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Best podcasts about michael yeah

Latest podcast episodes about michael yeah

The Remote Real Estate Investor
Making sense of the current real estate market

The Remote Real Estate Investor

Play Episode Listen Later Jan 28, 2023 28:14


In this episode, we welcome House Canary's Director of Research, Brandon Lwowski to look at what has been happening in the real estate market over the last years and where we are headed as an industry. We discuss the health of the real estate market, the residual effects of the response to COVID-19, and the main challenges facing investors today. Brandon Lwowski built his career after studying Computer Science Mathematics at The University of Texas at San Antonio. In his role at HouseCanary as Director of Research, Brandon distills what is happening in the real estate market through data analytics and machine learning to help investors make more informed decisions about their portfolios. Links: https://www.housecanary.com/ https://www.linkedin.com/in/brandon-lwowski/ --- Transcript Before we get into the episode, here's a quick disclaimer about our content. The SFR show is for informational purposes only, and is not intended as investment advice. The views, opinions, and strategies of the hosts and the guests are their own and should not be considered as guidance, from Roofstock. Make sure to run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Michael: Hey, everyone, welcome to an episode of the SFR show, the place where you get all of your up to date SFR investing information. I'm Michael Albaum, and today my guest is Brandon Lwowski, the director of Research over HouseCanary and he's gonna be talking to us about all of the things that have been going on in the market over the last several years and months, and how we can use that information going forward. So let's get into it.   Hey, Brandon, what's going on? Thanks so much for taking the time to come jump in chat with me today. Appreciate it, man.   Brandon: No, of course, it's good to be here to get an opportunity to discuss the real estate market for sure.   Michael: Yeah, I'm super excited. So you're the director of Research at HouseCanary. Give us all just a quick little bit of insight background on who you are and what house canary is and what they do as a company.   Brandon: Yeah, definitely. So HouseCanary, you know, it's basically a national brokerage and so it's really known for its real estate valuation, technology and accuracy. This company has been around since 2013. It was founded by Jeremy Sicklick, our CEO and our Chief of Research, Chris Stroud, kind of off of the 2008 housing crisis, they did decide to form this company to kind of help speed up the transactions and speed up and really gain knowledge and just competence in the real estate market through using analytics machine learning to provide 100 and 14 million valuations on properties as well as 91 million rental valuations. So if you think of how scary it's built around the analytics and valuations of the United States real estate market.   Michael: It was at $114 million valuations that you said since it since inception.   Brandon: No, that's monthly, we produce 114 million property valuations. Of course, the 114 million is a subset of you know, every property in the United States and that repeated monthly, but we train this very complex machine learning model AI model to produce 114 million property valuations.   Michael: That's incredible. Well, I want to come back to HouseCanary as a company here in a minute. But I want to first start by asking you, Brandon, because it is so analytics and data driven, what is it that HouseCanary as a company and you as an as the director of research are seeing in the numbers in the data with regard to just where we are in the market, there's so much chatter about market cycles and ups and downs and bubbles, give us a little bit of insight to what are the numbers and facts supporting where we are right now, as we're recording this brand new into the new year 2023.   Brandon: I think kind of the one of the biggest headlines to kind of drive home right now, especially in the market, we have this unique combination of these elevated interest rates and you know, the slow buying season that we typically see during the winter months, this has really impacted across the board, our new inventory coming into the market, our new listings, listings going under contract, all of these metrics that we typically look at to understand the health of the market and the health of the real estate market, have really had significant declines year on a year over year basis, that's across the board inventory listings under contract, the Feds kind of you know, their fourth straight 75 basis point interest rate increase, you know, as the thing is, the fourth month straight or the fourth, fourth one straight, has really had that negative impact on net inventory. But this is just providing more evidence that you know, supply of homes is still squeezed and it's remaining negative over time, we've kind of seen this trend since August, right where our supply of affordable housing and actually all housing in the market has really continued to drop and this is basically you know, the biggest driving factor here is that interest rates shot really driving down these new listings volumes to like a multiyear low since pre you know, I don't use the word pre pandemic because you know, we're still in the pandemic, but that pre pandemic peaks we'll call them we're seeing you know, all its multi-year lows in terms of new listings, everything going on the real estate market. The biggest picture here is even as these interest rates come up, our supply just remains extremely negative and still going in a downward trajectory.   Michael: And when you say downward trajectory is that From 12 months prior, or is that from the prior month?   Brandon: We're looking at a year a year basis right now. If you think about the month over month basis, we are still seeing declines. But when we're talking about these multi year lows in terms of net new listings, on the purchase side of the market, we've reached those multi year lows. I think, you know, the reason why this supply crisis is also happening right now is, in this current real estate environment, it's really difficult to convert homeowners and current renters and convert them into future homebuyers, right. In this elevated interest, interest rate market, it just doesn't make sense financially for a lot of people to enter the market, you think of this large group of, of homebuyers that purchase homes at record low interest rates, they refinanced during the peak of a call it the peak of the refinance, boom, that happened during the pandemic and for them to reenter the market, it just doesn't make financial sense for them. So in order to move out of their current home and into a new loan, they're going to be paying a higher premium for the same quality of home. So they're available availability to spend money has definitely decreased and I really don't see this inventory shortage, kind of relieving itself or beginning to increase well into, you know, the first quarter, second half or first half of 2023, the supply just remains super squeezed.   Michael: Okay and so that, like the supply aspect is, I'm guessing one ingredient in the recipe, so to speak, what are some of the other things that you're looking at, and that you're seeing, to give you an indicator of where we're headed and where we are currently.   Brandon: Right. So I think so the supply is, has been squeezed, I think since COVID, there's been a really tight squeeze on the flat supply side of the market. But with those low interest rates that were happening, I mean, 1- 2% interest rates, people were getting their home loans that the demand for property shot up, which is why we really saw that two, three years of just record breaking price growth and the real estate market. Now we're looking at the demand side, and we're actually in the seventh consecutive month of double digit declines in on a year over year basis, we're looking at the listings that are coming under contract in the market. So if you look at inventory as a supply of new listings coming in, if we look at listings of those listings, and the existing market, this existing supply, existing supply, listings under contract is still seven consecutive months of double digit declines since November, are all of our data right now, it's kind of up to that first week of December 2, so we kind of think of it as, as of November. This is this kind of is the driving force behind this is, you know, we've never seen this kind of seventh consecutive month of double digit. So it's kind of driving a lot of fear into homebuyers and home owners and the way we kind of know that this is not normal, it's kind of beyond the typical seasonality we'd expect during the cold winter months to have seven consecutive months, this kind of uncertainty in the market around interest rates, economic downturn, the inflation, they just continue to force homeowners and would be buyers, you know, to play the waiting game, they're, they're gonna sit in the sidelines, they're gonna stay away from the market and so they're a little more competent in in where this kind of roller coaster is going.   Michael: As I'm thinking about such a visual thinker. I'm thinking about this as almost like a race to the bottom in a sense of like supply versus demand once because it sounds like they're almost moving in lockstep negatively, we were having a reduction in supply, but we also have a reduction in demand and once right is that is that the right way to think about it?   Brandon: The demand has definitely began to decrease or is decreasing at a faster rate than supply because supply has been squeezed since the pandemic whenever the shutdowns happened. People just stop selling houses. They stopped listing their home so the supply side of the market has been squeezed since the shutdown the pandemic. The demand side due to the interest rate hikes the economic uncertainty, that's where we're really seeing the decrease on the supply side where the decreases are coming from. So even though you know supply is always been net always been tight. We've been tight recently in recent years. A lot of the continued decrease on supply side is actually coming from net new listings so people aren't putting listings on the market right now. For the reason that we discussed earlier. It's hard to get homeowners back into the game. They're actually down around 25% on a year over year basis, in terms of like how many new listings are coming into the market, but even a bigger piece here is on the supply side is our removals of listings are up 65% on a year over year basis. So houses that were listed last month six are being removed from the market further impacting supply, while supply has been remained squeezed like very, very tight supply of properties over the years, there still is a decrease in net new listings, and also an increase in removal. So in that supply is being affected. But when it's so squeezed already, that that impact in the market will not be as significant as the impact of a decreasing demand side of the market.   Michael: Yeah and that makes total sense and so what are you seeing with regard to sale, as opposed to sale of percent of this price and then also days on market?   Brandon: Yeah. So I think some other key indicators, the market, you kind of just discussed, you know, we have days on market, I think price lists ratio is important, I think, the median price, right, the time series of how is price behaving in this environment, all important and understanding kind of the overall health of the market and I kinda like to go with the big one first, in my opinion, which is the median price, right? Where is the market going? I kind of macro at a national scale. The, if you look at the year over year basis, median price of all single family listings, right, so single family dwellings, that those are actually up 10%, on list prices, and actually up 2% in terms of actual close prices. So even though we're seeing the storyline of these prices really starting to decline and kind of freefall, we're still seeing as a year over year basis, because we hit such a huge peak in the middle of 2022. We're still up year over year, by those two percentage I meant mentioned. On a month over month basis that compared to last month, we are slightly down, but it's very, very small. We're down around one and a half percent on listings and down and less than half a percent on close prices. So we see a lot of the storylines and the headlines across the news, that these prices are falling drastically. We're in a deep decline. The roller coaster rails are off and we're down to 2008 again, but just looking at the data alone without any sort of human interjection or opinions. I'm not an economist, I'm a data scientist. But by heart, I'm just looking at the data because we had such a high peak in the middle of 2022, in terms of the median house prices were still up year over year and on a month over month basis, the declines in price are very, very miniscule, to what we're kind of hearing in the media. So that's one thing, right? The median price is definitely a driving factor. Everyone's concerned about like, what am I going to get for my property? Where's the trend of our nationwide real estate market heading and even though we're in a slight downtick month, over month, if you look at long term, we're still up 10% on listings and up, you know, 2% on closed prices.   Michael: It seems like there has been so much resiliency, if we're seeing such a miniscule price reduction month over month and year over year, there seems to be a lot of resiliency to interest rate increases for folks, and that they're still closing transactions, even at this much higher interest rates, and they're not saving a lot or really anything at all, in terms of the price that they're paying out the door.   Brandon: Right, I think what's causing these prices to, I don't wanna say remain elevated, but kind of not declining at the pace that we would expect is that tight supply. Now, we're still a few months probably away from seeing how this kind of mass layoff and technology could affect the real estate market. Because, in my opinion, what's really going to drive these prices down is when we see supply, increase at levels that the demand has decreased and that imbalance in the market is what will really drive those prices down and the reason why kind of refer to that technology, layoff if that same style, that same volume of layoffs, hits other sectors of employment, then we're going to see defaults and people need to give up their homes because they can't afford it anymore. So unless something in outside of the real estate market really drives the demand. I'm sorry the supply side of the market to escalate at a very fast rate, that safety net is there to kind of keep our prices from really crashing, like we saw in 2008. We don't have the same supply that we saw in 2008. So we're kind of have that safety net there. Unless like I said, something really drives that unemployment up and forces people to default and give up their homes or sell their homes because they can't afford the mortgage anymore.   Michael: But it's interesting, because from all the news that I've been hearing, and correct me if I'm wrong, maybe you've been hearing, the unemployment rate is super low. Like there just doesn't seem to be those mass layoffs that we saw in the tech industry, yet anyhow, affecting so much of the so many other industries. So it doesn't feel as imminent.   Brandon: 100% right, I'm hoping I mean, just for the health of our economy, I'm hoping that that mass layoff doesn't reach other sectors and I hope that we're done with majority of it. But we're probably a month or two away from really understanding did that actually have an impact on our median, price per square foot or median close price of a property and then we can track those defaults, and those the supply over the next few months to see if that really impacted the real estate market or not.   Michael: And that makes total sense. We'll talk this Brandon about those other two factors that you mentioned the price to list ratio, and then the days on market.   Brandon: The price to list ratio has actually been on a pretty big decline. I think back in May 2022, it may have been June or May, I think we're at a multiyear high of around 102%. So most properties, were selling 100 or 2% higher than the list price, which means that it's definitely a seller's market, right. If I if I can list my house for X amount of dollars, I know I'm gonna get 102% return, I mean, I happen to present a 2% return on that is definitely a seller's market. We actually for the first time in about mid-August of last year, we're now down below 100. So that's just an indicator that the markets kind of switched right now buyers kind of have that power and that ratio now stands around 98%, which is kind of the levels before COVID emerged, and actually the lowest number since the first half of 2020. So we're not we went from a high of 102 in May to now we're down to about 98 which is definitely a key indicator that buyers now have more power than the seller's because of you know, just multiple aspects that we've been talking about the high interest rates buyers be a little more choosy. Even though the supply is down sewer buyers, there's not enough buyers in the pool to compete with me anymore. So I have a little bit more pool, which is why we're seeing that sale to list price or price to list ratio, starting to decrease. That kind of in parallel, what we see with that is to kind of tell that same story that we're now entering that buyers' market, even though demand is low, if you look at the volume of price drops, right, think about how many times a listing comes on the market for 100k. It sits there for 30 days, they come back and they say hey, you know what, let's list it for 95 maybe we can get more buyers, those price drops in terms of volume are actually up 142% year over year since the last time. It's just more evidence that buyers now because demand is so is so squeezing this high interest rate environment, they get more power listings are staying on the market longer list to or sale to list price ratio is down and then but yet the because supply still squeezed, we're not really seeing a huge impact that we're kind of seeing in the news right now, on the actual median price of all listings.   Michael: Brandon, just out of curiosity, I think I remember if my memory serves me correctly, which it often doesn't, but like in the height of 2022, the max or the highest median home price in the country was like 395k. But do you happen to recall what that number was and maybe what it is now today?   Brandon: Yeah, so if you look at the peak of 2022. So kind of that halfway mark, I think it was right around the ending of H 122. The actual median price is actually higher, at least according to our data, right? The data that we have availability to our actual median price was actually above 400,000. We're sitting right around like 420,000 was kind of that median price for closed listings for active listings was actually even higher than that. So for closed listings were around that for 120,000 range, right now as of the first week of December is kind of our data cut off. Right now in terms of the data that I'm giving you, we're sitting right around $380,000 as the kind of median price per square foot, I'm sorry, median price of closed listings, it sounds dramatic, and we go from, you know, that 420 ish down to three, it's a pretty big drop. But as you look at the entire time series from, we'll call it the pandemic, the start of the closed downs, all the way to today, if you bought a house, during those pandemic years, you're still doing really well in terms of the amount of equity, it's still in your home prices haven't dropped that drastically to where you're now upside on your loan, you're still well above you know, what you bought the house in, during the bottom of the pandemic years, what's really going to cause kind of some worry, and headaches is these people who kind of bought later in the year, kind of towards the end, or middle of 2022. Now, they're beginning to worry the most because they didn't have that same amount of cushion that these homeowners bought when they don't worry about houses a year or two years ago. So that number does seem like a big decrease. But if you look at the longevity of the time series of the pandemic eight pandemic shutdowns to now, you're still up quite a bit in terms of percent and you have a large cushion before you even have to worry about being upside down in a mortgage or, you know, losing a large amount of equity in your property.   Michael: Does the data give us any indicators as to what's coming down the pike because obviously, data is rear looking. But how can we use that to be forward looking or is there a way to be?   Brandon: Yeah, so I think you're talking about forward looking, you know, the next 6,12,18 months. If you look back slightly, we hit this topic quite a bit. It's a big topic right now in real estate is these large interest rate hikes. If you look at the timeline, the time series of the real estate market in terms of medium price terms of you know, list to sale rate of sale to price ratio, you look at, you know, the days on market, it seems that with the large amount of growth that we experienced in two years, you know, record growth, that was actually able to absorb a lot of the impact that people would assume, continuing to month over month raise this interest rate to higher and higher levels, they assumed that it was going to impact the real estate market at much a much quicker, much faster way. So then they can stop, right, the goal of raising interest rates tend to raise them forever. They're just raising them until they kind of see the market growth kind of settled down and adjust and kind of normalize. But it's kind of shocking when you think about how much and how quickly that interest rate rose and until a few months back. I mean, most of 2022 there was very little impact from those rounds of interest rates. So it's one thing that we can we can learn as, as we saw record growth, even that dramatic increase really did not impact the real estate market as we thought it would. Secondly, what's really kind of driving any sort of kind of negative view of the real estate market right now around this interest rate, is you gotta think of like purchase power of our homebuyers, right?   We didn't see salaries raised at the same rate as the real estate market, we didn't see household income raise at the same rate as real estate. So the really big question here and the kind of the, you know, the driving force here is the purchase power of homebuyers. We actually seeing and this is from Freddie Mac, I believe a 32% decrease in purchase power, based on this 30 year, you know, FRM, that's given the same monthly payments for a loan made at the end of 2021. So we're really seeing a decrease in what homebuyers can afford and that combined with hopefully the Fed has definitely signaled smaller rate hikes in the future. We're hoping that housing fundamentals can hopefully come back to a quote unquote normal seasonality cycle and the expected returns, but into early 2023. I think we're still going to see you know, a real estate market that's just characterized by this continued tight squeeze on supply tight squeeze on demand. With the exception of what we discussed earlier, which was a major economic event causing mass layoffs or firings, then I'm thinking early 2023 is going to be characterized the same kind of, of patterns we're seeing now, which is tight supply, shrinking demand, days on market, increasing. median price is slowly decreasing month over month, until we see hopefully towards the second half of 2023, a market that's brought back to its normal seasonality and its normal housing market fundamentals.   Michael: Brandon, I want to be super respectful of your time and get you out of here, man. But before I do if people want to learn more about you and the research team HouseCanary has a whole services that y'all provide. Where's the best place for them to do that or get a hold of someone?   Brandon: Yeah, I would definitely just go to https://www.housecanary.com/ . From there, you can get a list of all the products services, there's probably people on our company that can explain the better business use cases and appear researcher, I'm all about the data. But if you go to https://www.housecanary.com/, there's plenty of people to contact through there and also, I'll attach my email. I'll pass it on to you, Michael after this. So you can share it with the listeners.   Michael: Thank you so much for taking the time. This was super informative and definitely again, curious to see how things all pan out.   Brandon: Yeah, stay up, same tune. I think next week, our new market pulse comes out as well. So if you're interested in different states and how the market is performing, and also at the national level, it's a free report and that report will be valid all the way up into the end of December. So it will have kind of our December numbers added to that report and you can see those trends going on there as well. So usually is dispersed on our website. Also LinkedIn, if you follow HouseCanary on LinkedIn, that report is shared monthly for free and you can see all those metrics that we talked about updated on a monthly cadence. So you can kind of have competence in your decision making process.   Michael: Love it, love it. We'll definitely check that out as well. Well, thanks again, Brandon. Appreciate you and we'll chat soon.   Brandon: Appreciate it, thanks, Michael.   Michael: All right, everyone. That was our show a big thank you to Brandon for coming on and dropping so much knowledge, facts, data and statistics on us to help us guide our investing through these kind of tumultuous times. As always, if you enjoyed the episode, we would love to hear from you all ratings and reviews are always appreciated as are comments with additional topic ideas that you are interested in learning about. We look forward to seeing on the next one. Happy investing…

The Remote Real Estate Investor
Revolutionizing real estate investing on the blockchain

The Remote Real Estate Investor

Play Episode Listen Later Jan 14, 2023 35:07


This episode features the masterminds behind Roofstock OnChain, Geoffrey Thompson, and Sanjay Raghavan. We discuss the revolutionary product of tokenized real estate, how it works, the problems it solves, the incredible scaling power of this new technology, and who it is for.   Geoff Thompson built his career at top-tier law firms practicing in the areas of capital markets, banking and credit, structured finance, private equity, and cross-border transactions. Geoff's prior role at Roofstock was as general counsel where he advised on partnerships, product innovation, fundraising, deal structuring, real estate matters, securities law, international expansion, and all other legal and compliance matters. Sanjay Raghavan is the Head of Web3 Initiatives of Roofstock onChain where he leads the real estate investing platform's blockchain initiative. After being accepted into Cypher Accelerator, Sanjay continues to build connections between real estate investing and blockchain. Sanjay is also an advisor at Pudgy Penguins NFTs. Roofstock onChain is the Web3 subsidiary of Roofstock, the leading digital real estate investing platform for the $4 trillion single-family rental home sector. Relevant links: https://mobile.twitter.com/eth_sanjay https://mobile.twitter.com/_gthomps     Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Michael: What's going on everyone, Michael Albaum here from the Remote Real Estate Investor, we're actually in the midst of a pivot and so we're changing the name of our show to be the SFR show. Reason being is we really want to double down on the single family rental industry as a whole and so we wanted to pick a title and a name that's reflective of that. So join us here on the new show, the SFR show where we're gonna be bringing you everything you need to know about SFR investing from what the market is doing at the micro and macro level, to what the factors are influencing and changing the space. So let's kick it off with this first episode. We hope you enjoy.   Hey everyone, welcome to the SFR show. We're going to be talking today with Geoff and Sanjay on Roofstocks web three team about cryptocurrency tokenization, alternative investments, portfolio theory and risk management just to name a few. So with that, let's just jump straight into it.   Geoff and Sanjay, good to see you both. How have you been?   Sanjay: Great. Good to see you again and, Michael, you look really different from the last time we spoke and so much younger and much more refreshed, I think after the holidays.   Michael: Thank you. Yeah, I came back from the holidays ready, you know, cut, put some 10 pounds on and took 10 years off my face. So I'm doing the best I can, so…   Geoff: That's it.   Michael: That's it. So for anyone who didn't catch our prior episode together, I'd love if you could give a really quick intro who you guys are and what is it that you're doing here at Roofstock.   Geoff: So yeah, we are co leading the web three business unit every stock. I'm Geoff Thompson, this is Sanjay Raghavan and we have been at Roofstock for several years and over the last year, we've spent all of our time focusing on how to use blockchain and web three technology to improve the real estate transaction process and to generally make single family rentals more accessible and asset class.   Michael: And for anyone who isn't familiar with what web three is definitely go back and give that prior episode a listen. Sanjay gets into it and kind of what the technology is. So I'm curious gents where we are today, where are you seeing blockchain and tokenization playing a role in the single family space.   Sanjay: So first of all, we had a sale of our Genesis property in mid-October. So for your audience who may have read about it on crypto Twitter or on media publications, that was a very successful launch of this product, we spent about 10 months working on legal and tax analysis of how to structure this product so that it would be compliant and when somebody was purchasing this property in a web three as a web three home, they were in fact getting, you know, ownership of the underlying assets. So that took us about 10 months to engineer and the sale. The first sale that happened in mid-October was a huge success, went viral on crypto Twitter, and was picked up by all the leading crypto and non-crypto publications and the reason for that was because for the first time, what really happened in crypto and blockchain, which, if your followers are looking at the market, in general, this has been a really particularly bad year in the industry for the stock market. Inflation has been at a 40 year high feds have been drastically, like we went to 475 basis point interest rate hike and so, you know, we're going through this very tumultuous time in the industry and crypto has not been an exception, either, they've, you know, Krypto has been having an unprecedented winter, where either like Bitcoin and Aetherium lost 60% of their value since last year to this year and then a bunch of crypto companies went insolvent, because of various either it was just poor risk management or just, you know, for whatever other reasons, you know, they didn't have the capital to withstand the, this bear market. So during these times, you know, this was sort of like a ray of light in this industry, because we had successfully demonstrated that it was actually possible to sell a single family rental property, which normally is a three four week closing process was done instantaneously using battery technologies. But we were also able to find a leverage partner who was able to provide a loan for that property at a 65% LTV and so the combination of all of this really was a very positive thing in the industry, and we got a lot of outreach because of that.   Michael: Hopefully it wasn't FTX, right…   Sanjay: No, the leverage partner was not FTY, it was Dehler finance. But specifically, you know, about your question about, you know, with respect to blockchain tokenization, what does that really mean for real estate is that, you know, we've been able to now demonstrate that it is possible to have a better sale experience, right? When you typically look at the three week closing process on a real estate transaction, there's a bunch of contingencies on an offer, both the buyer and seller are extremely nervous about what happens during the diligence period in those three weeks. You know, like, for example, as you're aware, you know, the inspection results come in, and then you find out something about the property that you were not aware of before and then there's typically some kind of negotiation that goes on the offer price after the fact. There's an appraisal, contingency financing contingency, and, you know, so anything can happen during this three week period, the seller and buyer, even though an offer was accepted, may have a disagreement later on, you know, based on the results of further analysis, and sometimes the offer can be rescinded and then you're back to the drawing board trying to relist the property and sell it. So it's a particularly stressful time, both for the buyer and seller and doing it through this web three mechanism essentially allows us to take a lot of that diligence, which still has to happen, but we're just moving it, you know, upfront in the process, so the buyer and seller have access to the same information about the property, and the buyer is able to perform all of their diligence upfront. The way Geoff talks about his experiences, you may spend a week or two looking at Amazon Prime to figure out what you want to buy for Christmas. But once you've made that decision, you want it to be delivered, you know, on Amazon Prime, same day or next day, you don't want to wait four weeks for it to be then shipped from China to you know, get to Los Angeles, and then from there to be transported to, you know, San Francisco. So, you know, we really want to make this process easy for people, right. So you do all your diligence upfront, but when you decide to make that purchase decision, it happens instantaneously and on top of that, when you add that financing in a way that's asset based and not based on your personal credit underwriting, you're not trying to find a lender and you know, sending them two years of tax returns and bank statements and as you as you're aware, Michael, what happens in this process is you send all this information, you get a pre underwriting approval and then as you're getting ready to close on the property a month or two have elapsed, and all your information is outdated, and you're resending all the information back to the lender. So you know, you want to avoid all of this as well, because that's also incredibly stressful as you're going through a purchase process and here, because it's a rental property, it's cashflow generating, you based on the value of the asset, you can actually underwrite the loan and say, you know, it's a $200,000 property, I'm comfortable giving you $100,000 loan against it and that makes the lending paradigm a lot simpler as well. So overall, it's generally a better experience, both for the seller and the buyer, when you bring in the battery technology into this process.   Michael: This is mind blowing, you guys. So, I'm curious, like, how are you seeing really or rather, are people doing this at scale? I mean, is this we did it once we've, we've proven that it can be done once. But what is the scalability factor look like here? For both buyers and for sellers?   Geoff: It is yeah, I can jump in here. It is scalable. It's scalable in the same way that buying and selling homes today can be done, you know in bulk, or you can assemble your own portfolio over time. It's not you know, there isn't a delayed production process in creating these and preparing them to be sold on the blockchain. We do get that question a lot. Well, how much does it cost to mint a token? You know, is it 10s of 1000s of dollars? No, that's, that's essentially free. How long does it take, it's essentially instantaneous. The work that we do to prepare this to be sold is, is what Sanjay alluded to the diligence and inspection making sure everything photos have been taken, taxes have been paid HOA square all of those things. That's what we do up front, which has to happen in any real estate transaction, we just package that up in a very short timeframe of you know, call it five or 10 days, once the home has been purchased, and rehabbed and you know, it's ready to be listed for sale. So this can be this can be scaled and then once the home has been put on chain, then this is where the seller really is going to feel the scalability and the ease of interaction because imagine that you own five or 10 or you know some number of homes, you want to rebalance your portfolio. Maybe you want to get into one market and get out of another market. Right now you know, you'd have to do that through the traditional process. It might take a few months and involved a number of different intermediaries. In our case, if you if you own those homes as tokenized properties, we can get them ready for sale in five or 10 days, and then they can be listed immediately and once they've been listed on an NFT marketplace, the sale can happen with one click. So you don't as the seller, you don't have to go through a you know, a prolonged and painful back and forth with the buyer countering after they get the inspection and you know, trying to haggle on the price or trying to get a discount here, whatever it might be. That's all taken care of up front. So in that sense, it's it does make this much more scalable and much more liquid than the traditional process.   Michael: Should audience and listeners be thinking about crypto almost like a foreign currency and so just quick anecdote. So I've invested in Portugal, I signed my purchase agreement to purchase the property in Portugal back in 2020, just before the pandemic, then where the dollar was really strong against the euro than the Dollar tanked against the Euro and so I changed money after the fact and just got totally hosed on the exchange rate. How should people be thinking about exchange rate, if you will, between cryptocurrency and whatever currency there?   Sanjay: Yeah, that's a that's a really good question, right and when you think about a cryptocurrency, like Bitcoin or Aetherium, these are the two sort of more commonly discussed cryptocurrencies, in a way it is, you can make the analogy that these are almost as though they are, you know, sovereign currencies of their own and there is an exchange rate between the US dollar and Bitcoin or Aetherium. The only difference here being that, you know, unlike Euro, or the British pound, where they have their own fiscal and monetary policies that, you know, determine what happens to their bank against the dollar, in the case of cryptocurrencies, they are highly volatile and we see that there's, they're very, actually strongly correlated to the stock market today. So, when, for example, the, there was an indication that the feds might slow down the rate at which they're increasing the interest rates and I think the expectation for, I believe this week the Fed is meeting and the expectation is that this week, it will be a 50 basis point taken sort of a 75 basis point high, the stock markets rallied and sorted Bitcoin with that and however, even though they're kind of strongly correlated, they're also highly volatile and so when we talk about people having cryptocurrencies that they can use to buy these properties, we actually suggest that they buy and keep their money in stable coins, which are pegged against the US dollar and there are companies such as circle which have USDC, and Paxos which has its own version of dollar pegged stable coin. And having your money in stable coins means that you're not subject to the same volatility, as Bitcoin or Aetherium might be which can drop or go up in value by 20-30% in a single day and that's, that's how we will really think about it. If people want to, you know, have an allocation, if somebody is really long on Bitcoin or Aetherium, and they want to have an allocation in that asset class, that's fine. As long as they're aware that those are highly volatile and in the short term, they could be, you know, fluctuating quite a bit.   Michael: Yeah and that makes sense and so when are you seeing people make the change from the stable coin to whatever coin they're going to be using to purchase the properties?   Sanjay: So the stable, you can actually purchase properties with stable coins and because, you know, we have a way to when we received those stable coins, for example, if we are the seller of the property, and, you know, property is purchased using, let's say, serpents, USDC. Once were paid in USD C, we have a way to convert that back into US dollars. So that's, you know, it makes essentially, you can think of the stable coins as programmable money meaning this whole transaction is happening on the blockchain, and it's happening through a piece of computer code, there's no you know, you and I are not sitting across the table signing documents and you know, giving a check and receiving title and in return. So, this is all happening because a piece of computer code is transferring money from you to me and transferring the, the LLC through the NFT giving you the LLC that I own, which has this property and since this is all being executed by computer code, this stable coin is really, you know, we refer to it as programmable money because a piece of computer program is able to move money from you to me, and, and allow this transaction to happen in that one click process that Geoff was talking about earlier.   Geoff: You know, it feels like this is the way things should work, right? If you think about the system that we have right now for closing property transactions. It's basically inherited from England 800 years ago. You know, we've made small advancements, but not really and it shouldn't you know, it all of everyone who is involved in these transactions, and every step that's taken is taken for a reason it's solving a particular problem. But if you stop and rethink how this is done, you realize that by reordering some things, and maybe, you know, using a splash of new technology here, you can actually dramatically change the experience for everyone and it's not necessarily, you know, a zero sum game, I think it's best, it's better for everyone, everyone who's in the industry is going to be better off, there will be more transactions, because it's easier to transact, there'll be more demand because people are interested in getting in, if they know they can get out easily, right? Right now, you know that if you're looking at buying a property, you're probably going to have to hold it at least five years to recover your closing costs and wait for it to appreciate a little bit and you know, it's going to be a headache, when you do have to sell, if you don't have those constraints, you know, transaction fees are less and the time involved is less, you'll be more inclined to get in the market, because you know, you can get out when you need to.   Sanjay: And, you know, I'll also add one more thing to that, right. So Michael, if you think about, you know, back in the day, when there were these kind of all day, buyers, a lot of them were like businessmen that, you know, one year, they might have made half a million dollars, but you know, then another year, it was only 150, or something and so it's very hard to underwrite those types of folks through a traditional underwriting process, because you're looking at two years of, you know, income and tax returns, and all of that, and a lot of them may not can qualify for more conventional financing. However, in an asset based lending type solution, you know, as long as you have the money, and, you know, you're not constrained by, you know, your income for the last two years or three years, as long as you have the money to buy the, you know, to put in as down payment on the product, and the asset itself has the value, you're able to borrow against it much more easily. So, you know, we just talked about the complexity of closing a real estate transaction, in general. But once you add in the financing layer, on top of that, it gets even harder because, you know, there's, again, in a in a, you know, when the market is going up, you just, you just don't know, if you know the max, you want to make the best offer, you can but at that offer, you don't know if you will qualify for the loan, because the also the rate might have moved since the time, you initially got underwritten and suddenly, with the new rate, you don't qualify anymore for that and you have to find that little bit more down payment to offset it or buy some points. You know, you and I have gone through this numerous times in our lives. But you know, you can avoid all of those types of issues because in an asset based lending program, you know, that when you buy this asset, which is worth $200,000, there's a lender, if they're willing to come in at 65%, LTV, you know that based on the value of the asset, you're going to get that loan.   Michael: And if we just decouple the crypto piece of this and blockchain piece of this, I mean, asset based lending, is that available for regular folks?   Sanjay: So in the traditional finance world, it is available, right, but it becomes it becomes harder, because when you're buying an investment property. As you know, Fannie Mae puts limitations on how many investment properties you can get financing for as an individual. Once you get past that limit, then you're looking at pretty much private money, hard money type lending solutions, until you can get up to a scale where you have enough properties where Citibank or Wells Fargo or Goldman Sachs might be interested in working with you. But there's this pocket where after you know, your first 10 properties till you get to a few 100, we are primarily working with, you know, non-bank lenders who are generally, you know, where the rate could be 10 or 12% and then, oftentimes, some of these lenders will also ask for a personal guarantee on top of it. So it's not, you know, while it is possible to get financing on investment properties in the traditional finance world, at some point, it doesn't scale very well and, you know, you're sort of in that desert for until you can somehow figure out a way to get to 200 properties when suddenly the larger lenders are willing to talk to you. So that problem goes away when you're using Blockchain, and specifically decentralized finance or defy as we refer to it, because they're incrementally each property that you're buying is getting financed based on asset value and so you know, you're able to get a much more sort of a pleasurable experience to get through the lending process on the blockchain than on the traditional work.   Michael: Let's pivot just a little bit and talk about risk management and portfolio theory and as folks are starting to scale their portfolio or really as institutions have already a sizable portfolio, where does tokenization fit in to their playbook? When's the appropriate time? When should people be thinking about it in general?   Sanjay: The way I like to answer this question is if you as an individual, if you went to your financial advisor, and said, okay, you know, I have, you know, a million dollars, I want to invest, and I want to make sure there's, you know, come up with a portfolio allocation, that makes sense for me, typically, they're going to, like, in the old days, it was just a sort of a 60,40 rule, there was 60%, in stocks, 40%. In bonds, yeah, but I think people have gotten smarter over the last 10 years and nowadays, when you go to a financial advisor, they're going to say, some allocation in stock, some allocation in fixed income bond products, and then an allocation to alternative investments, because that's where, you know, you can get non correlated yields, because the stock market moving in one direction should not and like, you know, God forbid, if you have an emergency, and you need some cash, like this would be a, you know, if you bought at the height of the market last year, this would be a really bad time to sell, you know, your S&P 500 shares to, to, you know, pay for whatever you had to write, whether it's a wedding, a doctor's thing, education, whatever it is. So, generally speaking, financial advisors these days suggest that you should have an allocation in alternative investments that are non-correlated to the stock and bond markets and, you know, you can access that pool of capital, you know, when you need to, right. So from that, from that perspective, diversification, and then when you talk about alternatives, there's, obviously, there's a wide range of assets there. But real estate is on top of mind, for almost all the, you know, anytime we talk about alternatives, real estate, sort of is one of the top things people talk about. So from that perspective, you know, almost every investor should probably be looking at some allocation, and it will depend on their individual circumstances, whether their age, their income, their marital status, and you know, their need for cash there, this cauldrons and all that, but, you know, advisors might ask you to put five to 10% or, or more into alternative asset classes and so the same financial hygiene should also be applied by corporations and institutions, because you're sort of being asked to manage the treasury of your company, let's say you are a venture funded company, and you just raised $100 million, well, you are going to keep a good portion of that money in cash and cash like instruments, money market, and so on, because you have working capital, you have other things that you need to be spending on. But some allocation of that you might put in US Treasuries, for example, right and in the crypto world, crypto institutions may keep some allocation in Bitcoin and Aetherium and other protocols that they have high conviction and but nevertheless, whether it's a web two institution or a crypto institution, it's just basic financial hygiene to have an allocation in alternative asset classes and specifically, with our product, being a web three product, you know, that money can stay, you know, essentially, the token they're purchasing is a is an NFT and it is part of the blockchain ecosystem, so they can keep their assets within the crypto world without having to continuously off ramp into US dollars and then on ramp it back into crypto when they need to switch back and forth with respect to how they receive rental income, of course, you know, if your properties are managed by a property manager, which they should be because institutions are not in the business of managing properties, you can collect your rent in cash if you have, you know, if you have to, if you have expenses that need to be paid out in US dollars, but also if you want to collect your rent and USDC or DDM, you have the option to do that as well.   So whether you're a two institution or a web three institution, depending on your cash needs and your crypto needs, now you can have a yield generating crypto asset, and the yield can be collected in Fiat or in or in cryptocurrency. So, you know, it is good financial health to do it. We encourage everybody to have some allocation, whether it's through Roofstock, or through any other channel channels that they would like to pursue, but they should have some allocation and alternatives if it just makes sense. Geoff, if you'd like to add something back?   Geoff: No, that's it. I mean, in our case, because we've designed a solution that allows you to transact with crypto natively. This is something that we've heard from a number of crypto or web three institutions that it's potentially very interesting for them, as opposed to maintaining all of their assets in a cryptocurrency or a stable coin, this isn't a way to get access to, you know, a diversified asset that does create yield and it does have a price appreciation component. So there are a lot of, you know, we've heard from the web three community in particular that this is a perfect diversification play.   Michael: And if I'm someone that owns a sizable portfolio, maybe I own it all in cash, because that's been my mantra and I do need that quick capital injection. I mean, could I tokenize these properties and then go get asset based lending and convert that into cash very quickly.   Geoff: Yes, that's your thinking ahead, I like that. Yes, the properties can be tokenized. Basically any point in their lifecycle. If you own them, now, you bought them through a traditional sale and settlement, you can, you know, basically what it means is you have to drop it into an LLC and the LLC has a particular structure that we've worked out, it is very particular. So you know, we'll work with you to set that create that LLC, to help transfer the property into the LLC. In most states, I think the vast majority of states that transfer from an owner to an LLC that's owned by the owner doesn't create transfer tax obligations. So there's, you know, there's a little bit of the traditional closing costs, recreation fee, or whatever that might be part of that. But it is perfectly possible to onboard existing assets that you own into the system and similarly, for if we're talking about other points in the lifecycle for builders, we've had a few builders reach out and say they're close to completing a community and they might want to try to sell some of these as in an NFT form, those can those new assets as new properties that really have never been titled before, those can also be titled directly into an LLC. So it's a very flexible structure, it accommodates property at whatever stage of the lifecycle it's in.   Michael: Anyone who's got conventional financing experience under their belt might be listening to this and saying, Well, you're talking about lending or talking about LLCs. Those two things often don't jive play nice get in the sandbox. So the acid base lender that we're working with, or that we are going to be working with, I would imagine has no issue lending to an LLC. Is that right?   Geoff: Yes, that's exactly right. The lenders that we're working with are the web three lenders, we have talked to numerous traditional lenders, and some of them expressed a lot of interest in digital assets and maybe they've even created a team. But in most cases, the underwriting aspect of it isn't, isn't there yet. They're not ready to take this to credit committee and make a loan on the structure that we're proposing here but that's okay because there are there's a lot of money that's available in the web three space, and it is more flexible in terms of what it requires. They don't necessarily need to have all of the same checks and balances that a traditional lender would be in terms of underwriting against the individual. They can be comfortable underwriting against the asset, because they're comfortable that in the event of default, that asset, it is already in their vaults. So it's in the lenders wallet at the time of default and because we're building this system where you can sell them through an NFT marketplace, there is liquidity that there wouldn't otherwise be if you were holding this you know the traditional way so you to your to your question. Are Trade Fi lenders, the traditional finance space interested? Yes, we've heard some say they're interested we haven't seen anyone actually show up to engage in detail. But there is an entirely separate pool of capital into web three space that's much more flexible and willing to work with Blockchain structure.   Michael: I think my last question, guys before I let you out of here is like I'm sold this sounds obviously like a really great product, like a really cool technology that exists. Who isn't this for who, who listening to this should think about that. It's not a good fit for me because XY and Z.   Sanjay: Yeah, I mean, I can start with a couple of things and then Geoff, you can add to that as well. So if the property already has financing in the Trade Fi world, this structure is hard, because we can't really transfer unencumbered property into an LLC and then tokenize it right because there's a traditional mortgage on the property and there's a whole kind of thing that's a fillip off chain, in terms of financing. So it's not going to work. If primarily you're looking to get off chain financing, then this is not for you. You have to you know, sort of follow the traditional sense. But anybody that's open to purchasing this as a web three property and open to looking at web three financing alternatives. For those people, this absolutely should be something they should consider. The one kind of drawback or question we've heard from a lot of people as they need to become familiar with how to use crypto wallets and how to essentially convert money into USD C or some stable coin, and then use that to go and make a purchase. We're here to help with those types of Q&A, right? The, you know, until you do it for the first time, it's hard, but after you've done it, then it's you know, it's easy, right? Just like when we, the, you know, iPhones first game, and people didn't know, you know, how do you which way do you swipe to do what, but then over time you get used to it and so we're absolutely happy to help anybody that's staying in the sidelines, purely because they don't understand the technology aspects of it, we can help them out. But for people that have financing constraints or other things, and you know, for them, it is until they can, you know, overcome those issues and look at sort of a pure web unencumbered property in the web three world with, then financing added to it on the blockchain. So for those audiences, that might, you know, until they figured out that, it might be a challenge.   Geoff: I'd also add for owner occupants, the financing isn't fully worked out yet. So the financing that we added to the initial home sale a few weeks ago, that was very much geared towards an investment property, and for the immediate future, to the extent that we're building out the different options for defi lending, it looks like most of them will be focused on these as investment properties, as opposed to owner occupant properties and that's for lending law reasons, not wanting to cross over into a mortgage lending licensing requirement and it also just dealing with, you know, the people that are different in the, at that point, the underwriting is different as well, because it's not as easy to necessarily sell that asset if the owner is living in it and so that type of thing. So for at the at the moment, we're thinking of this mostly for investment property, use cases.   Michael: Really, really cool stuff. For people that have questions that want to reach out that want to learn more, what's the best way for them to do so?   Geoff: Reach out on Email or Twitter. We're, we can drop our emails here, but it's: gthompson@roofstock.com or is it sraghavan, right?   Sanjay: Yeah, it's a sraghavan, so: S R A G H A V A N @roofstock.com. I'm also @eth_sanjay, Sanjay, Y on Twitter, so you can also reach out to me there. One thing before we sign off for today, we're super excited to say that we are in the process of closing our second property, that's going to get tokenized. Soon, this one's going to be in Georgia, at CES Atlanta suburb and we'll be going through the process as soon as this is closed in the next few days, we will be going through the process of documenting what the property looks like when we bought it and any Rehab we end up doing on it and you know, they'll be you know, talking about it on social media quite a bit as well as people who are new to real estate investing, maybe this is an opportunity for them to understand, well, you know, what are the kinds of things people should be looking at when they're analyzing a rental property and so as we go through the process of rehabbing this will sort of document that a little bit. But that, you know, once the rehab is completed that that'll get, they'll get tokenized soon, but once the rehab is completed, we'll have it available for sale.   Michael: Awesome, we'll definitely have to keep my eyes peeled for the process and for the property once it's finished. That's super exciting. Well, guys, it's always a pleasure, great seeing you both. Thanks for hanging out with me.   Sanjay: Thanks for having us.   Geoff: Always great to chat.   Sanjay: Bye!   Michael: Take care and talk soon. Hey, everyone. That was a wrap to our show. Thank you so much to Geoff and Sanjay. Super, super, super interesting stuff. Definitely leave us a rating or review wherever it is you get your podcasts and definitely reach out to those guys if you have any questions about web three, about tokenization about cryptocurrency home purchases. Again, really cool stuff. We look forward to seeing you on the next one. Thanks so much for listening. Happy investing…

ArtBeat Radio
Episode 140: CECA's Holiday Songs, Traditions, and Stories

ArtBeat Radio

Play Episode Listen Later Dec 16, 2022 14:41


Welcome back to Artbeat Radio!  Today, CECA's Star Club takes us through the holiday season. Listen in as they discuss holiday treats, movies, and Disneyland before sharing some of their favorite winter songs. At the end of this episode, you'll get a glimpse into the world of Neurologic Music Therapy, as some of our service users share what they've been working on in sessions.Thanks for listening and tune in next time! For more information about our organization, please visit our website www.ableartswork.org  Audio Transcription: (Please listen on Podomatic or Spotify to view the full transcript) *Intro music by Artbeat Radio staff*  Music, stories, and more! You're listening to Artbeat Radio, a program of Able ARTS Work. ALL: Welcome to CECA's Star Club. Jenny: With ArtBeat Radio. *Instrumental variation of Feliz Navidad plays in the background* Juliet: claps Mollie: Hey, Maria, Johnny, what are your favorite winter traditions? Maria: Vocalizes.  Mollie: Johnny, what's your favorite winter tradition? Juliet: claps Mollie: Juliet's sharing hers. Do you like baking? Johnny: vocalizes Mollie: And Maria, do you like eating during Christmas? Maria: vocalizes Mollie: Ah! Jesus: yawns Mollie: So, the other day we talked about what a perfect ice cream sandwich for the winter would be Michael: OO Johnny: vocalizes Mollie: Oh, I'm hearing some yeses.  Michael: vocalizes Mollie: What about a peppermint, date, and chocolate cookie for the base? Michael: Yeah! Mollie: Alright, I'm hearing some yeses. And for the ice cream, just plain vanilla? Maria: vocalizes Mollie: Yeah, Johnny? Michael: Chocolate. Mollie: Oh, or chocolate. Michael: Yeah.  Mollie: Yeah. So, you heard it here first, folks, Able Arts at CECA's star club recommends if you're making an ice cream sandwich this winter, that is going to have peppermint, date, and chocolate chip cookies and vanilla or chocolate ice cream based on your preference! Juliet: claps Mollie: That's something to clap about right, Juliet?  Juliet: claps Mollie: Wow, that sounds good. What is your favorite winter tradition, Jesus?  Jesus: squeals Mollie: What is it?  Jesus: vocalizes Mollie: Where do you go, Jesus? Jesus: Disneyland. Mollie: can you spell that for our audience? Jesus: D-I-S-N-E-L-A-N-D. Mollie: Disneyland! Wow, and what do you like about Disneyland during this time of the year? Jesus: S-T-A-R W-A-R-S Mollie: Star Wars? Jesus: Yeah.  Mollie: laughs Alright. What do you think about that Maria? Maria: vocalizes Mollie: Okay, and what is your favorite part about Disneyland during this time of the year?  Maria: vocalizes Mollie: Is it the rides? Ah, I see you nodding.  Maria: vocalizes Mollie: Is your favorite ride the Haunted Mansion ride? Maria: vocalizes Mollie: Yeah? During this time of year? Maria: vocalizes Mollie: And that's because you like the decorations and like all the different fun parts of it? Maria: vocalizes Mollie: Do you think it's fun? Maria: vocalizes Mollie: Cool. And I know you like something else about Disneyland-- Jesus: squeals Mollie: --all times of year but also this time of the year, and what is that? Maria: vocalizes Jesus: vocalizes Johnny: vocalizes Mollie: Does everyone want to say it at the same time? Would that be good? Okay—1, 2, 3! Michael, Maria, Jesus: Pizza! Johnny: squeals Mollie: Maria loves the pizza at Disneyland. Awesome! Thank you for sharing, Maria. Jesus: Me, me, yes.  Mollie: Oh, and Jesus likes it too. Kyuta: vocalizes Mollie: And Kyuta! So, I heard Michael say you like the movies like Christmas movies or holiday movies, so Michael what's your favorite holiday movie? Michael: I like Home Alone. Mollie: You like Home Alone? Michael: Yeah. Mollie: Cool. Home Alone! Does anyone else like home alone? Jesus: Home, home.  Mollie: Yeah.  Juliet: claps Mollie: Oh, and Juliet, very good. So, Johnny what is your favorite part about the holidays is it Disneyland as well? Yes or no. Johnny: gestures Mollie: Yes, and as we're talking to Johnny right now he's wearing a jumper with Mickey Mouse with a Santa hat on and snowflakes. Jesus: Oh no no, oh no.  Mollie: So, I would say that's confirmed. Okay, Kyuta, what is your favorite part about this time of year? Do you like the music? Kyuta: vocalizes Mollie: And right now he's signing music in American Sign Language. Do you like the music, Kyuta? Kyuta: vocalizes Mollie: For ‘yes' you can clap, for ‘no' you can put your hands down. Do you like the music? Kyuta: vocalizes and claps Mollie: Very good, Kyuta! Alright! Speaking of music let's play the people some of our winter holiday and Christmas recordings. *Instrumental variation of Feliz Navidad finished*  *Instrumental It's the Most Wonderful Time of the Year original arrangement plays* PJ: DJ PJ! *All I Want for Christmas is You original arrangement plays in the background*  “All I Want for Christmas is You” lyrics I don't want a lot for Christmas There is just one thing I need I don't care about the presents underneath the Christmas tree I just want you for my own More than you could ever know Make my wish come true All I want for Christmas is you Yeah I don't want a lot for Christmas There is just one thing I need (and I) Don't care about the presents underneath the Christmas tree I don't need to hang my stocking there upon the fireplace Santa Claus won't make me happy with a toy on Christmas Day I just want you for my own More than you could ever know Make my wish come true All I want for Christmas is you You, baby  Mollie: And for our last winter holiday song, here is Santa Claus is Comin' to Town.  *Santa Claus is Comin' to Town original arrangement plays in the background* “Santa Claus is Comin' to Town” lyrics You better watch out You better not cry You better not pout I'm telling you why Santa Claus is coming to town He's making a list He's checking it twice He's gonna find out who's naughty or nice Santa Claus is coming to town He sees you when you're sleeping And he knows when you're awake He knows if you've been bad or good So be good for goodness sake You better watch out You better not cry You better not pout I'm telling you why 'Cause Santa Claus is coming to town 'Cause Santa Claus is coming to town  Mollie: Wow, incredible work! Thank you all for sharing your traditions! Another nice thing to do around this time of year is think of classic, beloved stories. We will be reading excerpts of “How the Grinch Stole Christmas” and an original Letter to Santa. Please enjoy the students' creativity and the speech group's hard work!  *Excerpts from “How the Grinch Stole Christmas”* *Instrumental You're a Mean One, Mr. Grinch plays in the background on electric guitar* (Target words underlined) And then They'd do something He liked least of all! Every Who down in Who-ville, the tall and the small,  Would stand close together, with Christmas bells ringing. They'd stand hand-in-hand. And the Whos would start singing!  They'd sing! And they'd sing! AND they'd SING! SING! SING! SING! And the more the Grinch thought of this Who-Christmas-Sing,  The more the Grinch thought, “I must stop this whole thing! “Why for fifty-three years I've put up with it now! “I MUST stop this Christmas from coming! …But HOW?”  And the Grinch grabbed the tree, and he started to shove When he heard a small sound like the coo of a dove. He turned around fast, and he saw a small Who! Little Cindy-Lou Who, who not more than two.   The Grinch had been caught by this tiny Who daughter Who'd got out of bed for a cup of cold water. She stared at the Grinch and said, “Santy Claus, why, “Why are you taking our Christmas tree? WHY?”  And the Grinch, with his grinch-feet ice-cold in the snow,  Stood puzzling and puzzling: “How could it be so? “It came without packages, boxes or bags!” And he puzzled three hours, till his puzzler was sore.  Then the Grinch thought of something he hadn't before! “Maybe Christmas,” he thought, “doesn't come from a store. “Maybe Christmas…perhaps…means a little bit more!”  And what happened then…? Well…in Who-ville they say That the Girnch's small heart Grew three sizes that day! And the minute his heart didn't feel quite so tight,  He whizzed with his load through the bright morning light And he brought back the toys! And the food for the feast! And he… …HE HIMSELF…! The Grinch carved the roast beast!  *Instrumental You're a Mean One, Mr. Grinch finishes*  Jenny: Here's our Letter to Santa. *Letter to Santa with background music featuring bells plays* (Target words underlined) Nanako: Dear Santa, Hey! My name is Michael Hinckley, and I am writing to you with my friends Chuy and PJ. Come to my house! It would make me happy. I know you, Mrs. Claus, and the elves work very hard. I will listen out for you when you say, “Ho ho ho” (three ho's). May I please have two shirts, an iPhone, and one DVD (choose between “Dumb and Dumber” and “South Park: The Movie”). Thank you and Happy Holidays! Love, Chuy, Michael, and PJ  Mollie: Thank you again for listening to CECA Star Club's episode of ArtBeat Radio. We hope you enjoyed and wish you joy and good health over the holidays and into the new year.  *Auld Lang Syne plays on piano*  *Outro music by Artbeat Radio staff*  We hope you enjoyed this episode of Artbeat Radio. For more information, please go to our website. Ableartswork.org. Thanks for listening and tune in next time! 

Super Serious 616
Episode 186: Where do sabertooth tigers come from? The past … or Antarctica? (X-Men #10) -- March 1965

Super Serious 616

Play Episode Listen Later Dec 15, 2022 8:55


Apologies for no episode last week. Here in 2022 we are also shutting down for the Christmas holidays. We should be back the first week of January. Also: Welcome to all the new listeners. If last episode was your first with us, we would love to hear how you heard of us. Apparently we are now the #25 top Marvel podcast, but that was published on December 11th, and we picked up many new listeners on November 30th. Where did you all come from? If you subscribe at www.SuperSerious616.com you can reply to the email we send you and you can tell us. We would appreciate it if only to satisfy our curiosity! See you in the New Year!In this episode:Mike and Ed discuss the mind-bending news that a sabertooth tiger has been found in Antarctica. Does this mean that other previously assumed extinct animals are not actually extinct? What about dinosaurs? Questions abound!Behind the issue:This is the first appearance of Ka-Zar and the Savage Land, which will go on to be a major environment in X-Men comics and the Marvel Universe more generally. There are rumors that the Savage Land and Ka-Zar may make an appearance in the MCU during the Thunderbolts movie due out in a couple of years. This is where it all began.In this issue:The evening news broadcasts a video from Antarctica of a Tarzan-like figure with a sabertooth tiger fighting explorers to the frozen continent. The X-Men suspect that this wild man may be a mutant, and they decide to investigate. They head to Antarctica and find a secret passageway through the frozen environment to a tropical land filled with dinosaurs and other strange creatures. They also encounter warriors fighting with preindustrial weapons. The wild man Ka-Zar and his sabertooth tiger Zabu come to their aid and help turn the tide of the battle. The X-Men leave, having made a potentially valuable ally.Assumed before the next episode:People are still wondering whether the sabertooth tiger is real, and if so, whether other extinct animals may return from the dead.This episode takes place:After the amazing news that a sabertooth tiger has been cited has been somehow lost in the new cycle.Full TranscriptEdward: Mike, when did Sabertooth Tigers go extinct?Michael: I don't know exactly, but I thought they were prehistoric. Did they not go out at the time of the Willie Mammoth? Think so. 2000 years ago.Edward: I feel like, my understanding is that they, ex, number one is they existed. They're not like a unicorn. Unicorns never did exist. I know some people think that unicorns went extinct, but they did not. There was never a unicorn as far as we know. But sabertooth tigers, which kinda. Kinda unicorns. Cause they have giant, huge, giant teeth that kind of stick out. They existed and I think they were North American. I think they existed in North America. Yeah. And then when people came across that the land bridge into Alaska and then came down through the continent, there were all these crazy animals there. And humans just basically killed them all. By the time the Europeans got there, there weren't many of these big animals left. There were still bison and there were cougars, but, things like the mammoths and the sea two tigers were all killed off.Michael: Were they killed off or they just die? I don't know if there's historical record for it being killed off by humanity, but I thought,Edward: I think the record is, they overlapped with humanity. So humanity was there at the same time as they were. And, humanity lasted and they didn't. So they died off at some point after humans were there. And it turns out humans liked to eat animals. So there's a possibility that humans. Them all.Michael: I thought it'd be more temperature. I thought it'd be more temperature related.Edward: It could again, maybe, maybe Was Willie Mammoth ? Well, there's, there's wooly mammoth in Europe I think as well, but they also went extinct. And we know that humans ate those things for sure. Mm-hmm. , I think there's a lion, but regardless Europe, there's a lion in Europe too, and that, that also went extinct and we know that humans kind of wiped that out. I think I was curious what's going a lot of these animals in, in North America, they basically, they didn't have a defense against humans. Like all the animals in Africa. They evolved along with humans and the ones, and so they had defenses against humans. But I think all those animals in North America, we were an invasive species and we showed up and the animals had never seen us before, so they didn't know what.Michael: That's interesting. Well, anyways, you asked me, but going back to the beginning. Yeah. So Saber Tooth Tigers haven't been around for a long, long time.Edward: Except now they are.Michael: Except now they are. Yeah, I mean, likeEdward: they're back baby. They're back.Michael: They're back. They're back. And they're better than ever. So the people, uh, they watch thisEdward: not just as a sports team logo, basketball. No.Michael: Well, like, so what we're talking about,Edward: I feel like there should be though, shouldn't there be, why isn't there a sports team with like the Philadelphia Sabertooth Tiger.Michael: Well, I, support it, but now they could probably get one maybe, but, for people that aren't, that haven't, haven't watching the news lately, what it is, is that there's a recording, a video recording of a man who looks like Tarzan walking with a sabertooth tiger who's attacking people in Antarctica. And it's like, it's so,Edward: can interrupt thatMichael: crazy.Edward: He looks like Tarzan. What does that mean? That means he, that means what does Tarzan even look? You mean like the drawings, the things that were on the covers of his books like a hundred years ago.Michael: Yeah. Like a bear chested, loin, loincloth, guy walking around Antarctica, which is odd with a se tiger.Edward: When you're saying he looks like Tarzan, you're basically saying there was some dude without clothes on.Michael: It's for our younger listeners. I didn't wanna get too graphic, but Yeah. Some, some dude is basically wearing Speedo, walking around Antarctica with a sabertooth tiger.Edward: Mike's gonna go to the next swim meet and he's gonna be like, Tarzan Tarzan's everywhere.Michael: Well, that's what comes to mind when there's a man dress in a loin cloth with a prehistoric animal. Yeah. It kind of makes sense. Or with a big cat, like a saber tooth tiger. But there's a saber tooth tiger.Edward: Yeah. But, Tarzan was never a, didn't have prehistoric animals in those books, did he? He was just, it was a chimpanzee, elephants,Michael: the lord the jungle. No, he's in charge of the jungle and this guy's in charge of, it looks like from the video that he's in charge of the sabertooth tiger. And so, no, that's why, that's my connection, . But anyways, the Tarzana, the tar side. What I'm really getting at is that it's nutty.Edward: Don't get confused by the Tarzan reference. Tarzana is not evolved.Michael: I'm moving on from it. Moving on from bit, but here it is. So a sabertooth tiger. And, 10 years ago we would be, it would've blown our. If there's a video of a saber tooth tiger, that would be the front page of the news. I don't think many people know about this. Number one, and number two, we can't. We, you and I were talking before our show. Neither of us can totally agree on what is the most likely reason. There's a sabertooth tiger right now.Edward: Yeah. There's a couple of things going on. Number one is, there's a sabertooth tiger. They went extinct thousands or tens of thousands of years ago, and now there's one back. So that's weird. Number two is it didn't appear in North America where they were last seen. It appeared in Antarctica. , which is like a weird place for it to be. And then number three is of all the, the weird places for it to appear. How does it survive in Antarctica? Like nothing survives in Antarctica. There's penguins.Michael: And, and then so you say, well, where would it have come from? Because presumably, if there's been a line of savory tooth tigers for thousands and thousands of years that we didn't know about, there would be some evidence of that. And, people that investigate these things and the study of prehistoric animals just got it wrong and missed it and missed the evidence of years and years and years of sabertooth tigers prowling around or, the evidence, their bones or whateverEdward: Be fair fossils if sabertooth tigers were really prowling around Antarctica this whole time, we haven't spent much time in Antarctica. I just think the evidence that any animal could survive in Antarctica is so low. That's the reason why we haven't been exploring Antarctica, is it's not really a place where animals survive.Michael: Well, so that leads, okay, so number one, sabertooth tigers can survive in Antarctica. That's number, that's the first question, but it doesn't make a lot of sense because there are mammals, they're furry mammals that would live in,Edward: they're predators. They have to eat other animals. If this sabertooth tiger is surviving in Antarctica for any period of time, that means there are prey animals living in Antarctica for some period of time. And I don't think it's just penguins. Like I think we've studied penguins in Antarctica as far as we know they do not have lions preying on them.Michael: No, no. And so, it's kind of odd, but that's the most logical thing is that just it, we just happen to have missed it. And that's the conclusion that we'd have to draw if this was 10 years ago. But we have to entertain other possibilities. Could it be that we know time travel exists? So maybe it's a time travel thing.Edward: That sounds a really easy answer, right? Like if, Kang who came here and tried to take over our timeline, take over our world, what would stop him from just going back in time and picking up a caveman in a sabertooth tiger and bringing them into our time. That sounds very reasonable.Michael: It's a possibility or maybe it's another dimension that overlaps with our, we know that there's other dimensions and overlaps with ours and just maybe that. There's a crossover point down there. Maybe,Edward: maybe in that dimension, Antarctica is like hot and bombing because we also know that a long time ago in humanity, Antarctica was hot and bombing, it was a nice warm right place with lush forests and so on. Maybe there's another dimension where that never changed and we got a portal to that dimension and these guys hopped through.Michael: Maybe it's an alien because we know that there have been alien attacks and they seem to be similar. The aliens seem to be relatively similar to how we look, so maybe there's versions of mammals on other planets and this is just an alien either left their sabertooth tiger here, or maybe the sabertooth tiger is an intelligent species from another planet and we just haven't found the spaceship .Edward: And he brought along his prehistoric man as a pet .Michael: That's right. That's what it is and then maybe the other one I was thinking maybe it's from Asgard or something. Maybe it's from where Thor comes from. Because just a magical beast just like Thor's a magical Oh, that's true. God, I don't know.Edward: And then this magical beast might be tens of thousands of years old. It's an un aging magical tiger.Michael: Yeah, but the point is that we don't know. And so,Edward: oh, I have another, I have another possibility.Michael: What's thatEdward: robot? You know what I mean? We've had robots be we're we thought they were aliens. Turns out they were robots or we thought it was Iron man. Turns out it was a robot. It feels like robot impersonators are a thing. Why not just make a robot cat?Michael: How about, and that's a good idea. But how about this also, it came from underneath the earth.Edward: Oh, we, Atlantis is we know there's, there is an Atlantis underneath the earth. That could be a, it's almost like another dimension at this point, but yeah, that makes sense. Totally.Michael: Boy, this all leads though. Is thatEdward: Maybe this old Atlantis kidnapped primitive humans. Mm-hmm. and and, giant cats and mammoths and stuff. And then breeding them underground in zoos. And these ones just escaped from the zoo.Michael: Well, the point is that these are all now equally logical. , right, because it's just because there are of theEdward: broadest sense of the word .Michael: Well, but there are, there, they, we know that there's these are things that are, have happened last few years and so it, it doesn't stretch the imagination to believe that this is that there are sabertooth Tigers through any of these various reasons. So this is why you and I have been doing what I consider to be the hard news Ed, where we've been talking about the real stories. And I do think, these things have to be studied so that people, we, we could turn to, a more scholarly academic source to say, oh no, we've looked into this and turns out the robots who promote it, and now that people can study itEdward: like mad scientist, it's a mad scientist who found ancient DNA and recreated primitive man and and tigers.Michael: Oh my, I love it. I love it.Edward: It's, it's The Thing. It's The Thing for an academic to dive into.Michael: Yeah. Well, you know, Ed, if you and I, if our legacies that we're encouraging scholarship, so be it. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit www.superserious616.com

THE WONDER: Science-Based Paganism
INTERVIEW: Michael of the Atheopagan Society Council

THE WONDER: Science-Based Paganism

Play Episode Listen Later Nov 28, 2022 45:35 Transcription Available


Remember, we welcome comments, questions and suggested topics at thewonderpodcastQs@gmail.com   S3E41 TRANSCRIPT:----more----   Mark: Welcome back to the Wonder Science-based Paganism. I'm Mark, one of your hosts. Yucca: and I'm Yucca. Mark: and today we have a really exciting episode. We have an interview with a member of the Atheopagan Society Council, Michael, who is joining us today, and is gonna tell us about his journey and what this community means to him and his vision for the future and all kinds of cool stuff. So welcome. Michael: Well, thank you very much for having me. Mark: I'm delighted to have you here, Yucca: Thanks for coming on. Michael: Yeah, no, I'm excited. Yucca: Yeah. So why don't we start with so who are you? Right? What's, what's your journey been to get here? Michael: Gosh. Well, I kind of have to start at the very beginning. So my name's Michael and you know, I've, I start, sometimes I go by Mícheál, which is my Irish, the Irish version of my name. And that's something I've been using more as I've been involved in the Pagan community. My parents are both Irish and. They moved to the United States in their early eighties cuz my dad got a green card working over there Mark: Hmm. Michael: and I was born in America. And then they decided they want to move back to Ireland then in 1991. So already I had this kind of dissected identity. Was I American or was I Irish? I never really lost my American accent. When I, when I moved to Ireland my sister who was born in Ireland, she actually has a slight American accent just from living with me. So she never people always ask her, are you, are you American? And she's like, I've never lived there. So it's funny that it's kind of stuck with her, but I moved to Ireland and I suddenly was kind of got this culture shock at the age of five and moving to this new country. And my mother has a very large family, so she has like, two, two brothers and seven sisters, and then I've got like 30 cousins. So , it was a big, a big change from AmeriCorps. It was just the three of us. Moving back to Ireland and. It was a very, you know, Ireland, you know, is, would've been considered a very Catholic country, and it's been kind of secularizing since the nineties up until now. But back then it was still quite Catholic. Like homosexuality was only decriminalized in 1992 and divorce was only made legal in 1995. So, I guess the first kind of sense of, of what I meant to be Irish back then was, You know, you learned Irish in school, you learned to speak Irish in school, and this was very it wasn't taught very well, I would say, and I think most Irish people would agree with that. It's kind of taught like almost like Latin or something as a dead language rather than as a living language. So you're spending time learning all this grammar. And you don't kind of develop that love of it that I think you should. I did go to like Irish summer camp in the Gaeltacht . The Gaeltacht  is the Irish speaking area of Ireland, and I kind of became aware of my Irishness, you know, just through being part of all this and also. I would've introduced myself as American when I was little but people didn't really like that. It was kind of a, like a weird thing to do. So my mom eventually told me, maybe you should just stop paying that. And so throughout my I, you know, as I mentioned, it was a very Catholic country. And when I was in the Gaeltacht in Irish summer camp one of the kids said they were atheist. And I was like, what does that mean? I'm like, I don't believe in God. And I was, and in my head I was like, I didn't know you could do that, I didn't know that was an option. . So I kind of thought about it for a while. I became, we started studying the Reformation in school when I was about 14. And then I learned that Catholics believed in transubstantiation and nobody had really mentioned that before. They didn't really teach the catechism very well, I guess. I'd done my communion and my confirmation, but nobody ever mentioned that. We literally believed that the, the body and blood, you know, was that the bread and water? Oh, sorry. The bread and wine actually became literally, And the body. And I thought that was a very strange thing, that that was a literal thing. It wasn't just symbolic. And then we also studied Calvinism and all that stuff. And I was like, then I started to read the Bible and I was like, then it fun, it finally just dawned on me that I didn't believe any of this, and it was kind of liberating. But it was kind of a way of being d. In a very homogenous society too. You could be a bit of a rebel. So I think I was one of those annoying teenagers who was always questioning everybody and having, trying to have debates with everybody about religion and they didn't enjoy that . And so I went through school and I just remember hating studying the Irish language until eventually when I left school. On the last day, I actually took all my. My Irish textbooks and burnt them and I feel I . Yeah. I mean I feel so much guilt and regret about that and I think about that how important it's to me now and that, that was a real shame that, but I didn't, partially I didn't put the work in, but also I just think the structure. Was not there. I mean so many Irish people come out of outta school not really know, knowing how to speak the language, you know, and I think it is an effective col colonization as well, where, you know, you consider English is a useful language and learning French or Spanish, that's a useful thing, but there's no use for Irish in people's minds, which is a, and I find that a real shame and I. could go back and change that. In university I studied anthropology and history because I was very interested in religion. All throughout my teenage years, I was obsessed with learning about world religions, you know, there was a world religion class in, in secondary school. I didn't get into it, but I begged the teacher to allow me to. Into it because I was so interested in the topic. And he was like, fine, fine. And he kind of thought he'd humor me in one class one day and he was like, well, Michael, maybe you could talk about satanism. That's the topic for today. And I was like, well, let's start with Al Crowley. And he was like, okay, maybe he actually knows what he is talking about So, I went, I. I went to the university sorry, national University of Ireland, Minuth Campus. And it's funny because that used to be known as so it's actually, it's two campuses. They're St. Patrick's college, which is like a, a seminary for priests. And there's the I, which is like the secular version, and they're both, but they both share the same compass. So it's funny, it used to be the, the biggest seminary in Europe. They call it the priest factory cuz they pumped out so many priests that sent, sent them all over the world. And it's when you go out and you walk down the corridors, you see all the graduating classes. So you go back to 1950 and you see a graduating class of like a hundred priests. And every year as you're going down the corridor, it gets smaller and smaller and smaller. Until I think the year I graduated, there was like two people graduating as priests. Yeah. So that was, that was a, I decided to study history and anthropology at n Y Minuth and one of the books that I read. Was kind of a gateway into thinking about land and language, which are two things that are really important to me in my, when I think about Paganism. It's a book called wisdom Sits in Places by Keith Bato, bass by Keith Bassell, and. I'm just gonna read a little bit here from the book because he was an anthropologist working with the Apache, the Western Apache, to try and remap the land using the Native Apache words rather than the, the English words. So trying to make a native map and working with Apache people to find all the true, the true names of all these. so this is the quote, but already on only our second day in the country together a problem had problem had come up for the third time in as many tries. I have mispronounced the Apache name of the boggy swale before us. And Charles, who is weary of repeating it, has a guarded look in his eyes after watching the name for a fourth. I acknowledged defeat and attempted to apologize for my flawed linguistic performance. I'm sorry, Charles. I can't get it. I'll work on it later. It's in the machine. It doesn't matter. It matters. Charles says softly to me in English, and then turning to speak to Morley. He addresses him in Western Apache, is what he said. What he's doing isn't right. It's not good. He seems to be in a. Why is he in a hurry? It's disrespectful. Our ancestors made this name. They made it just as it is. They made it for a reason. They spoke it first a long time ago. He's repeating the speech of our ancestors. He doesn't know that. Tell him he's repeating the speech of our ancestors. And I'm gonna just there's another section here, a little, a few pages. But then unexpectedly in one of those courteous turnabouts that Apache people employ to assuage embarrassment in salvage damaged feelings, Charles himself comes to the rescue with a quick corroborative grin. He announces he is missing several teeth and that my problem with the place name may be attributable to his lack of dental equipment. Sometimes he says he is hard to underst. His nephew, Jason, recently told him that, and he knows he tends to speak softly. Maybe the combination of too few teeth and two little volume accounts for my failing. Short morally, on the other hand, is not so encumbered though shy. Two, a tooth or two. He retains the good ones for talking and because he's not afraid to speak up, except as everyone knows in the presence of gar women no one has trouble hearing what he. Maybe if Morley repeated the place name again slowly and with ample force, I would get it right. It's worth a try, cousin. And then he, I'm just gonna skip forward a bit and he successfully pronounces the name, which translates as water Lies with mud in an open container. Relieved and pleased. I pronounce the name slowly. Then I, then a bit more rapidly and again, as it might be spoken. In normal conversation, Charles listens and nods his head in. . Yes. He says in Apache, that is how our ancestors made it a long time ago, just as it is to name this place. Mm-hmm. So this became important to me when thinking about the Irish language because something similar happened in Ireland in the you know, we have all our native Irish place. But in the 1820s the British Army's Ordinance survey came and decided they were gonna make these names pro pronounceable to English ears. And so they kind of tore up the native pronunciation and kind of push an English pronunciation on top. So you have these very strange English Anglo size versions of Irish Place names Yucca: Mm-hmm. Michael: Soin in is is probably better known in English as dingle, but doesn't really have anything to do with the Irish. And there are plenty of, there are so many examples of this and I think when you're trying to learn about a landscape in your relation to a ship, to a landscape, it is important to know the native place. It's something that I think about a lot and I try to learn. One of my favorite writers is named Tim Robinson, and he's well he died in 2020. But I had the opportunity to meet him in 2009 and he was an English cartographer. But he moved to the west of Ireland, to the Iron Islands and also to Kamara. So he kind of moved between those two places. He lived there for more than 30 years, and what he actually did was he went out and mapped the landscape and talked to local people, and he was able to find some of the place names that had been lost over the years that weren't on the official maps, and he was able to help recreate a Gaelic map of those areas. I think that's a really kind of religious or spiritual activity to go out onto the land and walk it. And to name it and to name it correctly. And I think that's what I think my pagan path is in a way. It's to go and walk the land and learn it, what to call it. Cause I think language is the most important tool we have as pagans. Mark: Hmm. Michael: So those are, that's kind of when I started to think about this stuff. I've always been interested in folk. It was actually funny. There was, it started with a video game one of the legend of Zelda video games called Major's Mask Mark: Hmm. Yucca: Yep. Michael: in, in the game, they actually have like a mask festival and they dis they discuss the the history of the festival. Anna was just like, wow, I didn't, I ended up making masks with my sister and we kind of pretended to. A little mask festival of our own Yucca: Mm-hmm. Michael: that you're, you're familiar with that? Yucca? Yucca: Yes. Yeah, I played a lot of it. Michael: Yeah. So, but I guess I really started to think about folklore when when I watched the Wickerman as um, as a teenager. I was probably at 16 when I watched it, and it kind of opened my eyes completely. And we've talked a lot about this in the group. And I. It's watched as a horror movie in a way, but   I think I really got into the, the paganism idea of, of paganism as a teenager because of watching the Wickman and just the symbolism and the pageantry. And I also just like the idea. These island people turning on the state in the form of, of the policeman. So that's kind of been something I've that I've really enjoyed over the years, watching that every every May as part of my, my, my annual ritual so, you know, after university, I, I moved to South Korea to teach English, and, but at the same time I was quite into Buddhism. I had been practicing some Zen Buddhism from about the age of 18, and, but not like, more as just a practice rather than believing in any of it. Not believing in reincarnation or anything like that. I just found the ritual of it very beautiful. And I ended up going and doing a temple stay in a, in a place at, at a temple. Up in the mountains and it was very beautiful and really amazing. You know, something you'd see in a movie because the monk, the head monk actually brought us out into a bamboo grove and we sat there meditating just with all surrounded by bamboo. And it was waving in the wind and it felt like a correction, tiger Hidden dragon or something like that. And one of the powerful events that happened on that trip. Doing the Buddhist meal ceremony where we ate in in the style of a Buddhist monk. And the idea is that you do not leave any food behind. After you're, after you're finished eating, you've, you eat all the food, and then when you wash the bowls and they kind of put the communal water back into the, the, the waste bowl, there should be no no bit of food, nothing. It should just be clean water. That comes out of, after everybody finishes washing all their bowls. So we followed all the steps to do that and, you know, some people really, really weren't into it. They didn't wanna do the work of, of being extremely thorough. And there were a few rice pieces of rice in the water at the end and the head monk said to us oh, that will now get, you're, you're gonna cause pain to the hungry to ghost. Because the hungry goats ghosts have holes in their throats, and when we pour the water outside for the hungry ghosts, the rice particles are gonna get stuck in their throats. And a lot of people were like, what? What are you talking about Mark: Hmm. Michael: But I thought that was beautiful because it doesn't, not, you don't have to. It's a story that has a purpose, and that's why, you know, It made me think about the superstitions that we have. And I don't know if I like superstition like these, calling it that. Cause I think a lot of these things have purpose and you have to look for the purpose behind them. And the purpose of that story of the honky go story, maybe for him it is about not causing harm to these, these spirits, but it's also about not wasting food. And I think it, it has more power and more meaning. And you remember. More thoroughly when you have a story like that to back up this, this practice. So I think it kind of made me rethink a lot about the kind of folkloric things that I, in my, in the Irish tradition and that, you know, I think about things like fairy forts, which are, you know, the, these are the archeological sites that you find around Ireland. Like, I think there's like 60,000 left around the country. These, these circular. Homesteads that made a stone or, or saw, or saw that you find all over the country and people don't disturb them because they're afraid they'll get fair, bad luck. The, if you, if you disturb the, the fair fort the ferry's gonna come after you , or if you could, or if you cut down a tree, a lone tree. Lone trees that grow in the middle of fields that don't have a, a woodland beside them, just singular trees. These are known as fairy trees and it's bad luck to cut them down. But I feel like these folk beliefs help preserve the past as well, because, you know, farmers who don't have this belief, they don't have any problem tearing down fray, forts and that kind of thing. They just see it as a, something in the way of them farming, especially in the kind of age of industrial agriculture. Yeah. So it just made, that was when I started to think about how important it is to keep folk belief alive. And I've really, and I really started to study Irish folk belief after that point. And I lived in South Korea as I mentioned. I met my wife there, she's from Iowa and she was also teaching in, in South Korea, and we moved to Vietnam after that. And we lived there for a couple of years, and I might come back to that later. But fast forwarding, we moved to Iowa then in 2013, and I'm teaching a course in Irish. At a local community college, but I always start with this poem by Shama Heini Boland. And I just wanted to read two extracts from it. So the first stands out is we have no prairies to slice a big sun at evening everywhere. The eye concedes to encroaching. And then moving downwards. Our pioneers keep striking inwards and downwards. Every layer they strip, they, every layer they strip seems camped on before. So I, I started with that initially, kind of trying to, as, it was almost like a gateway for my students to kind of look at. Look at Iowa with its historic prairies, which don't really exist anymore. It's all farmland. There's very little prairie land left. I think maybe 2% of the state is prairie. But that idea, that idea of our pioneers strike downwards, and I've been thinking about that a lot as well, that that's kind of a, a colonial look at the land because this land, the American land has is just as camped. As Ireland, and I've been kind of experiencing that more and more. I have a friend who's an archeologist here and just hearing them talk about the kinds of fines that they have. You know, we lived in a town where there was a Native American fishing weir was a couple of hundred years old. It you could kind of see the remains, but it mostly washed away by the time we had. But I did see an old postcard of it from the seventies, and you could see it very clearly. And so just make, and then we always it's become a ritual every every autumn, we go up to northeast Iowa to these, to these effigy mounds, which are some Native American mounds up there on a bluff, just overlooking the miss. Mark: Hmm. Michael: And that's really amazing to look at that and experience and experience that. And you know, I'd love to go back, unfortunately, Shamus, he died more than 10 years ago now, but I'd love to go back and ask him if he would consider rewriting that line, you know, because this land is just as a count on Yucca: Mm-hmm. Michael: and I'm trying to, trying to make sense of that and what it means. As an Irish person living in America, Yucca: Mm. Michael: Cuz we, Irish people are victims of col colonialism,  Mark: Hmm.  Michael: Irish people, when they moved to America, they just became white as well and had the same colonial attitudes as everybody. And I'm trying to kind of, but you know, there's, there's, there's kind of stories of reciprocation as well. Where during the famine, the Irish famine the, I think, I believe it was the Chota Nation sent Emin relief to the AR to Ireland. Even though they didn't have much themselves, they still saw this. People in need across the water and they sent money to help. And, you know, there's that connection between the Chta nation and the Irish has continued to this day. But I am just trying to figure out what it means to be an Irish person and a pagan living in this country. And that's kind of where I, where I am right now. But to get back to how I got into Ethiopia, paganism I mentioned earlier that I was really into the Wickerman and I found this group called Folk folk Horror Revival on Facebook. And somebody one day mentioned that there was this group called Atheopagan. And so I decided to join and I found a lot of like-minded people. And I've been kind of involved in the community for, for, I think that was maybe 2018. Mark: Mm-hmm. Michael: And I've been involved in the community since then and maybe on a bigger, I've been much more involved since Covid started and we started doing our Saturday mixers. And I think I've made maybe 90% of those Mark: something Michael: and we've, yeah, and we've been doing that for the last three years and it's just been. It's a really amazing, it's one of the highlights of my week to spend time with with other people in that, in that hour and 45 minutes that we spend every Saturday. Mark: Mm. Michael: Mm-hmm. Mark: Yeah, I, I really agree with you. That's, I, it's a highlight of my week as well. Such warm, thoughtful people and so diverse and living in so many different places. It's yeah, it's just a really good thing to do on a Saturday morning for me. And. We'll probably get into this more a little bit later, but the idea of creating human connection and community building I know is really important to you and it's really important to me too. I think there have been other sort of naturalistic, pagan traditions that have been created by people, but they just kind of plunked them on the internet and let them sit. And to me it's. That would be fine if I were just gonna do this by myself. But when other people started saying, I like this, I want to do this too. To me that meant, well then we should all do it together. Right? Let's, let's build a community and support one another in doing this. And so the Saturday mixers, when we, when Covid started, I think. I mean, to be honest, COVID did some great things for the Ethiopia, pagan community.  Yucca: Yeah. Mark: yeah. Kind of accidentally, but that's, that's Yucca: Well that's the silver linings, right? That's one of the things we, you know, life goes on. We have to find the, the, the benefits and the good things, even in the challenging times. Mark: Mm-hmm. Mm-hmm.  Michael: yeah. I think. I'm just thinking back to when we started. So it's kind of, we have maybe six or seven regulars who come to every meeting maybe. And then we have other people who join now and then, but I'm just trying to think back to the first meeting. I think we, that's when the idea of doing virtual ritual began as well in that first meeting. And we were trying to figure out how to do.  Yucca: Was that was the first meeting before Covid or was it as a response to Covid? Mark: You know, honestly, I don't remember. I think it must have been in response to Covid because everybody was shut in and, you know, everybody was kind of starving for human contact. Michael: I think the first one may have been March or April. 2020, Yucca: Okay, so right there at the. Michael: Yeah, right at the beginning. Yeah. And I think, I remember in the first meeting we were talking about ritual ideas and I think the first suggestion I came up with was like I'd love to somebody do like a, describe what an atheopagan temple might look. Mark: Oh yeah. Michael: Yeah. And I left, and I think you were recording the meetings at that time, but we don't record 'em anymore, just so people can feel free to be themselves and not have a recorded recording of themselves out there, . But I know that, I think James who you interviewed recently he, he was listening to that one, I believe, and he came the next week and actually had prepared a guided meditation. Of what a pagan temple would be like to him. And it was a walk through nature. I think that was the first, our first online ritual together. Mark: Yeah, I remember that now. Yeah, and it's been, it's really been a journey trying to figure out how, how can you do these ritual things over a, a video conferencing platform. In a way that makes everybody feel like they're participating and engaged. Right. So that there's a, a transformation of consciousness. But I think we've done pretty well, to be honest. I mean, some of the rituals that we've done have been really quite moving. Michael: Yeah. And I think the ritual framework that you've worked at translates very well to. A Zoom conference as well. I dunno if maybe, if he wants to describe that, what the usual atheopagan ritual would look like. Mark: Sure. We've, we've talked about this before. The, the, the ritual structure that I proposed in my book is basically a, a five step process where the first is arrival, which is sort of, Transitioning into the ritual state of mind from the ordinary state of mind, and then the invocation of qualities that are a part that we'd like to be a part of the ritual with us, which is sort of the equivalent in Wicca or other pagan traditions of invoking spirits or gods or what have you, ancestors, what have you. And then the main working of the ritual, which varies depending on what the purpose of the ritual is. But it can be, well, we've done lots of different kinds of things. We've braided ribbons and then tied, not tied magical knots in them. We've made siles, we've we've done just lots of different kinds of things. And then gratitude expressions of gratitude. The things that we're grateful for. And then finally, benediction, which is sort of the closing of the ritual at a declaration that we're moving back into ordinary time. Yucca: So how does that look in, in a meeting, like a Zoom meeting In a digital format? Mark: Michael, you want to take that one or should I? Michael: So you know, you have maybe, I think usually when we have a ritual more people attend that and so we might have 12 people there and often  Yucca: cameras on. Michael: Camera's on. Well, it's optional. Yeah. If you don't feel comfortable having your camera on, that's completely fine and you don't even have to speak. We do encourage people just to you know, leave a message in the chat so you can just listen in. You can engage as much or as little as you want. And you, you, so. We have all the people on in the conference, and maybe we'll try and get some more of the senses involved as well. So sometimes we'll like candles and everybody will have a candle in front of them. I do know for for some of our sound rituals. Mark, you've used two cameras where you, you aim one camera at maybe a focus, like what's one of the examples of that that you. Mark: Well we did that both at Sown and at Yu. So both the Halls ritual and the Yule ritual where I would create a focus or alter setup with thematic and symbolic things relating to the season. and then I would point, I would log into Zoom with my phone and point my phone at that. And then, and then I'd log in separately on my laptop for myself as a person, and then I could spotlight the focus so that it's kind of the centerpiece of what everybody experiences on their screen and sets the atmosphere. Michael: Yeah. So just a virtual focus that everybody can, everybody can virtually gather around. Yucca: Mm-hmm. Michael: Yeah. And I think we've also used a Pinterest board in the past as well for people. I think it was at Sound again, we had that Pinterest board where people could put up notes about. Their ancestors or loved ones that they were That's correct, isn't it? Mark: Yeah. Yeah. Or pictures of people that had passed recently or. Yucca: mm. Michael: yeah. So yeah, there's a lot of digital space that you can use for this ritual. We also try not to involve too many props as well. Because we wanna make it as easy as possible for people of all abilities. And just if you don't have the space for something, for a large proper if you don't wanna make a lot of noise, you know, we're not gonna have you using chimes or things like that. So we try and make it as easy as possible. Sometimes we do invite you to bring some food to eat as well, because, you know, a lot of these are feasting rituals. So we maybe, if you feel comfortable bringing some refreshments, you might want to do. And just have a friendly meal with people online. For example, we're actually gonna start doing I'm gonna be leading full Moon meals every month on the, on the, so the first one's gonna be December 7th. And I'll post, post about that on Discord, and I think Mark will post about that in the Facebook group. Yeah. And so the idea is everybody just comes. Joins the Zoom meeting and everybody should have their meal. Whether you're, whether that's lunch or if you're in a different time zone, maybe there'll be dinner or maybe it's just a snack. And then we'll spend a minute just thinking about the providence of the food and then we'll eat us and maybe people can talk about the food that they're eating and what it means to. And I'm hoping to make that a monthly event that we meet every full moon to share a meal together Mark: That sounds. I, I, I really I have pagan guilt over how little I pay attention to the full moon. I'm, I'm always, I'm always aware of what phase the moon is in, but I, I don't do a lot in the way of observances of the phases of the moon. And so, I'm excited to have this added in to something that I can attend. Michael: Mm-hmm. . But yeah, as you can see from that format, it's very simple. And again, you, if, if people listening would like to attend as well, there's no obligation to keep your. Your camera on, there's no obligation to speak. You just, you can just listen in and just feel part of the, part of the community that way. Yucca: Mm-hmm. So in the mixers sometimes ritual, are there discussions or what else do the mixers. Michael: Usually the mixer is kind of a freeform thing. Yucca: Mm-hmm. Michael: Maybe we'll have a topic sometimes, but usually people just come and do a check in and talk about how they're, how they're getting on that week and if there's anything they wanna discuss, we just open it up to that. Depending on the size of the turn, we may require some kind of etiquette stuff. So if there are a lot of people and we don't want people to. Shut it down or have spoken over. So we'll ask people to raise their hands if they wanna speak. That's, that really is only when there's a lot of people and, and often I, I know I'm somebody who likes to talk, so it's a, I think raising hands also gives people who are less confident, or, I'm sorry, not less confident, just not at, don't feel like interrupting. It gives them an opportu. To to have their say as well and be called on mm-hmm. Mark: Yeah. Yucca: Mm. Mark: I think it's really good that we've implemented that. It, it's, it helps. Michael: Mm-hmm. I think one of the really cool rituals we had recently was for like the ATO Harvest, so that was when was that? That was in September or October. In September, yeah. Yeah. So. We were trying, I mean, usually it's, you could do some kind of harvest related and I think we've done that in the past. But I have a book called Celebrating Irish Festivals by Ruth Marshall. And this is my go-to book for, for, for ritual ideas. And this is, and I like to. Kind of some of the traditional holidays and maybe just steal from them. . So Michael Mass is is the holiday around that time in Ireland? It's a Christian holiday, but it's also it's a  Yucca: were older. Michael: yeah, yeah, Yucca: Christians took for the older Michael: yeah, yeah, yeah. you know, it's about St. And he's known for slaying a dragon as just as St. George was known for slaying a dragon. But I thought, well, let's turn this on this head and let's celebrate our inner dragons. Let's bring our dragons to life. So it was the whole ritual was about dragons. And we actually drew Dragons, drew our inner dragons and shared them. Talked about what they. And kind of we were feeding our inner dragon so that they could warm us throughout the coming winter. Yucca: Hmm. Michael: Mm-hmm. Mark: as well as watching the home. Star Runner Strong Door, the Ator video, Michael: Oh yeah, Mark: which you, you have to do if you've got dragons as a theme. It's just too funny to avoid. Michael: That's an old flash cartoon from the early two thousands. That was pretty popular. Mark: Mm-hmm. Michael: Yeah. Track toward the ator. Google it, and in fact, I did a, I did the hot chip challenge as part of that ritual as  Mark: That's right. Yeah.  Michael: where I ate a very, very hot tortilla chip on camera. And. It was it was painful, but I'm sure, I don't know if it entertained other people, but it was, it was fun Mark: Oh yeah. It was fun. Michael: So, yeah, they're like, I mean, these rituals aren't all, they're, they're fun and they're kind of silly and goofy and but I mean, I thought at the same time they're very meaningful because people really opened up in that one  Mark: Yeah.  Michael: and shared some really profe profound truth. That was one of my favorites actually, and I hope we do another, another dragon invoking ritual in the future. Mark: Maybe in the spring Michael: yeah. Mark: you do it at, at both of the equinoxes. Michael: Mm-hmm. Mark: so you've joined the Atheopagan Society Council, which is great. Thank you so much for your, your volunteering and your effort. What do you think about the future? How do you, how do you see where this community is going and what would you like to see? What's, what's your perspective on that? Michael: Yeah, so just before I discovered the Pagan Facebook group I had attended A local cups meeting. So that's the covenant of Unitarian Universalist Pagans. And so it was just a taro reading workshop and, you know, I was, I, I like kind of using these kind of rituals just for their beauty and, but not, for not, not seeing anything supernatural in them. I was, it was amazing to, to find a group that was interested in these kind of things too, but without the they weren't incredulous. So I guess what I'm hoping for is that as we, as we kind of find more people who are, are, are aligned with us, maybe we can have more in. Experiences. That was one of the great, the great highlights of, of last year was attending the Century retreat and meeting all, all these amazing people in real life and being able to spend time together in real life. And I hope that as we kind of, as the word gets out about this group, more and more of us can meet in person or as we are able to, Mark: Mm-hmm. Michael: That's what I really hope for the future that you're finding your, your people that we are, we are being able to get these local groups together and then spend time on these important days of the year. And I believe the Chicago Afu Pagan group was able to do that not too long ago. And I know Mark, your local group meets quite regularly as well. Mark: We, we meet for the, for the eight holidays, for the eight Sabbath. So yeah, we're gonna get together on the 18th of December and burn a fire in the fire pit and do a, a ritual and enjoy food and drink with one another. And yeah, it's a, it's a really good feeling that that feeling of getting together is just You can't replace it with online connection, but online connection is still really good. So that's why, that's why we continue to do the mixers every Saturday. And Glen Gordon has also been organizing a mixer on Thursday evenings. Well evenings if you're in the Americas. And. Yeah, there's just, there's, there's a bunch of different opportunities to plug in and it's always great to see somebody new. Michael: Yeah, I think that would be another hope as well that, you know, if you've been on the fence about coming to a mixer I hope that what we've described today maybe entices you to come along. You know that there's no expectations and you can, you can share, you can just sit in the background and watch, or you can participate. There's no expectations and it's just a nice way to, to connect with people, so, Yucca: how would somebody join in? They find the, the link on the Facebook discord. Michael: that's right. Yeah. So I think, mark, you post it regularly on the Facebook group, and it's also posted on the disc. As well. So, and it's the same time every Saturday, so it's 12:15 PM Central for me, so, and that's like 1115 for you, mark, on the, Mark: No, it's 1115 for Yucca. Michael: Oh, okay. Mark: It's 10 15 for me. Michael: Okay. Okay. Yucca: one 15 for Eastern. Then  Michael: one, yeah, that's right. Yeah. Yucca: Hmm Mark: And. Michael: and it's always the same time, and I think we've, I think we've only missed one week, maybe in the last three years. Mark: Yeah, I think that's right. I wasn't available and I couldn't find somebody else to host or something like that, but yeah, it's been very consistent. And I see no reason to think it isn't gonna keep being consistent. But yeah, we, you know, we welcome new people. And if you're not in the Americas, that's fine too. We've got a couple of Dutch people that come in all the time. There's a, an Austrian woman who lives in Helsinki who participates. So Yucca: E eight nine ish kind of for Europe, Mark: Yeah.  Michael: Yeah, yeah. Yeah. We've even had on the Thursday night mixer, we've even had Australians join occasionally too. So Yucca: That sounds like that'd be early for them then, right?  Michael: yeah,  Yucca: getting up in the. Michael: Mm-hmm. . Yeah. But I'd I'd love for some of the listeners to come and join us on one of the mixers and then cuz you know, you bring new ideas. And I we're always looking for new ritual ideas, Mark: Mm. Michael: That kind of bring meaning to our lives and to everybody else's. Mark: Mm-hmm. Yeah, cuz that's, I mean, that's what we're doing, right? We're, we're create, we're, it's a creative process for us. We've got these sort of frameworks like the Wheel of the Year and the, the ritual format that I laid out. Although people can use other ritual formats too. That's fine. But it's, it's an ongoing process of creation and of taking some old traditions and folding them in where they fit but creating new stuff as well. One of the innovations that we, that we've been doing for the l past year or so is if people want to be done with something, if they want to be finished with something in their. They can write it in the chat and then I take the chat file and I print it on my printer and I take it and I burn it in my cauldron. So it is actually being burnt physically. But it just takes a little bit of technical processing before that happens. Yucca: Hmm. Mark: And it's those kinds of innovations that are really useful for online rituals. And boy, if you have new ideas about things we can do for online rituals, I, I would love to hear 'em. Yucca: So thank you so much for sharing your story and your visions or the future with us. This has been, it's, it's really been beautiful to hear and to get that insight. Thank you, Michael. Michael: Well, thank you for having me on. Yucca: Yeah. Mark: It's been delightful hearing from you and, and I, I gotta say, I, I feel like our community is very lucky. You've been exploring religion and and folklore and ritual for a long time in a lot of different frameworks and I feel really fortunate that you've landed with us cuz I like you so. Michael: Okay. Well thanks very much. I like you too, Mark: Okay folks, that'll be all for this week. And as always, we'll have another episode for you next week on the Wonder Science Based Paganism. Have a great week. Yucca: Thanks everybody.  

The Remote Real Estate Investor
The largest risk that one has is being an employee, with Neil Timmons

The Remote Real Estate Investor

Play Episode Listen Later Nov 19, 2022 27:18


Being only an employee leaves you vulnerable to the ups and downs of the market. Real estate investing is one powerful defense against job loss and economic downturns. In this episode, Neil Timmons provides insight into the real estate business and shares his experience with overcoming economic adversity to secure a robust financial position. Neil Timmins is the CEO of Legacy Impact Partners, where they invest in real estate opportunities ranging from houses and apartments to industrial and medical offices. In 2021 Neil published his first book, Unicorn Hunting for Real Estate Investment Companies: How to Easily Attract, Screen, and Land a Unicorn. The book is tailored to helping real estate investors find and retain top talent through the strategic systemization of hiring. Neil also hosts his own podcast, “Real Grit” where he pulls back the curtain on real estate investing through interviews with industry titans. “Real Grit” provides listeners with the tools they need to secure their lasting real estate legacy!   Episode Links: https://legacyimpactpartners.com/ https://legacyimpactpartners.com/podcast/ --- Transcript Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Michael: What's going on everyone? Welcome to another episode of the Remote Real Estate Investor. I'm Michael Albaum and today with me I have Neil Timmins, who is an author, a podcast host, entrepreneur, real estate investor and he's gonna be talking to us about going from an agent and employee to building a significant business in the real estate space and what it takes to do so. So let's get into it.   Neil Timmons what is going on, man, welcome to the podcast. Thanks so much for taking the time to come hang out with me today.   Neil: Good. It's so good to see you again. I appreciate the invite. Looking forward to this for some time now.   Michael: No, likewise, the pleasure is mine. I'm super excited. So you and I of course know each other. We were chatting offline just before we hit record. But for anyone who doesn't know Neil Timmins, give us the background quick and dirty. Who you are, where you come from, and what is it you're doing real estate.   Neil: High level out of Des Moines, Iowa, born and raised, started as a residential real estate agent built a built a brokerage there on to REMAX for a number of years was a top REMAX guy with my 20s and then eventually found my way stumbled into investing worked my way through single family investing, we still do a little today but morphed into commercial investing. And that's a primary focus today.   Michael: Love it and I hear this this theme so often with agents start as an agent, got my teeth cut, then went into the investment side. My guess if you're a top performing agent, in your local market, you're making a lot more money on an annual basis than you would if you're investing. So why did you make that transition? Why'd you make that jump?   Neil: Yeah, no good question. Well, the not so fun story is I was probably 31 ish at the time. Maybe 32, I came home one day to my wife of a decade in our three little kids, all about five or younger, and my wife had them all packed up and said she was leaving, leaving for good. I had spent the better part of seven years or so working like a dog every day of the week, I worked. My second year in real estate, it worked 355 days. So that business was built, ultimately, you know, I was able to put his team in place and that business, but it largely was built on my back and my effort and so it was at that point that, you know, I had an ultimatum and I begged and pleaded with her to go, you gotta give me give me an opportunity. I understand. So give me an opportunity. She did thank God. 45 days later, I sold my REMAX and took a whole bunch of time off to decide, well, how am I going to how am I going to do this? How am I going to make a living in contribute because I like doing what I was doing and not the not to the degree in which I did it. But I enjoyed real estate a lot, right? The people, all the fun things around it. So it took some time off to evaluate things and then ultimately plugged back in largely on the investment side.   Michael: And today you own a business around the real estate investing space. Tell us about that.   Neil: Yeah. So I own a couple of things. On the on the investment side of things. We're primarily focused on commercial investing, right, we buy by multiple asset classes, you're on a primary ladder, Des Moines, Iowa, we still do fix and flip in the office. Although I'm not largely involved, we've got a nice little machine that runs that really good. Contractor base in place, literally same contractor. Don't quote me on how many but we've done probably nearly 200 with the same exact crew. So it makes running things and the efficiencies there of all awfully simple. I love talking to people going you know what I don't like flipping because then I gotta go pick the carpet, I gotta pick the paint whatever else I'm like, What do you mean, you have to do that we picked it once. It's the same carpets, the same paint, same countertops, the same appliance, nothing, nothing changes. You're not doing a whole block of these things. It's not like anybody notices. You just pick it once yeah and so then also, I run an education business, which we launched this year, which has been very well received from folks who want to make that bridge want to leap into commercial real estate and, you know, figure it out either how to do their first deal or how to do their next deal.   Michael: And I'm curious, Neil, because I also come from the education space, and the folks that you're working with, are they the DIYers or are they the folks that have heard of commercial and want to get exposure to it in some form or another are a mix of the two?   Neil: Yeah, no, it's really DIYers. Yeah, that's not largely the passive investors, if you will, it's people who are active in real estate like, like using… if you will, you know, in my career was it just laid out you know, as well cradle to grave if you will, coming through I'd like if you were to go, how should someone progress? Although most don't do that, you know, they end up in one thing and often stick there, but I kind of work my way through that. Is this constant evolution of how do we elevate oneself and one skill set to take it to a to a new level and that's where these folks are they know they've done, they've done single family, they've largely been exposed to it, maybe they've been exposed a little commercial, but just haven't gotten to the results. They haven't they haven't been on a foundation, a legacy had been on a foundation of financial freedom and, you know, arguably, in mice that that commercial gets you there faster and easier.   Michael: And within commercial because it is such a diverse asset class and really name where do you see folks going that are having the most success?   Neil: Oh, good question there. You know, we bring people in, and we do a lot of things from a training standpoint, want to be in an asset class exercise to go alright, well, fill this little asset class matrix out, we have my hand if answer a handful of questions to go, you know, do you resonate better? Would you rather work with people or businesses, and we just bring them through a series of questions, and that lines it up to go well, top to bottom ranked, we focus on six level six largest asset classes, there's top to the bottom, here's what here's what it looks like and then my encouragement from there is, Listen, if number two resonates a whole lot better with you than number one on that list, that's what you should do, because it's just easier and you know, this, if we were to go work on something you can get passionate about, it's a whole lot simpler, then put a little more effort into it and something you're just like, huh, maybe?   Michael: Totally, totally and, you know, I'm curious, so many folks, I think can go invest in single family on the side as a project as a test as an experiment, the DIYers that are doing commercial real estate, are they doing it on the side? Are they really jumping in with both feet, kind of like you did, and making this their full time gig?   Neil: Yep, great question most are doing on the side, most are either stacking it on to their single family business or, you know, if they've got a day job and several folks do is they're doing this, you know, in the evenings, nights and weekends, side hustle, if you will and you think about you know, from makeup, a number of you were to go market to single family or markets or commercial just by being in commercial, the number of available prospects has been largely diminished. It's a much more manageable group of makeup, an asset class, let's say self-storage, you're going to go market self-storage is in your county, well, in comparison to houses, it is a mere fraction. So your ability to call text or you know, mail somebody or connect with a broker, perhaps it's very manageable. You don't have to do it full time. In fact, that would not encourage it, because you're gonna sit around, you're gonna get discouraged. Because there's candidly not enough to do versus the single family side, you could always find something to do.   Michael: Interesting. Talk to us about kind of the exits and the thought process around the exit from that business. Because in my mind, and I think in a lot of other investors' minds, a house is a house is a house, you know what it is? I know what it is everybody on the street, you know, that you bump into knows what it is, and knows how to buy it, versus a self-storage unit. I could maybe Name one person that I know that's involved in that business and so if I'm trying to sell it, who's gonna buy it?   Neil: Yep, no, exactly. So that's, you know, what I do on the training side is bring people through, even if you know, largely set some goals, understand why you want to be in this business, and perhaps what you'll do get through the training go, I don't want to be in the business. And that's okay, too. That's okay because what you don't know or what you what you now know, empowers you, right? To make a better decision about what the path you should be going down. So we bring people through that large infusion for retraining to expose them to what this world looks like, and then how to, you know, identify an asset class that really resonates with you how to price something up, how do we get leads, so largely from a marketing standpoint, from a lead standpoint, what do we say then? How do we value it? How do we actually put something a price to it to go alright, this looks like a potential really good deal, then how do we put it under contract and then from there, you know, the exit plans largely are or we get to resell the property. Occasionally, we get a property that comes in our wheelhouse, what I call, it's not our perfect seller, so it's a good deal, just not for us. Now, can we move that along, so to liken that to single family wholesale it double close it novated right, do all the same things in the commercial side or, you know, we decide, hey, this is our perfect seller with the property we want to own. So how do we how do we close it up or we get to raise equity? How do we go get debt and then how do we bring the whole thing together to properly manage it? So that's what we show folks how to do and ultimately starts you know, on the front end of the process to go Alright, how are we buying this because I know what our required returns are and if it doesn't hit that I'm that's gonna lead us down a different path to either go it's either a non-deal or we're gonna get this moved along to another investor and cash up the big check that we can utilize for the next year.   Michael: Yeah, that makes a ton of sense and you use the term that I'm not frankly familiar with novate. What does that mean?   Neil: Novation is that this has become very popular on the single family side. So there's a lot of buzz on the single family side, especially for those in the wholesaling business. Okay, it is to replace one contract with one another with another contract. So essentially, if I was to, you know, say, for example, I was to buy a property from Mr. Jones, I have a contract in place with Mr. Jones, I decided I want to move this property along under innovation process, you would then provide me a contract that would replace mine, there's typically a difference in pricing, right, you're gonna pay more than what I've just paid and that delta ultimately gets paid back to me. As part of the process. I'm high level in here. There's some moving pieces but high level?   Michael: Yeah, okay okay. Great to know. Neil, I'm curious if we can zoom out for a little bit, because you went from realtor agent, which is a kind of a unique profession and that, yes, you are an employee, but also you are kind of the business owner, your own of your own little business, your own little domain, and then you went and put a team in place, and then you ultimately sold that business. But for so many people that are employees in a traditional nine to five w two employee position to make the transition from employee to business owner, I think is a big leap for a lot of people. What was that like for you mentally going from? I'm going to be an agent to now I'm going to start and run and operate a business.   Neil: Yeah, no good question in it. I think that's, it comes in incremental gains, right. So how do you how do you elephant, right, one piece at a time and so the same thing occurred from me mentally and I think that is? It's a terrific question because I think so much of this business, in business in general is mental, right? It's a six inch game in between your ears and so how do you combat that I read a book when I was probably 20 to 23 years old. The Millionaire Mind by Dr. Thomas Stanley. He wrote The Millionaire Next Door, that's probably his most famous book, The Millionaire Mind was incredible and it broke it down to, you know how millionaires think and my thought process, of course, is well, if you just think like a millionaire eventually, and then, therefore, act and operate like a millionaire, I will eventually become one, right. So it's not it's not hard success leaves clues. So there was a lot of things in there that that impacted me at a very deep level and one of them, the biggest takeaway for me was, the largest risk that one has is being an employee. They can let you go any day of the week, this is what I came to believe in, it's still my operating beliefs today are just risky, if you have no control and I, I am well aware that as a business owner, as an operator, as a real estate investor, we take tremendous risk. There's no doubt about it but I still think they pale in comparison to putting all eggs in one basket, men have an employer of someone else.   Michael: Yeah, it makes total sense. So as you started moving things along, and created and formed and founded your business, how did you figure out who the right people were to put on the proverbial bus because I think, again, so many people have either a great idea, and they're really good at maybe doing that one thing. But doing that one thing isn't a business and so how do you scale it and have a proper functioning, running operational business?   Neil: Yeah, no, great question and that's, that's probably, if I was to attribute any of our success over the course of last three ish years, two and a half years, somewhere in that range, we've had significant success in that period of time, it's largely been correlated to my evolution as a leader, knowing that the only way forward is ultimately with and through other people. And so I've had a focus internal so go back to a question you just asked earlier, from a mental attitude of taking that leap. For me, it's how do I develop as a leader how to become a better a better person, somebody that people look up to somebody that people want to be around, so many people want to listen to, and, and be on the same bus with going rowing in the same direction and so that has largely, that's been a big focus over the course the last couple of years. When I was at a spot where he's gone, it's time to grow. You can't hire and retain a player's unicorns as I call them. You can't hire and retain unicorns if you're not one. So how do you how does one improve their personal self to be able to get to that level? That other a players want to be around?   Michael: Yeah, that makes total sense. So what it what did you do? Can you open the vest a little bit, let us peek under the curtain…   Neil: Yes, you know, it's, I wish there was a silver bullet here, but it's largely just been, you know, what do they say what's mentionable is manageable and for me, it's just having that Cognizant thought that okay, well, now, I'm mindful of this and so now I need to give thought to this. How do I say things how do I handle things? How do I handle certain situations? What is the impact when making this isn't with an employee or with a team or with a customer in front of folks, how's this gonna resonate? What does this look like and then having the vision as a leader, as any leader, doesn't any organization, that vision to go, where are we going and this isn't about me, this is about us and so oftentimes you'll hear me say, we did this, I almost, you know, I try very hard to say that 100% of time, I didn't do anything. We did this collectively, all the results are collective right. It is us together and that reading, continuing to stay focused on that, stay ahead of what's transpiring, trying to, you know, hosting a podcast being around other people like yourself, other people in the industry having an understanding what's going on. So been trying to be on that curve from a knowledge base standpoint about what's transpiring that's helpful, too.   Michael: Yeah, yeah. I love that and asking for a friend. I hate people and I don't think I want to interview people and screen people and that sort of thing. Does that mean that I shouldn't start a business with my great idea?   Neil: The first part is I don't like people. So let's just call that the introverted, right? They don't want to interact with other people. My right hand gal is an introvert. She's not very gregarious as it relates to people. She's very good with people. But she wants to she's far more task oriented about how do we execute on what we're doing? I think that's terrific and now, what hadn't you hire her because she's the Yang, right? It's Ying and yang. She complements me in a perfect opposite fashion and I do the same thing. The other way around. Yeah, it's, I think that's terrific. I think it's wonderful, if you can, what you just expressed was, you know who you are, if you know who you are, you can identify a path forward and I would encourage you absolutely. Knowing what your deficiencies are is wonderful. We're all we're all given strengths someplace, just balance this balance your weakness with somebody else. Don't try to what are the what don't master in the weaknesses, right? So anytime we have a weakness here in anybody, you know, largely for me, it's going just don't do it. Don't master in the minors, because at the end of the day, you're still going to be a d minus for you, no matter how good you get at your weakness focus on your A's.   Michael: Yeah. Oh, that's such a good expression. I can't tell you how many times I've heard people say, oh, I wanted to visit with my best friend. We're so similar that I'm like, that doesn't sound like a good partnership.   Neil: Sounds like sounds like a great bar and I but not a good business decision.   Michael: Yeah, I know. Totally, yeah right.   Neil, if we zoom back into the commercial side of real estate coming from the single family space, what is it that you see is the biggest hurdle of barrier to entry for folks that want to make that leap into commercial but utilize someone such as yourself to help them get there?   Neil: You'll never guess us? Are you ready for this?   Michael: I hope so.   Neil: I know, you're it's a mental barrier. It's all made up in their head. It's they don't think they can't. Yeah, but they don't think that that is it because past that, the ability to go well, okay. Well, if you've ever let me let me liken it to single family. A duplex is like a single family rental house, right? It's just two doors and the numbers change a little bit? Well, a 20 packs is the same thing. There's largely, there's not much difference in these things you're adding some zeros are calculated a little differently, but it's pretty much the same. In fact, management, in my opinion, gets easier. The more doors you have, right, you get professional management, you get it, it becomes simpler. Yeah and then to make a change to go into some other asset class, we just have to make a bridge. What does that look like? They have to go to an industrial buildings on a triple net lease, which is probably the simplest thing to calculate and get one's head around when you're going, well, they just pay a lease rate, and then they fix all the stuff that goes wrong with it, right? That's it your true and your true and why is the rent, we've got multiple properties like that and we're the management company, which means we just get the rent and never hear Yeah.   Michael: Yeah, that's by far the easiest piece of property in my portfolio is triple net.   Neil: Yes, correct. But people are, you know, we're scared about what we don't know and that's true of all of us, right? We're scared about what we don't know, afraid to make mistake, which is totally understandable and so we just help folks, we educate them as we go answer questions as we go and show them the exact path to be able to get from, you know, I want to learn more about commercial real estate, I'd love to be able to buy a deal to actually get to a close.   Michael: That's awesome. And I'm curious, Neil, what's your favorite asset class and why?   Neil: My favorite asset class, although I own I'd have to calculate up four or five different asset classes, but my favorite today is going to be industrial.   Michael: Industrial why is that?   Neil: Yeah, industrial is in demand like crazy. Secondly, in 2021, had the second largest rent increase across all asset classes, only trailing two apartments. But in comparison to apartments, they're far easier to manage, right, I get a triple net deal, or a double no deal, there isn't much to do, there's very few moving pieces you end up with, on average, let's say a five year to 10 year lease is pretty straightforward.   Michael: Okay. So if I'm playing devil's advocate here, and we're looking at this industrial building, this is suited only for a business. This is not for people can't come live here and the type of business you might have to build to suit it out for that particular business 5-10 years down the road, that might be a future Neal problem. But let's drive down that path that tenant leaves goes out of business, what have you economy turns? If businesses aren't doing well, in the area, are you stuck with this vacant building now?   Neil: 100%. If businesses are doing well in the area, meaning they're laying off or not employing people, my thesis is you still have you still have an apartment problem relative to occupancy and or rent rates. This goes back to earlier question is, admittedly, we have to take a risk someplace, right? It's just my comfort level and I like the box, you know, not a somehow engineering building has been added on to or defined for one, one person's exact use, I like a big giant box, just a rectangle, that's it, a business of multiple businesses come into that and fill it out in which way they want to. So like the fact that if I can buy my, my preferred buying is for buying some older not buying brand new stuff, buying some older buying something with a value add or on buying at a discount of some managers, the intent is to buy it correctly. And if I can buy a property, let's call it make up a number right now 70 to $80, a square foot brand new construction is gonna be 120 to 130 a square foot, I think I'm in pretty good shape over the course of coming years, I think that my dollars, and my rent rates get pulled up to the fact that sheer cost of new construction is gonna be 60% higher.   Michael: All right, I dig it, I dig it and for anyone, I'm just realizing now, some of our listeners might not be familiar with the term double net triple net lease, can you give us a quick definition of what it is?   Neil: Yeah, it just defines what people pay for double net, for example, is probably one of the least likely terms that use but let's say triple net triple net means ultimately that the tenant pays for everything, there may be some nuances inside the lease, but taxes, insurance, repairs maintenance, the tenant pays for that. So if your releases 100 grand a year, your net is 100 grand a year before, before your mortgage, any sort of debt payment you have on it. A double net means they don't pay for everything they pay for perhaps taxes and insurance, but not all the repairs and all the maintenance, and therefore your NOI is gonna be a little lighter, depending on what you have to maintain and pay for.   Michael: Okay, perfect and I'm sure some of our listeners are hearing that and thinking like, this is the best thing since sliced bread. I'm gonna go put all of my single family homes and all my apartments on Triple Net leases. Why is it only a thing that's been heard of in the commercial space?   Neil: Yeah, no good question. You know, to liken it to single family, you're like lease with an option or a contract sale, that's probably the closest thing you get to a triple net in the in the single family house side, right? So you kind of contract sale, somebody that mean that contract buyer is now responsible for everything associated with that house, right? That's what it looks like. If you look at the closest thing, there's some differences there. Obviously, a contract sale into a down payment interest rate. That's not the same as a triple net lease on the industrial side but that's probably the easiest way to liken it to single family.   Michael: Yep. Yeah, that makes total sense and for anyone listening, like Neil mentioned, it's just the cap rate is like the easiest thing ever in the Analyze easy thing ever, you got a million dollar building cap rate 6% they're paying 60 grand a year, then bam, boom, end of discussion. You're not paying taxes, you're not paying insurance, you know, capex and maintenance. So you can calculate your true return, and then look to calculate what your debt service payments gonna look like and determine what your return looks like after that, versus the traditional single family rental or apartment or traditional residential space. They pay you a set fixed amount, the rent, and then you have to go figure out the taxes, insurance, repairs, maintenance, capex, that sort of thing.   Neil: So hey, just because I like it or you know, in other investors likes something else doesn't mean it's right. There's only what's right for you.   Michael: Yeah, yeah. I love it. Neil, this has been so much fun, man. I want to be very respectful of your time. Let's get you out of here. But before we go, like where can people reach out to you find out more about you continue the conversation if they're interested?   Neil: Yeah, no, great question. Well, if you want to learn more about commercial real estate getting rich in what I call the 20x niche, why do I call it that? Well, because our target internally is to produce in a monthly return that's 20 times that of us Single Family return so we're scaling up largely is just go to my website give you a free download free report just you can learn more about the industry getting into commercial. So www dot legacy impact partners forward slash gift JF T legacy impact partners Ford slash gift: https://legacyimpactpartners.com/   Michael: Right on thank you so much and before I let you go I mean I'm not gonna let you out of here without mentioning your podcast you're also the host of a podcast was that was a you're kind enough to have me on what is that called and what can people expect to hear on it?   Neil: Real grit is the name of it it's about the trials tribulations anybody from real estate. So we talked about single family talking about commercial talk about everything in between. But really, so that we fully admit that you know, life isn't all about Lambos and big houses on cash and checks and everything on Facebook that or social media wherever you'd see it right? That there's ups and downs there's, there's we have to go through stuff and many times to be able to find our own personal success and so we talk through that and people's personal stories and how they got there because all bunch people, they get their different ways and it's really exciting. It's, we get into some really interesting, very dynamic conversation a lot of fun, love it. You and I had a great conversation.   Michael: I had a ball. I had a ball.   Neil: It was a blast, man.   Michael: Awesome. Well definitely go check out that podcast, real grit, a lot of fun, really cool stuff going on there. Neil, thank you again. Any final words thoughts for our listeners?   Neil: No, you're going to find me you know, like I shared it though the website I'm also on all the all the social media platforms. Facebook's the best place to find me Neil Timmins, or there are many Amin just spell it right you got me   Michael: Right on, many thanks again. Appreciate you, see you soon. Bye.   Neil: Bye, bye.   Michael: All right, well, that was our episode. A big thank you to Neil for coming on the show. Really, really interesting stuff that Neil's been through seen and experienced. As always, if you enjoyed the episode, we'd love to hear from you with a rating or review wherever it is get your podcast, and we look forward to seeing on the next one. Happy investing…

Super Serious 616
Episode 184: Not by the Charity of the Butcher (Strange Tales #130) -- March 1965

Super Serious 616

Play Episode Listen Later Nov 17, 2022 16:14


In this episode:Mike and Ed discuss whether the Fantastic Four or the Beatles are more famous. The Thing and the Human Torch were recently at a Beatles show and did some damage while capturing thieves who targeted the cashboxes. Who should pay for that damage? Should good samaritans like the Fantastic Four be held responsible? If they are, what type of disincentive does that create for other superheroes to help others? Are there more superpowered people out there who are keeping their abilities secret because they can't afford the insurance?Behind the issue:The Beatles are first mentioned in the Marvel Universe in Fantastic Four #34 (two months prior to this issue's release), but this is the first appearance of the actual band. The Beatles' first comic book appearance was a few months earlier in July 1964 when Dell Giant released a special issue focused on the fabulous foursome. A few days after the Dell book hit the stands, an Archie title also mentioned the Beatles (Archie's Girls Betty and Veronica #105) and the girls shopped for wigs, but the actual musicians did not appear. Perhaps the very first appearance was in the aforementioned Archie series #104, which teased the following issue and had a page of text explaining who the Beatles were (see below). The Beatles are mentioned in Marvel Comics a number of times through the years, but, as far as we are aware, they do not appear again until 2007, when it is revealed that the band had been kidnapped years ago and had been replaced by Skrulls (who were responsible for the majority of their music in the Marvel Universe).In this issue:The Thing and the Human Torch are getting under each others' skin, and likely need a break from each other. No such luck, as their girlfriends convince them to go see the breakout sensation from Britain, the Beatles. The foursome head to the show, but before it begins, they learn that the venue's payroll has been stolen. The Thing and the Torch head out and capture the criminals, but unfortunately miss the entire show.Assumed before the next episode:People are more interested in being entertained by the Beatles than being saved by the Fantastic Four, or so we assumeThis episode takes place:After the Beatles have started their British Invasion!Full transcript:Edward: Mike, who is more popular? The Beatles or the Fantastic Four ?Michael: I think if you listen to our show regularly, you would assume the Fantastic Four. But if you lived in the real world you'd probably say The Beatles people meaning it for a reason, right?Edward: Fantastic Four have clubs, fan clubs, but there's no fantastic mania. How even the four mania how would you even say that?Michael: Yeah, I don't know ff mania, but like, you know, there's, I thinkEdward: we don't swear on the show, Mike. No swearing on the show.Michael: Yeah, . Well, they're certainly popular. They're incredibly popular and they're being followed and there's celebrity magazines that report on them, but, Nothing like the Beatles. Nothing like The Beatles has happened in a superhero superpowered world. Yeah.Edward: And in this particular case, we had the Fantastic Four went to go and see a Beatles show and we've had no incidences, we know about where the Beatles have gone to see a Fantastic four show.Michael: No, they're not showing up the Baxter Building, you know, pen and paper hand asking for autographs. Although, funny about it is maybe it's just a comment on human nature or our society, but like the Fantastic Floor have saved the world more than once.Edward: And Beatles, the Beatles have not, Beatles have never saved the world.Michael: So you think, you'd think that if there's gonna be this adulation, idolatry, of anyone, it would be the fantastic for, but no, it definitely isn't. It definitely is not. The Beatles are far more popular.Edward: Yeah. The, I guess the Beatles have saved music.Michael: Okay, we'll go with that. They definitely struck a nerve in our society and they're making their mark. And so time will tell us whether the Beatles will be remembered. But right now it's hard to avoid them. If you're trying to avoid them, they're everywhere.Edward: There's that question too, a thousand years from. Looking far, very, very far in the future, are we gonna remember the Fantastic four of the Beatles and I think it would be the Fantastic four, the first real superheroes on the planet are I imagine more memorable than any music bandMichael: the Fantastic four are, as we chronicled or the vanguard of this new evolution of almost post humanity then this is a moment in our history, where there's, who knows where we're going to evolve to. So my money would be that the Beatles are a flash in the pan and the Fantastic four are here to stayEdward: and interesting there's four of each of them. I think that's a coincidence?Michael: Oh my, I didn't think about that. So do you think that maybe, do you think that there's a matching principle going on here, we noted in, remember we talked about recently with the frightful four, there's four of them and we're just confused as to why they would limit them.Why wouldn't they be like the hateful eight or something. But instead it's like they pick the four and the beetles are quarted as well. So do you think. Are we? Are the Beatles being influenced by the Fantastic Four? Is music being influenced by superhero culture?Edward: Yeah, maybe. Or maybe the other way around. Maybe the Fantastic Four just search out for groups of four things.Michael: Yeah.Edward: They go to the grocery store and be like, yeah, I know you have a dozen eggs, but do you have like a smaller package, like maybe a third the size?Michael: Or maybe. Or maybe it's just. Things come into four, right? There's the four of food groups, there's four seasons. It kinda just naturally would evolve to where the Fantastic four, who, when you really think about their powers are quite elemental in nature. They have this sort of,Edward: there's four elements. There you go.Michael: There's four elements. Yeah. So maybe there's an inherent connection to the idea of having teams of four. Although maybe I'm just spinning some mirror here. But anyways,Edward: Can you match them? Can you look at the, we talked about this before, the frightful four. There's like a match almost between, Medusa had her stretchy hair. Mr. Fantastic Reed, Richards could stretch his body. There was kind of a rough match betweenMichael: mm-hmm.Edward: the Frightful Four and the Fantastic Four. Can we do the same thing with the Beatles, is there does Paul match to Sue? Like what is the match? The Four Beatles and the four Fantastic. Four.Michael: You know, I just don't know enough about 'em but maybe there might be something there. Maybe that's something that if they stick around, we can we'll explore it a little more and look, maybe they're the first. Maybe the Beatles were the first super. Powered band. Maybe we're gonna find out that they have powers too. Just don't know about, we just know, knowEdward: IF it happens to anybody, it'll happen to the Beatles. I think a couple things to talk about. I think with this encounter with the Beatles and the Fantastic Four, well, I guess the Fantastic Half, the Fantastic four, it was The Thing in the Human. Torch were going to see a show and in the process, I guess someone tried to steal all the money from the show andMichael: mm-hmm.Edward: the Fantastic Four prevented that. So I guess they did, they did their good deed for the day. But in the process of doing that good deed, they did some damage and. I think this is interesting is that the damage that they caused is not being paid for by the theater, not being paid for by the Beatles, not being paid for by the government, not even being paid for by an insurance company. The fantastic for themselves are gonna cover that damage. And I think that's just, it's interesting that it wasn't like The Thing and the Human Torch were being professionally employed by anybody. They went out of their way to help the Beatles or to help the theater anyway with these thieves, and now because of that good deed, they're gonna have to pay. They're taking the money outta their own pocket, and that doesn't seem,Michael: It doesn't, and it, but it's interesting. It probably, it gives us some insight into the institutional nature of the, or at least the institutional connection between the Fantastic Four the society that they live in. So we've talked before about how the Avengers seem to have a pretty direct connection, almost be a separate like military force or arm of the armed forces in America. But the Fantastic Four haven't. You think that Fantastic Four has some kind of formal relationship. As being almost a police force that they would. They'd have an immunity from any kind of possible civil liability or prosecution if they're,Edward: are you saying that they are a police force or they should be a police force?Michael: I'm saying that they aren't, because if they were then if they're acting in the course of their duties, then they would have an immunity from prosecution and civil liability to provide that they were still carry of their duties within their own responsibility. And so then they wouldn't care about paying the damage themselves because if they got sued, they have an insurance policy, they would respond. And they're not, they won't be worried about, say, being arrested for the damage that they caused in the course of exercising their duties.Edward: And that's, I was gonna say that's probably true. If when the US military went and asked the Fantastic four to go and take down the Hulk, they were basically working under the under the authority of the US military, and I'm assuming that any damage caused during that battle with the huk was paid for by the US government, by the military. In this case nobody asked Ben and Johney to go and stop the thieves. They just, they were good Samaritans and they went and did it. That changes the calculation a little bit.Michael: It does up that. I think when they're tasked by the American military, I think that they could be considered to be contractors in that role. But I am saying that here, that they just acted as good Samaritans and did a public good. They acted as if they were, police officers. But the fact that they paid outta pocket tells me that they don't have any kind of special protection or immunity from prosecution or from civil liability. So they did, then they wouldn't have reached into their own pocket. But the fact they reach into their own pocket tells me that they're doing the analysis, which is that it's probably better for us just to pay outta pocket than to get sued by the people that owned the buildings that were damaged or anyone that had a possible liability claim.It's probably just worth their time to pay it out. So they must have number one tons of money. And number two they don't have any kind of protection. So number three, they're gonna use their money to avoid getting sued and have their time being eaten up. It's just worth their time to just pay people rather than having a claim against them.Edward: But I guess why are they doing it at all? So basically these thieves came in, they stole the money, they took off if Ben and Johney just said, oh, you know what, that's not our problem. We're gonna go sit and watch the show.Michael: Mm-hmm. ,Edward: Then number one, they get to see the show, and number two is they're only out of the ticket price. Instead, they went and chased these guys down. They didn't get to see the show, and they had not having to pay a bunch of money outta their pocket. What was the incentive for them to do that?Michael: That's The Thing, right? If there was a, they had immunity from a civil lawsuit, then they would go do it. But here they clearly don't. And so they had to pay out of pocket because they're involved in this incident that caused damage and they pay out pocket cuz it's easier for them to make the claim go away, the potential gifts go away. And I don't know what their incentive is other than to do that other than that they're heroic or because they feel they can solve the problem and they have so much money that it's worth it for them to both be heroic and to also make sure that they don't have their time wasted that they're, after you keep against them,Edward: you keep saying they have so much money. Is that true?Michael: They'd have to, otherwise they wouldn't do it. If they didn't why would they pay out of pocket? Why would they wait and get sued? I guess.Edward: I guess that's my question. So where's that money coming from? I guess they had that one movie that they had a while back. And Reed has some inventions that he's invented. He lost all his inventions that he invented in the past due to that bankruptcy. But he presumably he's invented other things since then but it doesn't seem that that's an unlimited fund of money. I just, I think there's a, from my business world. One of the heroes of the business world was Adam Smith, who invented the whole idea the trade is good. And one of his famous quotes was, it's not the benevolence of the butcher, the baker, or the brewer that we expect our dinner, but it's regards to their self interest. We don't count on the butchers and the bakers to give us their foods for free. Why are we counting on superheroes to do all of their work for free?Michael: We're missing some information then, right? Because it's clearly happening. So number one, the Fantastic Four don't have this protection from being suit for damage that they cause in the course of acting heroically because they're paying out pocket, because that's the only reason that you would pay outta pocket. So why would they continue? Why would they do it?Edward: So let me dive into that cause it's exactly right. It sounds like of there's an incentive to be a butcher, there's an incentive to be a baker.Michael: Mm-hmm.Edward: society incentivizes people to be police officers and salesmen and retail clerks and radio personalities like us, there's all sorts of incentives in the system for these things. It sounds like right now there's a disincentive to be a superhero, and so that's what, okay, go ahead.Michael: I was gonna say that, but that's where I think this is going is that. On its face it doesn't make any sense unless they have so much money and how are they getting so much money? I don't know. Perhaps it's that we are talking about the Fantastic four who have access to space travel and interdimensional travel, right? Based on their recent adventures to our knowledge.Edward: They're just stealing from other dimensions and bringing,Michael: I don't, yeah, I don't know. I do not know if they have access to resources or minerals or something that we don't have access to here and that we're just not made aware of it. Or Reed has been inventing things and selling and profiting off of that.Edward: Yeah. So I guess that could be it, right? So you could be Right. Maybe they're just obscenely wealthy and in order to keep that wealth, in order to keep getting access to these other dimensions and keep the government off their back, they go and do good deeds for good public relations and those good deeds cost them money. But in the same way that, I dunno, Proctor and Gamble donates to clean water in Kenya, they're just like going like they're, it's like the tax on them. The good deed tax is there to keep their good PR so that they can go and make their money some other way that we don't really know.Michael: Yeah but on a personal level I work as a lawyer, so I make my money by going to work and billing and I bill my time. And so if I'm walking to work and I see someone's gonna walk into traffic and I'm gonna stop them because that's a normal human thing to do and it, but on a cost benefit, I guess it costs me time so therefore it costs me money. Cause I don't get to go to work early enough. But, It's on a human level it's what you wanna do. Now if it's now if to save, if I saw someone fall into traffic and for me to save them would require me to, you know, run.Edward: You don't want to skuff your shoes.Michael: No, but if I could lose my life, then I think that it might be more, I'd hope I'd be heroic and chance losing my life to save somebody who's falling into traffic but I don't know, maybe that's where there would be a line. And what I'm saying is that the fantastic core haven't hit that line yet. Yeah, it's still worth their time.Edward: Let's going back to this scenario, it's even worse than that. It's imagine if now you go and you save that guy, he falls down the road and you rush into the road and you save him but in so doing so, you cause a car to swerve and hit another car. And so now they wanna fine you for that car accident because you jumped in the way to save that dude. That doesn't seem right either. It's one thing you've already risked your life, you've already taken your time. Now we're gonna say, Hey, oh, and by the way, now we want your money too.Michael: That analysis only works, that analogy only works, is that I said, whoa, whoa, whoa, whoa, whoa. Okay, hold on a second. Let me pay for everything outta my own pocket. But I have an insurance policy that would respond to it. So likely I'm gonna be okay. So even if I did that quick math in my head, is it worth it for me to go in traffic?Edward: Yeah. But should your insurance company be paying for that? The guy who busted his car up again, not, not his fault, maybe the guy who felt that in traffic, you go after him, but going after the insurance company of the guy who saved the person's life, that doesn't seem right,Michael: It doesn't work like that though. If somebody falls into traffic and I go in and try to save them, as a result, some other car gets into an accident. I guess if they sustained injury, they would sue me. They wouldn't Sue the insurance company. My insurance company would respond on behalf of me. And there are some legitimate legal defenses that would apply to that very scenario where it's there. I didn't do anything wrong. I wasn't negligent. They'd have to establish negligence in order to trigger it. But my point was less about the intricacies of motor vehicle law and claims, and more just to say that my analysis is not gonna be influenced. I wouldn't have to think I take into my pocket and pay this person out rather than pay my deductible so that when I got sued, that my insurance company would respond and defend me. Whereas the Fantastic Four, clearly it's just not worth it for them to. To possibly don't have insurance, which I don't think they do to respond to the claims that would be made them damaging thatEdward: if they did their insurance would be so high ,Michael: they'd be so high.Edward: What insurance?Michael: You're an orange, rocky, monster that could destroy a building. So I think the insurance would be quite high if you had it. But at the same time, they could sued personally. The, Thing would have to, he is paying outta pocket. They must have so much money that it's just like there's, they're not even thinking about being tied up in a potential lawsuit later because so much doughEdward: and so clearly all these disincentives that we're creating haven't stopped the Fantastic Four from existing. But what's I always find interesting is when these disincentives exist, we have to ask what isn't happening because of these disincentives. Are there lots and lots of other superheroes out there that are being like, you know what, I don't wanna be a superhero. Look how much it's gonna cost. It's too expensive to be a superhero, like being a lawyer. I'll just be a lawyer by day and a nothing by night because it's too expensive.Michael: Well, I'm not, nothing by night a cause you know that.No that's why Spider-Man wears a mask. We've been quite critical on Spider-Man, how he wears a mask and doesn't reveal his identity would be super critical of him.Edward: And it's not, it's not afraid of a villain's attacking him. It's not because he's wants to do criminal things. It's because he's not super rich. Everyone who's not super rich wants to be a superhero, has to cover their face.Michael: So maybe, so I think the solution would be if we recognize it being a superhero is public good, much like having volunteer firefighters and police officers and things like that, then there needs to be new legislation passed in order to provide some immunity from civil prosecution civil claims, if he did, it would remove that disincentive if The Thing and the Torch burned down a building or destroy a building, the building owner can't sue them because they were legitimately acting the course of their superhero duties and roles, then I guess I had to put a claim over to their insurance company. But what would, and I think the only way that works is that probably all of our insurance rates are gonna rise to accommodate that but it's pretty fair to spread their risk out of superhero related damageEdward: It does. And then what that should open up is all these other superheroes that are presumably hiding right now and aren't doing anything. Or have they have secret identities or they have no identities at all because they're not super, they're just, well, they're super, but not heroes. If you wanna take, if you want more of your supers to be heroes, fix the insurance laws.Michael: No fix. You know what we need to have, there? Have to be local, state level and federal legislation that's passed in order to have, immunity from prosecution and immunity from civil claims pass. And that the question for us, I guess as a society, is that a better way to go? Or is it better to have them running around with masks and I don't know. I used to be pretty anti masked, but now I'm kind of seeing the value of it.Edward: Yeah. I think these laws, when you create these new laws, don't they have like catchy names and stuff too?Can we call this law the put the hero back in supers?Michael: I like where you're going with this, but what it be like, there's no i n team, but there's I Insurance Act from 1965. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit www.superserious616.com

Super Serious 616
Episode 183: The Most Elite Engagement Party (Fantastic Four #36) -- March 1964

Super Serious 616

Play Episode Listen Later Nov 9, 2022 6:03


In this episode:Mike and Ed discuss Reed and Sue's engagement party. Why were only superheroes invited? Was there another non-superpowered person party that was kept secret? Also: the Wizard has recruited Paste Pot Pete, Sandman and Medusa to become the “Frightful Four”. Why did he stop with four villains? If he really wanted to defeat the Fantastic Four, he should have created the Terrible Twelve or the Amazing Eighteen. Why are the villains fighting fair? At least they waited until the party was over.Behind the issue:This is the first appearance of Medusa, who is clearly tied to Greek Mythology at this point. Later she will be retroactively changed to being the noble Queen of the Inhumans, but there is no sign of that at this point.In this issue:The media are abuzz, and falling over themselves, with the news of Reed and Sue's engagement. Meanwhile, the Wizard has gathered together three other super-powered people to create his own Frightful Four - the Sandman and Paste Pot Pete, who happened to be flying by the Wizard as he floated through the atmosphere weightlessly after his last misadventure, and Medusa. The newly formed Frightful Four attack the Fantastic Four at their headquarters after Reed and Sue's engagement party (which was full of superheroes) and nearly defeat them, although they are ultimately defeated, with the Frightful Four mysteriously disappearing from the fray.Assumed before the next episode:People are more interested in who attended the party than the FF's battle with the other FF.This episode takes place:After the Fantastic Four have seemingly defeated their apparently evil counterparts.Full transcript:Edward: I don't think any journalists were invited to this engagement party. Mike, did you get an invitation?Michael: No, and I was looking for it. But sadly, no.Edward: Reed Richards and Sue Storm are now officially engaged. I think they were unofficially engaged before, but now this is like a, kinda like they're coming out big party and a big, big giant celebration at the Baxter building.And, well I say big, but it was probably more intimate in that it was really only other superheroes that were invited to this party.Michael: It's sort of funny you'd think that they would've parlay, I mean, the superheroes, like the Fantastic Four are the most celebrity focused kind of superhero, I think the most media friendly superheroes.You'd think that that would lead to them parlaying that celebrity into connecting with other celebrities outside of their particular field. Because you look at Hollywood parties, it's not necessarily that rock musicians only hang out with rock musicians when they throw parties. All forms of entertainment types seem to gather. So it's sort of funny that superheroes only invite superheroes for their big party.Edward: Seems that's even weirder than that. You think about if, Reed and Sue, presumably like they've not been superheroes for that long, we're talking about a few years now, four years, did they not have any friends or family from prior to them being superheroes that, maybe would wanna invite to their party? This engagement party was such a publicity event okay, so some rockstar gets, I'm sure like celebrities know celebrities and some rockstar gets married to some other rockstar. They invite a lot of rock stars, but presumably they also invite their brother and their I don't know, their, friend that they had from when they were a kid. These people have these entourages doesn't look like Reed and Sue do it looks like their only real friends to invite to this party were the X-Men and the Avengers.Michael: Shows they have a complete dissociation to their past life. It just seems odd. Maybe this, actually, I've been thinking about this this whole time.We're talking, what if this is just the public one?Edward: Oh, I see. They're having another oneMichael: This is a celebrity one, right? The photos. That's true because the media we're there. I don't know, maybe let's play it out this way. If you are Sue storm's cousin, would you really want to go where there's all these nosy tabloid photographers because there were a ton there, right?Edward: More than that. We know that every time these superheroes have some public event, they're attacked by super villains and see, do you want, do you want your cousin to show up and be attacked by the wizard?Michael: So maybe what they did here was. Okay. At first I thought was just weird, but now it kind of, it makes a little bit of sense. Okay, we're gonna have this, and we know that the tabloids would rather have a picture of say the Human Torch standing next to Thor. You know what I mean? So we'll have, we'll throw that and that that'll give the tabloid. Reporters and photographers a chance to write their story and take their photographs and that's the public one.And then there's more personal and intimate one that's with their friends who aren't in the game. And that way you don't put them at risk. That's true actually, that makes a lot of sense to me.Edward: Does make a ton of sense. It's interesting cause I say there was only superheroes invited, There were, there were two non superheroes invited to the party. One was Professor Xavier, who's an expert. The mutant genes. And how these mutants are happening. And the second was Bruce Banner, who was the, the guy who saved the world , from the alien invasion a couple years back. So I guess when you, save the world from an alien invasion, you're an honorary superhero.Michael: Yeah. And they didn't care about the safety of those two guys, I guess, . Wow. Well, they're very smart. They can, they can figure, they can respond.Edward: I guess the other thing around safety is , we know that, when Spider-Man shows up at his fan club, they, get attacked. And when Reed Richards goes and talks at his alma mater he gets attacked, but in this case, you had to be a pretty ballsy superhero to go and attack the Fantastic Four and the X Man and the Avengers all in the same place at the same time.Michael: So maybe it could have had Aung Pentunia show up, but I don't know. It doesn't seem to make, I think I can see why they split this up.Edward: It's interesting that I talked about, these, villains attacking, the Baxter Building was attacked by super villains, but I guess they waited until the party was over. Let's wait until Thor vacates the building before we attack Reed Richards.Michael: Smart. They're getting smarter Ed. They're just getting smarter. .Edward: Well, the Wizard is one of the, the smartest, villains. Well, one of the smartest people in the world. Right? He was known as well before he became a villain. He was one of the smartest people in the world didn't, he still hasn't been able to defeat the Fantastic Four using, incredible brilliance.But he has been able to recruit, a more substantial team. He's realized that trying to take them on, on his own is not the way to go. And so now he's recruited, uh, pop. Yeah. How Pace pot. Pot pee., yep. Who he's worked with before, but now he's also recruited the Sandman and this new, super villa villains super villainous, named Medusa, at his side.And so, I guess four on four is probably, better odds. And as far as, as far as we know, it was kind of a stalemate, right? So they, they, they did not successfully hurt the Fantastic Four, but they also escaped fairly unharmed.Michael: Well, yeah. It's interesting though, it seems like the wizards figured out, like you say, he might have stand a better chance if he has a team of his own, but it seems like incredibly personal, his whole purpose of his team seems to be to match up perfectly with the Fantastic four, apparently they're called the Frightful Four , and it's justEdward: He's just trolling them now. He's just trolling them with that.Michael: He's trolling them. Like, I mean, like I, I took issue with, there's been some unimaginative team names, like Fantastic Four is one of them. It just seems like it's aEdward: Terrible trio. Remember the terrible trio?Micheal: Yeah, that's right. But they're just trying to like, No, no, no. I'm not looking about world going for world domination anymore. I'm just doing this because I'm a better, smarter person than read Richards, it seems to be what seems to be what the Wizard's trying to go for itEdward: And clearly getting, getting four of them together is, gives them better odds and trying to take him on like one on four. But it's funny that he can go further. Like why? Why stop at four? And then why even limit yourself with your branding, the Frightful Four? Why not be be like the terrible 12 and that that yeah, your odds are gonna be a lot better.Michael: Yeah, exactly. So maybe, maybe the wizard isn't as smart as he thinks. .Edward: He needs a few more. He needs a few more. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit www.superserious616.com

The Remote Real Estate Investor
How you handle adversity determines your legacy

The Remote Real Estate Investor

Play Episode Listen Later Nov 8, 2022 33:03


In this final episode with Aaron Chapman, we discuss how adversity can shape your legacy. In this current market environment, many investors will be challenged, but that does not mean they must fail. Your mindset, work ethic, and ability to learn from the external forces that turn your world upside-down will be the deciding factor of your long-term success. Aaron Chapman is a veteran in the finance industry with 25 years of experience helping clients better understand, source, and finance cash-flow positive investment properties. He advises over 100 clients a month in the acquisition and financing of their investment properties and primary residences. Aaron is ranked in the top 1% of mortgage loan processors in the country, in an industry of over 300,000 licensed loan originators, closing in excess of 100 transactions per month. Episode links: https://apps.apple.com/uy/app/qjo-investment-tool/id1533823468 https://www.aaronbchapman.com/ --- Transcript Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor Podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Michael: What's going on everyone? Welcome to another episode of the remote real estate investor. I'm Michael Albaum and today with me I have for our third and final episode of this series, Aaron Chapman and Aaron's a lender, and he's gonna be talking to us today about how well you take a beating determines your legacy. So let's get right into it.   Aaron, what's going on, man? Welcome back for part three of our conversation. How are you?   Aaron: What's up, brother. Man, it's looking forward to this one.   Michael: Me too our last few conversations. If you didn't catch them, I highly recommend you go back and give them a listen to Aaron drop some amazing wisdom and knowledge. Today we're talking about how well you take a beating determines your legacy as a theme. But for anyone who didn't catch the first two episodes, give us a quick and dirty who you are. And what is it that you do, Aaron?   Aaron: So I am in the Real Estate Investment Finance space. I'm one of the few conventional lenders that focuses on real estate investments. And I do about 1300 transactions a year for investors, I've been doing that since 1997. Got a great big team of 30 plus people, and we're into heavy into the education and helping people build a business while at the same time getting financing done. And it cost them nothing to have all the experience and the the wisdom, we're trying to give them the guidance while it is getting their financing done like they would do anywhere else.   Michael: Yeah, I love it. And so many lenders, especially conventional lenders, I've come across and you might have shared experience are just trying to push the biggest loan that someone qualifies for on them. And they don't really care what that's gonna be used for. They don't really care what how it's gonna affect the end user. But it sounds like you take a little bit of a different approach.   Aaron: It does bother. Well, there's two things about this industry. You know, I think I may have even referenced it, maybe not among the last two episodes is that humans are the apex predator, we fall prey to no other species except other humans. And I found that our industry is just full of predators. They don't care what you do, as long as you close, they will use every sales technique, everything they've ever been taught to try and find a way to get you to close on that transaction.   Myself, I'm of the mindset is I'm gonna do everything I can to ensure that you close and are successful in that transaction. Because if you're unsuccessful and what you end up doing, you're not going to do deal number 2-3-4-5, I don't care about deal number one I care about deal number 10. Why do I care about deal number 10. Because if you made it to deal number 10, you're a badass, you're getting stuff done, you're achieving your goals, if you get to deal with and pretend that I'm a badass, because I'm getting more deals done, right?   But one, if you have that bad experience, man, I'm never gonna see 10. So we don't when people come to us, and they've got questions that they've never had before. They've got decisions they got to make that they've never had to make before. There's a good chance they've never had to really experience what it's like to make that kind of decision. Well, what I do 1300 transactions a year and I've been doing it as long as I have, I don't answer the question with an answer. I give them stories, what I've seen people do in that same scenario, and then give them the outcome of those decisions. So they're making decisions based on practical data, not speculation, in theory.   And then I also if they're questioning a deal, like, I'm not sure if this is right, if it's wrong is like Well, let's take a look at some things I tell them what to look at, and what questions to ask and who to go get the answers from. Take notes and bring them back to me. And we'll evaluate those answers together. And what I'm doing is helping them to determine whether they move forward or they walk away. And they also got to education about it at it. And they also learned about the other people they're working with are these people that are in it for the closing, or they're in it for them and the longevity of their business. And we get to find that out. And you get to talk to people really, really quickly.   And sometimes it takes time you have to investigate things. You have to spend money on appraisals, you have to spend money on on inspections, and things like that. And it could be costly, but you never stay in the deal because you spent money that you spent the money to walk away from it. And we help them understand that they're their CEO, their real estate investment business, and we're here to support it.   Michael: Yeah, no, I love it. Sunk cost was definitely something I got exposure to early on in his business. And it's could be a very tough concept to wrap your head around. If you're not familiar with it, you know, don't throw good money after bad.   Aaron: And that's a heavy duty sales tactic to get people to follow the sunk cost, thought process and process and get really, really caught up a man have already spent this money. If you understand why you're spending the money. There's never a sunk cost. Yeah.   Michael: Yeah, no, it's so true. It's so true. So let's talk about I mean, where we are today is very different than we were six months ago, a year ago, 18 months ago. And I think people might be in for a little bit of a whirlwind. So let's kind of talked through this concept of determining how well someone takes a beating really determines your legacy, which I think is a really great theme. So why do you think it's pertinent to talk about today, Aaron?   Aaron: Well, we're going into what could be a rarity A very big beating. And the fact that, like you just said, we're coming into something we were this different than what we experienced the last little while. It's different. It's something we've ever experienced. When you go back into the market and started researching what's happened in history of these markets that we that we've been following all the way back in the 1800s, we don't have any data to tell us how the economy and how the market or the world is going to react to the last What is it 12 years, 13 years, since 2009, January 1 2009, we started the quantitative easing, and it's continued to keep going $8.9 trillion $8.9 trillion that put into the market. And now we don't know we have no idea how the markets can respond to that as they're, as they're trying to back off of that 40% of the of the world's currency, or I guess the US currency has been produced in the last 18 months. So for people to tell me, Hey, markets go in cycles, and we can get this particular loan, and we'll just refi later, like, Dude, you can't think that way. Because we're not in any cycle we've ever seen.   The last cycle last tilt since 2009, was really the cycle. Sure, there are some little mini cycles in there. But for the most part, we had extremely low interest rates, never seen before we had a housing market has just been on a tear for 13 years. And now you're thinking that some cycle is gonna come along the next five that you can risk getting a five year loan, and do that. No, I think weren't, it was. And I just know, I think Warren Buffett said the 30 year fix is one of the greatest instruments in the world, because it's a one way bet. If you bet on the 30 year fixed and you're wrong. Worst case scenario is you refinance the house. But if you bet on the 30 year fix, and you're right, you're save yourself 1000s and 1000s, if not hundreds of 1000s of dollars, depending upon the size of your portfolio. So don't get suckered into these short term loans on a long term investment.   So now going into what we're going to be experiencing here, one, I don't know what it's going to be. But if we go back to 2008, here's my own personal story in 2008. You know, I shared my story about coming into the industry and the beatings that I took getting into it, right, and now we're getting into what happened in 2008. Everything starts crashing, everything's falling apart. I at that time, was still doing pretty well. I was making a good six figure income. I had decent clients coming in in 2008. And I was doing kind of a night thing for two throughout two months. I had a buddy of mine I I'm a former fabricator, I've worked on vehicles, I built a hot rods, all kinds of stuff, build jeeps, a lot of things and I have that kind of a background. Well, a buddy of mine says hey, we need you in on this deal. I need another fabricator on this and what we were doing was taking a double decker Bristol bus an English bus. We cut the top off of it, turned it into basically a mobile strip club is what we did. And we did this for a guy that wanted to take it to Burning Man, you guys can look it up. It's called shaggileic. Rapping it's this white bus wrapped in for a cruise ship horn on the front. I mean, it's just it's one of the craziest things you've ever seen. What a trip, I was fabricating everything up top building in the DJ booth. There's a bed going up there places for the poles, all that and that's what I was building.   While I was doing this thing where I was sleeping maybe three hours a night I go to the office, keep working on my lending business. And at night I was fabricating all night long for these guys. Because they were doing during the day and I was doing my part at night. Well then August 8 rolls around am I lucky numbers always been eight. And so as a result that this is August 8 of 2008. I was jumping on the bike, heading out of town for a three day ride through New Mexico just to clear my head. So it's a crazy time in my life and mind that my head was not in the right place. I'll guarantee I just tell you that. Cruising down the highway and right next to this guy is in a black truck and I've been by him for a while so I knew he knew I was there. But Donald suddenly flips on his blinker and he starts coming over to me. Well, I quickly looked over to my right, nobody was there. So I hit my throttle, I leaned that bike. What I didn't realize is somebody just then started to pass me and I clipped her front bumper, and I went flipping. So I don't remember the accident self except for my bike kicking sideways. And then I remember waking up in the hospital and we're looking around and this this really bright light and really quiet area and I remember sitting up and I noticed kind of fuzzy there's somebody sitting in a chair and my lapse my vision got clear is my wife. So I asked her where am I at and what seemed like was kind of an exasperated going to tell me for the 40th time you're in the hospital. You had an accident, and she started explaining things.   Well, what what ended up happening is when I went flipping, I used to race mountain bike so I would instinctively talk I realized this because I had such a massive bruise. This is where I initially hit my my my helmet had big ol crack in it. When I hit it just obliterated my collarbone and a bunch of ribs. It collapsed my right lung when I flipped my legs hit and I shattered my legs and ended up skidding to a stop. So if you've ever been to Arizona in August, but the pavements not nice to lay on in August so I had a lot of burns. A lot of road rash And so I was in there for a couple of weeks in the hospital that a bolt me back together my memory at that point because the head injury we had pinwheel would basically flip every three minutes. I could only remember every three minutes and never reset, but little things would would stand out.   So there's some things I do remember, but a lot of it's gone. And then there's actually some stuff in my history that's gotten my I was with my sister and brother in law, and they showed me some pictures from their wedding. I'm like, I don't remember this. And they showed me pictures of me being there. And then they played the video Like, I have no idea about this night. So there's certain things in my history that are gone because of that accident. So kind of the point behind all that is, I wheeled into that hospital I was I was a mountain climber. I was a marathoner. I was in phenomenal shape, best shape of my life at the time, I weighed in at190 pounds, maybe 12% body fat, worse about on paper, because of my investments worth about three ish million dollars. When I wheeled out of that hospital weeks later, I was 156 pounds at six foot one, and I had a negative net worth of 1.5 million everything was taken from me.   So I had to start over from there. So I had to learn how to walk again. I had to train my memory back. And then I had to negotiate with everybody who is foreclosing on all my rental houses, they're coming after me for all the other debts. And because if it wasn't for the fact now, to me, it was a blessing. There's a lot of people that went through the crash. And they lost everything I know of people that ate bullets, they went back to their office and they shot themselves. I know people who did that. But I had the blessing of being able to negotiate with these creditors, and I'd send them my first week's medical bill for $1.7 million, and then immediately back off. And what I have is a certain amount of money left in the bank, that was all I had to my name. And it was about I think it was like five grand or something I don't remember exactly.   Well I called every creditor up that I owed money to that was calling me and I said here, here's how much I have in my account, you look at my credit report and how many people I owe, I will give you that if you agree to that and wipe the credit clean. So I negotiated that with every single person. And what I did then is then I had an underinsured motorist thing finally kick in months later. And I was able to use that to pay off everybody that one negotiated amount. So I got clear of the whole world and they let me do that because the nature of my accident. Not a lot of people had that. So they didn't have the blessing getting their *** kicked, and be able to leverage an *** whoopin to be able to get out of that right.   The other thing that was real tough about this *** whoopin was I came back to an obliterated business. The lending industry was not doing well and I got back on my feet about eight months later. And all the people I was doing business with before the realtors and people like that they were out of business. They were doing something else. There was two left in the industry, my mom and a gal by the name of Carolyn Irby with Coldwell Banker, they at that point, they were still doing business, they're getting deals done. And they call me up say, Hey, I got a client for you need to call this person, they would got to the point that they'd call me back five minutes later say, Hey, did you call that person like what person they said, Get your pad and write this down. So I got to I was carrying a notepad with me all the time, I'd write down what I do all day long. And the calls are supposed to make the outcomes of those calls. And then if it was crossed off, that means I did it. If it wasn't crossed off, then I would have to make this call. I can't tell you how many people I called that weren't crossed office. We just talked on the phone. Right? It's like well, can you can you tell me what we said.   So talk about earning trust, right? That's a real hard way to earn trust with somebody when five minutes before you don't even remember the conversation by explain the scenario. And people were very, very, very kind to me. Now. There were some saying, Hey, I can't do business with that does have a memory. There's a lot of people that were that did. And I rebuilt my business on that. And because of that notepad, I rebuilt my memory and I read, I was able to reconnect those wires in my head by the grace of God. And by just being very, very religious about maintaining my my pad, I wished I had my stack of pads, I throw them away, oh, I don't know why throw them away. But that was how I lived my life at that point. And I recovered back to a business that I built back up from zero to now. I get I start the the real estate investors coming into Arizona, and they're buying these houses that are undervalued. And so I started to do those loans. They were really little loans. There's like 50,000, or loans. Nobody's making a bunch of money on 50,000 our loans by doing a ton of them. And then I went from there to doing more and more they went from from Arizona to Indiana, Indiana, Missouri, Missouri, to Texas, and then over to Tennessee. And so I started doing more and more loans.   Well, then I had one of my biggest competitors, who was also a guy call and he'll give me pointers on how to do some of these loans are a little bit tougher. He decided in 2015 that we should merge our businesses. So when he flipped, they flew me out to Utah, I sat down with him and some of the executives in the company. Let's do that. So I merged the business with him. But you can only do the loans under one person's name. Well, since we're merging into his company, well, the company he worked for as a loan originator was put on to his name. Six months later, he pulled it all apart, took it off himself and left me at zero again. And it took my entire database.   Well, the executives called me up to say, um, we're probably at the fire your staff, and you're just gonna have to start over like, No, give me 90 days. So me and my staff have two or three, we sat down and we said, what are we going to do when the phone rings is going to ring in 10 minutes? What are we going to do with these deals, now, you don't have our big team anymore. And we mapped out a plan. And within six months, I was ranked number nine in the company. And within a year, I taken over the number one spot within the company. And now years later, that guy's out of the business. Because he I mean, that's what happens when you become selfish you and it's all about you, everybody leaves you he ended up all by himself, he end up not having a business anymore. He's completely out. I haven't heard anything from him, he got away from doing investor loans like three, four years ago. And I would venture to say I'm the number one guy in conventional lending for real estate investors. And last I saw by statistical numbers that was just published in a mortgage originator magazine, if you look at how many trends looking at by how many transactions closed per year, I think I'm right, number six or seven, the United States.   Michael: That's wild Aaron. That's so insane.   Aaron: And to me, a lot of people is like, how did you do all that and I'm like, you just every single day you have an objective and you keep moving forward. And it was actually, to me the noise of the world getting turned down around me and I was stuck to my own thoughts. You have to decide whether or not you agree with the person that you were and I would did not like the person I was at that time. I was a really arrogant, cocky prick before that accident. You know, I was dressing the part and acting department being the man. Now it's like, you know, I decided I'm just gonna be me. And if people don't like me, then then that's fine. I don't need to we don't need to do business. It's not about that I would do whatever I need to do to close a deal before. Now. I just want to make sure I get along with a person. And like one guy told me this last week, I thought it was really interesting. He says, Do you you just collect people? Like what do you mean I collect people because you collect relationships, because that's that's your investment, you invest you invest in things, but you spend money to make sure you have more relationships with people. And that's the truth.   And that came up because we talked about flying first class, one guy said he's really really cheap. The other guy said no, I love first class, I got pampered by it. They say you fly first class all the time. So yeah, I'm Executive Platinum with American Airlines, I spend more time in seat 3D and I do at my house. But it's not for the seat, or for the free drinks. It's for the person next to me. Because you'd be amazed at the kind of people you sit with in that environment and the kind of conversation you get to have. And they're all very, very memorable. If you'll just reach out and say hi.   Michael: Yeah, that's such a different way of approaching it. You know, so many people are going for the drinks or going for the big seat. Sounds like you could care less about that. Aaron: No, I mean, it's comfortable being a sibling I hate sitting in the back, because because of how much Americans have the room. Let me I'm not I'm not a fan. I do have to I do fly Allegiant from Arizona to to Missouri. So it's only one one stop to go to my place out in Missouri. So I still do it. I'm not a fan of it. I don't love it. We in fact, my family is dubbed at low rider of the sky. But when we go to kind of fly American, I'm, it's gonna be a long flight. I need to be comfortable. For two reasons. One, I've just gotten used to it. And I like sitting next to people I sit next to number two, I've lived the last What is it now? 12 years, 14 years in pretty heavy pain. And because of that pain, when we hit the sky, and they start pressurizing. I was doing a lot of pain in my shoulders, a lot of pain in my legs, my ankles are just both my feet were snapped off in that in that accident. So the extreme pain I was dealing with that. It's now gotten a lot less because I really took the time to rehab this last year, I went to rehab to physical therapists like crazy and we had loss and I got back to working out I got in a lot better shape than I've been in a long time in 14 years, honestly. And I feel awesome. But now the reasons I sit up there is not for the same reasons. It's for the it's for the relationships and like yourself, right? Well, I'm collecting people right here now. And now wherever I go. I see you as there's my guy. There's Mike.   Michael: Yeah, no, absolutely, absolutely. So Aaron, I mean, you've been like literally to hell and back again and came out on top. So for people that have maybe been never been through a downturn or a market cycle, if that's what we're headed into. And it sounds like that might not even be the case. I mean, what should people be doing to prepare, if they do find themselves with those shorter term loans coming due now?   Aaron: Well, and they're gonna come to at some point, even if it's not now, I think they need to be on the watch for any opportunity to put themselves into a longer term loan and have to bite the bullet or whatever that expense is. Do I believe, I mean, I think interest rates going to keep climbing to an extent they're gonna have to taper off because I can't see us continuing down this path. Interest rates are just, you know, mortgage backed securities are getting slaughtered, but I also can't see why anybody, anybody want to invest money in the mortgage backed security. Honestly, I don't understand why that money is flowing in there. Because if inflation is as high as it is, and you're going to lend somebody money, potential for 30 years risking it for 30 years, you're not getting your money back, you're losing money. But the marketing engine that is the real estate, the mortgage lending world, for the banking world, the marketing engine has convinced people, if you drop it 1%, you should refinance. And so the majority of people will refi, within the first four to five years, you're looking at an amortization, amortization table, the first four to five years, they're taking advantage of you, because you're all you're doing is paying an interest and then you put you back into a heavy interest period, they're gonna continue to keep them just just sucking money from you is what they're doing.   So they're, I believe, there's going to come a point that we're going to taper off, things might get a little bit better. And if it does that, within the next year or two, I'm going to highly encourage you, if you got suckered into a short term loan on a long term hold, get into a long term loan, get yourself comfortable. I always say control what you can control for as long as you can control it. And you can't do that in a short term loan. It's just not going to work that way. Michael: Yeah. No, I love it. And from a mindset perspective, I mean, it, I could see it so easily where you could have given up when you lost everything in a weight when you woke up from when you came out of the hospital, you know, went from a positive network to several millions and negative net worth overnight, seemingly? I mean, how do you get out of that? Because I think, again, it's so easy to go into despair and poor me. What kind of mindset does it take to lift yourself up from that?   Aaron: Yeah, that that was an interesting question to have to answer. Because not only do you have when you stack it all up, and I have to ask myself several times, how did I get where I'm at? Now, when I look back on that particular thing? It it was, like you said, you get your *** whooped that heavily. You're the everything's taken from you, you can't get you can't walk, you can't think you can't pay for anything. And they're giving you free drugs. And it wasn't just, it wasn't just weak drugs. This was good, good stuff. I don't know if you've ever had a lot of bad stuff. Is that amazing?   Michael: It's not Advil.   Aaron: No, it is definitely not Advil, and they were just willingly handing it to whatever you wanted, I had to get off of that. And I had to point myself in the right way. And I was still in a wheelchair, I was still having to deal with all this intense pain, I still had a lot of rods and stuff, multiple surgeries still being done. And I threw the stuff away and like, I don't want it, I gotta get my mind, right, I gotta get focused on where I needed to go. And what it was, as I've never sat still I just never had in my entire existence. So it was the drive to get up and get moving again. It was also that I always had an objective and a goal and where I was heading in life, even if it was just it was never really defined, but it was just kind of floating out there. I decided I was going to go after that I was going to continue after that. But I don't like to do is what was in front of me that day is day after day after day, day after day after day. But I think to the biggest driver at that point was I did not like the person I was before that accident. So I want to do everything I can to be anything but that man. And I am grateful that he was there to show me the way you shouldn't be doing things. But he was the biggest driver to continue to become something different.   And then after that the next big driver was I had a good friend of mine. His name's Joel. He's like a brother of mine. And it's it's a really long story to tell you how we met because we hate each other first. But now he's basically like my brother. And we went out one night with our wives. And at the end of dinner or after the event, we went to walk into our cars we have the opposite direction goes, Hey, by the way, I'm making a big deal happen right now me and my business partner, and it's going to change your life. Like how's it going to change my life? If you're making a deal, he goes, I can't tell you, he goes, but it's going to close here real soon. But it's going to change your life, believe me, I'm gonna change your life.   And as we parted ways, give him a hug. He turns around and walk in his car with both his hands and he goes, I'm going to change your life. And he yells out to me from like, 50 yards away, not knowing what that is. My colon changed my life, dude. Well, let's see what this is. Well, then, short time after that I found out he closed on the second largest. It's now the second largest real estate brokerage in the state of Arizona. And they'd made a deal with another lender to be their premier lender inside. What he wanted me to do is contact that lender and he told them call this guy, I want this guy in your company to work with us. So they called me and we talked about me coming over there. And to go over and meet with them and went through all the back contracts and everything. I'm like, Okay, well see how this goes. And they said we want you to come meet the CEO of the company, but you can't meet the CEO until you do this exercise and they hand me this five year vision that the CEO had for himself, you know, his five year plan and then they told me gave me the elements of the five year plan.   Cool. So I wrote this out like this is all bullcrap. Nobody does this. None of this crap works as goal setting stuff is stupid. But Fine, I'll do it. Just so I can meet the CEO, Joel opened up the door on going to do a jewel asked me to do like sat down. I wrote out this audacious freaking plan, right? The best month I've had before that was 18 Maybe 18 transaction that due in a month. And I think I closed maybe 20 Some million a year or 25 million, maybe 30 million year my best year. Well, I wrote this thing I was going to do 100 million a year and my staff is gonna grow by this and that in that net over the five year window, no ideas, I set it up as a story. I'm sitting on along Rubicon Trail in my chair with a fire gun. My wife's next to me, we got the Jeep parked there were searing steaks on the on the trail grill, and I'm thinking back on my life or last five years, and I'm writing a letter to myself of everything that happened.   So then I went forward, I met the CEO, he's like, this is the most unique five year plan I've ever seen written, we would love to have you come work for us. Now, incidentally, I didn't go work for those guys. It didn't work out. But I stuck with that five year plan. And I continue to follow that five year plan to go back and look at it look at it. I blew through everything on there and doubled it. Because I wrote it down. And then I discovered a few write things down things happen. So one of the next things that I'm doing, I have a book out there shows people I'm working on another book with Robert Allen, if you know who Robert Allen is, but we're working together on a book. So he wrote the book, no money down in the 80s. The guy was basically   Michael: Oh, yeah. Okay.   Aaron: So he's an absolute bad***. I mean, Robert is awesome. And we're writing this book as if me sitting there talking to an eight year old about how life or 18 year old about how life works. And it's taking a beating. So it's how to take a beating. And that beating is actually how you learn. And explain why believe that. And so on and on be teaching people within the first chapter, then all the way through the book on how to write this out, and then help people come to me will sit you down, I'll take it in an environment. And there's more stories about how that got done. And other ways I've used writing it down to become successful, and show people you write this stuff down. It's amazing how the universe starts to line up to get things done for you.   Now, when it comes to a beating, right, the one thing is that we have noticed that we as humans learn better by getting our butts kicked. And I believe that there's this Bigfoot that wakes up at about 7:30 Every day, this big, ominous invisible foot to kick your *** all day long if you let it. If you so think about this, I wake up at 4:30 in the morning, I get up way before the foot does and I do what I want to do, right I sit down, I send a message to my team, every single morning, I read, I write, I do the stuff that I need to do I have prayer before I get started all that and then I go and I work out every single day. So but if you're a person who wakes up at 7:45, and you got to be the office by eight, the foots already up, right, it's already kicking your *** the second you put your foot on the ground from from the from your bed to try and get to the bathroom, you stumble into this, you stumble into that your day is just wrong from the very beginning.   Get up before the foot does, you got to figure out where your personal foot wakes up. That's out there to kick your butt. And you got to get up before the foot doesn't plan your day and start executing on that. The other things that I've noticed with people, you know, how we learn, we do have to take a beating learn so you need to dissect every beat you've got so what am I learning from this? And how do I need to take from that, and let me illustrate how I know that. That's how that's true. I was six years old. And my parents put me in a Pentecostal school for my first grade year. I didn't go to kindergarten straight to first grade. And it was this Pentecostal church in this small town. And they had everything from first to high school senior all in one church and everybody had their own little thing and you had different teachers for all of it. And I segmented us first graders off for the first three months and we're meeting in the little room and they were teaching us the alphabet and numbers. And as they're going through the alphabet every letter was had a nursery rhyme style Limerick to it and a filmstrip. Now you may be a little too young to remember filmstrips. But it's up…   Michael: No I got it, I got it.   Aaron: Okay, so you got the film strips got the little thing. You'll play the music and here's the beep and you flip it to the next next slide, right? It's basically slides. Well, it was a it was the we got to the letter M. And the letter M was about this mule named Milton. And the way the nursery rhyme when it says Milton the mule he made a mistake as you read a map, you walked in a lake. And as it's going through those filmstrips, you've got this cartoon mule walking down the road, in a suit holding this map, and then you see him falling in this lake. Well me being me, even at six years old, I redid the limerick, and I said it out loud. So instead of having Milton falling out falling in a lake, I had him ******* in a bucket. I know it's stupid. Right? The six year old stuff. The little girl sitting next to me did what you just did, she laughed about it. That didn't go over well with the teacher. Now the teacher happened to be the wife of Noah, who was also the pastor. She heard all this so she grabbed both of your ear lobes. Walk the straight to the principal's office and sat us down in these chairs.   This guy was not a small guy. He was a big man. So he's the pastor. He's the principal. He made me repeat exactly what I said. When I was done. He turns around he picks up this old aircraft aluminum style briefcase, sets it on his desk, puts in the code opens it and very ceremoniously turns it so I can see the contents had a padded interior cut out to houses pattern. So then he pulls the paddle out makes us both stand up and turn around and put our hands on the on the chairs. She got one swap I got two because I'm the one that came up with the limerick. Now it wasn't that hard. My dad's Irish my mom was Spanish Believe me I that way harder buttons for a lot less than what that guy gave me. But it was The gravity of the situation that caused the tears to flow. And then I also knew I had to face my dad that night. He always told me if you go to the principal's office, you're getting an *** whoppin. Well, I did. I got a pretty good one. But ultimately, the main reason I bring that story up is there's how many letters in the English language?   Michael: There's 24   Aaron It's 26?   Michael: That's so embarrassing.   Aaron: I know. I googled that I thought it was 24 as well very recently, and I go, so yeah, there's 26. So 26 letters, which we just established. How many guy remember the limerick for?   Michael: How many did you remember the limerick for? You probably remembered him for all of them. But for sure M.   Aaron; Just one. That's the only one I remember. I remember the letter M. I don't know anything about the other ones. That was 42 years ago, I can only recite the one for letter M I don't remember what the other ones were about. I can't remember you even articulate what the letter A would have said for it be what it stood for. But remember what M step four? Why do I remember it because I got my *** beat. That's why.   So we as humans learn very well through a beating. So what I tell people don't take, don't take a beating is something that's bad, learn whatever you got to do, just don't take the same beating. There's nothing wrong with making mistakes, just make new mistakes. Because you're making new mistakes, you're still advancing. There's nobody, that people who fail to get ahead in life make the same mistake over again. The other there's another thing that they say is there's two types of people never amount to anything. A person that can't do it, they're told, and a person that can do nothing but. I would say take the time, and analyze that to people that will never amount to anything, a person that can't do what they're told, and a person that could do nothing but.   Those are some very, very powerful words to sit and think about. And you have to figure out who am I? What am I getting done? What kind of *** whopping am I taken on a daily basis? And I said the same one over and over again. What do I got to do to make adjustments so I could advance myself and get away from this beating I keep taking.   Michael: Man Mike drop exit stage left Aaron Chapman, everybody. This was so much fun, man. How do people get in touch with you if they need you?   Aaron: Best way is Aaron chapman.com Or just go to Google and type in Aaron chat and you see a bald bearded redneck lender you got the guy.   Michael: That's you awesome, man. This was so much fun. Aaron thank you again for coming on for the third time. This was definitely the one that did it. We'll do it. We'll be in touch man.   Aaron: Thanks, brother. Appreciate you man.   Michael: Likewise, you got it.   Okay, everyone that was our episode A big thank you to Aaron for coming on today and the other two episodes as well. If you didn't catch those, I highly recommend you give those listened to Aaron dropped some really fantastic wisdom, knowledge and thought perspective on where we're headed in the next couple of months and yours with the market.   As always, if you enjoyed the episode, we'd love to hear from you with a rating or review wherever it is get your podcasts and we look forward to seeing on the next one. Happy investing

The Remote Real Estate Investor
Billy Keels on making the leap from employee to entrepreneur

The Remote Real Estate Investor

Play Episode Listen Later Nov 1, 2022 30:57


Today, we welcome Billy Keels back on the show to discuss how he went from living the corporate life to running his own business. We discuss his motivations, the mindset shift, the challenges, and finally, the rewards of his decision. Before becoming a real estate entrepreneur, KeePon Cashflow's founder Billy Keels worked in the corporate world. In fact, he was one of the best “corporate soldiers” you'd ever want to meet. Billy says that he was happy enough in his J.O.B., but something was missing. An emptiness and longing for a different life chewed on him, pulling him to what he knew he wanted to do more than anything else. Billy wanted to be an entrepreneur who brought two worlds together. So he took steps and kept on the path to his goals. Today, Billy is an international real estate entrepreneur, problem-solver, author, coach and mentor. He sees opportunities where others often don't in real estate. --- Episode Links: https://www.firstgencp.com/ https://www.firstgencp.com/paylesstax https://www.linkedin.com/in/billykeels/?originalSubdomain=es --- Transcript Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Michael: What's going on everyone? Welcome to another episode of the Remote Real Estate Investor. I'm Michael Albaum, and today with me I have Billy Keels back on for another episode. For anyone who missed it Billy is an entrepreneur business owner ex former tech sales guy, and he's gonna be sharing with us today about how he started his business, why he started his business, and really the mindset shift around going from employee to entrepreneur. So let's get into it. Billy Keels, welcome back for round two, man. How are you? It's so good to see you. Billy: Michael, what's up man? I, um, super excited to be back. This is nice.   Michael: I'm super excited to have you here. So for those listeners that did not catch our first episode together, give us the quick and dirty who you are, where you come from, and what is it you're doing in real estate.   Billy: Very cool. But you know what? You know what I have to do first man, because you're very kind to welcome me back and I just wanna say everybody, by the way, if you haven't already, Leave Michael a nice, wonderful, honest written review as well as rating. It helps to… Michael: Oh my gosh…   Billy: Bring guests to you, which is phenomenal. No, I mean seriously. I mean.... The energy, you all bring the organization, you bring the structure. Uh, and also I know a lot of the things that you are doing are making positive impact cause you're helping to educate people and also inspiring them to take action. So it's the least I could do also as a fellow podcaster, um, to go out. Uh, and, and, and ask of that. So, um, but yeah, Billy Keels, I'm still the, the same guy from the Midwest, uh, of, uh, of Ohio, who has spent the last 26 years of his life, uh, in corporate up until recently, uh, no longer, uh, in the corporate world. I've also been spending the last 21 years, uh, living in Europe. I know Michael, that's close to your heart as well? Michael: Very much so. Billy: And specifically, yeah, specifically between, uh, France. Italy and most recently Spain. I am someone who really, really had a great corporate experience. I really enjoyed it. It was fantastic. Some personal things happened in life that helped give me some clarity that was time to do some other things. Uh, and now I am very, very fortunate to be living, uh, you know, I'm living my, my best life and, uh, was able to make my nine to five optional and doing that in a point in time where I'm still in my forties and, uh, living between, uh, the US and, and Europe and that was part of my life goal. Uh, very, very fortunate and super excited to be back here and share another conversation with you, man. Michael: Oh my God, I love it, I love it. Billy, before we jump into it, I'm just curious, do you remember the best compliment you've ever received? Just outta curiosity. Billy: The best compliment. So you've kind of putting me, putting me on the spot, man. Um, I don't know. I think that's when you have to ask my parents. I don't know because they're , you know? I don't know. I just, I don't know. I, I, I can't remember. But usually it's, it's probably something that's not related to me, but something that I would've learned from my parents. More than likely. Um, but I don't remember specifically why, Why do you ask? Michael: I love it. I'm just curious, man. I'm curious to know if people remember, like human psychology, if people remember the compliments more, or do they remember the insults more? Billy: I spent 26 years of my life, uh, 20, one of the 26 years in sales and sales leadership roles. So the, the bad stuff I've learned to just kind of let it go. , the good stuff. I try to. Um, but if it, like, one of, part of the process that's happened with me is I try not to internalize too much of this stuff because then I kind of keep that and there's a tendency to say, Well, I've heard this so many times, therefore I am, um, I always try to work and be in the best version of myself, so even if I get a compliment, it's kinda like cool. I appreciate that. I probably learned that from my mom, from my dad. It's something I've seen from my brothers or something that my, my wife is helping me to be better in. Michael: I love that man, I love that. Can we turn back the clock a little bit, Billy, and talk about. Your corporate career, because I think that you have a, a similar story to a lot of folks, especially listening, have an amazing corporate job, are killing it in whatever it is they're doing. Um, and they can see themselves doing that maybe forever you had kind of a life change. I'm just curious, like why did you decide to go into business for yourself? Billy: So, you know what, Michael, this is actually super, um, such a wonderful question and I can tell you, I think the last time I told you that there was something that happened to me when my, um, it didn't actually happen to me. It happened for me when my son turned three, I missed his birthday right and I, because I chose to go to a business meeting that was in Germany because I was chasing the corporate dream. I was, you know, that was the thing that I was supposed to do, I was a really young father in that day. It was, I felt an incongruency in my, like, in my being right. I was, I woke my wife and son up to, you know, wake them up and our one year old just to give a hug to our three year old and kiss and then I was out the door. So that was the thing that made me realize like, hey, look, I've gotta kind of take action. I really like my, my corporate career, but I got lost somewhere along the way and my priorities got outta whack and so that helped me to take, start taking action, stop reading a lot of books. Cause I'd been reading books for probably three or four years, right? I knew all the numbers, all the theory, all the stuff, but I didn't take any action and I'm very, very proud to say that I've just celebrated a decade later, right? A decade later, I was able to accomplish the goal, which was being able to make my nine to five optional and even though I went in probably for the last three years and I didn't actually financially need to, I chose to go because, um, the life balance that I had was much better than it had been the previous years. Um, I was still enjoying the things that I was doing in my role. I was really well recognized. I was, you know, making way more money than I thought I ever should be, Uh, making and a decade later, like I literally just came back from, uh, Ohio, uh, where I was, uh, over visiting some friends, got to go to a, a sporting event, which was fantastic. Saw family members and then was able to be back here. Uh, for my son's 13th birthday. So a decade later, I recognized that the action that I took for a decade while I was working my day job, having this side hustle, like it really, it's paid off and it hasn't been perfect. Michael, Um, not even close to perfect, but the fact of the matter is I got outta my own head. I started taking action. I started seeing results, and then I started multiplying on that action and. Even though I left the corporate, because something also non-financial, and I think we talked about this last time, happened with my dad, and it helped me to realize like, okay, I really like what I'm doing, but there's some other things that I can do now less than a year later and my son's, you know, 10 year, 10 years later, his 13th birthday, I'm at a point where I'm like, wow, you know, all these things that I dreamt and wrote about on my dream board. They actually came to fruition. Um, not perfectly, like I said, but you know, being able to be in this point now is, I, I, you know, I'm glad that I started taking the action and I'm glad that I started that side hustle and I know that I worked through a lot of, you know, a lot of crazy hours during some of that time, but it wasn't all for nothing. Michael: Yeah. That's amazing, man. Well, first off, congratulations. That is super, super exciting to hear and I'm sure your family is super thankful as well. Let's talk about like, I think so many folks get it in their head that they can't have a side hustle, or they can't go build a business of their own either because they don't feel creative enough, they don't feel inspired enough, they don't feel called to do something, or they just feel like they don't have enough time. So talk to us about the mindset around. I'm working my nine to five scraping by or doing really well, not even scraping by just doing really well, but I'm exhausted at the end of the day. How does someone like that even think about doing something else? Billy: Yeah, so, and you know, I, I guess I kind of put it in a, there's a couple different things inside of me. I kind of always knew that I wanted to do something else as well, because I think one of the best things about working in a corporate role is in specifically like I was in the IT sector, right and not only in it, I was in software. So this is like super cutting edge, massive profits, and so it was great place to be every single day and so there are so many, like I realize like for a while, I just wanted to continue to work and be an employee and, and things were great and I was really, really fortunate because I had great salary. Um, you know, I was given opportunities to learn to grow leadership opportunities, great training and so for that period of my life that I didn't really wanna do anything. This was like, this was the most amazing thing ever. But then also as I started getting into the other phases of my life, I realized like, hey, listen, there are other things that are really important to me. I want to be able to be here or be there, or just be nowhere when I want to do it and not have to worry about somebody else telling me when and so when those things started happening for me once again, I started realizing like, okay, well, number one, the things that, because I didn't grow up with money at all, but I got into a point where I actually was not just saving money, but investing money, but then I realized that it was outside of my control. Like the stock market couldn't control that, but that was the only thing that I'd been taught to do, which was buy low, sell high, not really a winning strategy, and I didn't take enough time to get educated on that. That happened in 2000 when the DOT combo will happen, and the same thing happened again in 2008 I lost 33% of my portfolio, so I knew that even though I was in a really great c. Opportunity and create corporate experience inside of me. I needed something else. I wanted something else. I just didn't know what it was and so it wasn't until I came across that little purple book that so many people have read that that started turning like the idea on in my mind. But even with that, my goal, like I said, it took me like three and a half, four years to go from theory to practice and it took me missing my third, my son's third birthday to actually start to take that action and so, once I started, uh, you know, being able to, to take that action, I realized like, hey, listen, as long as I continue to give the outputs, cause I was in sales and sales leadership, like what are the outcomes that are expected In my role, I always performed at a high level. Like I was in the top talent program. I was going to Hawaii every other couple years for, you know, overachievement against quotas and stuff like that. So I felt like it was always important to be able to give everything that I gave during my corporate time because that was also providing me the income to be able to do the investments in the other stuff, which is actually creating my runway for my own life, like the one that I was building for my family. So it was finding that balance between being, a really good sometimes great. Uh, corporate employee, I think even, well, I don't think for on my, for a while on my, um, on my LinkedIn it said, hey, you know, happy corporate employee like that was my moniker. So that, that was like the thing and people were like, You really a happy corporate employee? Like yeah, I mean it's treated me really, really well. Yeah. Um, but it was something more that was inside of me that said, hey listen, it's time to do something else and I was afraid for a really long time because I was a high paid executive who was visible and people, you can't be doing anything else, man. You like, you need to be client facing all the time. You make a lot of money, you're doing this, you're doing that. But I knew that it was, um, it was something that I, I really wanted to do and there was sacrifice that also went on, right? Cuz you, you, you're in that type of role, you're expected to be on. Almost 24 hours a day. So I was waking up really, really early in the morning and I was staying up really, really late at night and fortunately both my, my, my wife and my kids understood that, um, once I got back on track, um, and, and it was about being able to find that balance. So I know it's maybe a little bit of a, kind of a longwinded answer, but I think it was about, you know, recognizing how fortunate I was in the corporate role that I was in and I did like it. Uh, I liked it a lot and at the same time, at a certain point I knew that I wanted something more. I knew that I wanted. The control. Initially it was of the financial, uh, outcomes of my life and what I realized it was, I really wanted to have more control over my time and it manifests itself just a couple days ago, which was a decade later, which was me being able to fly to my hometown, stay there for a week, hang out, and then be back for my son's 13th birthday. So, um, yeah, so that's. Hopefully that answers your question. Michael: Freaking amazing, man. So let's talk about like the next obvious question because you were an executive in it, tech sales. So what did you end up doing? Like what kind of business did you start?   Billy: Yeah, so, um, so the thing that I started to understand was it was a thing that came across. It was really, this is kind of dumb luck. It happened, it just really happened that I read that low purple book. The proof of concept was really simple. He was like, okay. I was working in this intangible world selling software. You can't touch it. You pay multimillions for it and then there was, hey, you pay a couple hundred thousand, then a couple million, and you get this actual, physical, tangible thing that you can touch. People wanna sleep in it, so they'll pay you for it. So that's the revenue line. By the way you've gotta make sure that this place stays in order. So you've got some operating expenses, you know you gotta pay your insurance taxes, maintenance and operations, maintenance, repairs, things like that. Then afterwards you get to this line, which is net operating. Well cool and if you have some debt service or mortgage, you pay that mortgage and everything else you get to keep. I was like tangible, simple business model and there's a need for it. So I went and started investing in real estate and I think we talked about it last time, but here based in Barcelona, Spain, but investing always back in the United States, exclusively in the US. So I started with the, with the smaller multi-family and then I bought a mobile home park and then I opened my mind to thinking about new things and I was like, okay, cool. Once I understood that, I get the education, start to build a network around people and then start to continue to take action on this imperfect information I started seeing my asset base grow and those assets, you know, the smaller multi-family, the mobile home park, the ATM machines, and then I started investing with other people because that made a lot of sense for me because I was a high paid executive. So I started realizing like, this is really, really cool, but it's taken a lot of time. I need to do something where I can actually leverage the e efforts and expertise of other people and I was somebody who was a credit investor. I figured that out later and so then I started giving, or not giving, but investing my capital with other people and things like the ATM machines and things like, um, larger multi-family buildings and some development projects in the hospitality space and then I kept having this one specific problem, which was, I was investing in all of these, and I don't wanna get too technical, but passive streams of income, like IRS definition of passive income and I kept still paying 40 plus percent in income tax, and I was like, this doesn't work. So then I started realizing that I needed to start asking different questions. I got into a specific area within the energy space, and that energy space helped me do a couple things, which was continue to build my asset base. That was generating income. This time it was active income, but it was also helping me out as a high paid executive. It was really helping me on my income tax because there were some specific, um, tax code rules related to energy production that helped me not just generate, you know, income moving forward, but it also helped me keep more of my income through income taxes and income tax deductions. So it was looking at all of these different things. At a certain point when I left my corporate career, I thought, I really like this building the asset base. I like continuing to do it and I'd build a lot of relationships and the one thing that really made the biggest impact on me as a high paid executive was the, the thing that was helping on the generating active income and, and keeping more of my active income. So today I really focus, uh, my company in that area through syndicating capital with accredited investors, uh, for those people that are very similar to the way that I was when I was in my corporate role. Uh, and that's, my business has continued to evolve, uh, today. So hopefully that answers the question as well. Michael: I love it, I love it. And Billy, can you give us, I mean, because you're in the energy sector and if anyone's been paying attention to the news or the world or living not under a rock, the energy sector has gone a little bit haywire over the last couple months, years. So can you walk us through like, what has your business gone through over the last couple years with Covid and the war in Ukraine and this sort of thing? Billy: Yeah, man. So this is, so this is really, really interesting, right and one of the things that I appreciate us as, uh, as investors in real assets, right, is number one, it's just, and whether we start in real estate or we start in something else that's tangible, it, it starts to open up our mind to way of thinking, right? I remember when I was just doing stocks, I just thought about stocks. But then when I started investing in real estate, it was like real estate. Oh my gosh, this is simple. this makes sense and okay and yeah, and then it opened my mind to other things and so I was then open to, uh, doing other things and it's very similar, right? If I think about now what I'm understanding about energy, like energy has always been super important, right? If you think about it at a very high level, every single output that we have, it has two component. The first component is labor and the other is energy and I thought, wow, okay, well yeah, that kind of makes sense and as I start realizing that, and then I started saying because of some of the incentives that are related to energy and energy production specifically, it made it a place that I really wanted to learn more about right and, and it, I've now started learning about a lot of different types of energy. But to your point, because energy is everything and everything is energy regardless of what's happening at, um, at your house down the street or even across the world. There's always something that is going to impact energy and the need for more energy, and so, It's very similar to what I started thinking about from a, um, basic needs perspective. When you need a place to live or you know, you need or want a place to live, the proof of concept already exists and so being able to explain the need for energy, to your point, I don't, you don't, I don't really need to explain it. It's just a matter of how is the energy being produced. That's where more of the, the explanations come. Um, and because of that, because it's something that most of us understand or understand the need for um, that part has made it relatively, uh, easy to have conversations about. Of course, there's always, um, very specific conversations or if I'm speaking to somebody who's in, uh, for instance the energy or oil and gas space, and they may be an expert, I always learn stuff, uh, as well. So, um, so just recognizing all the different things that have happened, uh, in the energy space and also having now a real focus on it. It's something that I've seen my business expand exponentially. Like what do I mean by that? So remember I was, uh, a high pay professional. I was, you know, very visible and at the same time I was, you know, syndicating capital, bringing people together around common goals and common dreams and just to kind of give you an idea from the first year, more or less that I was doing this, or a little bit year and a bit, Um, while I was still working my corporate role, since I've left my corporate role and have now done focus just specifically on helping accredited investors that are looking for these, uh, types of investment opportunities that generate returns and also help with income tax problems, um, our business has multiplied by seven right and so what that means to me is one, I have more of a focus now. Um, I'm understanding the accredited investor base that we are serving because also it helps that I am one of those people. I understand, uh, what it's like to go every single day, all day from early morning to late night and recognize that you're doing a hundred percent of the work, right? I was doing a hundred percent of the work, and many times I would bring home, you know, 50, 55% of the work at a certain point, I didn't like that, especially because I was open to learning about new investment opportunities because the real estate that helped open my mind is now continued to keep my mind wide open and so, now being able to look at new opportunities, evaluate those new opportunities, understanding the teams behind those opportunities, it's just, it's one of the things that's now an extension, uh, of where my business is and how we're serving, uh, those accredit investors and why and the energy spaces is one that's, I think, gonna be around for quite a while, kind of like real estate. Michael: That's great, man. I'm curious, Billy, for yourself, I mean, you're clearly a super bright individual. You're very open, you're very curious for the person that is just getting involved in the investment space or maybe in the real estate space that's new for them. They're high paid professional, they don't understand that world. They don't have maybe the same curiosity that you do. I mean, what's the mindset shift around hey, I know stocks and bonds. This is what I've always done and it's worked for me. Why should I bother with this alternative asset class this, this, something different? Bolly: Yeah. So I'm gonna probably, um, cheat a little bit here because we're asking the question and you are asking the question of me and the person that's listening that had that question. Here's the good part, You're already here listening, so you know that something inside of you knows that something's wrong, knows that there's something more that's out there. So what I would suggest is that you've already taken the first step, right? You're already here listening to Michael. You're learning from the guests that are here. So, you know, continue to go down that path. The curiosity's already there because you're already here, right? Yeah. Um, and the, and the reality find out, listen, um, you know, talked about it before. I mean, you have an opportunity to even leave an honest review and in your review, say, hey look, I would really like to have this question answered. I guess what, somebody's probably gonna respond to you and it's about being able to take the steps that you feel comfortable with, um, as an investor. The curiosity's already there. You're already here you heard the question asked, so give, you know, I would say I would give. The ability to continue down this track. Listen to more of the podcast. Start to read about the things that you believe will help to, um, move you forward, move you closer to whatever your, your goal is, um, because everyone has a, you know, have as an investing goal and allow yourself to get educated, move towards the things that you really want to be able to do and ultimately that's gonna help you. So, um, I only say that because I know that they're listening. If they're here, they're listening to the question that you ask, and they just need to give themselves the, uh, ability to keep going down that path. Michael: I love it, I love it. I'm curious, Billy, for most of the clients that you work with, the credit investors you work with, are you having to sell them on this idea of, of your business model and what it is that you're doing or are they already here coming to you saying, hey, I've already done the research. I know who you are, I know what the asset is, like, let me give you money and, and or throwing money at you. What does that look like Billy: Well, so I'm, I'm pretty particular, right? Like, I don't, um, if our relationship started that way, it wouldn't be a relationship that would last very long and, and what I mean by that is, is yeah. What I mean by that is if someone just wants to throw money, uh, at you, I don't want a transactional relationship right I want to build a long lasting relationship. It, that may be the person's intention. Hey, look, I, I eventually want to invest with you, but the type business culture that we're building is we're building an investor family. And so in the same way that we want to get to know one another, you know, I'm very intentional. Hey, let's you know, let's invest 20 minutes in getting to know one another. At least have a 20 minute conversation, 30 minute conversation, understand a bit more about your goals, your dreams, priorities, and also understand about me and my business, what are our business goals and priorities because if there's an alignment, then it makes it really easy for us to take the next step and say, okay, well listen, you can, I know you have an investment, uh, opportunity. You've probably seen something about me somewhere online, or you've listened to this wonderful podcast and you're thinking, okay, well listen. I think because we sound pretty similarly aligned, so what's the harm in investing 30 minutes to get to know one another, right? I'm doing that multiple, multiple, multiple times a day. Um, and so from there that, that's the first part is to, to be able to, to start the relationship on the right foot. Getting to know one another, getting to, to like one um, you know, one another, you like one another, eventually you trust one another. But also, like, one of the things, and this is probably comes from, you know, the 26 years of, of working in, um, you know, really a relationship based type of roles in the last 21 years in, you know, high value type of, of selling, um, and relationship building.   It's really about like, I wanna always help and I want our company to always help those accredited investors that we're serving to make an informed.  because what we do, like the solution that we offer, it's the solution. Like it does what it does. So you have to be comfortable, you have to be informed, you have to ask all of the questions that you feel uncomfortable asking, and my team and I have to be able to give you the information or the data in the way that makes the most sense to you, so that you ultimately can make an informed decision. Because the worst thing that can happen is you look at something, you're like, Wow, this looks absolutely awesome. The numbers are fantastic. You don't spend time getting to know the person or the company that you are going to invest with. You don't know if you're aligned and you're making a decision just based on some numbers that you saw and when as soon as things don't go according to plan and you haven't done the prep work on the front. That's when things get really, really wild and out of, out of control. Like at least that's what I've seen at least in the last 21 years of my experience and so I do have a lot of focus on, you know, being aligned up front, being able to get to know one another, and then also being able to help someone make an informed decision and then after that, you know, if they're informed decision things go. Hey, listen, at least they were informed, they knew about the risks and you know, we will also wanna protect on the downside and, and talk about risks, because that's something that's also very, very important to helping someone make an informed decision. So, um, I don't know if that's a little bit long winded, but hopefully that answers the question. Michael: No, it's, that's great, man. I mean, as you were saying that, I had this, this question you were saying, you know, we're not transactional. We wanna develop this relationship and in my head, I'm, I'm thinking, why, why, why, right? Because from a, from a growth standpoint, from a revenue standpoint, Yeah. I mean, people could look at, at you and say, well, Billy, you're doing it wrong. You're taking too much time with this person. You're spending too much time there. But I think you've explained the why so eloquently and it is because you're protecting the downside when something, if something, probably when something goes side based when something happens, you've got, you've got that foundational relationship to look back on and say, Hey, this, you know, we trust each other. There's not a finger pointing game going on, I would imagine. Billy: Yeah. Well, that's part of it and then also too, you know, I guess this goes back to the company, is that I've worked, been fortunate enough to work for, a lot of this is about business models. It's like I was talking about earlier, Well, let me, let me put it this way, maybe so, I like food. My kids like food and there are things that, like my son, when he's given the opportunity to go somewhere, well, he chooses to go to McDonald's, right and so that's where he likes to go and he likes to eat McDonald's.  Um, I don't so much, but, um, the, well, sometimes when you used to a lot when I was smart, younger, and then there's other places… Michael: There Mc Flurry outta control, right? Billy: All right, I'll go agnostic, I'll go agnostic. Some people like fast food. I probably should have done it that way. Some people like fast food, right? Um, and there was a point in my life where I like fast food as well. I'll change it up a little bit. Um, there's also another point in my life where I like to be able to sit down and I wanted to have more of a, you know, you wanna sit in the booth and you wanna talk and you, um, you just wanna spend a little bit more time and then there's also a.  in my life where I like to take my wife to. Very nice. Sometimes one, two or three Michelin star restaurants, right? The thing is, each one of those business models work. They can all be profitable. But the thing is the business models are very, very different. Do you like fast food? Do you like slow dining or do you like Michelin restaurants? All of them are profitable and it coming back to… Michael: It's got tingles, man, that's such a… Billy: But it's, but, but it's coming back to the question that you ask. , our business is not a high volume business, right. I would rather invest the time to build a deep, valuable relationship and that also means that the, the, the, the investor base that, that my company is serving, I is the investor base that we've decided to do is a, is an accredited investor, is typically a busy high pay professional. That once they have more control over their time and I recognize that for some people that's gonna be a challenge, but it's also for the person that's willing to invest the time. I know that that person has a much higher probability of getting to the goals that they're, that they're really wanting because they're gonna invest that time outside of the stuff that they're, that's keeping them busy and they're gonna be investing the time on the things that's gonna get them closer to their life priorities. That's our business model. There are other models that pretend that will prefer to go to a high number of, right? It's, but there's no wrong business model. That's just the one that I think works the best for me because I'm kind of that person today. Uh, that's the person that I understand the most. Michael: Yeah, man, I love that I love that so much and, and your analogy, the restaurant, different service types just was like, loved it… Billy: Use it whenever you want. Michael: Yes, Yes. I'm gonna, It's, you know, tm Billy Keels. Um, this has been so much fun as always. For everyone who's stung, who stuck with us this far, and there's like on the edge of their seats, what is the name of your company if they're like, I have to invest with this guy. Billy: Yeah, it's first Generation Capital Partners that you can find it at firstgencp.com and actually for people who are the credit investor, having that challenge around, um, being able to find things that where you can find investment opportunities that are gonna get you closer to your life goals, generate income for you, as well as provide tax benefits earned income side of things. We have a guide for you. You can go to firstgencp.com/payless tax. Um, that's a probably the best way to find out exactly, you know, what we're doing. Have a nice little white paper there and if it makes sense for you to continue to move forward, love to be able to get on the phone call and talk. Uh, have a conversation with you, Michael the other thing is, and this is the kind of, people can find out more about me as well, but they should go. Um, the going Long podcast, episode 2 21, where you absolutely crushed it . So going long, podcast episode 2 21 with your buddy Michael. Uh, and then from there, I, I think I'm the only Billy Keels in Barcelona, Spain. So if you wanna look me up on LinkedIn, you can go there. Uh, like I said, Billy Keels, Barcelona, Spain, just let me know that you heard Michael and I, uh, having a conversation here and it's gonna help us to, uh, keep our conversation going. So, uh, with that, I, you know, I love being able to be back here. I, I feel very, very thankful, grateful, uh, for the, uh, for the ability to be back here and share a little bit more of my story. Uh, Michael team really, really appreciate it. Thank you so much. Michael: Oh no. The pleasure is ours, Billy. Thank you and we will definitely be in touch, man. I'm looking forward to doing this again soon. Billy: Thank you. Michael: Take care. All right, everyone. that was our episode. A big thank you to Billy for coming on again, opening his vest a little bit, showing his cards, being a little bit vulnerable, and sharing some of his mindset and what was going on in his life when he made some of those massive transitions. As always, if you enjoyed the episode, we'd love to hear from you with a rating or review wherever it is to get your podcast, and we look forward to seeing you on the. Happy investing…

The Remote Real Estate Investor
Why you might want to have a Public Adjustor on your team

The Remote Real Estate Investor

Play Episode Listen Later Oct 29, 2022 26:34


In this episode, we welcome Public Adjustor, Andy Gurczak to speak about the role of PAs, and how you can make the most out of the undesirable experience of haggling with your insurance provider -- ensuring the highest possible settlement under the terms and conditions of the policy.  Andy Gurczak started in construction as a laborer and got his in as a public adjustor through a contractor he worked for.  Quickly climbing the ladder, he helped grow the business by attaining new clients and further building relationships with existing clients. Andy started his own company, AllCity Adjusting, where he and his team process over 1000 claims per year. Andy's Contact Info: https://www.allcityadjusting.com/ c: 708 655 4186 --- Transcript Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Michael: What's going on everyone? Welcome to another episode of The Remote Real Estate Investor. I'm Michael Albaum and today with me I have Andy Gurczak with All City Public Adjusting. And he's gonna be talking to us today about what a public adjuster is, and why anyone who owns property should consider using one if they have an insurance claim. So let's get into it.   Andy, what's going on, man, thanks so much for taking the time to hang out with me today. I really appreciate you coming on.   Andy: Mike, thank you so much for having me on. It's a pleasure. It's always it's fun to do these. So I'm excited.   Michael: No no. It's truly my pleasure. You're the first like we've done I think this is episode 300 and change and you're the first public adjuster we've had on so anyone who knows me knows that I'm a total insurance nerd and insurance buff so but for anyone who's not familiar, like what is a public adjuster and kind of give us a quick and dirty of what you're doing in real estate.   Andy: First of all, Bravo on 300 episodes. Plus, that's awesome. So thanks for you guys. And I'm lucky PA so this is pretty cool. Yeah, so public adjuster is is licensed by the state, he's legally able to represent the insured in their claim process, negotiate and settle the loss for them. Whether it's commercial or residential. It's basically like having an attorney on your side or an accountant doing your books. It's the same exact thing. They're licensed by the state that they work in as well.   Michael: Okay, okay. And I mean, it just seems like kind of counterintuitive. I go and pay an insurance company every single month, every single year to give me insurance. Then when I have a claim, an insurance claim, I go to the insurance company said, Hey, insurance company, here's this claim, pay me for the claim what I'm owed. So why do I need a public adjuster? Like why does your job even exist?   Andy: Yeah, that's a that's a great question. The reason our job exists is because insurance companies don't pay claims and don't pay them fairly. We've talked about this before the show, Mike, you work the insurance side. So you know, that claims, actually two people that work in our office work the insurance side, and they've got they seen how bad a guy and came to our side. Because claims are handled, I mean, horribly every year, it gets worse and worse. And our we just had a meeting with a couple of attorneys just discussing what's going on and what we could do in some situations, because it's getting so bad, that, you know, insurance companies aren't responding for a month or two months, or just I mean, so having a PA on your site, even though it's your claim, and you think you have to remember that insurance adjuster, that staff adjuster and every one that they send out every vendor contractor they sent out, they all get paid by the insurance company. So they're all working for this one entity. And then you're by yourself. And you're thinking, well, they're on my side, no doubt on your side. It's all about profits, margins, all that good stuff. So…   Michael: Yeah, I know it's so the word of news is sick. When you find out kind of what's going on under the hood. It's really what should be a partner relationship. Like you mentioned, everyone on the same team working for the same goal can be come very contentious very quickly. So you said it's like having an attorney or like having a bookkeeper on your side? I mean, it sounds expensive. How much do public adjusters charge? Like, how does that work?   Andy: Easy. Yep, Pa is most of the time charge a contingency fee. So there's no retainer is nothing, it's all contingency on what they recover. And you know what the claim settles for. And standard is 10%. Like our company has adopted just a 10%, nationwide, whatever claim we're handling, whatever the size is now, some situations where we come in, let's just say months after a year after the claim has been paid, and we're just trying to figure out maybe another coverage or paid additional than it might be a higher fee of maybe 20-25 on the money that we recover above that amount that would the only difference,   Michael: Okay, and so just so we get it crystal clear for all of our listeners, because I just went through this on a claim to fire claims I had on a property. If the insurance company comes into my claim, and says, Hey, Michael, we're gonna give you $100,000 For your claim, and I'm like, There's no way it's gotta be worth way more than that. You will come in or a public adjuster comes in, you end up getting me a million dollars, you're gonna take 10% of that additional 900k That you got me above and beyond what I was originally awarded.   Andy: Yeah, exactly. And something in your situation. So when we have claims, and we have large investors and management companies, we have a pay scale that actually the percentage goes down once it reaches a certain amount. So reaches, you know, half a million that 10% may become nine, right for every client, we kind of work with them, just because we kind of know their position. And again, we want to create a relationship that is long term, because then we're getting called when before the claim even starts right because we want to be there. You know, another question is when do you want to hire PA for the day you have a claim, because you want to make sure if that claim is a legit claim, if you should even file that claim, whatever your deductible is, is that even a covered loss?   A PA will, you know, we do this for our clients all the time we do their policies with their claims without making any money or charging any fee. It just part of our relationship with our clients.   Michael: Okay, I'm so glad you brought that up, Andy, because I get this question all the time. Because so many people don't like, insurance, education is not something that's really provided out there. And I'm wondering if that maybe is on purpose by the insurance companies, but like, how should people if they have something happened to their property? And statistically, if you own a property or enough properties long enough, you will probably have a claim?   So what's the process? Like if you could articulate and paint us a picture of as a property owner, whether it's our own property or an investment property? What should that process look like? What should what should owners be doing? Who should they be talking to?   Andy: Yeah, if you don't have a PA, and you're kind of going to try to do this on your own, you want to first stop whatever loss happens, you want to mitigate the loss, right, you want to get first you want to you want to get your copy of your policy to you want to see if your agent because you most likely don't have a copy, because no one knows that they don't have a copy until they have a loss to be like, Oh, I have this page, I'm gonna get your declaration, you need your policy, your booklet, you know, no one gets that usually, until something happens. And then it's hard to get it from the insurance company, it's like, they don't want to give you your own policy, very normal. Then you want to mitigate the loss. So if it's a fire, you want to board it up, protect it, make sure no one can get in there. Or if it's a roof, you want to cover the roof, if it's a roof claim, and then you want to go and take pictures and document as much as you can, and then call the claimant.   And when you call on the claimant and you're trying to set the reserves high enough. So then when they come in, and let's just say you have $100,000 loss, but when you told them the claim, you might have said, well, it's a small fire in the kitchen, small smoke, they might have reset the set the reserves at 25,000. And now the claim is actually 100. So now when we're trying to fight it, we're going to five managers like what's the example at State Farm, for example, once it goes past the reserves, you're going through letters like five managers to approve one payment are one extra additional line item, it's it gets really crazy.   So the most important is mitigating, mitigating the loss, getting your policy, reserving the claim calling the claimant, right? And if you don't know the answer, when you're discussing that claim, when you're calling it in, just say I don't know, because a lot of people get into trouble by trying to say too much to be too honest. And it's not about being honest or not, or, or lying. But people say the wrong words, they might use the word like mold, I see mold. Oh, well, molds not covered. Here's a denial letter. Well, the water, you know, the water happened three days ago, we have there's mold, because you know it's wet, it's humid mold molds catch up, but there's still water damage that's covered.   So different words they use. So you gotta be careful with words you so you want to do your due diligence, or even call your agent to call that claimant for you. If you need help.   Michael: Let's talk about that for a minute. Because in the agent world, you have captive and non captive agents. And so just like you were saying all the vendors are paid by the insurance company. I mean, in a lot of instances, aren't these agents paid by the insurance companies as well?   Andy: 100%. And I have friends that are agents and I know people are agents, and agents have a bonus if their clients don't file claims. So there is a bonus, there's a perk of them if their clients don't have claims or the correct. So everyone's got a benefit if the claim is not filed, and if it's underpaid, everyone gets points on that.   Michael: So can we surmise that if you have a claim, you should just call a public adjuster immediately?   Andy: 100%. Because it's a free review, what's the worst is going to happen? He's going to come in there and say don't file it. You don't have to sign with that PA but at least get that expertise. Now you want to make sure you find the right one. But if you do you have them looked at it and in depth look at the claim inspect the roof, inspect the fire damage inspector water damage and let you know everything you should do.   Michael: Yeah, I am. I had my first big claim to have them back to back couple years ago, I had two fires in a commercial building back to back a week apart, which I used to work as a professional fire protection engineer. And it's like statistically impossible to have that happen. I'm the one exception, right? So I went through the claim process I had the insurance company come out do their inspections like oh, it's small fire just like you said, you know teeny tiny claim payout. And I'm like dude, that doesn't even cover the materials that were sitting on the roof when I had the roof fire. So I brought in a public adjuster and they know about 15Xed that claim. So I can't sing their praises enough. When someone is searching for a public adjuster and you just mentioned this, you want to find the right one, like what does that process look like? What questions should you be asking?   Andy: I've never been on the other side. When I look and talk to our clients how they found us obviously they were looking online Googling and stuff and they were doing a search engine and kind of we came up online we do a lot of blogs and stuff. So we'll come up there with a lot of tips and stuff for people so they'll find our name. Otherwise, so if you're not looking online, you know, you can check websites like patio, which is Texas associations of public insurance adjusters, California has their own, some states have their own. There's the NAPIA National Association of Public Insurance. So there's different associations that you could go on, and find adjusters pas that have been screened and have backgrounds and pay their dues, because they're part of an organization. So that would be your, you know, your best bet. Referrals. Again, if I, if I knew you, I would say, Hey, Mike, you had a couple of fires, you know, did you hire who's a PA, you have someone to recommend. That's, that's your best bet. Someone that they worked for referral.   Michael: That that has had the actual experience with them? Yep. Okay. Are there certain questions that someone should be asking? I mean, what separates the different pas that are out there? Because I'm sure if I google that would get tons of different results. Is one better than the other? Like, is it just based on the fee structure? What should people be be considering? If they're going to hire someone?   Andy: That's an awesome question. So a lot of what you should be asking, and when you go online and look for PAs, a lot of them say, you know, fire water, they do all these things. But 90% of PAs handle just roofing claims, usually residential, some commercial. So it's, you have to make sure that hey, how do you handle fires? And how many fires have you handled? Or what do you specialize in? You might say, Well, we do a lot of roofs. That's not the PA, if you had a fire, you don't want the guy that's handling roofing claims. Right? For us, we do large loss, fires, water, hurricanes, we don't if someone calls for a residential roof. We don't we don't do residential roofs, we would love to, but we don't we don't specialize it. There's other PAs that do a great job, here's a couple of names you can call or, you know, Google and and find the problem just and it's in that it's just a committed, you know, attorney, some attorneys do, you know, personal injury, some do properties. Same thing with PA some PAs are better at some coverage than others.   Micael: Yeah, that makes total sense. Andy, let me ask you a question. Because it happened to me. And I'm curious now with the hindsight, what the proper move is, so I had this fire, and it was on the roof. And it was during a reroof. So they had all the materials up there. So all the materials burned up. And my public adjuster said, Don't touch anything on the roof. He said, We got to come out, we got to photograph everything we need to take care of, you know, we need to document everything. And meanwhile, it's really windy. There's debris blowing onto the neighbor's property into their, into their, into their courtyard and their fence. And so the neighbors called me complaining threatening to sue, they got crap blown everywhere. And I'm like, I can't it's like an active insurance investigation.   So you were talking about you want to mitigate the loss stop the loss from getting any worse. But are there instances where physically mitigating the loss than is like evidence tampering is the wrong word, but you understand how it's changing the scene.   Andy: Double edged sword? Yes, a double edged sword. We walk into properties all the time. And you know, or let's say we go into a hurricane area, or right now in Florida, and we see people outside with all their contents, right? Like all their house stuff, just in a pile. And I'm like, did you guys order material? Everything's gutted? I'm like, did you guys inventory take pictures? Well, no, but the insurance company said to just throw everything up. That's the worst idea ever. That's what they want. You just get rid of all your evidence. So that's a double edged sword. So when I say mitigate, you're supposed to mitigate the loss because they can technically your duties after last say you will mitigate. So if you don't, they can deny it. But what's mitigate right? If I had a pipe burst from the third story water comes as floods my whole house right? The insurance company is going to want to send a vendor out to pull some drywall or spray everything or dry everything and leave it. That's the goal. That's mitigation. But mitigation is you turning off the water. That's already mitigation, because it doesn't specify what technically mitigation is. It just says mitigate. So by me turning off the water, I have mitigated the loss. And I will tell my insurer just leave it because it's already all damaged. Whether you dry it or not, that's just gonna go against your thing. It's already damaged. It can't be its category three water. So it's got to be all replaced. Instead of paying a vendor all this money, this has got to be gutted, all that money should just go to you instead of that vendor.   So yeah, there is instances. So in yours, just because we have insurance, karma saying any Can we start rebuilding? Well, now because we're still fighting with the insurance company, and we're still negotiating, and if you start the repairs, then you you can date that's what they want. They want to keep holding, holding until you actually accept it and start the repairs.   Now, if they don't start the repairs, then they'll go well, why didn't the insured start the repairs? Right? So it's, we're trying to keep our clients in the best situation to make sure it's the best possible outcome. But it's hard sometimes, especially with landlords when they have tenants, right? Hey, my tenant is going to sue me or my tenants gonna go this if I don't do the repairs. Then do the repairs, I guess. And this is the settlement we're getting. So an insurance company knows this. So, in your situation. That's a tough call. What do you say like either the PA say, Hey, we got to do it this way. And he was doing it the right way. Because if you did mitigate or clean up that thing? And they come in? They're like, ah. Even if you document it, I'm telling you, it's like they don't even look at your photos. They don't care. Yeah, so they did the right thing.   Michael: Okay, good. Well, that's good to hear. I'm gonna go, I'm gonna go send them another thank you text after this episode. Yeah. Andy, can you give us like, maybe two scenarios to stories that you've experienced one where things went perfectly well, or as good as they could have gone and what you you're insured what your clients did to get there. And then maybe a scenario at the opposite end of the spectrum where things just like, just like, give us like the worst thing you've ever seen happen? Just so we have a little bit of context that…   Andy: Part of like claim handling or like? Okay, so I'll tell you, we were just like I said, we had the attorney, we were kind of going over claims and we have one, and I won't say the insurance company. This is in Gary, Indiana. This this poor lady that waged her claim has been handled, and it's by an adjuster that we've seen handle bad claims for other people in that area. Whether it's color, race, area, I don't know. But the way this this claim has been handled this lady the under oath and everything she's been through, like we thought we had it all over, they finally after six months, say okay, well pay the claim. And here's the money, we got to argue with them. They started at 30,000. It's $160,000 claim. But then we have contents another 160 that we sent wants to go and now we're asking what's going on with the content. So they come back well, well, which which was the insurance and which was her daughter's. Why does it matter? If you had a fire Mike, and you have your kids and your wife stuff in the house? That's all personal property? They're not on the pile? Are your kids on the policy now? Yeah, no kids are on the policy, but their stuff is covered. Right? So why are they're asking her so now they want to examine her again and her mom. So this is going to drag on for 10 months. So this and this claim is ongoing. So to us that to me, it's like, well, now I'm powerless as a PA. But what can I do?   So the only way is the attorney can help. But again, she's still going to have to do that examination. But it just shows how long they'll drag it and try to find ways of however, to underpay or just deny that claim. So that's bad. Yeah. And we have a bunch of those. So those hurt a lot of them, we win, this one again, we got the structure paid and figured out. Now we thought the contents was going to be a slam dunk, easy. Here's everything, even your vendor said, you can't clean this stuff. Great. Here's the list. Here's the pricing age of items. And now they come back with this. So, another tactic to delay the claim.   On a good note, we had one, it was a it was from another podcast, one of the investors students called us, he got the number to us and he called us he had a 16 unit in Champaign, Illinois, burned down here to ACV policy, you are familiar with actual cash value. Your listeners might not but meaning he would not recover depreciation, he would not get that amount even if he rebuilt. So he was just getting what's what it's worth now. So that building, he had a fit 550 limit that just came in, he wrote like 560. And they depreciated and cut him a check for maybe 300,000, something like that. So when we got hired, we sent our letter representation, and the adjuster called and said, Hey, Andy, you know, I paid this, I paid this to Max, I don't know why he hired you. I'm like, Well, you didn't pay loss of rents. And also you haven't paid demolition expense, and you only paid 300 when it's a 550 policy, you stopped writing, because our estimate is like 900,000. With no like edit, like this is just it.   So then we reconcile and the insured ended up getting 100%. So 550 plus 5%, debris removal, some other endorsements, plus he maxed out everything. So he ended up walking away with another 400, like 300K. So again, when an adjuster says, you know, we don't need you. And that's it again, there's many claims like that, those are the positives, it's the ones that drag on, and that you like, you know, you're close, but they're still like delaying, delaying, delaying. And it's like they want the insurance to just finally say, Okay, well, I'm done.   Michael: I'll just throw in the towel.   Andy: Yeah, it sucks. And, you know, there is statutes in each state, which they have to follow, but it's never followed, because no one ever calls them out on it. Because unless you actually go to court or litigation, that's when they show okay, we didn't do this. They didn't do this. But other than that, they don't really know. They kind of do their own thing.   Michael: Yeah, because they're so big. And you bring up you bring up a really good point ACV versus replacement costs for anyone that's not familiar with the to give us from from like the PA side of things. What is the benefit of one versus the other? Because I'm sure your clients have seen like the reason your client probably had the ACV was because the replacement costs value on that 70 unit 50 unit was just probably astronomical. So it's often a cheaper policy to get like what's the downsides of going with one versus the other and what risks do people run by choosing one versus the other?   Andy: So the riskier is with the actual cash value policy and most most policies are RCV based. And then they have the actual cash value endorsement that says we only pay actual cash value, what happens is why you would do that policy where some people might get that policy and our insured wasn't even aware of it. But the agent sold it to him didn't explain to him the differences. He didn't know that he had that extra cash value policy. So you know, that's another story. He went on his own. But, so what happens is you, it saves you a lot on your premium, especially if you're investing you're trying to make margins and you know, it could save you on a property like that 2-3-4K a year, right? Well, it's great until you actually have a loss, when you have a loss. You know, it's especially on older buildings, it's cutting your payment by half. And you can't recover that money because it's actual cash value. So the replacement cost of you know, your home today is 300,000, but the actual cash value after depreciation, your actual cash value is 150. Well, you're only getting that 150. Even if we got the settlement of 300. With insurance, your policy will only allow for the actual cash value of 150, which will leave you with only half the money to rebuild.   So you're always as an as an insured, you should always have a replacement cost policy. And now they have you know, different like guaranteed replacement costs and all this other openly, openly insurance actually has it. They don't even have its guaranteed replacement, because they don't even have a limit. I think it's up to one like there's no limit on structure a   Michael: Holy smokes.   Andy: So there's some new carriers that are really, really, really good, actually.   Michael: Okay. And that brings me to my next point. And I'm so glad you brought it up. Like Should folks be involved in public adjusters in their insurance carrier decisions as they're looking to go place insurance on properties?   Andy: I would hope so. Because all we do is read policies every day. All I do is read policies interpret policy. So I know when I'm looking at a policy, I'm like, Well, you have a good policy, but you don't have you have a finished basement, you don't have any water backup, you your roof is actual cash value only. Oh, I didn't know that. I didn't know there's a lot of stuff you you should be aware. So yeah, our longer term clients will actually inspect their properties, look at their policies to make sure they don't have any exposed liabilities. Right. Now, it's not our job. It's the agents job. But most of the agents now are just, you know, selling policies instead of actually doing their due diligence and ensuring the claim the right way, they insured.   Michael: Yeah, I just want to echo exactly what you said, for all of our listeners, like now the public adjuster that I worked with on this on these fire claims, I sent him every policy and every quote that I get for properties, and he told me he's like, happy to do it. He's like, Yeah, this is a great carrier. But this is the other thing. And also, he can tell me like, Hey, I've run up against this insurance carrier, we see them all the time, like they don't pay claims, we're going to be working together a lot more if you have a claim if you go with this company, which is super great insight to have.   Andy: That's, that's awesome. And that's the same thing. I would say, I would say this carrier, we have a lot we have, you know, this many claims every year. And you know, maybe it's a lesser policy, and that takes longer, but they'll pay the claims, right? These guys just don't pay or they didn't know, I have a list of insurance companies that I know that are easier to deal with. Now, it's your claim guarantee you're gonna be paid when you file a claim with them. No, it still might be a hard process. But they're much easier than these eight other carriers that they're that are out there.   Michael: Yeah. This has been so great. Andy, my last question for you, man. How many claims do you handle a year just out of curiosity? So I can we give people an idea of…   Andy: Yeah, we do over 1000 claims a year?   Michael: Well, but how many how many public adjusters in your office?   Andy: Oh, right now we have four. Right now we have four and we're just we just keep growing. We do a good job marketing and, and building our social media presence. And yeah, it's, it's, it's good. And I mean, I guess it's bad for the insurance. Maybe these claims are handled. But yes, tactically, we, our business grows and we get more calls.   Michael: That's awesome. And I want you to share with everyone your contact information where people can get a hold of you and like what kind of I know you said you don't do residential roofs, but what kind of claims should people consider reaching out to you for?   Andy: Any fire, you know, water claims, you know, whether it's broken pipes sewer backup, we can inspect those or at least advise sewer backups, usually, or water backup limits, they usually have a limit. So I see your limit is 10,000. I look at the photos and I'm like, Well, you max out the limit. You don't need a PA this one's just a max policy easy. A lot of people that call us if we get to two calls, three calls a day of clients that we just kind of give them advice because there's no need for a PA in some instances, they will but we can give them at least advice and help them out.   But fire claims hurricane even commercial roofs we do commercial roofs a lot. Residential roofs is just the one thing we don't really do. Just because we we don't have the staff to do it. So…   Michael: Yeah, okay, fantastic. And for people that want to reach out learn more about your take advantage of your services, what's the best way for them to do so?   Andy: The easiest way is my cell phone. It's literally for your clients they can for your listeners, they can call me it's 708 655 4186 that's literally my cell phone. They can text me call me I'm really easy to get a hold of while I still can. I'm able to get my phone away so write it down because I might have to switch here I might not be able to give my phone away and my wife gets mad with more calls.   Michael: I hope you're so busy that happens.   Andy: So ya know so far so far. Okay, wife's not getting mad, so…   Michael: Awesome. Andy, thank you so much, man. This was super great anyone watching the video could tell I'm super giddy talking about insurance stuff. It's so great to meet someone that's also as giddy so no, I really appreciate the time.   Andy: No, it's fun to actually have a host that actually knows that that area and yeah, it's fun. You You know you've been through it now yourself. So you kind of know the you know, you know, you know what we do and what a PA can help. So it's, good.   Michael: Big time, big time. Well, thanks again, man. I'm sure we'll be in touch.   Andy: Mike, thank you so much for having me. I appreciate it.   Michael: All right, everyone. That was our episode with Andy, A big thank you to him for coming on and sharing some great information, some great knowledge and wisdom with us. Definitely. If you are someone that is going through an insurance claim or will go through an insurance claim in your lifetime with the property you own, definitely consider hiring a public adjuster they are worth their weight in gold. As always, if you enjoyed the episode, please feel free to leave us a rating or review. We'd love to hear from you all in the comments section and ideas on future episode topics. And we look forward to seeing on the next one. Happy investing

The Remote Real Estate Investor
How much to today's higher interest rates really matter?

The Remote Real Estate Investor

Play Episode Listen Later Oct 25, 2022 23:29


In this second episode with Aaron Chapman, we discuss how much interest rates actually matter. Over the past couple of years, low interest rates have allowed people to get into a deal and see immediate cashflow. But with interest rates rising, many are concerned that they are not seeing immediate positive cash flow. Is that a deal breaker? Should investors sit on the sidelines and wait for rates to drop once again? Or should investors be thinking about real estate like other business models and be willing to put their capital into a deal and expect to see profits occur over a longer time horizon? Tune in to hear Aaron's unique take on these questions.    Aaron Chapman is a veteran in the finance industry with 25 years of experience helping clients better understand, source, and finance cash-flow positive investment properties. He advises over 100 clients a month in the acquisition and financing of their investment properties and primary residences. Aaron is ranked in the top 1% of mortgage loan processors in the country, in an industry of over 300,000 licensed loan originators, closing in excess of 100 transactions per month. Episode links: https://apps.apple.com/uy/app/qjo-investment-tool/id1533823468 https://www.aaronbchapman.com/ --- Transcript Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Michael: What's going on everyone? Welcome to another episode of the remote real estate investor. I'm Michael Albaum and today joining me again, I got Aaron Chapman. And in case you missed, here's prior episodes, definitely go back and give that a listen. But Aaron is a lender in the residential mortgage industry. And he's got a wealth of knowledge and experience under his belt. And today we're talking about how much interest rates actually matter to doing our deals. So let's get into it.   Aaron Chapman, welcome back, man. Good to see you.   Aaron: Good to see you too, man. It's good to be back. In fact, it hasn't been long.   Michael: For those of you that caught our prior episode with Aaron, we are recording this back to back so we figured we just knock it out.   Aaron: I don't I don't have a dozen of these specific shirts for those who are wondering.   Michael: Like, yeah, he bearded his braid exactly the same and wearing the exact same hat and funny, he's in the exact same location. So Aaron, today we're talking about how much rates really matter. And you've been in the mortgage business since 97. For those folks that didn't catch your bio and background go and get that first episode listen to let's talk about like how much rates matter, man, like rates are creeping up, not keeping up but seem to be running up as to where they were previously. And I'm hearing a lot of folks kind of get scared and spooked and want to hang on the sidelines until rates come down. So give us a little bit insight is that right thinking? Is that the wrong thinking help drop some knowledge?   Aaron: Well, it's I like to tell everybody so level of your everything has to do with a level your comfort, right? Your ability to get in there and, and slug it out and make things work? Because it all has to be about interest rate. And are you really a real estate investor, because that's why I work with as a real estate investor, opportunity is only sitting in front of you at the time that it's in front of you. And often people are trying to get the market to line up and I look at that kind of like watching a star football player sitting on the bench on the sidelines, waiting for the perfect time to jump on the field to get on the highlight reel. Well,   Michael: That's such a good analogy.   Aaron: We're on the field at the time the game is being played, right? They're not sitting on the sidelines at all. It's amazing how often people think that they have the capability to time something and most people trying to time it have never time the damn thing in their life. Right. In fact, most of them are fairly new new investors or investors with maybe you've had five or six houses. So you feel like you're a seasoned investor. I've been doing this for 24 years I've been at this since 1997. I'm barely seasoned in what I do. And the reason I feel that I'm barely seasons, because I do over 1300 transactions a year for real estate investors, I get to see where a lot of people are making decisions, or a lot of people are making mistakes and where a lot of people are doing it right where a lot of people failing or a lot of people are succeeding.   What I tell all my all the people I work with is there's this old saying good judgment comes from experience and experience comes from bad judgment, great way to learn on the grade school playground of very, very tough way to learn in real estate. So don't go about trying to figure out things that way yourself. Reach out to me, I got to see for 1000s of people have made decisions. I'll guide you through that telling you stories. I don't answer questions. I tell stories as to what I've seen other people do. So you will have practical data, not speculation in theory, and then hopefully, hopefully, we're able to guide you in a way that makes you successful now is it going to be successful every time you make a decision? No, you're going to hit a brick wall between those brick walls, that just means you got to change your direction and keep moving and keep moving and keep moving.   So then you eventually find success because you become nimble enough become successful, it does not benefit me to close a deal and you fail, because that's only one deal. I need your 100th deal. That's what makes my business work is to do this dozens of time with you not just one time and walk away. That's not the business I built. So when it comes to interest rates, you need to get comfortable with it and understand that you're never the price of money is always going to move. But what we also have is the price of housing is always moving. You know, we talked about in last episode, the average rent is going up by 12%. Year over year. I don't expect that to be sustainable. I think it's probably a go up, you know, maybe seven, but it's going to keep going right? We have we're short how many houses right now in the United States,   Michael: I think like 5.2 million or something of that effect.   Aaron: 5.2 million and what's the building looking like right now people are not there's not a lot of construction going on, compared to what the demand is. We've got a hurricane, they just wiped out on how many houses we don't even know that the full total that devastation and then the ability of the supply chain to be able catch up with that. And then of course there's talk of another pandemic coming which we saw the effects of that one, and how well handled that mess was. You start stacking all these things up rents and quarterly rental increases are here to stay. So when you're on that end of it, and you get to continue to increase your rents effect, let's do the math real quick here. Let's say, let's say you got $100,000. House, you're renting it for $1,000 a month. Right. And now you get to raise the rent by 3%. Well, they're saying you're only getting say 60 bucks a month in cash flow. That's not sexy. You're not getting excited, right?   Michael: That's a couple of Chipotle is with guacamole.   Aaron: Exactly. So 60 bucks right now, not a big deal. So you raise the rents by 3%? What's 3% of 1030 bucks, 30 bucks, nothing. It's actually nobody's excited. Again, what's really cool about is your tenant won't get excited. And I can just up and move and know the night and dump concrete down the toilet. Right? So it went up by 30 bucks. But you're making $60 a month cash flow, you're one now you're making 90. So what percentage did your cashflow go up by?   Michael: 50%.   Aaron: That's a 50% compound growth in your cash flow. So what you start to see here is over time, it's not going to happen right away. You know, it's not, it's not Swift, but it is certain that you will continue to get this compound growth in the double digits a year over year over year. But as we talked about, in the last episode, go back and listen and get my get my my tool, the QJO investment tool, and run these numbers, you're gonna find that you're paying back less and less and less for that set mortgage you have, even if the rates go eight, nine, 10%, you're paying back less, because inflation is eroding the dollar. But yet you're increasing at double digits. As far as your cash flow, there will come a point that one catches the other and you surpass it. It's much like any investment that a person does. It's amazing how we can talk ourselves into getting into other types of investment vehicles, like all but if you stick with it for three, four years, you're gonna see it really grow or 10 years or whatever. But yet you get into a house. And also we think of it as an expense. When it comes to real estate. It's not you're not spending money and going into debt. You're a business owner, that is now the pass through for this capital, you get to increase.   Michael: I love that. I love that. Aaron answer me this because I think it's something that I've been hearing from a lot of people I know for sure, in the Roofstock Academy is folks saying, Michael, five months ago, I could go buy a house for 150 grand and make 100 bucks cash flow at three and a half 4%. Now that same have that same price, the same purchase price is still 150 grand, but now I'm paying seven and a half percent that eroded all my cash flow. Does that mean I should still go buy that deal? And hang on for those first couple of years? Because I'm going to get that double digit compound growth with the rental increase? Or do I just need to go find a new deal? Or potentially a different market?   Aaron: I've got I've got a few answers that I would give right. And I sometimes depends on the individual, right? Because I do ask them Okay, so what do you think right? Now let them tell me, because I want to find out what's going on your head, right? So tell me what your first instinct is. But if they're asked me exactly what I would do, I mean, again, I might get cut out here, guys, when I was gonna have your balls attached or are they there for decoration, right? Nobody has ever made a fortune because they they want out of the gate. Nothing is ever has ever paid what a few things are paid off out of the gate, right. But most times they don't. We had a history of people making this amazing cash on cash return for the last, what 10 years, it was the easiest thing in the world to sell cash on cash return for the real estate sales side of it. I think my personal belief is the real estate sales side of it has actually put themselves in a corner, and they're trying to claw their way out of it. Because we spent so much time talking cash on cash. We never talked about the rest of the ways people made money. It never got discussed.   For the last eight, nine years. I've talked about everything but cash on cash return, if they take that metric and throw it away, take their performance somebody gave you because that's that's Greek for bullcrap. It doesn't mean anything. They made those numbers up. Right? So let's talk about reality. Right? And reality is business is going to cost you something nobody has ever opened up a shoe store was profitable in the first five years, right, you have to have a certain amount of capital to get started, everything needs a certain amount of capital to get started. You're the CEO, the CEO of your startup real estate investment firm, that means you are going to be a lot more discerning about what kind of property you buy, when you're not making $200 a month cash flow out of the gate than you would be when your before making cash no matter what happened because of interest rates are so low, they softened all the blows.   But now, because of things the way they are, you're going to become a better CEO, you're going to sink more, you're going to take more time to understand what you're buying, you're going to buy the right property. And that's what it's all about. What can you keep reasonably rented for the entire time you own it, and what can you raise rents on that's it. If you can get that to line up and that alone, you will continue you will see that compound increase we were talking about. You may have to nurse that that investment along for the first couple of years. But then you're going to get that compound set and forget it kind of growth. And that's where I tell people it's going to teach you to be a real estate investor now. The people that are not real estate investors, they're out we're not gonna have to deal with them anymore. You're not gonna have to fight with the masses of people try To get in on that one deal and bidding at too high, what you're going to have is people gonna be very, very discerning, and you're become a smarter person as a result.   Michael: Yeah, I think it makes a lot of sense. And I was just going to ask you, but I think you kind of beat me to it, do you think we're going to see the investment investor pool thin out, because folks are looking at deals and saying, the numbers don't work, I can't invest in this, or they bought deals two months ago, and are now getting burned by it?   Aaron: Yeah, I think we're going to see people get out of it. And we're gonna have some of the true investors be able to capitalize on it, that people understand what they're getting into, they're gonna jump in there, and they're gonna be able to weather this properly. Because it's about the it's about the real estate itself. It's not about the loan, it never was about the loan, you know, we had the loan was a way of getting a lot of people involved. And probably a lot of people shouldn't have been involved with, they got involved anyway, right. And so they're still going to do well, because what's really cool about that, if you got that in that loan, that 3%, or 4%, or 5%, loan, that is an, that's an asset in itself. That's a massive asset. In fact, any loan for 30 years is a massive asset. But that's even even bigger assets. So now you have a tradable commodity, if you will, because now it's like hey, I can I can hold this house, and I can literally kind of sell this into with a with an owner financing kind of deal or something to that effect.   Now how that will play out, don't say Aaron Chapman said it's okay to do this. You got to check with your lender, make sure you're not putting yourself in a bad spot, talk to an attorney, all that kind of thing. There's instruments to make that happen. I'm not your guy to guide you through that. I'm just saying that that's a valuable thing to lock money up in single digits. Think about that single digits, because if you go back to 1971, all the way till 2009, the average interest rate for somebody living in a house was 9.1%. If you take that 1971 Till now, the average interest rate was 7.76%. For somebody living in the house, that was not real estate investors. The only reason it went down from 9.1 to 7.76. Is because of quantitative easing. When did quantitative easing start, Michael?   Michael: Man, I didn't know I thought it was just gonna be an interview. I didn't know it was gonna be a frickin test. When did it start?   Aaron: I'd love to quiz everybody. Because here's why your mind starts thinking and now you're gonna remember the answer. We're gonna give it to you.   Michael: That's true.   Aaron: Hopefully, because I'm gonna ask you next time. So quantitative easing didn't start till after the crash crash happened in 2008 2008. We'll talk about that in our next time we come together because that right there had to teach resiliency to a lot of people. Well, then the government decided, Okay, we're gonna start this quantitative easing thing, we're gonna take US Treasury capital flowing through the Fed. And we're going to start buying into mortgage backed securities and into treasuries in was a corporate bonds and all of these other things. And as a result to doing that started January 1, 2009, till the end of March 2010, the Fed dumped $1.25 trillion into the market, just in that short window of time to bring interest rates down and start getting the economy going again. But now, they couldn't stop it, and they kept it going and kept going kept going, then you get to the pandemic of 2020. Now, we just talked about 1.25 trillion between March January 2009, to end of March 2010. Now you get to March 20, 2020. From March 20 to march 30. They dumped in another trillion in 10 days to basically bring the market off of where it was because the market crashed. Right. We had a massive meltdown in the in stocks.   What happens? What happens if people have more? Have stocks on margin when stocks dropped that far?   Michael: Oh big problem.   Aaron: Yeah, massive, I've got a margin call, right? Well, banks don't take our money that we deposit and just stick it in the vault, right? They invest it places, they need to make money on that money, they're gonna pay us our little pittance of whatever, right? They're gonna continue to make money on it? Well, a lot of times, they're gonna have that money into the markets and stocks and other equities. And as a result of that, they may have no margin, they did have no margin, they gotta pay a margin call. They can't just go back to the coffers. Because the the vaults empty, they have it all on investment. So they have to sell assets, what assets did they sell, they sold mortgage backed securities. Interest rates spiked during that window of time. It was it was amazing how much they spiked. The fact got to the point, I couldn't lock rates now. Now and again, the rates will be published might have five people on my team all ready to go. And I just kept refreshing the rates all day. As soon as there's ready to go, we could we'd lock 50 loans at a time. And they were ugly rates, but people needed to lock.   And so we had this message that we're going to continue to keep business flowing during that window of time. But then they got that trillion dollars dumped in there, they got seeing semi stable, they're dumping 30 to $40 billion a month in the market, sometimes more hundreds of billions of dollars a month in the market, trying to keep this money flowing. And that's how we got our interest rates down into the threes and fours.   So because of that, all that capital going in there, we had this this run on lower interest rates. So from January 2009. Up until just this last year, we had all this capital dumped into the keep the rate so that's what gave our average that a little bit lower point. But you know, some people are saying well, can we just get an ARM and wait for the rates to go back down? What makes you think they're going back down? The only time they went down from that average of 9.1 was when they dumped eight Point $9 trillion into the markets? Are they doing that again? I think they've learned their lesson not to do that. Michael: Yeah.   Aaron: So if that's the case, and let's just say that's the case, let's say, somebody's actually going to learn from history, and we're not going to erase history, we're not going to call it you know, whatever, whatever make up whatever we want to make up about it and say we're triggered by it, we're actually gonna remember this move was a bad move. I don't see interest rates getting back anything lower than what we have right now, this might be the lowest interest rates that we see in our lifetimes.   Michael: Interesting. Over the last 30-40 years, when we've seen interest rates spike like they have hasn't there been a pretty sharp decline after the fact?   Aaron: We have seen that a lot in our lifetime, just because of what I was just talking about with the Fed manipulating it. But prior to that, we didn't see that very much. We saw interest rates, hovering in fact, I got in the industry in 1997, the interest rates are in the sevens. And then that was for owner occupied. And then when they went down, like 6.875, I got this refi boom going on. In fact, you know, I was working two jobs, I was running heavy equipment in the morning, from 3am till noon, they go to the office from two till 10pm, I sleep four hours a day, for for a full year. But for the until those rates dropped below 7%, I was able to replace my income of 50, whatever, thousand a year at the time, and got full time into this industry. Well, as a result of that, you know, we got this 6% thing going on. And it never really got much lower than that we saw a window where the during the mid 2000s, that I was able to get an adjustable rate loan, like a five year ARM don't like 5.75. But that was it. It wasn't until quantitative easing do we start seeing these enormously low rates.   So we're not seeing these massive swings, like we see now, then the swings happen to be because we have a global market that everybody's tapped in, we get to see everything that's going on in real time, all the time. That's one of the really, really bad things of social media in the way our, our our technology is, what it's done for us has brought us to where we see the slightest thing happened. But on the other side of the world, it kills markets overnight. So that's why I see such massive swings. So some people think, well, if it goes down as we come right back up. We don't know that because there's another black swan waiting right around the corner. Why do we know that because we know what's going to happen in the other country when it happens.   It'd  be one thing we were just a an economy to ourselves. And it was not such a big big market mover. Now we're a global economy. And we have we have crazy people out there running countries, including our own doing stupid things that's causing such a massive swings and so much so much emotion in the market that I can't say it's going to improve. Now it's going to have to I mean, there will be some but to the extent we've seen I don't believe so.   Michael: Yeah. Interesting.   Aaron: Let me just say I pray I'm wrong.   Michael: Yeah. That makes two of us man.   Aaron: You're wrong. We're back in the season. We're good because I'm making another couple million dollars a year.   Michael: I love it. Someone if they didn't have the wisdom of hearing this show five years ago, three years ago, when they got their five, one ARM and now they got two years left on it and they got a 5% They got the ability to lock in a 6% for 30 years say? Or do they roll the dice and let it roll for another two years? See where interest rates land? What are you doing?   Aaron: I think goes back to that are your balls attached situation, just see, see what you're willing to do? Right, you're the ones guy put your head on the pillow at night, you got to be able to understand how you feel about. Me, I love to control things for as long as I can control it. I'll take my lumps. And I'll take that 6% all day long. Because I would much rather allow inflation to erode the dollar over a long period of time. Rather than forcing me in a situation like that. I've had too many people that I've talked to that did the ARM thing in somebody else's request even at my own. I mean, I did the there's something out there right now called the all in one. This is a big deal. Back in the early 2000s. We sold something very, very similar to this. It just wasn't called the all in one.   And when the market freaked out in 2008. And they started freezing these people's credit lines, I got numerous calls saying What did you put me in? Because I didn't know what was going to happen. Now I do know. And everybody says, well, they're not going to do that. What makes you think I'm not going to do that? The banking industry will do whatever the heck they want to do. They'll shut down. They will kill product, they will not honor locks. They'll wipe anything out that makes it work for them on the next day. They don't care about what they committed to today. They care about what it keeps them in existence tomorrow. As a result of that. I know that's what they do. I've seen them do it. I can't in good conscience do anything but tell person Hey, the 30 year fix so far is the only one with a proven track record.   Michael: Yeah, that makes a ton of sense. How did you think about the interest? I know you said it's not all about the interest rate. But let's put that on the shelf for a minute. If someone's got a property that they're not thrilled with its performance, but they've got this outrageously low rate and a 30 year fixed. Do you think time is going to heal that wound or do you think they should maybe look to move into something else at a higher rate, but that they might be a little bit happier with?   Aaron: I think it really, really depends upon the scenario what's making them so unhappy about it, is there a possibility to try to change whatever is making them happy unhappy about that there's something about the property, this specific thing that's creating a difficulty with it, is it just not being rented because of this or because of that, you know, it may be one of those times, we have to spend some time understanding what's happening in the market that's causing that property to be what it is, right? People coming by either I don't want to rent this thing. Because of this, or because of that, it could be a very simple thing. You know, when we own something we don't see with our lens very, very well, we see, hey, this is what the possibility is because we can only see from one angle, but when you get the whole market's angle on a multiple people are willing to come through a look at it, sit them down and ask them, Hey, can you tell me what what about this place? What would have to happen to that make it something so yes, I do want to rent this, or yes, this I can make my home for five years?   Understand that is sometimes you might have to bite the bullet, put a few bucks into it. And next thing, you know, now you have a very low interest rate, which again, that right there is, is is a very, very valuable piece in itself. And then you have whatever changed on this house that now makes it what it needs to be. And its location that might be something's completely, you know, one of these things you can't fix, right? You have to find the one person in the world that wants that and carry a note for them and see if you can swing something like that. But if it's something that's changeable because of aesthetics, or or usability, or it's just whatever that might be, you might have to bite the bullet and fix that one thing.   But investigate it first, before you try and make a very, very big decision. Like leave it as is and suck it up and write it out or dump it and move because I've seen I've got a very good friend of mine, named Joel, he owns a lot of shopping centers. I don't understand shopping centers. This guy's like the walking talking Stephen Hawking of shopping center this guy, just look at it, tell you what's wrong with it, and make it make money overnight. And the guy's amazing at what he's able to do. And because one person can't make it work, you have a guy like Joel come in, he looks at it makes an offer, they sell it cheap. He spends a few bucks. And now that thing's fully rented, and it's worth 10 times what he paid for it. It's just a matter of getting the right perspective. Take the time, understand the market, get the perspective.   Michael: I love that. I love that. Aaron, I want to get you out of here until next time, but in the meantime, where can folks if they didn't catch on the first episode, reach out to learn more about you or get a hold of one of your loans?   Aaron: Just go to aaronchapman.com And if that one doesn't work, go to aaronbchapman.com. Another good place to just Google Aaron Chapman. There's like five of us out there that pop up on Google there's only one bearded redneck lender there is a pastor there's a there's a English soccer player there is a an author and then camera with the other guy is but yeah, there's five and I'm an author as well so you can go to you can look me up on Amazon that kind of stuff. I'm working on another book got a few things cooking.   Michael: Right on man love it. Well hey, this was awesome as always and until next time, looking forward to it be well.   Aaron: Thanks, buddy. Good to see you again.   Michael: Likewise.    Alright everyone that was our episode A big thank you to Aaron for coming on again dropping some fantastic wisdom, insights and knowledge. As always, if you enjoyed the episode, feel free to leave us a rating or review and we look forward to seeing the next one. Happy investing

The Remote Real Estate Investor
Are higher interest rates prohibitive to making profits in real estate today?

The Remote Real Estate Investor

Play Episode Listen Later Oct 22, 2022 35:22


Aaron Chapman is a veteran in the finance industry with 25 years of experience helping clients better understand, source, and finance cash-flow positive investment properties. He advises over 100 clients a month in the acquisition and financing of their investment properties and primary residences. Aaron is ranked in the top 1% of mortgage loan processors in the country, in an industry of over 300,000 licensed loan originators, closing in excess of 100 transactions per month. In today's episode Aaron gives us his take on the current interest rate and inflationary environment, where he sees things going, and his thoughts on what investors should be doing in a time like this. Episode link: https://www.aaronbchapman.com/ https://apps.apple.com/uy/app/qjo-investment-tool/id1533823468 --- Transcript Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor Podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Michael: What's going on everyone? Welcome to another episode of the remote real estate investor. I'm Michael Albaum and today I'm joined by Aaron Chapman, who's a lender, investor, bearded man and entrepreneur as well as an author and he's going to be talking to us about inflation and using long term debt as your battle ax against it. So let's get into it.   Aaron Chapman, what's going on, man? Thanks for taking the time to come hang out with me. I appreciate it.   Aaron: What's happening brother thanks for the invite. I think I kind of pushed my way in a little bit but I just   Michael: Invite, forced invite.   Aaron: Let's put that way.   Michael: Ya, no happy to happy to and it's been a minute since since we saw each other over think Realty in Tampa. How you bee?   Aaron: Been very good man. Think Realty in Tampa seems like so long ago, because I've been to Tampa two times since then. Miami a couple of times. Literally, I don't get to see very much of anything. But seats 3d of American Airlines is what it seems like.   Michael: And that's pretty close up to the front of that first class?   Aaron: It's always first it's what I've discovered in my career, it used to be you know, you got to you got to hang on to your capital is really kind of dumb to spend money unnecessarily. But then I got to thinking. So like I said first a few times, and I sat next to some amazing people. So it's not about the seat. It's about the person next to you. And more often than not, it's often enough, let's put that I sat next to some people, just some amazing conversations that end up doing business with some people when they didn't want to talk to me. And then it wasn't long, they were talking to me. And then they're giving me pointers, one guy who was like one of the executives over at the Business Journal. And I was finally DC next year, he's telling me all the cool places to go in DC. And now I've seen him pop up online. And I'll check in with him to see what's going on just a really cool guy that I recognized him by couldn't place who he was, until I got in talking. And then I found figured out who he was. So it's just, that's the kind of person that I ended up sitting with. And it's more the conversation than anything.   Michael: What a different way of thinking about things like so many people see the price of the ticket. They're like, Oh, I don't want to pay that or like the experience. But you're you're approaching with a whole different lens. I love it, man.   Aaron: Well, it's kind of how I approach going out for an expensive dinner paying a big tip, things like that. It's like, we know what's happening with the dollar right? It's not doing a whole lot sitting in our bank account. And believe me, I agree with holding on to cash, I believe I agree with investing wisely. But I also agree with taking that capital and putting it someplace where you're building relationships and building up somebody else. And so there's times when somebody does a great job, man throwing $100 tip on a on $100 Dinner is not an uncommon thing in my world. And that's not me beating my chest. It's that person earned it and what's that 100 bucks going to do in my world? My wife will ---- it away on somebody Amazon, right? So it's really not going to, it's not going to enhance our lives that much. But you'd be amazed at what it does to that person. And you walk back in there to that place you think that person forgot you? Well, they definitely don't forget me with the braids.   Michael: I was gonna say yeah, with a look like that. Yeah,   Aaron: Yeah, that's remembered. But then they remember that. And then it's there's this, I talked about the economy of gratitude a lot, and that autonomy kicks in. And they will do more and go above and beyond. Of course, now you're kind of stuck to $100   Michael: That's the minimum, yeah, the bar has been set.   Aaron: So you got to be careful of how often you do go back or when you go back, you'd be amazed at the interaction you have with this person. It's a life changing experience. Because our like our lives are changed by the people that we interact with. And not necessarily what what we what we grow in it or what we amass in it is the relationships that we have.   Michael: I love it. I love it. Let's give people the quick and dirty of who you are and where you come from and what is it you're doing in real estate and then we'll jump into kind of the meat what I wanted to cover today.   Aaron: Very cool. So the quick and dirty is not so quick and but it's kind of dirty. So the interesting thing I was sitting in an event happen to be in Tampa, we were just talking about Tampa. This was years ago and one of the main speakers there talked about the lending industry that being a loan officer and he said the reason people become a loan officers because they can't get a job doing anything else. And it rang really, really true to me because that was my story. You go back to you know, I grew up on a cattle ranch in high school and from there to work in the oil fields in Wyoming drove truck ran heavy equipment, found myself in the mines in northern New Mexico in the late 90s. And they started to shut down the project and so I got laid off and I thought no big deal. I'll find a job easy and I had a wife and kid back in Arizona and I was up in northern New Mexico I go back and forth, went back and I couldn't find a job for nothing. I tried like crazy everything I applied for I got this this statement of being overqualified. I kept getting turned down.   And things were getting dire at that point, I needed to make something happen. And as I left to go apply for a $10 an hour truck driving job to me, it was like the worst thing I could possibly do, but it was gonna put, bring money so I can at least feed my family. My wife as I left gave me a coupon for free diapers. So I drove over to this place, I applied the general manager turned me down again said I was overqualified. So I'm 23 years old, I feel broken, and walking down to my truck up coming from the type one of those job site type trailers go down the stairs. Get on my truck, said a quick prayer. I was really just I was trying to hold back the tears started up my truck and I started pointing myself to this grocery store. Well, as I'm headed to the grocery store, my gas light comes on in my truck. I had never ran that thing long enough to find out how long ago on a gas light. So I quickly found a store that had a groat a gas station on the corner. I pulled up that pump, got my debit card out, I said a quick prayer, prayer, I swiped it and I got declined.   So I rifle through my truck looking for a lost dollar, found a few coins, I closed it lock the door, I started walking that grocery store pocket parking lot. And as I'm looking around, you know, I would find something on the ground look, make sure nobody's looking, reach out quickly pick it up, put in my pocket. This went on for what seemed like a couple hours. And then I got enough change that I thought would give me a couple gallons of gas. Luckily, it was 97 were Yeah, 1997 I think gallon, a gallon, a gallon gas, like 89 cents. So I went and exchanged my change, which was a couple hours of my life for two gallons of gas, went into the grocery store with my coupon, found those diapers hurried up and went to the checkout counter. I don't know if you've ever been this position, but nothing feels worse to, in my opinion, to have one item and your coupon for that one item. Right. And now it was just another just another crappy feeling to the day. So I got my stuff put in the bag, and I'm screaming either as fast as I can. And somebody recognized me.   He called me over and I didn't want to talk to anybody. But he asked me how things were. And I told him what I just told you. He goes, Let's go to dinner. I'm like, Dude, I can't afford dinner. And I hated saying that. He was no, no, no, I got a gift certificate to Red Lobster. I'll take you your wife out. So we went to Red Lobster a couple of nights later. And that's where he told me about the mortgage industry. He explained to me what happened in it? And I'm like, Dude, how can I do this? I know nothing about that. I think there's numbers involved, and I cheated my butt off to get that C in high school. If it wasn't for the fact that could pick a lock, I would not have graduated.   So I went in, I cut a foot off of my hair, I shaved. My mom bought me some business likes clothes, and I wouldn't do an interview. And they started me as a telemarketer in 1997. So that's how I got going. So going from a telemarketer to working actually some of my own leads to building this up and going through the crash and all kinds of stuff. And there's a bunch of stories in there. To now, you know, I was just called by an outfit by modex. And they recognize me I think is the number six guy in the United States. For transactions closed. I was number one guy in Arizona, I didn't even realize that I didn't really pay attention to the statistics, there's 1.6 million people in United States that do what I do. And from what I can tell, I'm ranked number six for how many deals I closed last year. So it's kind of an interesting dynamic to consider that swing.   Michael: Yeah, I'll say, Well, you know, congratulations on how you've come clearly a long way. That's really exciting.   Aaron: Well, thank you. And there is campfire story after a campfire story of of the different things we'll probably talk about this in the series of stuff we talking about the beatings that a person takes to become successful. And you don't what's really interesting is people say, How do you get there? How do you how do you achieve success? Mike, I'll let you know when I do. Because you just don't feel like it all the time. It's a consistent grind. You're always trying to be ahead of the head of everybody else. And once you achieve something, it's way harder to keep it.   Michael: Yeah, I think people think it's like this just flat curve, you know, flat line once you've achieved something, but really, it's very sinusoidal. It's up and down and valleys and troughs. And you're like, man, some days suck. And some days are great, but the like, I think it's about the end destination right? Where you're trying to get to   Aaron: 100%. So I look at it like Everest, right? You get up there. And I don't know, if you've ever really paid attention. Maybe you've climbed the same for all I know, but how long a person sits on top of Everest, it's a matter of minutes, and they're getting back down because that sucker will kill you. You know, and so it's it's just like any other achievement, we get the second you sit back and you relax and put your feet up. It's gonna kill you. You need to keep moving, you got to get down, you got to get to the next Everest. And it can be debilitating to think that we're constantly hunting the next goal. The next goal, the next goal, instead of just finding the happiness, you know, and you our viewers know who Larry Yatch is he says, you know, success is a optimized daily experience consistently achievable, right, something to that effect there are and so and it's sustainable over time. Yeah. I gotta find that optimized daily experience. Here's what I got to do. I don't think I've achieved finding that yet.   Michael: I'm right there with you, man. We're in the hunt together.   Aaron: Yes. And we'll keep hunting and maybe we'll keep communicating about one of these days. You're like, Dude, I found it.   Michael: Yes. let me show you. So, let's shift gears here a little bit and talk about a topic that I think is on everyone's mind. And that's inflation. And you're working in the mortgage industry for a long time, you've seen a lot of ups and downs, sideways lifts, REITs give us a little bit of insight into why is inflation being talked about so much? And what do we as investors need to be cognizant of, and either using it or being abused by it.   Aaron: So inflation is definitely an interesting animal. And it's talked about a lot, everybody is talking about this constantly. And what I point a lot of people to just even understand inflation is go to a place called Shadowstats.com. When you go to shadow stats, you're gonna go to, and I always encourage everybody to get log into it get to pay for the 100 bucks for the year, whatever, you're gonna go over to alternate data, you're gonna scroll down to inflation, you're going to find this chart, and what this chart has, it's going to be going to show you from 19, from the early 1980s, up until now, and it's going to have two different lines, a blue line and a red line. And they're going to be, they're going to be diverging at some point, they're gonna stay together at one point, they're gonna go down to when they show inflation started work its way down, and then they start to kind of break apart. And what you're watching there is the federal funds rate itself, or not the federal funds rate, but the CPI that the Fed tends to track, and it's what they have changed the index to contain. Right?   So you're familiar with the Dow and the NYSC. And the and the NASDAQ, right? s&p, right, the s&p, none of them have the exact same value Correct. They're all different because they have things in them. Well, if you didn't get into, if you look at the the CPI, the Consumer Price Index, they will stack certain things in there that they can manipulate with monetary policy. And that's what they'll go off of. And you can see in this chart, that it's going to show that that that red line is skipping across the bottom right around their 2% Mark quite a bit, and then it spikes up to about eight and a half 9%, which is where we've been at recently. But if you look at the real rate of inflation, which is the shadow statline, it's going to be pushing up closer to 17. Why is that?   Well, because back in the 80s, they took everything into account, what is the person really literally spending money on to on their day to day life, and they're going to track it so they can see how much their life is changing year over year as far as their expenses. But then they wait a minute, it's getting out of hand, because what we do to pass the law for will increase their their benefits or their social security and the retirement benefits to the rate of inflation. Well, we need to keep this to 2%. Right. So we don't want to raise that really, really quick. That's where you start seeing this particular manipulation? Well, if we're looking at 17%, people should really, really, really be concerned about what's happening with their dollar, because what's the dollar value doing with inflation?   Michael: Decreasing.   Aaron: Decreasing, right? It doesn't spend as far. So what I like to do is talk about this in the sense that it's always been that way. And when we're talking about real estate investing, you know, the, in my opinion, where a person does best when it comes to real estate investing is leveraging the property, you know, the way to leverage the properties, get some sort of financing instrument on it, if you're gonna get financing on it, you want to get it for as long as you possibly can. Because at that point, the longer you take a pay, the less you actually pay, because the dollar you're paying it with is worth less and less and less every year.   So I know in today's higher rate environment, we're talking about inflation is pushing interest rates up. And if you look back at the history of inflation, last time, we saw inflation of this, this magnitude, you'll see in some charts that will show the history of inflation, and how it's somewhere right around 20%. But then you can see the history of the interest rates and the interest rates were closer to the same 17-18% for a 30 year fixed. Well, if we're where we are, as far as inflation is concerned, actually inflation was right around this 13 to 15%, where we are today. And then we're talking to interest rates at 19%. Well, the federal funds rate achieved over 20% at that timeframe. We're not there right now. So explain to people is the gap that we have there as a gift.   Right now we're seeing somewhere in the sevens for 30 year fixed interest rates. And that's, you know, we're talking about this in October, the 2022. Do I expect it to get higher that I really do because of all the uncertainty within the market. But if you've locked it in and that interest rate for 30 years, and inflation stays consistently higher than that, you're never even going to pay back what you borrowed. In fact, I have an app to prove that, you know, people want to go to just go to my website, shoot me a message, I'll get you the app. And you can download this thing on your phone. And you can calculate your amortization table and then see what inflation did and how you paid less than what you borrowed over a 30 year window even though you're paying higher interest in what you hoped.   Michael: We have to come back to that point because that's so counterintuitive and the exact opposite of what everyone tells you. When you look at the sum total you paid over a mortgage. But before we get there, I want to ask is it appropriate to look purely at The rate of inflation against interest rates? Or do we also have to take into account just the pure purchase price that we're seeing today? Or is it become irrelevant?   Aaron: I think they're all a factor. Because sometimes when you're let's look back at interest rates go backwards a year, right? Interest rates were in the threes and fours were people buying investment properties. Unbelievable, we'd never actually seen that, and never thought that I would ever see that. But what's happened to the prices of houses, what what you're doing is you're opening up where they were, they say the affordability index had a right how that worked in and more people could afford houses. Well, the more people that could afford houses, the more people bidding on those houses, right, the more of those houses got bid up beyond their real value, price does not equal value in an environment like that people are just willing to pay an enormous amount of money.   Well, because of that, all that affordability, it was so so called built into it because of lower interest rate was getting eroded by the fact that pushing the price so high. So now we're at this really interesting point where the prices are still fairly high compared to, to the, I'd say the real value of real estate because of what people are willing to pay. But our interest rates have increased to not quite to the highest it could and it's really not as high as the national as the average has been since 1971. But it's going to slow that down, I think an equilibrium equilibrium is going to kick in here at some point. And you might see those prices start to decrease a bit. And then of course, it's going to make a little bit more sense. So there's going to be people sitting on the side and waiting and watching. But then again, are they going to increase or decrease that much this begs the other question, were five point I think 5.2 million units short to fulfill the needs of that for housing United States. And then you're we're already short on that. We don't have as many building permits happening. We don't have the supply chain we used to, and now we have how many houses just got wiped out in Florida, you start compounding all this out, man. I'm telling people if you're in a contract, you probably want to stay in that thing. Because if you're backing out of a contract, because you don't like the price, you don't like the rates. Expect, just imagine what you're gonna like and a year from now, I don't think it's gonna get prettier.   Michael: Yeah. Yeah, that's really interesting perspective. Let's come back to what you said before about, when you look at the total amount you've paid. Over time, it actually ends up being less than the original amount you borrowed because of inflation. Walk us through that again,   Aaron: Gladly. And you're probably have to say that a lot to our conversation. Let's go back. You start with a topic. And now I go 100 different ways, because my mind is one, obviously, beautiful mind. There's a dude in here.. just just see it. So you've got. So when you think about our inflation, right, now, let's just take the BS metric that the feds throwing out there eight point, I think we're at 8.63%, if I remember correctly, right. So 8.3%, that means the dollar is losing 8.3% of its value every year. So if you take 8.3%, I'm gonna get my calculator out here on my phone. And we're going to divide that by 12. That means we're losing .691 percent of the value every single month. Is that not alarming .619% of the value every single month. So that's pretty well. So what I have here, and I'm just going to launch my launch my my app here, and anybody can get it is to QJO investment tool, you can go right to the app store and get the QJO investment tool. They may bleep me out here, guys, but it stands for the quit ------- off investment tool, because I think that's all a person does when they're so worried about interest rates.    So if we're doing say, a 20%, down on a $200,000 property, and you're putting, let's say it's a seven half percent interest rate, you're gonna have a payment of a principal and interest of $1,118.74. Not real bad, right? But now you're gonna pay over that period of time on that interest, you're gonna pay $402,747.56, right? 402K. You got a $200,000 house, you put 20% down, that's $160,000 loan. Right? And then you're going to pay $400,000 In principal and interest people like there's no way in hell, I'm going to do that. But when you recalculate, every time you make a payment, that payment is worth what did we say? Point six 9%? Less? So I'll write $6.90 per dollar. Last, is that right? Or is that? No, that's not quite right. It's eight, it'd be eight cents per dollar per year. So it's point 06 cents per mile. Right? Right. But when you per dollar when you recalculate that every time for 360 months, the actual inflation adjusted payment over 360 months is $152,466. That's less than what you borrowed and that's based on 8% inflation, just 8%   Because you think about that the dollar you're borrowing is seven and a half percent. You're paying a Back at an 8% decline, right now it's bigger than it's 8.3 8.4%. In fact, if you want to look at shadow stats, if you look all the way back, when you look how they track it, it's been over 8% since 2012. So in reality, you're never paying back what you borrowed because you're paying less them what they're getting in the form of interest. You're paying, you're literally getting paid to hold their money. And what's really, really cool about this is where it gets awesome. Because of inflation, we get to raise rents, how much are rents going up year over year right now in the United States?   Michael: Like seven to 10%.   Aaron: Last time I saw it was 12. Right? When you average it all out? Dang. Yeah. To a fact,   Michael: I haven't looked for a while. Clearly,   Aaron: Property manager in Kansas City. I had him check it out. They ran their books, they figured they said there was like 14.2, we looked at the last year, Mike, wow, this is crazy. I'm looking at what my kids are paying right there. They're in these apartments, and they're bumping up two to $300 every year. To me, it's kind of immoral. Now I get there's costs go up, taxes go up, upkeep goes up, because you got you got supply chain issues, right? You've got workers, the man ain't fixing anything over there really fast. So it's not like I think that they're, they're hurting themselves. From what I'm hearing, right? They're staying in my house now. And again, because of the darn AC has out for a couple of days.   Those kinds of things. So when you think about that, what's going on in that type of environment, they're raising it like that? Well, let's see what I always tell people, we get to raise rents, even at just 5%. That's every time you raise rents, that's a compound on the previous year's rent, and then you compound it again and compounded again. So as you're compounding the increase in your income, you're compounding the decrease in what the lender makes, because they don't get to raise the payment because of inflation.   So eventually, it may suck for the first 2-3-4 years because of your start rate. And because of all that, and you know, people always like to use cash on cash return is their metric. I think it's a BS metric. Guys, that's not that's not ratio, focus. There's other places to focus, we'll talk about it. But when you start adding that up, and really, really working out the math on it over time, you start killing it at about years 5-6-7 And just compounds huge. Those who don't want to be able to hang for the first three to four years of the ones going to be off on the sidelines. And they're the ones going to say that real estate's not the place to be because of interest rates will they're the they're the the people in the crowd. They're the ones that are the spectators, that people on the field, know where it's supposed to be at and they understand it. And those are the ones going to take opportunity.   Michael: Love it. Aaron, let me ask you this, the Fed has tried to maintain inflation at around two to 3% annually. Right now we're up in that eight plus range. And so we did the math behind if inflation stays there for the duration of the 30 years that you're holding that loan. But if they get things under control, and it drops back down at 3%. I mean, did all of that benefit just get eroded?   Aaron: Well, we also have to look at what they're dropping by 3% They're dropping their index by 3%. And that's dropping the real rate of inflation by India by 3%. So I don't see that as being eroded because you look back at you know, go back to shadow stats, start looking at what they were they calculate real rate of inflation. We've been over 8% Since what since 2012. You have a consistent increase in inflation, it's going consistently up cost of living has not gotten cheaper. Now, I don't know when you were born, but in 19 in the 1980s I could jump on my, it was the late 80s I could jump on my skateboard my mom gave me $1 Literally $1 Bill, I could go down to the corner store, get a gallon of milk, buy some candy for me and bring change to her. how possible is that right now?   Michael: Um no, can't even buy the candy for the dollar right now? No, I just bought a KitKat for a buck. 75 Check it out. That's ridiculous. Dude, it's this dark chocolate and mint. KitKat I'm like such a sucker for dark chocolate. It was amazing. But yeah, Buck 75.   Aaron: Well, it's probably probably an extra 10 cents for the blend, right? But, but again, kefir dollar 75. So that's what I'm saying a gallon of milk and I could get into it. It wasn't like the big jumbo candy bar, nut it was something. And I brought that change. But that was possible in like 1986, I think is when that was okay. It feels like a little while ago, but it shouldn't have changed that much. But it did. So if you look back at that's not a 2% inflation increase. That's common. That's some serious increase, especially the price of milk today. Right. So we started looking at that the Fed has never really kept it under 2% control.   The other thing is, is our inflation today, I don't know if we're really know the full outcome of what's going to happen with what they did with those printed dollars. They have put $8.9 trillion into the markets that they never were in before. If you look at their holdings with respect to mortgage backed securities and treasuries, $8.9 trillion. Then we have they backed off by point zero 2 trillion. And now we have interest rates more than double what happens when they back off by half. Right? So when you start thinking about what they did, and what we're that we're the the amount of money that's in circulation, there's got to be some really massive moves here to get this under control and One of the things that really kind of stands out to me and if you heard this conversation were Powell, the chairman of the Fed was speaking. One of the things he said, I don't remember the exact words. He says one thing we've learned about inflation is we know very little about inflation. That's alarming.   Michael: Yeah, big time.   Aaron: And that was said within the last 45 days, I think 45 to 60 days. So what I am taking by that is inflation. There's this big loaded oil tanker, right, and it's headed towards ground right now. And they didn't get off the throttle early enough with all the stuff they're doing. Now. They're dropping all these anchors, they're hooking up tugboats. They're doing everything think everything they can, but it's too, it's too late. It's going to run aground. And what that happens when it runs aground, I don't know. But it's going to be pretty ugly. And so that's why I tell everybody I'm dealing with, you need to control what you can control for as long as you can control it. And the one thing we can control right now is a 30 year fixed loan. An ARM, Are these things they call, what did they call this thing be all in one loans, it's an adjustable rate, just a single adjustable rate, kind of a credit line? Yeah, great concept. But we have no idea how it's going to react in an environment like this. So for me, it's like whatever you can do to maintain it and keep control of it. And then when you know, we know for a fact that sense right now to close on this 30 year fixed and pay the points and get the rate.   But what I do know is you're not going to pay it back, you're gonna pay less than what you borrowed. When you go with what the bank say, let's go with a five year or seven year, you have to do something with that loan, at some point. What did you just become a new client for the banks, that's what they want. That's what they say in the background, sell the arm because you're insuring your business for the future, the business for who the loan originator, not the person buying houses to rent out and to maintain a business, you are now become somebody's servant, you become a business, somebody else's future, you're a commodity. And I try and tell her but don't become somebody else's commodity control it for as long as you can. Only pull refinances, you can pull the money back out and reinvest into other things. Other than that, let that sucker sit there as long as you can run that out and let somebody else pay the freight.   Michael: Yeah, that makes a ton of sense. Aaron, I know you deal exclusively in residential mortgages. But can you give any insight into why the commercial markets only have 5- 7-10 year options on their mortgages, as opposed to the 30? year fixed? I mean, I have seen a 30 year fixed, but it's not the Colt 45, like it is in the residential space?   Aaron: Yes, you're right. It's it's very, very uncommon. Well, because most your commercial mortgages have to be made up by by investor capital or by banks, right. And so banks are going to take depositor capital, and they're going to create this or they're going to create their own type of security. And they're going to be able to get investors come into most investors don't want to let their money sit for 30 years. Most people don't know that when you're letting your money sit for 30 years in an inflationary environment, you're not getting your money, right, we all expect a certain rate of return on if you do any sort of hard money lending. Or if you've ever done anything to that effect, or fix and flips, you're going to calculate your return on investment annually. And I searched for a 12 plus. Right. And I don't know if you listen to Warren Buffett, Warren Buffett was talking about where, you know, some lady came to him. And, you know, she was trying to figure out how to how to invest her money, and it was a lot of money to her, but not to him. And he said, we have any credit cards? And she goes well, yeah. And he goes, we'll pay that off first. Because why would I do that? I'm not making any money. He goes, What are you paying your interest? 18 20% Because I can't make 18%. So I was I don't know how to do that. So get rid of the debt, you know, then I can show you how to make at least 12 to 13. So that's what we all are wanting is get that 12 13%.   You're not going to make that in a 30 year fixed, you just aren't. So what we've had we've we've created a way to kind of subsidized by the system. And we've got this Fannie Mae or Freddie Mac. And what they did was they created the mortgage backed securities, luminary did that for anybody who watched the The Big Short. And if you haven't actually watch it. I know this is a family family show. So don't let the kids in there when you watch it, but it explains the history of the mortgage back series security, where it came from. And now what you have is now a tradable piece of paper that people keep just trading around. That's where its value is. Its value is in its trade ability in its liquid tradability as well as the fact that it the performance of the note people making the payments on time. That's what makes that's a valuable piece of paper, not to sit and hold it for 30 years. It's not valuable at all, you're losing money on that paper.   So that's why I think in the commercial world because they have not had this initiative from the from the government say we need to create housing or we need to create people's businesses, right. They didn't have that initiative. They had the initiative when you create housing, when you give people opportunity to live in a home when you give them the best opportunity and mortgage financing. So they created a 30 year fixed and a 30 year fixed has caught hold and become kind of the gold standard is now the the the Qualified Mortgage, if you will, when you get into anything else. So those where you're not really a qualified loan, you don't have safe harbor from the government or do anything outside of that. So that's about my best guess is you can't get anybody to want to put money up for that long for so cheap and lose it, and just and not make a return is really what it boils down to. They probably just rather own the building.   Michael: Yep. Yeah, that makes sense. That makes sense. Aaron, one final question before you before I let you out of here 15 year fixed versus 30 year fixed, you'll often see a pretty big spread on the interest rate. Does it ever make sense?   Aaron: We're not seeing as big a spread now as we used to. But here's where I look, it used to be a bigger spread. It's not real big right now, if there is a spread at all. So and one, two reasons we're not seeing as big a spread as we used to, we have a lot of uncertainty in the labor market right now. And as a result, that uncertainty lenders like I don't know, if I want to saddle somebody with a bigger payment, when they may have a an issue with their income in the near future. And if they do have an issue with their income, what is their ability to pay this higher payment versus a 30 year fixed, so we're gonna price it in a way that kind of leads them back to good old fashioned 30 year fixed, because our value in our portfolio is them being able to make their payment. So then when you do compare them side by side, even if it's a lower payment, you can use my, you can't use my calculator, I don't have that feature in this, we will in a future iteration, by run the numbers, when you're paying off a 15 year fixed, even at a three eighths of a percent lower interest rate or even a half, I have found you actually pay more in actual dollars. The reason being you're paying those dollars while they're worth more, rather than stretching out over time when they're worth less, because in 15 years, they're going to be worth a hell of a lot less than they are within the first 15 years.   So those who pay that off quick like that, yeah, feels good. You're getting equity in your house and all that kind of stuff. I'm of the mindset pay the 30 year fixed stretch as far as I can take the extra money I would have paid for 15 and reinvested somewhere else. And as a result of being able to do that multiple different properties and compound it that way I'll generate a lot more wealth. Because when you have when you have a home and I tell people if you're gonna buy real estate investments and get those those single families, duplex, triplex, fourplex, you have two jobs, right, you have to pick the right people to work with on the real estate side. And on the lending side to understand what you're trying to do and will guide you not try and lead you to make them money but lead you to make you money, and then pick the right asset to buy the stays reasonably rent it for the entire time you own it, you can raise rents, if you have that, who pays off the mortgage?   Michael: The tenants,   Aaron: the tenant, so if the tenant pays it off, and it's easy to do the math, guys just take 100,000, let's say it's 100? Well, you have to say it's an 80,000, or only about 100,000, our house with 20%, down, you got an $80,000 loan, you divide that up by 30, which is how many years are taken to pay it off, you'll find that it pays off. They're all they're basically giving you $2,666.67 per year, they're giving that to you, right, and that's what you're paying off the mortgage with? Well, you divide that into your investment, which is the money you invested 20,000 plus a 6000 in closing costs as 26,000 your investments grown by 10.25%, every year, do the math, you figure it out yourself. If they're paying it off, you did your job. And that's all you made was done paying off the loan, you made no more cash flow, you put no more out of your pocket, that's 10.25%, predictable, you still have the tax benefits, you still have the appreciation on the home.   So that's before all, all cash flow. So what I tell everybody is let that drag out, it doesn't matter what you do, if you do it on a 15 year note, you're more than likely have to go to your pocket, you're more than likely have to try and maintain that in other ways. And if you're out of a tenant for a month or two, that's really going to hurt your pocket, stretch that thing out. If you really feel like you want to get it paid off 10 years you can all in 15 years, you can always pay a 30 like a 15 You can never pay a 15 like a 30.   Michael: Yeah, it's very I always tell people to there you have the optionality with 30 year and that you don't have the 15. Arron: Options or everything. You know, that's all people want is to be able to make a decision for themselves. But when you pitch and you back yourself in the corner, and you're not allowed to decide for yourself, that's when you're frustrated, that's when you get angry, leave yourself out. It's a good business move to leave yourself out. The other thing of it is going back to the to the arms these other stuff, man, we're going off of hope. And hope is not a good business strategy. You need to go off of what you know and stick with what you know and control for long as you possibly can.   Michael: Love it. And this is an awesome place to put us pause until our next conversation. Until then, where can people find out more about you reach out to you if they have questions or want to reach out to you for your services?   Aaron: Best Places go to AaronChapman.com If you can't find me there because sometimes there are some some browsers don't like it you have to type in Aaron B chapman.com. Just type in Aaron Chapman a Google if you find a bearded redneck lender you found him.   Michael: Right on. Right on. Well, hey, thanks a lot, man for hanging out with me and walking us through this really kind of tumultuous time appreciate you. And we'll definitely be chatting again soon.   Aaron: It was my pleasure brother. And again, thanks for letting me under to poke some holes in in people's heads out there.   Michael: All right, everyone. That was our episode A big thank you to Aaron for coming on and dropping some really interesting Insights for us on where we're headed in the market. As always, if you enjoyed the episode, feel free to leave us a rating or review and we look forward to seeing the next one. Happy investing

The Remote Real Estate Investor
Can you crowdfund a 1031 exchange into institutional real estate?

The Remote Real Estate Investor

Play Episode Listen Later Oct 18, 2022 28:00


Mr. Fernandez is President and Chief Executive Officer of 1031 Crowdfunding. Before founding the Company, he was Senior Vice President of Healthcare Real Estate Group in Irvine, California. Since January 2001, Mr. Fernandez has been responsible for researching and compiling accurately verifiable documentation across various industries, including assembling compelling content for marketing materials related to the purchase and acquisition of various real estate holdings. He has over 20 years of inside and outside sales experience. He is personally involved in raising over $800 million of equity from individual and institutional investors through private and public real estate offerings. He hired and trained a national internal wholesaler and external wholesaler sales force. In this episode, he shares how he interprets the current state of the economy and the real estate market; and how his company, 1031 Crowdfunding, creates opportunities to take advantage of during times of uncertainty. Episode Link: https://www.1031crowdfunding.com/ --- Transcript Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Michael: What's going on everyone? Welcome to another episode of the Remote Real Estate Investor. I'm Michael Albaum, and today I'm joined by Ed Fernandez, President and CEO of 1031 Crowdfunding and he's going to be talking to us today about the state of the economy, the market, and his company, 1031 Crowdfunding, and how we all can take advantage of crowdfunding 1031 exchanges. So let's get into it.   Ed what's going on, man, thanks so much for coming on and hanging out with me today. I appreciate it.   Ed: No problem. Michael, thank you so much for having me.   Michael: No, it's really, really my pleasure, I am super excited to chat with you, because you've got a really cool company doing some pretty cool things. So I know a little bit about it but for all of our listeners who aren't familiar with 1031 Crowdfunding give us a little bit of background, what is it that you all are doing?   Ed: Sure, so what we're doing is we're taking real estate, packaging it up and selling it to investors in little pieces. For those investors that are either tired of the tenants, the toilets in the trash, or they run out of this 45 day Id period that you have to actually do for the IRS and so if you're looking for institutional real estate, but you really don't want to go running around trying to find your own property in this limited period of time, you can come to 1031 Crowdfunding, where we have a slew of institutional property for those investors who are looking to be passive, and defer their taxes through a 1031 exchange.   Michael: Man, I love it, we are definitely going to come dig deeper into that because I was under the assumption that you couldn't turn 1031 into a passive investment. So we've got a lot to talk about. But before we get there, I would love if you could give us a little bit of insight into where you see us currently in today's housing market with all the stuff we got going on. We're recording this towards the latter half of September and 2022. What's going on man?   Ed: Well, as you know, yesterday, the Feds hiked rates again to another 75 basis points and so what's so what they're trying to do, obviously, and it's currently not working, by the way, they're trying to slow down in the housing market. But with money continuing to flood the economy, real estate prices are still exceeding and going up and people can afford real estate or housing, because interest rates are going up. So we're in a weird market today, I can say we can go back to 1991- 1992 and kind of look at that market, very similar type of events that are occurring today.   Michael: Okay, and for all of our listeners that weren't plugged in to the to the real estate market back then what was going on back then.   Ed: So back then it was the tech boom, right? Remember the tech bubble that blew up?   Michael: Yeah.   Ed: Prior to that event occurring, interest rates on loans were double digits 12-14% and people were still borrowing and buying houses and getting involved in real estate. But then the bubble burst in the tech industry and all that money flooded into real estate and that's where you had all this appreciation on the real estate side. So in today's market, even though we're not in double digit interest rates, interest rates are higher than what real estate is producing. So we're not as bad as we were. But we're actually pretty close to where, and who knows, we might get there. If the fence keep doing that. So those are the similarities where interest rates exceeded yields on real estate, and real estate just kept going up.   Michael: Yeah, that's so interesting. I mean, I remember hearing about those double digit interest rates, but I also have to think back and you could go park your money in a bank CD and make 6,7,8, 9%, which now is unheard of. So it's, again, we have these super high interest rates, but you can't make a yield, letting your money sit in the bank. It's getting eroded by the high inflation. So it's a really unique time   Ed: And I'm glad you brought that up. You know, what's very interesting is that Treasury bills now you could buy a federal backed treasury bill, fully liquid and get 4% where real estate is producing three and three and a half percent. So you're kind of seeing what's going on in this market.   Michael: Yeah, yeah. Where do you think we're headed? I want you to break out your crystal ball, change the batteries out put fresh ones in there. What's going on in the next two, three years?   Ed: You know, it's, it's, it's a weird market, you know, I'm not gonna get into the political frying pan of who's doing what?   Michael: Yeah…   Ed: Right. But if money continues to flood this economy, I don't know how you put on the brakes on inflation, if that continues to happen. So what has to happen and what I hope happens is that money tightens up so that the feds can kind of slow down and we can get real estate to a level where people can still buy a home, the millennials, those are the first time homebuyers and investors can still get a yield. I don't see that happening at least for another two years. That's where I think we're headed but we'll wait and see.   Michael: Okay and are you thinking that the interest rate hike is going to continue along that two year frame or are we kind of plateauing and we just have to wait a little bit longer for the effects to take hold?   Ed: Well, if Feds continue to raise interest rates, then now we're gonna go into a recession and how do we come out of that? So it's a fine line of how much to push and how much not to push. So we just got to wait and see, look, if I had a crystal ball, and I can tell you exactly what is going on, I would not be on this call. I'd be on my 200 foot yacht in Monaco watching F1. So I'm just letting you know.   Michael: Totally. Yeah, that's a great point to make. All right. Well, I am very curious to see how it all shakes out, I think, as are many others, but and let's transition here and talk about temporary 1031 Crowdfunding.   So someone has an asset to sell. They've, they've seen the skyrocketing appreciation and let's just walk through it like some numbers as an example. Because I find that makes the conversation a bit more concrete. someone's property is worth a million bucks. They got 400,000 and debt on it and they want to go 1031. The thing, so they sell it for 1,000,000 1031 rule says they got to buy something for at least a million, if not more. Where does sentry one crowdfunding come into play here? Does someone have to bring additional 400k that was in debt to the table to invest in have a proper 1031, how does that work?   Ed: No, no, absolutely not. So one of the one of the biggest things of a 1031 exchange is what we call closing risk, right and so you have 45 days to try to find something and then that's not, you know, there's holidays, weekends, that all counts, right? So you're out there, pounding the pavement, trying to find a replacement property within that 45 day period, which makes it very difficult. So in using your example, if an investor had a million dollar sale with $400,000 of debt, they can invest as long as they're an accredited investor and let me define that either an annual income of $200,000 a year for an individual 300,000 per couple or a million dollar net worth excluding the home you live in, you can come to our website and at any given time, we have anywhere between 30 to 50 different options to choose from and these investments are called Delaware statutory Trust, the term we use is DST been around since 2004, directly on the IRS website, and really what the DST is, is very similar to a living or family trust, where there's a trustee managing a trust for the beneficiaries, you as an investor, or a beneficial owner of a trust that's on title real property. So it could be a $50 million apartment building $100 million Amazon distribution center and for as little as $25,000, you can own a piece of this big property, right off all your expenses, like you're doing today, on your schedule II get paid cash flow on a monthly basis every 15th of the month, and when the property is sold, all the investors get 100% of the upside, and you're still in another 1031 exchange. So that's what we do. We're looking for those investors that are looking for passive investments, tired of the tenants and toilets in the trash or running out of time? Those are the ones that give us a call.   Michael: Yeah, no, that makes total sense and it sounds awesome. So if we go back to our example, of the million bucks in the in the 400k in debt, how does it work because like, my understanding is if I'm if I'm selling something for a million, I gotta go replace that with a million dollars of property. So if I go invest with you all, do I have to bring the extra 100,000, how does that work?   Ed: No, here's how it works. I'll give you an analogy. So let's say I'm a trustee. I'm going to go out and buy a $20 million apartment building. I'm going to create this broader. As the trustee, I'm going to the bank. They're approving me as the warm body, and they're underwriting the real estate, let's say they lend me $10 million. I'm the one that signs on the bad boy carve outs, and I'm the one that signs on the loan. So now the profit, I have 10 million of debt, I need another 10 million in cash. So I write a check for 10 million, and I close the property inside that trust. So to make the numbers easy, let's just call it 50%. LTV or loan to value and so let's say you sold your property for a million dollars, and you paid off the loan, and you got $500,000 in cash, and you got to buy something for a million dollars or greater. Well, when you invest in the DST, the DST already has a 50% loan on it and what happens is that it applies that debt to your position, along with the $500,000 of cash that you invest it. Now at closing, you own $1 million of this $20 million property, which allows you to satisfy your exchange.   Michael: No way. Everyone watching this video just watched my brain explode. That is why that is super cool. All right. All right, I dig it and can people invest using an entity? So like, if I have an LLC that I own this property in that I'm now selling? I need to keep that same entity, right as my purchasing as my up leg for the new property can folks use their entities to invest with you all?   Ed: Shoot, Michael, send me your resume I should be hiring you here quickly… Absolutely. So, so yeah. So you have to use the same tax ID number, right. So one of the one of the things we do in process in talking to investors is we ask them, are you owning this as an individual, an LLC, a trust and based on whatever tax ID number they're using on the sale of the property that tax ID number is the purchaser of this DST. So yes, you have to invest the way you sold.   Michael: I love it, I love it and are you I know you said you're passing on cash flows and 100% of the upside, which is insane. We're gonna talk about that in a minute but are you also passing along depreciation to the investors?   Ed: Absolutely. So whatever remaining basis they have from the sale will carry forward to this investment and based on the asset type, if it's an apartment building or residential 27 and a half years, or commercial 39 years, yes, depreciation will carry forward, in addition to that some of the opportunities have what's called a Cost Segregation analysis done on it, where you accelerated depreciation on the personal property in the first year, which is a huge help to shelter cash flow from tax.   Michael: Yeah, I love it, I love it. I've done several of those ad it's just been amazing to see what my taxes look like postclassic.   Ed: Yeah, It's good stuff…   Michael: And just getting back just for a minute on the accredited investor designation, because the question I'm realizing I've had for a while, and we always joke in the podcasts are super self-serving, I get to get educated here along with all of our listeners, we talked about the requirement having 200k as a single or 300k as a couple for the last two years. Is that adjusted gross income or is that net?   Ed: Adjusted.   Michael: Okay adjusted…   Ed: That's adjusted and here's the here's why that's required. It's because the investments in a DST are illiquid, right? So the regulatory environment wants to make sure that if you do have a financial emergency, that you have other funds to go after, and it doesn't have drastically affect your life, because you are in an investment that's illiquid. So that's why the requirements there.   Michael: Yeah, that makes sense and the alternative way to qualify as having a million dollar net worth or more, right…   Ed: Correct, or let's say you're in the financial services industry, and your securities license, and you don't have the net worth or the income, because of your professionalism and the designations that you hold that also actually qualifies as an accredited investor.   Michael: Okay, good to know. I was gonna say, yeah, because it could be kind of interesting. Speaking about cost segregation studies. If someone's got great income, but also has a great tax strategist, their AGI is probably going to be zero, if they know what they're doing and so that they could get discredited that way. But the net worth piece probably comes into play more often than the income piece, I'd imagine.   Ed: It does. Yeah, because we deal our client profile is anywhere between 55 to 90 years old and so they're always saying that they don't have the income, but they definitely have the net worth.   Michael: Yeah. Okay. Why is that? Why is your target demo in that age bracket?   Ed: It's because if you're younger, you know, I'm a control freak, right? I want to control everything. When you're younger, you want to control your destiny. Though most younger real estate investors go by their own deal, they manage their own deal, and they live or die with their performance. But when you get a little older, and you've already built up your net worth, you get tired of those tenants in those toilets in those trash, right and so you are looking for a passive way to continue to kick that can down the street, i.e. taxes and so normally the demographic is 55 years or older, they're kind of slowing down on their real estate investment portfolios.   Michael: Yeah and that makes total sense and so talk to us a little bit about what the exit looks like on some of your deals, because I was looking at your website, before we hopped on, I noticed you have some triple net stuff. So I'm just curious, you know, how are you exiting those assets?   Ed: Sure. So it's got to be accretive to the to the beneficial owner or the investors, I would say triple net lease stuff. Those are bonds. If you're looking for a Walgreens $1, General and Amazon, you shouldn't expect appreciation on those opportunities, you should just expect that coupon plus getting your money back, right? If you're looking for appreciation, which I would call more like a dividend stock. That would be a multi-tenant asset, apartment senior housing, student housing, self-storage, where you have the ability to mark rents to market which gives you that that appreciation. So the exit really is going to be based on the economics is or are the investors making money. If they're not making money, there's no reason to sell because it's still producing the cash flow, right. So as soon as the property starts appreciation to a point where the sponsor or the trustee feels okay, it's time to sell. That's the exit, you put it on the open market, you got a real estate broker, you get the offers coming in, and then you pick the best offer and you sell the property.   Michael: Love it and are you all targeting value add type of stuff, are you getting stabilized assets? What is the mix look like?   Ed: So the DST cannot use value add assets, meaning it can't move walls, and has to be stabilized assets? Unlike a tenant in common, right. 10 in common, you can do that, right, so the DST is all stabilized assets and when I say stabilized, it's either if it's multi-tenant, that's 90% plus occupancy and if it's single tenant, triple net investment grade tenant corporately guarantee and leases.   Michael: And is that regulated by the DSDM, is that a requirement of the entity structure that you're using?   Ed: That is the structure, yes, sir. That's the structure. Because if you if you disqualify the structure, You disqualify the exchange and now, people pay taxes, because it's not approved by the IRS.   Michael: Interesting. So the IRS is actually dictating what type of asset you can own in order to get this 1031 designation and benefits.   Ed: Yeah, if they're, you know, there's a specific structure and a specific way that needs to be structured. That's why a DST should have a legal tax opinion attached to it, from your securities lawyers to show that the structure is complying with this approved structure, that it should not be challenged if you invest and qualify for the deferral of tax via 1031.   Michael: Interesting, are there other vehicles out there that you could do something similar but have a value add component   Ed: Tenant in common. A tick, we call it a tick, the similarities are very similar to the point where you own a fraction of a piece of property. The differences are huge. Tenant and Commons. The investors make all the investment decisions. A tenant in common can have a capital call, a tenant in common can use non stabilized assets, a tenant in common can leverage the property and so back in 2000, and 4,5,6, and seven, the tenant in common was the most primary way of syndicating 1031 exchanges. But then and so, you know, everyone is going to agree as far as the investors are concerned when real estate goes up but in 2008, great recession, you have savvy investors, not so savvy investors. It's called hurting the cats. They disagreed on everything, right and so about six and a half billion dollars went into receivership by tips and so banks will not lend to a tenant in common structure. So your question and previously of how do I replace the debt would not happen in a tenant in common. That's why more tenant in common deals are all cash and the way they address Sit to investors is, hey, all cash, no foreclosure is owned, by the way, we're going to lever you up, pull the cash out and get it back to you tax free. Well, that's what happened in 2008 and everyone lost their money. So ticks in our business is a four letter word.   Michael: Very interesting. Okay, this is really good to know it. I'm curious and maybe some of our listeners are as well, because the investors are getting the cash flow, the investors are getting 100% of the upside, you're doing all the work, how does 1031 Crowdfunding make money, how do you all get paid?   Ed: So it's aggregating a portfolio. So yeah, we charge an acquisition fee, right anywhere between two to 4%, upfront and then we also get asset management fees, it's anywhere between half a percent to 1% off of the cash flow, but you really don't get rich doing that but the idea as a sponsor is, if you're managing $5 billion worth of assets, and you're charging a 1% asset management fee, you're making $50 million a year just unfortunately, watching paint dry.   Michael: It's not a bad business model.   Ed: It's not a bad business model. But you know, there's a lot of work to it. I'm thinking I'm kind of, you know, dumbing it down, but that's how sponsors make their money.   Michael: Okay, all right. This is great. If someone is considering investing with 1031 Crowdfunding or a different syndication, what are some things that they should be looking for? How do they go and educate themselves about the sponsor and about the deal?   Ed: You know, that's, that's a big deal right there and that's a great question because these deals have an upfront expense, we call it the load, right and even though the load doesn't affect an investor's capital accounts, so if you put a million dollars in, you're getting credit for the whole million in your cash flow is based on that whole million. The problem is, is that you overpay for that property. So let's give you that $20 million example that I used earlier, right? Let's say there's a 10% load on it. Even though I bought it for 20 million, I have to offer it to you for 22 million and even though your capital account is not affected, it's when you sell the real estate when that becomes material and so you need to make sure that the real estate can appreciate above its expenses, before entertaining a sale, right? So that at least you come out at par if you're going to invest in these things, and you're using a financial advisor to advise you to do this, the most important question you should ask is, Mr. Advisor, when does this investment overcome its upfront expenses and if that guy is any good, you should be able to tell you that, that's the most important thing when it comes to investing in these DSPs.   Michael: Yeah, that's super, a super great question to be armed with and so are most folks who are investing with you coming to you all via their advisors or via their team or they individuals. I mean, how do you find most of your clients?   Ed: So I'm, we do a lot of marketing, right. So we do a lot of SEO, a lot of SEM, I do things like this, my PR team is working. So we get anywhere between five to 700 new registrations a month on our website and we currently have about 60,000 registered investors today and so they just Google 1031 exchanges, and we pop up. So we're not, we don't use the financial services industry to distribute these products, even though we are in that service. But people normally just find us on their own or an attorney might say a CPA might say their friends might have used us. We have wonderful Google reviews. They just find us that's how they get to us.   Michael: Yeah. Okay, that makes a lot of sense and I'm wondering if you can shed light on like your worst deal ever, how it went wrong, and what happened?   Ed: That's a great so 2020 on the east coast of Florida, apartment building got hit twice by hurricanes within three weeks. Okay and you probably it's right, that time when Maria was coming and all that stuff. The property got flooded. 50% of the units became uninhabitable. Cash Flow stopped to investors, enough cash flow to pay debt service and then you had to get to the insurance companies and get the catastrophic damage insurance payment and the renter's interruption insurance payment and remember, I told you in a DST you can't do construction, right. So how do you fix the unit, right? So there's a term called a springing LLC. That's an every single DST ppm or private placement memorandum and what that what that means is that you dissolve the DST and now you're a member of an LLC, non-taxable event, your exchange is still good but now in an LLC, you can do construction, you can modify loans, you can do all these things to fix the property, right? So you go and you start fixing the property, you release the property, reinstate cash flow, right. But the issue is, you can't go your separate way anymore. You're in an LLC. So the entire LLC has to do an exchange or not. So they don't want to mess up there at 1031. So the LLC sells the property, does an exchange into another property and then two years later, the terms called Safe Harbor, you can convert it back into a DST and then everyone can go their separate ways when the property sells. That is the worst deal that has happened since I've been doing this.   Michael: And did the insurance proceeds cover all of your expenses enough in your business interruption to kind of make you guys hold in during the process?   Ed: Yeah, absolutely. So even though the timeline was delayed, the investors did very, very well. They just lost cashflow for about a year but then when the property was sold, they did well.   Michael: Yeah, I love it, I love and that's one of the things I really love about real estate investing as a whole is if you understand what you're doing the downside just isn't that scary…   Ed: Yeah, I agree. I mean, dirt is never gonna go to zero, right? It's just not gonna happen.   Michael: Right, right, man twice in three weeks. I mean, the only thing that I've heard of comfortable that I'm doing, I'm in the midst of a develop redevelopment project and I had two fires in the same building a week apart, during the course of construction.   Ed: Wow. Oh, that's not good. It's sucked.   Michael: It sucked, so… Oh, man. This has been super fun, man. If people want to find out more about you, continue the conversation invest with you, or what's the best way for them to do that and get a hold of you.   Ed: So you can go to 1031crowdfunding.com , like a crowd of people not a crown on your head, right or you can dial our number 844-533-1031 and you're absolutely you'll be able to find us.   Michael: Good stuff. Well, hey, thanks again for coming on and sharing and helping educate our folks. We'll definitely chat soon.   Ed: Michael, thank you so much. Looking forward to hearing back from you.   Michael: You got it, take care.   All right, everyone. That was our episode a big thank you to Ed for coming on super interesting stuff. I learned a ton. If you are in the middle of a 1031 or thinking about it definitely an interesting option to take advantage of. As always, if you enjoyed the episode, feel free to leave us a rating or review wherever you get your podcasts and we look forward to seeing on the next one. Happy investing…

The Remote Real Estate Investor
The full story of REITs and fractional ownership with Daria Davydenko

The Remote Real Estate Investor

Play Episode Listen Later Oct 15, 2022 29:51


Daria Davydenko is a Securities Sales and Operations Specialist at Roofstock where she supports Roofstock's fractional ownership product, Roofstock One. Prior to that, Daria served as Vice President at Goldman Sachs. Her background in finance provides her with a unique view of financial markets and risk management. In this episode, Daria walks us through the history of public and private REITs, and who might be a good fit for investing in them. Additionally, she covers Roofstock's exciting new investment, Roofstock One, a fractional ownership option for accredited investors. Episode Link: https://www.roofstock.com/one --- Transcript Before we get into the episode, this podcast is intended for general informational purposes only and is not financial, investment, or tax advice. The information provided is not directed toward any investor or category of investors and is provided solely as general information products and services or to provide general investment education. Nothing in this podcast should be construed as, and may not be used in connection with, an offer to sell, or a solicitation of an offer to buy or hold, an interest in any security or investment product.   Michael: What's going on everyone? Welcome to another episode of the Remote Real Estate Investor. I'm Michael Albaum and today with me, I have Daria Davydenko, who is our sales and operations lead for Roofstock One and she's going to be talking to us about the history of public and private REITs really what they are, and who might be a good fit for investing in them. So let's get into it.   Daria, what's going on? Welcome back to the podcast. Great to have you back.   Daria: Hey, Michael, good to see you again. Thank you for having me.   Michael: Yeah, my pleasure, my pleasure. Great to see you again. So today, we're talking about a really cool offering Roofstock has Roofstock One. Can you give us a really quick insight into what that is and then I would love if you could help walk us through kind of the history of REITs in this product and how it came to be?   Daria: Yeah, sure. So Roofstock One is a relatively new offering that we have as part of all of the different products use that we have on roofstock.com. Roofstock One is structured as a private REIT. So one of the benefits of investing in Roofstock One is if you invest in real rental properties, you have the benefit of knowing exactly what your own. While it is a nice benefit, generally, it's not available to visit more passive real estate investments like REITs, public or private. However, we made Roofstock One different, even though it is structured as a private REIT. It is a fully transparent and customizable. So you know exactly what your own by buying a share of Roofstock One. So it is the first of its kind single family rental rate that's transparent and somewhat customizable to investors.   Michael: Awesome. All right. Well, we're definitely gonna dig more into that here in a little bit. But I would love if you could give us again, a kind of a background, like what is a REIT? How did we get here public versus private, bring us up to speed.   Daria: Yeah, so actually, what so REITs have a very interesting history, that I don't think a lot of people realize how the first I guess, you know, private equity firms have emerged, and then how can a REIT structure was created. So back in the 1980s, investors were mainly individuals and they were kind of using real estate to kind of harvest losses and shelter profits. So that was kind of the main reason why people were investing in real estate and also in the 80s, there was something that was called S and L. That they were created by the Federal Home Loan Bank act of 1932. They were like Savings and Loan Banks that basically had some caps on interest rates on deposits and loans, and but they were able to basically lend money to those individuals so they can buy real estate. Now, obviously, in the 80s, we all know that there was a recession and so because of the restrictions that were placed, placed on this SML banks, you know, because they had some caps on interest rates on deposits and loans, it greatly limited their ability to compete with other lenders as the economy slowed and inflation took hold and so for instance, as savers spelled money into the newly created money market funds that were yielding, like a much higher interest rates, like SNL just could not compete with those traditional banks due to their kind of lending restrictions and so when you add the recession of what happened is because the recession was sparked by the high interest rates that were set by the Fed in an effort to end the double digit inflation, which is kind of what we are kind of seeing right now, nowadays. So now we're left with little, you know, little more than, you know, kinda like a dwindling portfolio of low interest rate mortgage loans and so obviously, their revenue stream, you know, were severely tightened and so in the 1986, Reagan changed the law and then this indication was, you know, basically it was no longer working and there was no longer like the tax loss harvesting that was allowed in real estate, that can actually cause a real estate values to crater because a lot of people did not see any value of investing, I guess, are holding real estate anymore and so that actually caused SNL crisis and so I think a lot of people don't realize but during the SNL crisis, there were like 8000 banks that have failed. So, because of this, yeah, because of this kind of crisis that happened. I mean, this was like the largest crisis, you know, since the largest collapse of US financial institutions since the Great Depression.   And so like that, that kind of happened in the 1986 and so what happened, right, so once there's no kind of crisis happened, the government had to step in. So while they found that there was a lot of highly levered foreclosed personnel that owned a lot of real estate, and so government inadvertently owned those banks, and so they end up owning hundreds and 1000s of properties. What happened next is they have created something that's called the Resolution Trust Corporation, that basically became a property manager. So there sole purpose was to own and dispose of those distressed assets. So Resolution Trust Corporation or short, RTC was a temporary federal agency. So basically, from the 89, to the 95. You know, they largely were trying to kind of resolve this SNL crisis that happened in the 1980s, they, you know, they were basically like trying to do some property management, cleanup, what kind of what was left behind and another, I guess, purpose or creation, the RTC was to dispose of this assets. Now, the government wants to sell a lot of assets and so they need to have, you know, it's going to be highly inefficient for them to find like a single bar and buy, like, you know, who can just buy like a single property. So what they had to do is they had to figure out how to find a pooled vehicle that can just come in and buy this pooled kind of assets and so that's when the first private equity firms were created, who kind of came in, they were able to kind of pull financing, and then kind of buy like large amounts of this kind of real estate that was left behind after the SNL crisis. So that's where kind of their real estate or you know, kind of private equity investment was created. That's kind of the history of it. Now, the real estate investment trusts were a way for individual investors or intervene institution investors to get exposure to real estate without kind of having to go through, like active management of the underlying real estate. So Real Estate Investment Trust was a way to, for you to get exposure to, you know, real estate as a class. But you don't, you don't have to kind of forego, like, you know, the whole kind of financing closing, you know, property management aspect of it, while still enjoying the benefits of getting dividend distributions from the rental income, you know, the appreciation of the properties, etc. and then, in addition to that kind of REITs were created to encourage investors to get into the real estate market, and also get some kind of tax benefits from it. Now, I know I spoke a lot. So I just want to make sure I, you know, there's any questions that I can answer for you, Michael.   Michael: This is super interesting. I mean, one thing that terrifies me is this idea of government, governmental property management, that just would have been an absolute nightmare, because we all know how that probably worked out. But no, I think that makes a ton of sense and so the so these private equity firms were created to buy all of the hundreds of 1000s of distressed assets that the government ended up owning because of the collapse and the financial crisis. But so maybe, help me understand what a REIT is, like, is a REIT a share of the private equity company that then owns these properties, is that how that works?   Daria: Yeah, so REIT is basically like a pooled vehicle, you can imagine that, you know, let's say, like, just as a simple example, let's say you, Michael, you own kind of 10 different properties and you would like to allow other, you know, investors to kind of participate in ownership of those properties. You know, you can package them basically into a read. Of course, this is more complex than kind of what I'm describing, but in the simple terms, you can package it into the REIT and sell basically shares of the three to other investors who can get economic benefits of kind of owning 10 of those properties. REIT like many companies, they distribute earnings to investors in the form of dividends, unlike many companies have a REIT incomes are not taxed at the corporate level. So kind of that means that REITs are actually they avoid the double taxation of corporate tax and personal income tax. So instead REITs are sheltered from the corporate taxes so their investors are only taxed once and this is a major reason why investors value REITs over you know, other dividend paying kind of structures out there. Another benefit of REITs I guess, that they were created is that they're widely used because they're highly for favorable tax advantages are REITs are required to distribute 90% of their earnings to investors and so that kind of like allows them to avoid the double taxation that I mentioned previously and so this benefit kind of trickles down to all the underlying investors, you know, they're not being double taxed, and they can receive the maximum amount of capital from rate, I guess another advantage, I mean, we all know that investing in real estate, one of the biggest advantages of is the depreciation.   So depreciation can be passed through to individual investors, even in a REIT structure, basically, you because you get to offset your income is a depreciation kind of tax deduction. Let's say you might be earning tax dollars, that $10 per share, but you only will be paying like $7 as an example, paying taxes on the $7 of those earnings and in addition to that, if you're kind of holding your shares, for longer than a year, you will be paying the long term capital gains taxes, which is kind of much lower than your ordinary income tax. There was another kind, I guess, good, good question that you raised Michael, about what is the difference between private and public REITs, the main difference is private REITs are less liquid, you know, compared to public REITs, public REITs are the ones that are being traded on the public stock exchange and so you're basically kind of they're just like stocks, you can buy them and you can sell them and you will also be getting the dividends while private REITs they're not being traded on the public stock market and so hence, they're being sought after as like a less liquid option for you to own real estate. But at the same time, they're less volatile, obviously, because they're not subject to all of the changes that are happening in the public markets. So you just kind of there's just some kind of major differences, right? The liquidity but you know, because you're foregoing the liquidity, you're obviously getting less of like volatility in the stock price of your, you know, under the ownership of the shares of the REIT. So that's kind of the major kind of difference between public and private REITs.   Michael: Okay. Yeah, that makes a ton of sense. Thanks for walking me through that. I guess the question that gets begged next is the Roofstock has been a marketplace for transacting on single family homes for years now. Why, like, why is this product coming about? Who is it designed to serve and who might not be a good fit for?   Daria: No, that's an excellent question. I think we what we have found as we've been speaking with investors who come to the roofstock.com website and who really enjoy owning kind of real estate and single family rental properties, in particular, one of the feedbacks we have been receiving from investors is that they are some of them you know, obviously, if you want to buy properties outright, you are getting, you know, there is like a large deposit, I guess, that you have to put to buy a property, there is a financing, there is like a very long process of kind of closing, the Roofstock does a very good job at making sure that we simplify this process for investors. So we tried to make it as simple and as friendly as possible. But still, there are multiple steps for you to close on a single property. But obviously, you will be kind of subject to that single asset race grade, if you are only owning a single property you will kind of whatever happens with this property, it will kind of great greatly affect your cash flow, now we have created Roofstock One because investors have been basically asking us, hey, I really can enjoy single family rental investing, but I'm still kind of trying to learn the space and understand how it works. I've never owned single family rentals before and so kind of I'd like to dip my toes into this asset class and so I think Roofstock One kind of offers this perfect opportunity for somebody to own this exposure to this asset class, single family rentals, while you know being completely passive, so meaning you don't need to go through the kind of the whole process of closing on the property, finding the financing, you know, finding the property manager, we do all of that for you.   You just kind of buy the share of stock one REIT you get exposure to this particular asset class and then kind of get, you know, potentially get quarterly dividends from the rental income and kind of just learn a little bit about single family rentals, how it works, how you know how you receive the dividends and gonna get accustomed to kind of owning single family rental asset class, where we have seen as there are, you know, some investors who really enjoy kind of being actively involved in the day to day of managing properties because you get this kind of owner exposure means that some people really like and so for those people, maybe Roofstock One might be a little bit too hands off and so they might kind of prefer to do like the direct ownership of the property. But there are also like a certain subset of individuals who just don't have the time to, like, investigate and spend time with property management companies and figure out like, you know, if they should increase the rent, or drop the rent, just kind of just to find tenants for the house, or should they kind of, I don't know, change the roof, or change the water heater in a property or wait for another month or two. So it kind of… Michael: All the operational stuff…   Daria: All the operational stuff, all of this kind of micro decisions that you kind of don't realize, but they do pile up and they do take a little bit of your time. So you know, some, some of those individuals are like, Look, I just want an exposure to this particular asset class, I want it to be passive, I really enjoy it, I think, you know, I believe in single family rental, kind of asset class in particular and so, you know, this is like, a perfect way for me to get a passive exposure, while still kind of feeling like I'm owning some, you know, underlying properties and we try to kind of make it as transparent as possible to investors, so they actually can see, you know, what properties are inside, you know, Roofstock, one reads, so they can understand, you know, what homes, kind of their tracking the economic performance of, and so they're still kind of getting the feeling of like, okay, with this share, I potentially can own 10 to 20 you know, how many properties they would like, still kind of feel like they're owning those properties. But you know, they don't have to spend as much time on the operation or day to day stuff. So yeah, that's kind of the major reason why we have created the Roofstock One is just to serve certain subset of our investors that we have seen come through roofstock.com website and, you know, obviously, there is absolutely still a lot of kind of benefit of owning the properties outright. But there's also like, you know, there's just a time kind of aspect that's involved in it as well.   Michael: Yeah, that makes a ton of sense and you said something about, for those people that are still learning want to dip their toes into the water, Roofstock One might be a good fit. But if I'm thinking about like a traditional REIT, I can go buy it on the stock market, I buy a share of it. I don't hear from anyone, I don't know what's going on in the day, like, I have zero insight into this. Is that different with Roofstock One like can someone truly expect to learn a little bit about what it's like to own single family rentals with roof stock one, or is it going to be just as hands off in passive and kind of, at a distance, like a traditional route would be?   Daria: I'd say it's somewhere in the middle. So I mean, it is just as hands off and passive. But I guess the major benefit is in public creeds, I guess it's a little bit more of like a pooled vehicle. So just by buying a share of like a public REIT, let's say, for example, that there are like 60, and 1000 properties that are public REIT owns. Now they can be in different like various markets, right. So there could be across many different states in the United States and so you kind of get exposure to all of those kind of little, you know, properties a little bit. So Roofstock One allows you to be a little bit more targeted, if you wish to do so, we have something that's kind of cool, called like a tracking stock, which is like a mini portfolio of subset of properties. So let's say if you're interested in a certain region in the US, just as an example, let's say Georgia, because you believe in this region, or maybe you have invested in this region before, you can get exposure only to the properties in Georgia instead of kind of getting the exposure to all of the properties inside the Roofstock One. But at the same time, if you don't have anything, you know, any convictions and you just kind of enjoy single family rental kind of asset class and you just want to have diversification, then you can also just kind of do that and you can just by exposure to all of the properties inside the restock one read. So we kind of just provide like an ultimate flexibility of investors coming in and kind of creating their own journey. Almost like a custom rate, create your own custom read…   Michael: The subway sandwich of REITs…   Daria: Exactly. Yeah, it's like a Subway sandwich. You're correct. Yeah, that just you know, you choose whatever you want, like and you can even choose your own sauce visit.   Michael: Except we use real fish and real meat in our subway sandwich. Don't know if this is the best analogy but people get the point.   Daria: Yeah, like yeah, we're you know, we're the like a guest who's probably accretes you're just kind of getting the you know, whatever the prepackage Subway sandwich that, you know, is not customizable, and you can't even choose your sauce. So that's kind of how I would think about it. I think the benefit of it is like, look, you can still kind of see what are the properties, underlying properties inside the, like those mini portfolios, for example, which is definitely something that you want to get with like a traditional public REITs, I feel like that they're kind of more giving you like, hey, this is our general structure, or a general investment objective, this is what we're doing this is like, let's say, 30% of our portfolios in Georgia, like x percentages in some other state, which is also great for those people who don't really have much conviction, and maybe they just want to get the general kind of diversified exposure. But you can also have to just be mindful of this kind of this still difference, there is still like this difference that exists between private and public REITs, where no public REITs are still subject to the same market volatility as any other stock would be, you know, I wouldn't say that there is like one, right or wrong way, just kind of, it's all about diversification, and what fits your investment goals and investment needs, and what makes sense for you, and for your investment portfolio and, you know, we're just kind of offering a way for real estate investors to create their custom REITs, if they want to get exposure to the whole asset class, if they wish to do so. They can also mix and match they can invest a little bit into public rates a little bit into private REITs and again, you know, there's it's always, diversification has always been a good way for you to kind of diversify your risk, so…   Michael: Yeah, okay, I do get well, Daria I have a question. That's maybe on every buddy's mind who's listening, you talked about the hurdles and barriers to entry of investing directly, and that's usually coming in the form of down payment heavyweight financing and there's steps involved, how much does investing in recycling cost? What's Is there a minimum investment is our maximum investment, like walk us through what that looks like?   Daria: Yeah, so we actually kind of tried to bring it down to minimum investment is $5,000. So anyone who so there is like a limitation that we you do have to be an accredited investor and accredited investor is something that's basically set up by CC, that's kind of their rules and regulations that in order for you to be invested in private REIT, you kind of have to be an accredited investor and I think it's kind of basically done for the benefit of the investors themselves. Since it is a limited liquidity you do want to make sure you have enough liquid cash that kind of set aside you know, that you have access to because you will if you're invested in into like any private vehicle private REIT or anything else, usually you know, you will not be able to like us you know this drill those money for like five years or so and so, I think that accredited investors just kind of really done to make sure that investors understand that this particular funds will not be able they will not be able to access it and they have enough liquidity on hands to you know, meet any some sort of like liquidity needs that they have during their like day to day life. Now accredited investor, someone who, who is an accredited investor, guess accredited investor is someone who has a net worth of a million dollars and that can include their real estate, investment portfolio or retirement, you know, retirement portfolios, or, you know, bank assets, kinda you name it, it can't include their private primary residence, but if they have secondary homes, and, you know, if they can only count equity basically on those properties, so if they have like a mortgage on the secondary home, they will have to figure out like how much of equity they have, and they can count it towards their networks. Another way to understand if you're an accredited investor is if you are making over $200,000 per year, and you've made over $200,000 per year, in the past two years, or you and your spouse or partner are making over $300,000 together this year and in the past two years. So those are kind of some of the limitations that beans set and they just kind of follow those limitations. But as long as you are kind of accredited investor, you can put you know $5,000 into like a Roofstock One REIT and there's $5,000 can be invested across all of our offerings. So we you know, we are not limiting you can only put $5,000 into like a separate a single kind of mini portfolio or a tracking stock. What we call, you can, you know, put $1,000 or $100 into tracking stock and the rest into like a giant, like a bigger font or you know, vice versa. So you can customize this $5,000 as much as you would like. So yeah, that's, that's kind of the limit. Yeah…   Michael: Great. Okay and I would imagine that other private REITs and for sure, public REITs that have been around for a while, have a track record the history of performance does Roofstock One have that yet or is it too new, like, how has it been performing to date?   Daria: Yeah, we do have a track record on Roofstock when you launched Roofstock One in November last year. So we are a little bit close to like a year of existence. So we have been distributing dividends and the dividend yields that we have distributed for the historical or like our past offerings, they are listed on our website. They can be accessed here, the investor reports and we also do have appreciation of the assets that has happened since we acquired them back in, let's say, November. So we just recently started to calculate something that's called nav, which is net asset value of our investments and that's in general, how private REITs figure out what is the value of their shares. So unlike public REITs, where the share price has been determined by the kind of just the normal forces of the markets, private REITs, because they're private, they, you know, they had to kind of figure out a way to value the assets, the underlying assets that they have and so the net asset value is kind of the common term where NAV is kind of a common term that they use to figure out what is the share price of their rate and that's what the Roofstock One does as well. So we are just like any other private three, we calculate NAV, we publish it, and then can investors are able to track estimated value of their shares. Now the reason I say it's estimated is because obviously, until we sell the assets, we wouldn't know the exact value of, of the underlying assets, we can only kind of do like an estimation of where we think it is right now. But it is, you know, a good proxy, I guess, for an investor to think, hey, this is like my estimated value. But you know, until you can actually sell the assets and just kind of the nature of real estate market in general, that it's very illiquid, and you wouldn't know the value of the asset until you actually like listed for sale and you started getting some buyers who are interested giving you offers etc. So very similar, you know, in REITs, because we own underlying assets. There, you know, we're kind of subject to the same market forces as any anyone else who owns real estate. But you know, net asset value is a good measure for someone to use to determine what is the estimated value of their shares.   Michael: Okay, okay super informative from the history to the product offering and why it makes sense. This is awesome. If people want to learn more about private REITs chat with you learn about Roofstock One, where's the best place for them to do that?   Daria: Yeah, we can be found on the roof stock.com website, or someone can just type in www.roofstock.com/O N E -one. That's our website. Now feel free to give us a call there is a button that you can click on and request a phone call and we have very friendly people to chat and they're always happy to talk about real estate, private REITs single family rentals investing. Now we love investors ask us questions and they love talking to them on various subjects. So yeah, you know, feel free to check out our websites style by ask questions and we are always happy to chat.   Michael: Amazing, well thanks again and definitely looking forward to seeing where Roofstock One goes from here. Talk soon.   Daria: Thank you Michael. Thank you for having me today.   Michael: You got it, take care.   Okay, everyone, that was our episode A big thank you to Daria for coming on really interesting stuff with the product offering as well as the history of REITs themselves. So go check out the website at roofstock.com/one. As always, if you enjoyed the episode, definitely love hearing from you. All ratings and reviews are super appreciated and we look forward to seeing the next one. Happy investing…