gold, coffee, or oil all the time. Yet, it’s not reaching ever a 50% move; however, it does make the news and it makes options expensive. That’s just the way we like it. Michael: That’s some really good points you brought up there. It reminds me of a story of why we started doing this in the first place. For investors listening that have sold close-to-the-money options, you know it requires a lot of effort and babysitting. What James is talking about, going further out in time, allowing you to sell much deeper out-of-the-money, not as concerned about those short-term random swings, higher odds. Probably one of the most overlooked benefits is lower stress, both to the investor and the trader. James, I know many people might not know that you and I, when we first started out, were retail brokers. So, about 20 years ago when we first started working together, we were brokers and we were making these trade recommendation to people and we were trading options 30, 60, 90 days out. A lot of the time, they did very well and they were very successful, but it was a high maintenance type of trading. You and I would be on the phone all day because people would be calling in and we’d be changing orders and changing positions and writing new because the market was moving and the options were always moving. When we switched to the strategy of selling deep out-of-the-money options, once that conversion was done, it was crickets. There was nobody on the phone and there was no reason to call. So, it was a lower stress for the trader, but as an investor, I don’t want to say you never have to watch it if you’re managing your own account, but certainly it’s a lot less maintenance than it is if you’re trading those short-term options. It’s almost like day trading, wouldn’t you think? James: Michael, I remember making that switch to much further out dated options. It’s so funny you bring this up. We did get one or two phone calls, and I remember one, it was from one of our favorite clients. He said, “James, I just love selling options this way because I’m such a bad trader.” Once you get that mindset, that you’re no longer gambling, you’re no longer betting on the spin of the wheel or the roll of the dice, when you’re actually taking fundamental analysis, if you possess it, and turning that into an investment, this is just a great alternative to what some mainstream investments are. Taking long-term views, treating this as an investment, once you made that switch, I know how it was for us, I would never trade a futures contract again. Selling options on commodities this far out based on fundamentals does give you the patience to wait. Let’s face it, that’s what the big money does and, U.S. listeners, that’s where you want to be, too. Michael: It’s hard to put a price on sleeping at night. I think that’s a good place to wrap it up this month. Obviously, these days, James and I offer fully managed portfolios. If you’re interested in a new account with us, I’m just looking at the sheet here, it looks like we are fully booked for September; however, Rosemary is currently booking interviews now for October openings. So, if you are interested in exploring the possibility of a managed account, you can certainly call her at the main number. That’s 800-346-1949. If you’re calling from outside the United States, the number is 813-472-5760. You can also contact her via e-mail. That is office@optionsellers.com. She will schedule you with a free consultation interview to find out more about our accounts. Obviously our recommended opening account is U.S. 1 million. Rosemary can certainly provide you with other details on the accounts, as well. James, thank you for your insights this month. James: Michael, always my pleasure. I just love chatting about what we do. Michael: Great. For all you listeners, have a great month of option selling. We will talk to you again in September. Thank you.

Episode 176: Theatre and Autism: How do you present a sensory friendly performance? How do Theatre and Autism fit together? Do you have students on the spectrum in your classrooms? Have you ever put on a sensory friendly performance? All of these questions and more are answered in this week's podcast with James Lekatz, program director of the CAST program (Creative, Accepting, Sensory-Friendly, Theatre) at the Stages Theatre Company in Hopkins, MN. Show Notes Stages Theatre Company - C.A.S.T Program National Autism Resources Autism Resources Autism Resource Kit School Community Toolkit Jacques Lecoq Drama Teacher Academy Episode Transcript UPDATE FALL 2018: James Lekatz is now the Artistic Associate at Interact Center for the Visual and Performing Arts. The mission of Interact is to create art that challenges the perception of disability. Welcome to the Drama Teacher Podcast brought to you by Theatrefolk – the Drama teacher resource company. I'm Lindsay Price. Hello! I hope you're well. Thanks for listening! This is Episode 176 and you can find any links to this episode in the show notes which are at Theatrefolk.com/episode176. Okay. Everyone, hands up. All of you, put your hands up – no, no, no. So, I have a question. How many of you have students on the autism spectrum in your classrooms? And, another, how do these students react to theatre? Do you believe it can impact them? Have you ever been to a sensory-friendly performance? Have you ever planned one? Okay, that was more than one question; that was a lot of questions and I'll bet that there is a lot more hands up to the answer to that first question than anybody thinks. And, yes, I can see you; I can see all of you. So, we're talking theatre and autism today. We are going to get some answers to those questions and more with today's guest. A very interesting conversation. I learned a lot. Let's get to it! LINDSAY: Hello everybody! I am speaking with James Lekatz. Hello, James! JAMES: Hello! LINDSAY: Awesome. Tell everybody where in the world you are. JAMES: Yes, I am coming to you today from Hopkins, Minnesota, which is kind of like a first-ranked suburb of Minneapolis. LINDSAY: Ah, perfect! Sometimes, I ask where people are and then they say and I'm like, “Well, I don't know where that is,” but this is good. Excellent! This is going to be such an interesting conversation on so many levels, I think. Let's start off, please, tell us what your job is. JAMES: Sure. I work for a theatre company called the Stages Theatre Company located in Hopkins, Minnesota. My job is twofold; one, I'm an education association, so I'm a theatre teacher and I work at many different schools in the west metro of the twin cities, and I also am in-charge of our access programming. And so, that is working with ASL interpreters, getting audio transcribers to come to our performances to do an open captioning, but also a major portion of what I do in the access is working with our sensory-friendly and autism programming. I run a program called CAST which is an acting program for students on the autism spectrum. And then, we have a ten-performance sensory-friendly season that we do throughout the entire year. LINDSAY: Talk about making sure that theatre is getting to everybody, right? JAMES: Right. LINDSAY: Also, I have seen it, time and time in the classroom, how those with autism, theatre really helps them. JAMES: It does, and it's kind of counterintuitive. You don't think it would because it's standing in front of people so it's nervous and a lot of people on the spectrum have anxiety. It's being able to use your voice where a lot of our students on the spectrum don't have that vocal flexibility. But, yet, they can do it. Seeing theatre works that way and doing theatre works that way. It's incredible! LINDSAY: Yeah, and this is one of the reasons I definitely wanted to talk to you and h...

Bill Hughes brings us another batch of Essential Songs; this time from 1991. James, Right Said Fred and Seal all feature.

Michael: Hello everyone, this is Michael Gross of OptionSellers.com. I’m here with James Cordier in our home offices in Tampa, Florida. James, what a month of volatility this month. James: It certainly has been. The commodities markets for the last 18 months have been doing a slow drip to the downside. Mainly because of the slow down in China and the demand for raw goods: nickel, zinc, copper, lead, and iron ore have been slowly falling, and, finally, with the idea that interest rates are not going to go up four times this year, which everyone had plugged in to their calculations, meaning a strong US Dollar, which means lower commodity prices. That has completely reversed. Again, here in the United States, we don’t think that’s going to happen, but that has certainly shot some volatility into the commodities market, something as Option Sellers, we really wanted and waited to see. Michael: James, I know when we talk about commodities, some commodities are more volatile than others, what we saw a lot of this month was some volatility in the metals markets, particularly gold and silver. We had discussed last month a strangle in the gold market, where we sold puts and calls. I know we adjusted those positions a little bit, and I think our listeners would be eager to hear how that’s done or how you would adjust a strangle in a situation like that. James: The gold market, like anything else that we put a strangle around, has a very good chance of increasing on one side or the other. In other words, moving towards the put or the call. Often, when we sell a strangle, whether it be gold or any other market, Michael, as you know, normally we are trying to highlight around a $1,200-$1,400 strangle around the market. If one side starts moving up, in other words, the rally that we’ve had in gold, just about $100 an ounce basically overnight, did increase volatility especially on the call side, what we would certainly want to do is protect our clients at all times. Even though the gold market is still some $250-$300 away from those original strike prices, we were able to now roll up into positions that are now $500 and $600 above the current price. It’s a strategy, as far as strangling goes, of selling puts and calls simultaneously. It’s certainly one of our favorite trades, especially when you’re looking at fairly priced commodities. The fact that gold rallied $125 rapidly, certainly did make the call side much more interesting. We did roll up several of our positions to levels that we really don’t think gold can hit. We have no inflation, we have a much more stable stock market right now, the banks in the United States are much more well-capitalized, and the chances of gold going to $1,900 or $2,000 in the next several months, looks like a pretty good thing to bet against, and that’s what we’re doing. Michael: James, we’ve gotten a lot of mail in this month from people talking about trading metals and some of the moves there, and types of strategies we might recommend. One point you made, that was a great point when we were talking last week, was that now that the volatility is in the market, it’s a ….. A great point you made, James, is that a lot of people trading gold and silver look at it and say “Well, I don’t want to trade that market. It’s too volatile”, and, if you’re an options seller, it’s exactly the opposite. The more volatile it gets, the better it is for you as an option seller, and, the point you made was, now that the volatility is in the market, there’s actually less risk for an option seller. James: That’s true, Michael. As we both know, having volatility makes it seem actually more risky than it is, in my opinion. When you’re able to sell options 20%-30% out of the money in a quiet market, is that better than selling options 50-60% out of the money in a volatile market, and I would say that the latter is true. Certainly, the higher probability is in markets where you’re able to sell options further from the underlining futures contract, and that is definitely what we have in gold and silver right now. The silver market hasn’t moved nearly as much as some of our articles we’ve written recently about silver being the kind of a market between copper and gold. Gold has made the big move. The large premiums right now are in gold calls, as well as gold puts, simply because the volatility, and we think right now is an ideal time to get involved by selling options on those two markets as the volatility has finally really increased into something that’s really the life blood of option selling. Michael: It’s like the Warren Buffet mantra: “Be greedy when others are fearful, and be fearful when others are greedy.” James: I couldn’t paint that picture any better than he does. Right now, that’s really a good observation of where our market is right now. Michael: Let’s talk a little bit about what’s going on over in the oil markets. That’s had a big month there, too, and some big developments with OPEC. Can you talk a little bit about that and what’s going on with OPEC? James: You know, for the last several months, so much of the analysis that’s taken place right now regarding oil prices, and regarding OPEC as well, you know, Iran is coming on, so they’re not going to cut. Saudi Arabia finally has the new producers, the United States, they have them on the ropes, so they’re not going to cut. Russia’s not going to cut because they all need to have a certain amount of income on a weekly/monthly basis. The bottom line is, they do have to cut. They do have to balance the market. We saw the first beginning of that this past week, as both Russia and Saudi’s did agree to freeze production and, of course, the long awaited production cuts were not there yet. However, a huge step forward was taken place. The market did not hail it with a great bit of fanfare because everyone was hoping for production cuts. We didn’t get those. However, we did have a huge 180 degree turn in the idea that the largest two producers are aware and very conscious of balancing the market. I think that first step certainly was taken place in order to do that. They froze production at basically record levels, which doesn’t sound bullish, but, for the first time, in as long as we can remember, as far as this rampant move down in oil prices, the market realizes and the leaders of OPEC, certainly Saudi’s, realize that they have to balance the market. We finally have that in place right now, and we’re looking at probably production cuts being announced sometime between now and June. Iran kind of threw cold water on it by saying that production freeze is kind of silly. I think that they’ve been out of the market so long that they lost their mind a little bit, because that was certainly not welcome news to hear Iran say that. I’m sure someone’s slapping them up right now saying “Next time that we’re discussing production cuts, don’t say anything like that of the kind”. I think Iran probably learned their lesson shortly after making that little announcement. However, we do see production cuts. There were actually numbers being floated around, and I would bet a dollar right now that the next time where there are production discussions going on, Iran cheers and thinks that it’s a good idea. We’ll see if in fact it turns out that way. The oil market, which has been flirting, once again, with down near 30, is gaining Traction. We think still the chances of seeing a four-handle on crude oil this spring is very good, and we think that being short puts being in the $20-$23 range is going to be a very fruitful idea later on. Michael: The big development there wasn’t actually the deal itself, but, as you said, the big impact was psychological. It sets the stage for, finally, there’s going to be some cooperation, and, as you said, sets the stage for a possible cut later this spring or maybe early summer time. James: That would be our guess. The market has to be balanced. The Saudi’s realize that. They will be the ones to lead that charge. When you think about Venezuela and some of the other periphery countries that are in OPEC, they have to see crude oil prices rally $5, $10, $15 just to make ends meet. I think it’s going to happen. How long would a rally last if, in fact, we do have production cuts? Will there be cheating going on? Certainly there will, but when these announcements are made, and I really think they will be, we are going to see a decent rally in crude oil, and hitting $40, I think, is a real high probability going into spring. Michael: I would imagine that would probably jack up the volatility of call options as well going into summer. One strategy we talked about possibly for the summer time, not just yet, but a couple months down the road, maybe selling calls high above the crude market. James: That is going to be, in our opinion, one of the best seasonal trades along with the puts that we have on right now. Crude oil is not going to be trading at $20, no matter how many of the talking heads come on CNBC and say “It’s heading to 20”. Just before we started this discussion today, I just heard someone say it’s going to 15. That’s not happening. We love the idea of being short the puts at the $20 level. We should rally into April, May, and June. If, in fact, we do that, we’re going to see call premiums on December crude oil towards the $80 strike price. Michael, crude oil is not going to 80, either. What we really like is the idea that you get through driving season, you go into shoulder season, which is September, October, November. Prices will likely be back down in crude oil, certainly a long ways away from 80. We think that the selling puts now and selling calls this summer for the December contract, probably around $80 or $85 a barrel, is going to be a very nice low hanging free trade for us. Michael: Plus, if the market does rally $5 or $10, you’ll have all the talking heads coming on saying that it’s going to 100. That’ll help the call option premium, too. James: That’s exactly what’s going to happen. The talking heads on TV certainly help push the market in whatever direction it seems to be most easily traveling. I think May, June, and July there’s going to be discussion like that. Hopefully, people are listening and buy the $80 calls from us. I think that’s going to work out really well. Michael: For all you listeners out there that are listening to the discussion on the metals and OPEC, we address both of those markets in your upcoming Option Seller newsletter. It should be coming out on or around March 1st, so look for that in both your e-mail box and your physical mailbox. Speaking of the Option Seller newsletter, you’ve probably read we have a number of different guest analysts that now are volunteering to work with us, come on, and be interviewed in the newsletter. Some very great option talent there that’s wiling to share opinions and insights into selling premium. We’re also lining up a number of those people to participate in our future issues. James, you’ve recently had the opportunity to be interviewed by a stock option selling newsletter, Born to Sell, and you talked a little bit about differences between stocks and commodity options and how you go about managing a portfolio. I know one of the key points you were talking about there was structuring a portfolio, how we go about being in different markets, and the type of different markets you look for. Can you talk about that a little bit and what you talked about in that interview? James: Michael, that's probably the biggest transition from most investors to writing covered calls, or what have you, on their stock portfolio, and wanting to get diversified, certainly with all the volatility. Michael, you’ve seen a lot of people come over to Selling Options with us and building their own and having their own portfolio with us. Everything is about diversifying, as you know, and we want to be in the different sectors that have very little correlation to either the stock market or sometimes to the economy. I think what I enjoy most about building portfolios is that we are able to hopefully prosper in bull, bear, and neutral markets, and, also, by being able to diversify inside the commodities market itself. Sometimes the price of wheat will have very little to do with the price of silver, and coffee very little do that with the price of crude oil. It really gives us a lot of the balancing power in order to make sure that a portfolio is diversified. Certainly we have some interesting times ahead of us with a 0% interest rates and sometimes negative interest rates all around the world. We probably are going to have some interesting moves in the stock market and in commodities over the next 12 months, and I think being able to diversify is going to allow us to prosper from them, and, of course, now we finally have the volatility to sell high premiums. Michael: Yeah, it was a great point that came up in that interview, and I don't know if it made the final cut, but I know he asked you “How would a portfolio like this perform in a down market or a bad economy?”, because a lot of the stock option sellers are selling calls, they’re selling covered calls, or they’re selling puts and waiting for the market to go down so they can buy the stock. That works great, except when stocks go into a bear market. Then, those guys are sucking wind. He said “Well, how’s your portfolio doing in a down market?” and you said “Well, it doesn’t really matter. It doesn’t correlate to down markets, and it doesn’t really matter what the market is doing because you can be on either side of it.” James: Right, and the fact that we can be, you know, positioned for a weaker economy. We can be positioned for China, continuing to slow down, or there's even people talking now about a possible recession in the United States. I know that sounds really dramatic, but people like Carl Icahn are usually listened to. I know he's getting a little bit older now, but he’s a very, very intelligent man and people are following words that he says. The fact that we are able to, you know, be diversified to a point where we can prosper in a market that’s falling or an economy that’s weakening, I think, makes what we do, you know, kind of a sweet spot right now. We are able to sell calls in markets that might follow a trend down with the stock market. I think crude oil, the one that you mentioned here a little while ago, is going to be a prime example. After a small rally this spring and summer, I think a lot of the energies, and maybe the stock market, has a weakening period going into the last third and fourth quarter of this year. That’s going to be one of our, probably, favorite positions. Michael: All right, for anyone interested in learning about our managed accounts or how they work, you can request our investor discovery pack. That’s at OptionSellers.com/Discovery, or you can always give us a call at 800-346-1949, and we’ll get one of those right out to you. James, we are going to shift gears here a little bit and we’re going to talk a little bit about strategy. We spoke a little bit earlier about positioning portfolios and the type of systems we incorporate into that. One of the more popular items that people like to talk about is the concept we describe in The Complete Guide to Option Selling as “staggering”, where we’re staggering our expiration dates with the objective of having options expiring, if not every month, close to every month. Can you talk a little bit about how you do that or how you recommend other investors do that? James: Whether an option seller is doing that on his own portfolio, or, certainly we do that for portfolios ourselves, the idea is if you have a fundamental view on a particular market, say for example, the silver market has been trading around $14-$15 an ounce recently, we expect silver to probably stay in this trading range for quite some time. A position that would inquire staggering would be selling, say, the $9.00-$9.50 put in Silver. For example, say the December contract: if, in fact, time goes by and that December contract starts to decay, and if the fundamentals are the same, we would look then on to the most active contracts in silver and then start selling the same $9.50 put there. As, certainly, the front contract starts to loose some ground, and, as a matter of fact, eventually come off, we will be looking at selling the next contract and silver. Certainly, the fundamentals change from time to time and the range that silver, or any of the commodity would be trading in, is going to vary slightly and, of course, we just sell a slightly different option that way. The idea is that once a portfolio is built, and it does take several weeks to do that, as you know, you can have options expiring worthless or getting to a buy-back point every other month or every other two months. It certainly is fun once the pipeline is filled. Basically, you’re looking at options that are coming off every one to three months. If you are in six or seven different commodities, it is possible that that staggering does offer good liquidity every 30 days and, certainly, that is our objective with staggering. It takes a while to fill the pipeline, but, once it’s done, it can be very rewarding going forward as these options start coming off. Michael: An important point to make there that you brought up is that you don’t necessarily have to wait for those options to expire. For instance, if you sold silver puts and they’ve lost 50% of their value so far, you don’t have to wait for those silver puts to expire. You can go ahead and go the next month out and take in some more silver premium in the same strikes. That’s a prime example of staggering. What does that do for the investor? James: Well, like you mentioned, you don’t have to wait for the option to expire to sell another silver put or another coffee call. Basically, as you initiate a position, you have a certain amount of margin that’s earmarked from your account to hold the position. If in fact, like the example you said, Michael, an option is now trading at half of what you sold it for, what that does is it frees up the margin. If you were putting down $1,000 to hold the position, now there’s only $500 to hold that same position. Let’s utilize that additional margin money to write an option on the same commodity, possibly, and, that way, you have the staggering affect. Often, what we will do, is sell an option for a certain amount of money. As it starts approaching maybe 10% or 15% of its current trading value that you initially sold if for, that makes it a great buyback. At that point, the option that you sold after that might be looking at 50% decay and it’s a nice snowball effect, once it’s in place and working correctly. Michael: Efficiency of capital… James: Perfecto. Michael: That is really what staggering is all about. Making it work as hard as it can be working at any given time. If you're interested in those types of things and structuring a portfolio, we feel it’s probably one of the most important aspects of selling options that most option sellers overlook. They’re thinking about what market to get in, they’re thinking about what strike they want to sell, and they’re forgetting that probably the most important part is how your portfolio is structured to begin with. What market you’re going to be in, how your capital is going to be allocated, those are the type of things we really talk a lot about in The Complete Guide to Option Selling, and, of course, that book is available at book stores and online retailers. You can also get it on our website through a special offer at optionsellers.com/book. Before we close out here this month, a couple of announcements: one, we do have some consultation dates open in March for new investors. If you’re interested in a managed account, or discussing one, you can give us a call at 800-346-1949 or 813-472-5760. Again, that is to schedule a free, no obligation consultation for a managed option selling account. James, before we go, we are coming into a time of year where there’s a lot of a seasonals coming up, and are there any markets that you see, coming up in the month of March, that may have a big seasonal impact here? James: A lot of the grains, Michael, actually, in the past, had seasonalities that would take place in June, July, and August because of the crop growing season in the United States, but so many commodities now are grown in the southern of the hemisphere in Australia, and Brazil. Quite often, a lot of the grain markets right now have seasonalities that take place the opposite of what they did, certainly. February and March has been a very fruitful time for selling options in grains and soybeans, so those are something that we’re going to be looking at over the next 30 to 60 days, as well. Michael: It is a great time for seasonal tendencies. In the April and May newsletters, we are going to be talking a lot more about that. In fact, I think we’re going to see if we can get somebody from Moore Research to come on in and do an interview for a newsletter, so we’ll talk a little bit about that. Anyone who’s interested, again, we have consultation dates open in March. I believe the second part of March, we still have some dates. You can give us a call if you’d like to schedule them at 800-346-1949. Otherwise, we wish you all a great month of premium collection, and look for your newsletter next week. We will talk to you next month. Thank you.