Latest / Brick by Brick - Wealth Building Conversations / From Cycles to Chaos: Ari Rastegar on Human Behavior, and Building for What's Next
Transcript
- Loren Wernette: Welcome to another episode of Brick by Brick. Today I am joined by Ari Rastegar. Ari is an Austin native and has been involved in raising hundreds of thousands of dollars for real estate in that space and currently has well over a billion dollars in assets. He's got a very interesting backstory, but we're gonna skip all of that and dig right into the meat of the matter, which is what is going on in real estate in Texas? how Ari and his company are handling that and what we as the audience can learn from people with his skill set. So Ari, thanks for joining. Ari: Thanks for having me, buddy. look, this has been a very interesting past five or six years. You know, if we zoom out a little bit, you know, I know everybody always hears that real estate happens in cycles, you know, it's there are cycles. And what does that really mean? Well, there's, you know, there's there's seasons to the broader economic, just how economies really work. And in fact, they're much more predictable, or, or easy, more easily anticipated than people think so much so that we can go back all the way to the Babylonian what's happened over this last five or six years, know, we've hit several black swan events, ⁓ know, effectively blacks for certainly for our lifetime. I'm a 43 old CEO. ⁓ started my business, started the Rastegar brand 11 years ago in ⁓ And as you mentioned, our investors are public pension plans, insurance companies, know, we've invested in 38 cities, 13 states, seven different asset classes. And these last five or six years have year, even more so than, you 2008, you know, for a variety of reasons, especially because COVID kind of started this, the fear factor and this kind of economic shutdown. And then it led into, you know, the quickest interest rate hike at 500 basis points in the history of modern economics. And real estate as a whole is governed by interest rates. Interest rates are the governed And then you take a micro economy like Texas and then you take that on top of cities that are growing like Dallas and Austin and Houston and you add all these confluences together, you start to create real stress on existing existing assets on existing values. again, the other side of the coin is it also creates exponential value creation in special situations. But there's other things that play into that in terms of the type of liquidity that you have, the way that you can transact. And then on top of that five years, which is another Swan event, is the entire reinvention of the office sector, which for the last hundred years has been the single largest investment vertical in all of commercial real estate globally. And to put it in commercial real estate as a whole globally is over three times the size of the stock market. So sheer volume in capital and commercial ⁓ residential loans ⁓ what we see in the public markets as general rule. So when commercial real estate or real estate in general hits these levels of stresses with all these other risk factors that we outlined, you talk about the value changes of different generations. So I'm actually a millennial or the oldest millennial and they created basically kind of a gap, a microgenerational gap for, know, within the people that are within a five-year age gap of me called the zelenials watch that change where people once saw Americans, the white picket fence, Cary Grant era, American dream era of owning your home and saving up your money and then getting a pension and retiring. This entire system and we can... pontificate about whether that's good or bad maybe another time, but it's changed and it's shuttered. People invest more in their camera lens, know, and value more their social mechanisms, their social circles, and their traveling and their experiences more so than getting that first job and getting married right out of college and having their first kid and their home becomes their retirement over 20, 30 years. of these things together. And then you electrify it with the fourth industrial revolution of artificial intelligence. On top of all this, to say the least, we are at a place of radical change, radical, radical, radical change. And real estate, the reason people invest in real estate historically for the last thousand years or so is the fact that it doesn't change so quickly. ability to stay as a... ⁓ as a solid piece of stability when you see the stock market do these ups and downs and turns and headlines alter what happens on a day-to-day basis. And there's certainly a place for that. Real estate has this ⁓ piece ⁓ generational wealth creation over decades, if not centuries, ⁓ it doesn't change as quickly from a building standpoint, ⁓ the technology that goes into building, where now we have 3D printing and robotics. which we're doing in some of our projects. And then the way we went from fixed rate mortgages to a whole world of floating rate mortgages. This is thousand years of change in five years. And so when you take all of those things together, we're at a place where this traditional brick by brick growth, this systemic predictable ⁓ rate and change rate that we've seen in the cycles has been completely Loren Wernette: Mm-hmm. Ari: completely reinvented to a place where hit this J curve of accelerating growth and change, exponential growth and rate change that we have to actually sit back and kind of build the bridge as we're walking on it. Loren Wernette: think the key thing I'm taking away is that ⁓ as we look at all these changes that are happening, they're not just directly impacting, you know, the money the interest rate. They're actually impacting how people are behaving and those people behaviors that are changing like less people are getting married, which is going to have a downtrickle effect on how many single less people are having children. Ari: That's right. less people are having children. The birth rate has plummeted too. Loren Wernette: There's less, even when they do have children, they have one child, not four children, and where they wanna live changes. Now they can live in a condo. They wanna be able to walk to where Ari: ⁓ pointing to the fact that it is evolving and changing or has is a matter of fact. and how as investors we manage risk because that is the main point that I've learned in my journey as an entrepreneur. I'm an attorney by trade. And so my brain works very much within structure, within law. And that's why we've done so much work in entitlements and zoning and working with councils and seeing, because a law on its face is meant to reflect the needs of a society at any given moment in time. That's what a law is, to create order. Well, when you change, that this piece of land that used to be a single family home, now I can build a skyscraper, that's saying something about that community. That's saying something about the city and the needs of that particular era. I think the takeaway, as you said very astutely, things are changing. Value systems are changing. The behaviors that we have you know, are changing so dramatically in real estate at his best needs to be a reflection of those needs to fill what those what those needs are. And that's why we saw multifamily do so well during the time is because people are like, well, why do want to just buy a house and be stuck in this place? It's not like I have a nine to five job that I'm going to have my pension at 65. I want a one year lease. I want to work from home and I want to move to another place. I want to move to Dubai and I want to run my company and be an influencer, these things that didn't even exist, and as real estate investors, we need to be responsive to it and at best anticipate those needs so that we can create long-term value for our shareholders, for our investors, and create the structure that's going to serve our customers, which are these tenants, which are these offices, ⁓ the small businesses that are in our retail centers and all the different asset classes that we serve. Loren Wernette: Yeah, I think anticipating what those changes are going to be in the next three to five years while also mitigating. You mentioned this mitigating risk for the unforeseen changes that are going to happen in the next five to 10 years, right? Because we have no idea what things are going to look like in 2035. Ari: And I think that's right. And I actually think there's a lot of science behind that is because the speed of change that's hit this J curve. So we talk about this growth curve, okay? Well, the thing about J curves, information technology doesn't just grow exponentially, it accelerates exponentially. So looking, I would argue, as a founder and a CEO that we run a... fairly substantial company and it wasn't long ago that I was delivering pizzas, by the way. So I went through two community colleges and, you know, I'm nobody from nowhere. But my point in saying that is we'd look historically at companies and say, okay, these are the quarterly earnings. Here's our one year budget. As a founder and CEO, I've started to look no further than 12 weeks because The things that are changing so much in front of us, even the policy changes that are affecting interest rates are happening at such a speed that looking even a year down the road almost becomes an exercise in futility because things are changing so much that these variables are changing where it's like, look, let's deal with what's right in front of us. Let's restructure the things we need to restructure, find the deals that we need to find. But that system on itself is making it hard to anticipate something that is by nature unanticipatable, if that's a word, because something is being invented that you don't even know it exists. And that thing that you don't even know exists is inventing something new. So to three to five years, you're with a place of so much unknown. And as investors, we try to control the uncontrollable. What are the things that we can wrap our heads around? Population growth. Population growth is one that we can look at, which companies relocating to where jobs are gonna be the the nature of the of the government within certain states or countries That you know that we can look to and Texas where I'm born and raised although we've invested all across the country You know in various capacities very various asset classes, you know, Texas got big eyes on it five six years ago big big eyes and little companies like Tesla and Oracle ⁓ moved their headquarters to Austin, Texas. The Gigafactory was opened in Austin. Now the New York Stock Exchange is now in Texas, in Dallas. These are seismic shifts that happen at best once in a generation. And that created a lot of exuberance in Austin. Austin's beautiful, it's on lakes. It was a sleepy little hippie town that became this town on steroids, which created this huge pop, which thank God, you know, helped our investors and then that started to come down, you know, pretty dramatically, which created a big change on top of it, which posed all its own challenges. But at end of the day, Austin has 400 people a day moving here. 400 people a day. That's adding the entire city of Pittsburgh every four to five years. And so no matter what headlines or things say, you know, the population growth, Dallas is on track. on sheer population growth alone, which is the headquarters of American Airlines, AT &T, massive companies, is gonna be the most populated city in the United States by 2035. And so when you talk about cities like Manhattan, New York City, you look at Los Angeles, you look at these other, Chicago, nobody could have fathomed 40 years ago that Chicago would be. devastated economically the way that it has been. Chicago is a staple of the United States. Me growing up, that's Michael Jordan's home. That can't, Chicago can't go. San Francisco getting crushed the way it did and seeing the resurgence. So Texas has been the beneficiary of this because there is so much more Texas. So Florida has also been on this list because of no state income taxes. Miami, but there's only so much Florida. You know, and yes, supply demand, that can drive value, but you know, a very small microcosm of Texas can have. And if you look at Texas, a funny statistic is if you took the density of New York City, okay, just let's just think and say, if we use the same density and zoning laws of Manhattan, okay, which is basically like think Tokyo, Singapore, Manhattan, you could fit. the entire population of the world in Texas. Loren Wernette: Hmm. Ari: That tells you how big Texas really is and it's centrally located. So geographically back to what can't readily change, it's right in the middle of the United States. You can be right in LA, you can be in New York, you can be in Miami, you have this central located area and then you're within the Sunbelt region that is fair weather climate. So these high level issues, although you'll see these blurbs and you'll see the Austen's get kicked in the teeth. these fundamental traits on the 10 year, on the 20 year, and the 30 year, which is well beyond a traditional seven to nine year private equity fund or investment thesis, so to speak, are not changing. And in fact, the population going into them is so dramatic that the bet against them is fighting a tidal wave. Those fundamentals are gonna drive people. It's why you're seeing people move there so readily and why businesses are relocating such as Goldman Sachs building their second largest office in the world, you know, right in that uptown Dallas area, JP Morgan, again, the Texas New York Stock Exchange. Like these aren't little, like these aren't like little, you know, changes. These are seismic shifts that need to be, that can't, if they're ignored, you're just gonna lose under the current of the inertia of what's actually happening. Loren Wernette: So is that the primary lever, just looking at that long-term forecast of people moving in to reconcile the, only can look at things at 12 weeks at a time because things are changing so fast versus this long-term developer mindset, like I've got to take this piece of ground, I've got to get it rezoned into whatever, and then I've got to go through all the process in order to get just to the construction phase. That could be a two to five year process. Ari: I think so. I think that's the only lever. think that's the only real lever that I can really, cause saying like the national average of multifamily, that is bullshit for how I invest in some neighborhood in Austin or in Dallas. Like that's nice, but you know, but we're looking at things like back to Manhattan as a microcosm. Loren Wernette: It's not how, but it's not how anybody invest. If I go to buy a house, I don't look at what the national average for a three bedroom, two bath house is. Ari: Yet these are the headlines. But these are the headlines that are governing, you know, all the things that that average Americans and people are looking at the average interest rate environment, the national average of these are not. Yes, there's statistics. You know, Mark Twain used to say there's lies, there's damn lies, and then there's statistics. And so this is this is one of those where you have to look at the micro economy. Yes, you start with Do I like the US? Sure. Loren Wernette: Mm-hmm. Ari: Do I like Texas? Okay. Do I like Dallas? Okay. But Dallas is fucking enormous. Like then going to Uptown and it's not even just Uptown portion. It's like what corner on Uptown connected and then what's the replacement, know, discount to replacement costs. Then what are the rents within a 500 foot radius? And so really honing in on the exact location that you're trying to underwrite in my opinion is the only way Loren Wernette: Mm-hmm. Ari: that you can get to some formulation of what reality is from an investment standpoint. And if you're buying a big piece of land like we do, we own hundreds and hundreds of acres. We build master plan communities, single family rentals, multifamily. We just built a new school. if people are coming in high density areas, I can make a great case that land banking or buying huge trunks, tracts of land ⁓ major employment hubs, you know, that people are going. And I have to deal with the bureaucracy of zoning and commissions of this antiquated model of how permitting and things done, which is another discussion. Time can work in your favor. So you buy the land, you keep it. Might take you three years to get a shovel in the ground. I have one case in Dallas. took eight years to finish the zoning. Mind you, it's from 20 feet to 400 feet, and it's big lift. But if you buy phenomenal pieces of land great growing areas, Loren Wernette: Hmm. Ari: you can then use that to your benefit that by the time you get through all that red tape, there is an extra gazillion people that are in the area you would think that would then drive demand. Loren Wernette: Yeah, I mean, if 400 people are moving to the area every single day, right? ⁓ Ari: At one point that's, and in fact, it hasn't slowed down even through COVID, through the time, through whatever, but that's the thing about real estate historically that's been so phenomenal is that the fact that it change ⁓ quickly. And so I've tried to zoom out and say, do people want to be in Austin? And I'd say, as we said, why? Say, well, okay, why would I want to be in Austin? ⁓ I'm a single father of three, so. I think about my kids, I was like, well, it's on the lake. Okay, so people like the lake. There's beautiful trees, there's a great music scene, breakfast tacos are pretty good, ⁓ like there's a young lifestyle, and I think, hmm, there's fun stuff to do, you great entertainment, fine. And you think about what makes people from a psychological standpoint, from a sociological standpoint, wanna be somewhere. And it's very simple. We as humans are not nearly as unique as we'd like to think we are. Certainly not in groups on the average. We like to have fun. like to eat. ⁓ like to have a job. And we like to have a house that's not too expensive. And between those things, you know, these cities like in Texas, as we talked about offline, are loaded with them. And they're a lot cheaper. than their counterparts are in some of these other cities. And does that mean it's great for everybody? No, but there's a huge tranche of people to justify that, cause those things aren't changed. And there's major university hubs, like University of Texas that are good at sports. People like that too. know, they want, they want the, you you know, and everybody looks good in burnt orange. I'm an Aggie, but, you know, but people look in burnt orange. I saw that look, Lauren. I could care less. But my point is, but those things together, those things together, Loren Wernette: Yeah. Ari: I believe are the longer term reasons that I could bet the ranch on that hedge against all the exponential growth and change that I have no fucking clue what's gonna happen. Loren Wernette: Now, the other piece you didn't mention is people like to be where people like them are at. And so I think you see a huge amount of elderly people move to Florida because that's where elderly people are. Austin, you have young professionals. And what do you get with young professionals? You get smaller families, higher income. You have more young professionals move in. It's a flywheel effect. Ari: ⁓ beautiful. Yep. Community. And yet in great night, great nightlife. In great nightlife. And you're right. And people, know, birds of a feather flock together, use whatever, you know, cliche that you want to do. And I think the weather also is a huge component in Florida. Seen that the reason New York has such a long-term relationship with Florida. And that's why Florida went crazy at the beginning. I believe is because there already was the symbiotic relationship between New York and Florida. When you hit a certain age, you retired. Loren Wernette: great nightlife. Ari: You didn't want to be in Manhattan anymore. You didn't want to deal with the four feet of snow in the winter. You moved to Florida. And so since that was already there in 14 million people in Manhattan, just Manhattan alone, once the world started to shift and COVID, a lot of those folks that had a little bit of savings said, fuck this place. I'm going to Florida now. so there is success or movement like that leaves clues. There's still breadcrumbs. you know, that we can follow along the way to your point of community. And then from a real estate standpoint, building these huge master plan communities, which has really become something that we're very focused on, of getting massive tracks of land, hundreds of acres, and then, you know, that are agricultural land and building green space and single family homes and apartments and commercial and schools and really looking at a high level. the same rules apply to building a master plan community as the reason people move to big states and big cities. They're similar. They need a place to get their coffee. They want to get ⁓ some barbecue. They want to walk their kids to school. They want to be able to walk in the park with their dog. And so these rules, I think, as long as we stay very cognizant of those rules as investors at a massive scale, things still apply to some degree to point of all the things that are kind of changing in the 12 weeks. And I look at investing in real estate through more of a Berkshire mindset of saying, although we absolutely buy, build, and we want to sell and monetize within a reasonable period, clearly, but I always do ask myself, you know, would I keep this forever? Like, is this a piece of land if I bought 300 acres in Kyle, Texas? Loren Wernette: Hmm. Ari: which is just south of Austin, just north of San Antonio. So just Austin, San Antonio, just you don't need to know where it is. But if it's in between those two cities, you can tell there's a lot of people. I said, well, if I bought 318 acres here and I didn't build anything, would I be mad in 30 years between those areas as much as they're growing? No, I'm good. And so I like to keep the would we want to own this asset forever? Do we believe in this community forever? Do we believe in this market on the 10 year, 20 year, 30 year? and then be prepared to sell the monetize, you when the numbers fit. So you're still having this forever focus in some regard, but tempering it with all the other things that we're saying, which is now has a little bit of art to it as well as, as well as science because of how unpredictable things are. Loren Wernette: Yeah. Speaking of art, talk to me about how you mesh the difference between the speed of government, especially with UDOs and how the government's changing those with the speed of which our customers need new properties built or the demand for new homes or the demand for these neighborhoods. Ari: Yeah. Oh, it's tough. Well, look, it this way. So simple, simple numbers. America is 5 million single family homes short. 5 million. Texas, for all its growth and all its leniency on building and construction and no income tax, state income taxes and whatever, is 500,000 houses short. So... the need to continue to build housing, even with the reinvention of our value system and this move towards renting and things that were still that short. So we have this massive shift where, you know, things change, I think, more out of desperation than inspiration. ⁓ know, maybe I'm become a little bit more cynic in my older age with little more gray hair, ⁓ ⁓ But for that reason, I can give you an example of something that we're doing on two of our sites, one in central Austin, there was an old apartment complex that we're scrapping and kind of rethinking, which re-imagining, which is our core business, who's owning an entitlement and things like that. And it's why we have such a breadth of asset classes is because we look at the dirt and the use ⁓ then bring partners in to explore the development, et is we're to 3D print houses. you know, in 3D printing houses, which sounds like something out of, you know, a brave new world, you know, now has become applicable and very real from a cost standpoint where if I can't change how quick zoning and the government does the process, it building a single family home, a Lenard, D.R. Horton house starter home would take nine, six to nine months. Let's just use a timeline. OK, we can build the same house effectively cheaper. higher quality in six weeks. So when you factor that against higher financing costs, higher interest rates, you can then maintain a margin that is still within the parameters of single family home, you know, build to sell But if you can build it in a seventh of the time, your financing costs are lower and you can move to transact quicker. And as I said, the quality is astounding. Like I had to see it with my own eyes over and over again. There's a couple of big shops that are doing it or growing shops that are doing it here to where we're like, my God, I like for me to build 500 of our build for rent strategy just on the Kyle site. It's like, is going to take two years before we get through all the stuff, all the all the horizontal developments done. The lots are fully finished. But if we can go do them in six weeks, we can put up less cash. We can get more creative financing and we can build a badass product that especially the Austin forward-thinking techie group think it's cool too. So the marketability side of it becomes even come becomes interesting. But that has become as a matter of necessity that we don't necessarily have to wait as much. It'd be nice if the governmental permitting processes, you know, are expedited and I'm not holding my breath just yet. And again, bad or good, that's another discussion. But if I can build them quicker and build them better and build them cheaper, hey. I can start to serve my customers in a more meaningful way. Loren Wernette: Right, and put a product out there that is just being clamored for, right? This kind of lower end product, and I wouldn't say lower end in quality, but lower end in price, starter home. It's a starter, yeah. Ari: It's essential housing. It's essential. So people talk about affordability and this, that, and the other, and affordability is so relative. Like that's such a relative phrase. So I've kind of moved towards the phraseology of essential housing. There is essential housing for folks that want to get into something that they want to own. And there's a certain level of that, a certain income threshold based upon your age and... Loren Wernette: I like it. Ari: things and so these what we are talking about or what I'm talking about with regard to the 3D printing these are essential housing level products. Loren Wernette: Yeah, and I think that gets to the crux of the issue. hear all, we need to reduce interest rates or we need to, you know, prevent institutional investors from getting buying these all these how all this crap. ⁓ the problem is, there's not enough damn houses on the market. If you get enough houses, then the price will have to come down supply and demand. Ari: ⁓ God, get out of here. Well, let me tell you the institutional buyer thing. it's asinine. And the reason why is institutional buyers at their peak own 60,000 houses, 80,000 houses. There's ⁓ million homes in the US. mean, so like my mind is, well, if people are just buying and building and they're figuring a way how to do it, Like we need product to be out there and plus the numbers are so low in percentages that it's an irrelevant mathematical discussion. 60, 80, 100, let's say it's a million houses. So it's less than 1 % at a million homes and we know it's only a couple hundred thousand at best. That's not the line of, we can use our headline space and our airway space to discuss much more substantive issues than banning institutions from buying houses. Loren Wernette: It's a scapegoat to take the eye off of what the real real issue is, which is you need to put better legislation in place to allow builders to do the thing that they do, which is build homes. Ari: Yeah, and the thing about rates. Well, and I'll tell you the other thing about it and I, you there's an old country song called politics, religion and her. And at this point in my life, there's some topics, politics, religion and her. just kind of put over here because I'm sure a lot smarter people can deal with those issues. But the thing about the change, the administrative governmental changes for housing is they're so locally governed. So it's not a nap back to the national average, like, so the national ordinances. Yes, I think can be important in certain ways, there's ways to do it, but what the local governing body of Kyle, Texas does and how their council works, how their local government works is apples and oranges to Manhattan. So there's changes that need to happen with how their databases are run, how their documents are processed. the budgets that are needed. So it's a much more complicated issue in fairness to change where it's easy, you need to go faster in zoning. Well, like there's like, that's also not fair either. Like there's other things that go into how that is, but there are some policy changes at a national level. Like for example, one of the reasons interest rates were so low for so long is that Fannie Mae and Freddie Mac, owned $1.5 trillion of mortgages on their balance sheet. And when they were buying a trillion dollars of mortgages from all the local banks, all the local banks had more liquidity, spreads tighten. So the other day, you know, I saw the administration talk about buying $200 billion in Fannie Mae using their balance sheet to buy $200 billion in mortgages. That initiative, it's not enough because 200 billion would probably move rates down 15 basis points, 20 basis points best. But if they use their balance sheet to go back to its peak in 2022, 2021, when it owed a trillion five, that would substantively and systemically lower rates by almost 200 basis points. So in my mind, if there's going to be a policy change, go tell Fannie Mae and Freddie Mac to go buy a trillion dollars in loans and free up all the local banks and free up all the other things to take that money and put it back into the economy. Loren Wernette: And do you think if that happened and this is projecting right where would the biggest winners and losers be on it? I'm going to say the word. Well. Ari: The American people. The American people would be the biggest winners. I'm dead serious. I'm not being, I'm not being kitschy. I say that because what would happen. So federal, the federal reserve, okay, lowering rates. So when people hear lower rates, ⁓ hear that lower rates, lower rates. The only thing the federal reserve can do is lower the short-term interest rate, the federal funds rate. That's the only thing they have control over. Okay. then but mortgages on single-family homes and most commercial real estate are based on the 10-year treasury rate, the 10-year. Okay, so what happens is if you lower the federal fund rate than the forward-looking curve is projecting, go with me here, you do it quicker artificially, that spikes the 10-year because it scares the market. So lowering rates, lowering rates is also not the answer because that's the only thing they can lower. We need to do something in a way to prudently, systemically lower the federal fund rate, yes, based upon a slew of other issues. But in order to really move the 10-year, there has to be more liquidity in the marketplace. And to create more liquidity in the marketplace, we have to do something that buys those mortgages back. And as far as I understand, I am not an economist. There's people way smarter than me that can think about this. but very simply and linearly, if Fannie Mae and Freddie Mac or the government in its various capacity buys these mortgages back to their balance sheet and holds them, spreads tighten because the demand for those mortgages goes up so dramatically and supply starts to dwindle and there's more liquidity to go do this and that will lower the 10 year just by economic nature. Loren Wernette: Where do you think the 10 year and the mortgage rate stabilize out at or have we reached that? Ari: Oh, hell no, it needs to go way lower. I mean, I'm biased, but I would say based upon the latest inflation numbers, and the CPI is an example, it's mostly housing, okay? And in order to get those 5 million houses built and convince home builders to build them, meaning that they can procure a creative financing to do that, I think we would be in a safe place where the economy is moving. where builders can build, we can keep up with the demand for multifamily and single family housing with 150 basis points dropped on the tenure, which is not inconceivable, by the way. There's a very clear path to get there with the new chairman that'll come in in May, working on lowering that federal rate, buying some of these mortgages and some other acts that can be done at the higher level. 150 basis points down makes the numbers pencil for more multifamily development makes the numbers pencils for builders to start buying and building houses more. So it doesn't need to be a crazy number, rates don't need to go to zero, but basis points would unlock the market in a meaningful way that is also not reckless. Loren Wernette: Yeah, now I think that would be a huge difference. We've seen just in one call unlocking but a de thawing of the market just in the last month and a half since we've seen 30 years, know, part of that seasonality, right, we got past December when everybody was shut down, got into January and things are more busy now for me than they were in September through December. Ari: Totally. But this is also a time, man, where if you got access to deal flow and people are freaked out. you know, if look, if I'm an accredited investor right now, and I have money in a self directed IRA or something where I'm not looking to fix and flip and be out in one year, I'm saying someone reasonable, hopefully that as a financial advisor before that looks at their portfolio and says, look, you know, Jim, Sally, you can put 200 grand into something and you can set it and forget it for five years. And if it took seven, it wouldn't break the bank. But if it does work out and you hit a meaningful double digit IRR, it helps, is the time. Like this is the exact time to make that decision, but not with the we'll be in and out in whatever and you know, we're going to just build this tomorrow and sell it. Like that's also not the time. And those aren't the clients that you want. You know, you want the people that, you know, me personally for we use our accredited investor base, which is substantial and growing every day to co-invest alongside the institutional groups and some of the bigger deals we do. And I love when they have advisors and stuff where they come to me and say, look, my advisor told me that I can put in 150 grand and I'm good for, and so when they have the reasonable expectations, I can do my job and I can put them in the thing and deal with the unforeseen and then get through the three year, five year, seven year timeline and hopefully walking away with a multiple on equity that's helping them with their entire. Loren Wernette: Yeah, we deal almost exclusively with accredited investors. And it's the same story all the time. Well, I thinking about doing some flipping or whatever. Like like I talked to a guy right before this call, he makes half a million dollars a year and he's like, ⁓ I think I'm going to be flipping. like, are you going to be better served focusing on your career and just letting me Ari: let's say you flip. You flip a house and you make a hundred grand, just using a number. You gotta pay short-term capital gains taxes. Who the fuck wants to do that? So there's other parts of it where you... I'm going to buy two houses and renovate them. How are you going to manage them? What are you going to do when the tenant calls you and the water breaks inevitably? There is nothing passive about passive income. Nothing. I would know that across all the apartment complexes, all the, it is a active business. So if you want to be in real estate, find great operators, you know, do your diligence on the firm that what they're doing, write the check, be a limited partner and let somebody else do all the work, make your promote, be happy. Focus on your job, make more income, and that's it. Loren Wernette: So if someone is interested in reaching out and finding out more about what you guys do if they're a credit investor and want to find out that how would they get a hold of you Ari? Ari: sure they can they can reach us through we're fairly active on on all the social media platforms you can go to at Rastegar property on Instagram or at Rastegar my last name you can find us on LinkedIn you can Google Rastegar capital you know what we've done is fairly visible good or bad ⁓ ⁓ you know what I'm very proud of our team is you know your call will be answered you know people we have real people that have been with us for years and years and years that will answer your calls, will talk you through it. We use a third party fund administrator that handles all this stuff. And again, all investments have risks. Things go up, things go down. I'm very proud that we have ⁓ institutional risk controls in place. ⁓ team is very personable. They'll talk with you, they'll answer your questions, and they'll be the first to say it's not for you. And that's another part of it, where this is a marriage. You know, I don't want somebody with us is calling every three days and saying, well, this was supposed to be done in six months. You know, like we want people that we can well educate the process. Some of them aren't, you know, they don't want to necessarily hear it could take three to five years to double or triple your money. But that's that's reality. Does it happen quicker sometimes? Sure. But if you're not psychologically prepared or liquid on your own to have three to five years or even seven years, barring these pandemics and things, you're not a good fit. You shouldn't do it. Go buy an index fund. Call your advisor. You know, put your money in the treasury, you know, but please don't start flipping and stuff when you have a full-time job because you're going to lose all your fucking money. Loren Wernette: Awesome. The last little bit here, anything you want to leave the audience on, any bit of tidbit of information or advice. Ari: Yeah, well, I think everything we've covered is, you know, educate yourself, man. Like there's so much great stuff on YouTube. Do your homework on the on the operators, you know, and get in the market because time is what makes you money. Compounding returns, time in the market, money just sitting in a checking account. If you're an accredited investor, like I said, whether it's us, whether it's Lauren, whether it's your financial advisor, you need the money to work for you. You spend a certain amount of time earning money, but I look at money. as an employee and I ask it every day, what have you done for me today? How much money have you made me, Mr., know, Ms. group of money? How much have you made for me today? And find a way to be in the market and let time do the compounding. And right now, real estate has got a bad rap for a variety of reasons and some of them are systemic, but the times when the markets are down, if you have the right operators, the right managers, this is the time to invest, not when everybody is running into everything and just buying whatever they can when money's flowing. That's when people are just doing deals. This is when you find out who are real investment managers. Loren Wernette: 100%, cash in the mattress is losing value every day. Ari: ⁓ yeah, well according to the Fed, it's losing three and half percent a year just to inflation. Loren Wernette: Yeah, so awesome. Ari, thank you so much for your time, your wealth of knowledge. I hope anybody that hears this is interested, reaches out to Ari and his team, learns about what he's got going on. I will make sure all of your links ⁓ and contact information is in the show notes. And thank you all and we'll talk to you again next week. Ari: Thanks, Lauren.