Latest / MPI Multifamily Commercial Real Estate Investing / Mastering Multifamily Underwriting: Essential Metrics You Need to Know

Transcript

Mastering Multifamily Underwriting: Essential Metrics You Need to Know · MPI Multifamily Commercial Real Estate Investing

• 1:17
  You're
• 1:17
  listening
• 1:17
  to
• 1:17
  the
• 1:18
  Master
• 1:18
  Passive
• 1:18
  Income
• 1:19
  Podcast
• 1:19
  Network.
• 1:23
  Hey,
• 1:23
  guys,
• 1:23
  Charles
• 1:24
  Seaman
• 1:24
  here
• 1:24
  with
• 1:24
  Erica
• 1:25
  McNew.
• 1:25
  And
• 1:26
  thank
• 1:26
  you
• 1:26
  for
• 1:26
  joining
• 1:26
  us
• 1:27
  on
• 1:27
  this
• 1:27
  episode
• 1:27
  of
• 1:27
  the
• 1:28
  Master
• 1:28
  Passive
• 1:28
  Income
• 1:29
  Multifamily
• 1:29
  Podcast.
• 1:30
  If
• 1:31
  you
• 1:31
  want
• 1:31
  our
• 1:31
  commercial
• 1:32
  Real
• 1:32
  estate
• 1:32
  success
• 1:33
  guide,
• 1:33
  text
• 1:33
  the
• 1:33
  word
• 1:34
  freedom
• 1:34
  to
• 1:34
  33777.
• 1:37
  Today
• 1:37
  we're
• 1:37
  going
• 1:37
  to
• 1:37
  be
• 1:37
  talking
• 1:38
  about
• 1:38
  multifamily
• 1:39
  underwriting.
• 1:40
  Now,
• 1:40
  a
• 1:40
  topic
• 1:40
  that's
• 1:41
  both
• 1:41
  interesting
• 1:42
  and
• 1:42
  confusing
• 1:42
  to
• 1:42
  many.
• 1:43
  So
• 1:43
  we're
• 1:43
  hoping
• 1:43
  we
• 1:43
  can
• 1:43
  shed
• 1:44
  some
• 1:44
  light
• 1:44
  for
• 1:44
  you
• 1:44
  guys
• 1:44
  by
• 1:45
  the
• 1:45
  end
• 1:45
  of
• 1:45
  this
• 1:45
  episode.
• 1:49
  Welcome
• 1:49
  to
• 1:50
  the
• 1:50
  Master
• 1:50
  Passive
• 1:51
  Income
• 1:51
  Multifamily
• 1:52
  Podcast,
• 1:53
  where
• 1:53
  we
• 1:53
  guide
• 1:54
  you
• 1:54
  to
• 1:54
  invest
• 1:54
  in
• 1:55
  commercial
• 1:55
  real
• 1:55
  estate
• 1:56
  with
• 1:56
  a
• 1:56
  special.
• 1:56
  Focus
• 1:57
  on
• 1:57
  raising
• 1:58
  money
• 1:58
  from
• 1:59
  others
• 1:59
  to
• 1:59
  buy
• 2:00
  bigger
• 2:00
  and
• 2:00
  better
• 2:01
  deals.
• 2:01
  And
• 2:01
  now
• 2:02
  here
• 2:02
  are
• 2:02
  your
• 2:02
  hosts,
• 2:03
  Charles
• 2:03
  seaman
• 2:04
  and
• 2:04
  Erica
• 2:04
  McNew.
• 2:08
  And
• 2:08
  no
• 2:08
  one
• 2:08
  better
• 2:09
  to
• 2:09
  talk
• 2:09
  about
• 2:09
  it
• 2:09
  than
• 2:09
  you,
• 2:10
  Charles.
• 2:10
  So
• 2:10
  I'm
• 2:10
  excited
• 2:11
  about
• 2:11
  this
• 2:11
  one.
• 2:11
  Oh,
• 2:12
  well,
• 2:12
  thank
• 2:12
  you.
• 2:12
  So
• 2:13
  what
• 2:13
  is
• 2:13
  multifamily
• 2:14
  underwriting?
• 2:15
  Well,
• 2:15
  basically
• 2:16
  what
• 2:16
  you're
• 2:16
  doing
• 2:16
  is
• 2:16
  assessing
• 2:17
  the
• 2:17
  financials
• 2:17
  of
• 2:18
  a
• 2:18
  property
• 2:18
  to
• 2:18
  determine
• 2:19
  the
• 2:19
  investment
• 2:20
  viability.
• 2:21
  So
• 2:21
  in
• 2:22
  layman's
• 2:22
  terms,
• 2:22
  you're
• 2:23
  seeing
• 2:23
  if
• 2:23
  the
• 2:23
  deal
• 2:23
  makes
• 2:23
  sense
• 2:24
  or
• 2:24
  not.
• 2:24
  So
• 2:25
  how
• 2:25
  does
• 2:25
  that
• 2:25
  happen?
• 2:26
  Well,
• 2:26
  you're
• 2:26
  going
• 2:27
  to
• 2:27
  be
• 2:27
  taking
• 2:27
  the
• 2:27
  existing
• 2:28
  financials,
• 2:28
  and
• 2:29
  we'll
• 2:29
  talk
• 2:29
  about
• 2:29
  that
• 2:30
  in
• 2:30
  a
• 2:30
  little
• 2:30
  bit
• 2:31
  to
• 2:31
  make
• 2:31
  that
• 2:31
  determination.
• 2:32
  Why
• 2:32
  is
• 2:33
  it
• 2:33
  crucial?
• 2:33
  It's
• 2:33
  crucial
• 2:34
  because
• 2:34
  whenever
• 2:35
  you
• 2:35
  make
• 2:35
  an
• 2:35
  investment
• 2:36
  decision,
• 2:36
  you
• 2:37
  want
• 2:37
  it
• 2:37
  to
• 2:37
  be
• 2:37
  based
• 2:38
  on
• 2:38
  data
• 2:39
  and
• 2:39
  not
• 2:39
  on
• 2:39
  emotion.
• 2:40
  And
• 2:41
  having
• 2:41
  good
• 2:41
  underwriting
• 2:42
  and
• 2:42
  understanding
• 2:42
  it
• 2:43
  can
• 2:43
  help
• 2:43
  you
• 2:43
  avoid
• 2:43
  costly
• 2:44
  mistakes.
• 2:44
  Do
• 2:45
  you
• 2:45
  agree,
• 2:45
  Erica?
• 2:46
  I
• 2:46
  do.
• 2:46
  And
• 2:46
  I
• 2:46
  think
• 2:47
  that
• 2:47
  not
• 2:48
  doing
• 2:48
  enough
• 2:48
  due
• 2:49
  diligence
• 2:49
  on
• 2:50
  your
• 2:50
  underwriting
• 2:50
  and
• 2:51
  making
• 2:51
  sure
• 2:51
  that
• 2:52
  you're
• 2:52
  calculating
• 2:52
  things
• 2:53
  correctly
• 2:53
  on
• 2:53
  that
• 2:54
  could
• 2:54
  be
• 2:54
  a
• 2:55
  costly
• 2:55
  mistake
• 2:56
  that
• 2:56
  could
• 2:57
  really
• 2:58
  hurt
• 2:58
  the
• 2:59
  cash
• 2:59
  flow
• 2:59
  on
• 2:59
  the
• 2:59
  asset.
• 3:00
  So
• 3:00
  I
• 3:00
  think
• 3:00
  it's
• 3:01
  critical
• 3:02
  to
• 3:02
  make
• 3:02
  sure
• 3:02
  that
• 3:02
  your
• 3:03
  numbers
• 3:03
  pencil
• 3:04
  and
• 3:04
  that
• 3:04
  your
• 3:04
  numbers
• 3:05
  are
• 3:05
  accurate.
• 3:05
  And
• 3:06
  I
• 3:06
  guess
• 3:06
  we'll
• 3:06
  get
• 3:06
  into
• 3:06
  what
• 3:06
  some
• 3:07
  of
• 3:07
  those
• 3:07
  numbers
• 3:07
  should
• 3:07
  be.
• 3:08
  Absolutely.
• 3:08
  Well,
• 3:08
  why
• 3:08
  don't
• 3:09
  we
• 3:09
  talk
• 3:09
  about
• 3:09
  some
• 3:09
  of
• 3:09
  those
• 3:10
  now?
• 3:10
  What
• 3:10
  are
• 3:10
  some
• 3:10
  of
• 3:10
  the
• 3:10
  key
• 3:11
  ones,
• 3:11
  Erica?
• 3:11
  So
• 3:12
  I
• 3:12
  guess
• 3:12
  the
• 3:12
  number
• 3:12
  one
• 3:13
  would
• 3:13
  be
• 3:13
  your
• 3:13
  net
• 3:13
  operating
• 3:14
  income.
• 3:15
  And
• 3:15
  you
• 3:15
  know,
• 3:15
  that's
• 3:16
  calculated.
• 3:17
  You
• 3:17
  have
• 3:17
  your
• 3:18
  per
• 3:18
  door
• 3:18
  income
• 3:19
  and
• 3:19
  then
• 3:19
  you
• 3:19
  have
• 3:19
  it
• 3:20
  monthly,
• 3:21
  annually.
• 3:22
  You
• 3:22
  take
• 3:22
  that
• 3:23
  annual
• 3:23
  net
• 3:23
  operating
• 3:24
  income
• 3:24
  and
• 3:25
  you
• 3:25
  divide
• 3:25
  that
• 3:25
  by
• 3:25
  the
• 3:26
  purchase
• 3:26
  price.
• 3:26
  That's
• 3:26
  how
• 3:27
  you
• 3:27
  get
• 3:27
  the
• 3:27
  cap
• 3:27
  rate.
• 3:28
  So
• 3:28
  the
• 3:28
  net
• 3:28
  operating
• 3:29
  income
• 3:29
  is
• 3:29
  critical
• 3:29
  for
• 3:30
  helping
• 3:30
  you
• 3:30
  determine
• 3:30
  the
• 3:30
  cap
• 3:31
  rate.
• 3:31
  And
• 3:32
  also
• 3:32
  that's
• 3:33
  where
• 3:33
  you're
• 3:33
  starting
• 3:34
  at
• 3:34
  before
• 3:34
  you
• 3:35
  calculate
• 3:35
  expenses
• 3:36
  and
• 3:36
  all
• 3:36
  that
• 3:36
  good
• 3:36
  stuff.
• 3:37
  Right.
• 3:37
  So
• 3:38
  keep
• 3:38
  in
• 3:38
  mind,
• 3:38
  guys,
• 3:38
  with
• 3:39
  any
• 3:39
  valuation
• 3:40
  in
• 3:40
  commercial
• 3:40
  real
• 3:40
  estate,
• 3:41
  whether
• 3:41
  it's
• 3:41
  multifamily
• 3:42
  retail,
• 3:42
  office,
• 3:43
  whatever
• 3:43
  it
• 3:43
  is.
• 3:44
  There's
• 3:44
  two
• 3:44
  components
• 3:45
  that
• 3:45
  are
• 3:45
  gonna
• 3:45
  help
• 3:45
  you
• 3:45
  figure
• 3:46
  out
• 3:46
  that
• 3:46
  price.
• 3:46
  You
• 3:46
  got
• 3:46
  the
• 3:46
  net
• 3:47
  operating
• 3:47
  income
• 3:48
  and
• 3:48
  you
• 3:48
  got
• 3:48
  the
• 3:48
  cap
• 3:48
  rate.
• 3:49
  So
• 3:49
  the
• 3:50
  net
• 3:50
  operating
• 3:50
  income
• 3:50
  is
• 3:51
  gonna
• 3:51
  be
• 3:51
  driven
• 3:52
  by
• 3:52
  the
• 3:52
  individual
• 3:52
  property
• 3:53
  you're
• 3:53
  looking
• 3:53
  at.
• 3:54
  The
• 3:54
  cap
• 3:54
  rate's
• 3:54
  gonna
• 3:54
  be
• 3:55
  driven
• 3:55
  by
• 3:55
  the
• 3:55
  area.
• 3:56
  So
• 3:57
  no
• 3:57
  one
• 3:57
  property
• 3:57
  is
• 3:58
  gonna
• 3:58
  have
• 3:59
  the
• 3:59
  ability
• 3:59
  to
• 4:00
  control
• 4:00
  the
• 4:00
  cap
• 4:00
  rate
• 4:01
  eventually.
• 4:02
  That's
• 4:02
  my
• 4:02
  goal.
• 4:02
  But
• 4:02
  you'd
• 4:03
  have
• 4:03
  to
• 4:03
  really
• 4:03
  have
• 4:03
  a
• 4:03
  lot
• 4:03
  of
• 4:03
  money
• 4:04
  to
• 4:04
  buy
• 4:04
  a
• 4:04
  whole
• 4:04
  area
• 4:04
  to
• 4:05
  do
• 4:05
  that.
• 4:05
  Most
• 4:05
  people
• 4:06
  don't
• 4:06
  have
• 4:06
  that
• 4:06
  type
• 4:06
  of
• 4:06
  cloud.
• 4:07
  Right.
• 4:07
  And
• 4:08
  I
• 4:08
  do
• 4:08
  think
• 4:08
  that
• 4:08
  cap
• 4:09
  rate
• 4:09
  is,
• 4:09
  it's
• 4:09
  something
• 4:10
  that
• 4:10
  you
• 4:11
  look
• 4:11
  at
• 4:11
  for
• 4:11
  sure.
• 4:12
  In
• 4:12
  my
• 4:12
  experience,
• 4:13
  you
• 4:13
  get
• 4:14
  in
• 4:14
  there
• 4:14
  and
• 4:14
  you
• 4:15
  truly
• 4:15
  start
• 4:15
  to
• 4:15
  do
• 4:16
  underwriting
• 4:16
  at
• 4:16
  a
• 4:16
  deeper
• 4:17
  level
• 4:17
  after
• 4:17
  you've
• 4:17
  gotten
• 4:17
  under
• 4:18
  contract
• 4:18
  on
• 4:18
  the
• 4:18
  asset
• 4:19
  or
• 4:19
  you're
• 4:19
  in
• 4:19
  a
• 4:19
  letter
• 4:20
  of
• 4:20
  intent,
• 4:20
  period.
• 4:21
  And
• 4:21
  so
• 4:21
  within
• 4:22
  that,
• 4:22
  I
• 4:22
  think
• 4:22
  sometimes
• 4:22
  you'll
• 4:23
  find
• 4:23
  the
• 4:23
  cap
• 4:23
  rate
• 4:23
  is
• 4:24
  misrepresented
• 4:25
  and
• 4:25
  sometimes
• 4:25
  it's
• 4:25
  better
• 4:26
  than
• 4:26
  what
• 4:26
  they're
• 4:27
  representing
• 4:27
  because
• 4:28
  there
• 4:28
  was
• 4:28
  some
• 4:28
  value
• 4:28
  add
• 4:29
  opportunity
• 4:29
  that
• 4:29
  they
• 4:29
  didn't
• 4:30
  see
• 4:30
  or
• 4:30
  we're
• 4:31
  just
• 4:31
  neglecting
• 4:31
  and
• 4:31
  overlooking.
• 4:32
  And
• 4:32
  sometimes
• 4:33
  it's
• 4:33
  not
• 4:33
  as
• 4:33
  good
• 4:33
  as
• 4:33
  their
• 4:34
  advertising.
• 4:34
  So
• 4:35
  cap
• 4:35
  rate
• 4:35
  is
• 4:35
  something
• 4:35
  to
• 4:36
  just
• 4:36
  be
• 4:36
  taken
• 4:36
  at
• 4:36
  face
• 4:37
  value.
• 4:37
  But
• 4:37
  it
• 4:37
  is
• 4:38
  a
• 4:38
  really
• 4:38
  good
• 4:38
  metric
• 4:39
  I
• 4:39
  think,
• 4:39
  that
• 4:39
  we
• 4:39
  use
• 4:40
  to
• 4:40
  help
• 4:40
  determine
• 4:41
  quickly
• 4:42
  if
• 4:42
  something
• 4:42
  is
• 4:42
  worth
• 4:43
  looking
• 4:43
  into.
• 4:43
  Yeah.
• 4:44
  And
• 4:44
  what
• 4:44
  I
• 4:44
  would
• 4:44
  also
• 4:45
  say
• 4:45
  is
• 4:45
  that
• 4:45
  different
• 4:46
  people
• 4:46
  look
• 4:46
  at
• 4:46
  cap
• 4:46
  rates
• 4:47
  differently.
• 4:47
  So
• 4:47
  you'll
• 4:47
  probably
• 4:48
  hear
• 4:48
  that
• 4:48
  throughout
• 4:48
  the
• 4:49
  industry,
• 4:49
  some
• 4:49
  people
• 4:50
  use
• 4:50
  it
• 4:50
  as
• 4:50
  a
• 4:50
  return
• 4:50
  metric.
• 4:51
  To
• 4:51
  me
• 4:51
  personally,
• 4:52
  I
• 4:52
  don't.
• 4:53
  Now,
• 4:53
  could
• 4:53
  it
• 4:53
  be
• 4:53
  a
• 4:54
  return
• 4:54
  metric?
• 4:54
  Yes,
• 4:55
  if
• 4:55
  you're
• 4:55
  buying
• 4:55
  all
• 4:56
  cash.
• 4:56
  Most
• 4:57
  people
• 4:57
  aren't
• 4:57
  buying
• 4:57
  commercial
• 4:58
  properties
• 4:58
  all
• 4:58
  cash.
• 4:59
  Some
• 4:59
  are,
• 4:59
  most
• 4:59
  aren't.
• 5:00
  But
• 5:00
  if
• 5:00
  you're
• 5:00
  buying
• 5:00
  all
• 5:00
  cash,
• 5:01
  then
• 5:01
  it's
• 5:01
  absolutely
• 5:02
  a
• 5:02
  return
• 5:02
  metric.
• 5:02
  If
• 5:03
  you're
• 5:03
  not,
• 5:03
  it's
• 5:04
  probably
• 5:04
  more
• 5:04
  of
• 5:04
  a
• 5:04
  barometer
• 5:05
  than
• 5:05
  is
• 5:05
  a
• 5:05
  return
• 5:06
  metric.
• 5:06
  But
• 5:06
  what
• 5:06
  I
• 5:06
  usually
• 5:07
  use,
• 5:07
  it
• 5:07
  is
• 5:07
  a
• 5:08
  reflection
• 5:08
  of
• 5:08
  buyer
• 5:09
  demand.
• 5:09
  Right.
• 5:09
  Because
• 5:09
  you're
• 5:09
  going
• 5:09
  to
• 5:10
  see
• 5:10
  how
• 5:10
  interested
• 5:11
  are
• 5:11
  buyers
• 5:11
  in
• 5:11
  an
• 5:12
  area
• 5:12
  by
• 5:12
  what
• 5:13
  that
• 5:13
  cap
• 5:13
  rate
• 5:13
  is.
• 5:14
  So
• 5:14
  cap
• 5:15
  rates
• 5:15
  and
• 5:15
  price
• 5:15
  have
• 5:15
  inverse
• 5:16
  relationships.
• 5:16
  So
• 5:17
  cap
• 5:17
  rates
• 5:17
  go
• 5:17
  up,
• 5:18
  price
• 5:18
  goes
• 5:18
  down,
• 5:18
  cap
• 5:19
  rates
• 5:19
  go
• 5:19
  down,
• 5:19
  price
• 5:20
  goes
• 5:20
  up.
• 5:20
  So
• 5:21
  the
• 5:21
  lower
• 5:21
  your
• 5:21
  cap
• 5:22
  rate,
• 5:22
  the
• 5:22
  more
• 5:22
  demand
• 5:23
  you
• 5:23
  have
• 5:23
  for
• 5:23
  a
• 5:23
  particular
• 5:24
  asset
• 5:24
  type
• 5:25
  or
• 5:25
  product
• 5:25
  type
• 5:25
  in
• 5:25
  the
• 5:25
  area.
• 5:26
  Yeah,
• 5:26
  absolutely.
• 5:27
  And
• 5:27
  then
• 5:28
  your
• 5:28
  debt
• 5:29
  service
• 5:29
  coverage
• 5:29
  ratio.
• 5:30
  So
• 5:30
  as
• 5:31
  we're
• 5:31
  looking
• 5:31
  at
• 5:31
  different,
• 5:32
  I
• 5:32
  guess,
• 5:32
  expenses,
• 5:33
  you
• 5:33
  know,
• 5:33
  what
• 5:34
  is
• 5:34
  the
• 5:34
  mortgage
• 5:35
  payment
• 5:35
  on
• 5:35
  this
• 5:36
  going
• 5:36
  to
• 5:36
  cost
• 5:36
  if
• 5:36
  you're
• 5:36
  not
• 5:37
  doing
• 5:37
  all
• 5:37
  cash?
• 5:38
  And
• 5:38
  knowing
• 5:38
  what
• 5:39
  that
• 5:39
  debt
• 5:39
  service
• 5:39
  coverage
• 5:40
  ratio
• 5:40
  is
• 5:40
  is
• 5:41
  extremely
• 5:41
  important
• 5:41
  too.
• 5:42
  What
• 5:42
  is
• 5:42
  the
• 5:42
  how
• 5:42
  much
• 5:43
  income
• 5:43
  is
• 5:43
  the
• 5:43
  property
• 5:44
  bringing
• 5:44
  in
• 5:44
  versus
• 5:45
  what
• 5:45
  the
• 5:45
  mortgage
• 5:46
  payment
• 5:46
  is
• 5:46
  going
• 5:46
  to
• 5:46
  be?
• 5:47
  Right.
• 5:47
  And
• 5:47
  I
• 5:48
  would
• 5:48
  tell
• 5:48
  you
• 5:48
  that
• 5:48
  that
• 5:48
  one
• 5:49
  there.
• 5:49
  But
• 5:49
  like,
• 5:49
  I
• 5:49
  don't
• 5:50
  consider
• 5:50
  that
• 5:50
  necessarily
• 5:51
  a
• 5:51
  return
• 5:52
  metric.
• 5:52
  I
• 5:52
  mean,
• 5:52
  that's
• 5:52
  not
• 5:53
  going
• 5:53
  to
• 5:53
  put
• 5:53
  money
• 5:53
  in
• 5:54
  your
• 5:54
  pocket,
• 5:54
  but
• 5:55
  it's
• 5:55
  probably
• 5:55
  the
• 5:56
  most
• 5:56
  important
• 5:56
  metric
• 5:56
  because
• 5:57
  it's
• 5:57
  going
• 5:57
  to
• 5:57
  tell
• 5:57
  you
• 5:57
  how
• 5:57
  safe
• 5:58
  the
• 5:58
  deal
• 5:58
  is.
• 5:58
  Because
• 5:59
  if
• 5:59
  you
• 5:59
  can't
• 6:00
  pay
• 6:00
  the
• 6:00
  mortgage,
• 6:00
  you're
• 6:00
  going
• 6:00
  to
• 6:00
  have
• 6:01
  some
• 6:01
  serious
• 6:01
  trouble
• 6:01
  and
• 6:01
  you'll
• 6:02
  probably
• 6:02
  be
• 6:02
  losing
• 6:02
  sleep.
• 6:03
  Yeah,
• 6:03
  absolutely.
• 6:04
  And
• 6:04
  I
• 6:05
  don't
• 6:05
  know
• 6:05
  about
• 6:05
  you,
• 6:05
  I
• 6:06
  don't
• 6:06
  know
• 6:06
  your
• 6:06
  experiences,
• 6:06
  but
• 6:07
  I've
• 6:07
  seen
• 6:07
  like
• 6:08
  the
• 6:08
  debt
• 6:08
  service
• 6:08
  coverage
• 6:09
  ratio
• 6:09
  that
• 6:09
  different
• 6:10
  lenders
• 6:10
  are
• 6:10
  looking
• 6:10
  for.
• 6:11
  It's
• 6:11
  fluctuated
• 6:12
  depending
• 6:12
  on
• 6:13
  the
• 6:13
  market
• 6:13
  that
• 6:14
  we're
• 6:14
  in.
• 6:14
  So
• 6:15
  I
• 6:15
  know,
• 6:15
  you
• 6:15
  know,
• 6:16
  when
• 6:16
  the
• 6:16
  market
• 6:16
  first
• 6:17
  locked
• 6:17
  up,
• 6:17
  it
• 6:17
  seemed
• 6:18
  like
• 6:18
  they
• 6:18
  were
• 6:18
  willing
• 6:18
  to
• 6:19
  do
• 6:19
  it.
• 6:19
  Lower
• 6:20
  debt
• 6:20
  service
• 6:20
  coverage
• 6:21
  ratio,
• 6:22
  and
• 6:22
  they've
• 6:22
  now
• 6:22
  gone
• 6:23
  back
• 6:23
  up.
• 6:23
  Like
• 6:23
  I
• 6:23
  was
• 6:24
  seeing
• 6:24
  0.8
• 6:25
  at
• 6:25
  one
• 6:25
  point
• 6:26
  and
• 6:26
  I
• 6:26
  was
• 6:26
  like,
• 6:26
  wait
• 6:27
  a
• 6:27
  minute,
• 6:27
  what
• 6:27
  are
• 6:27
  you
• 6:27
  talking
• 6:27
  about,
• 6:28
  lender?
• 6:28
  And
• 6:28
  so
• 6:29
  now,
• 6:29
  you
• 6:29
  know,
• 6:29
  I'm
• 6:29
  seeing
• 6:30
  again
• 6:30
  like
• 6:30
  1.2,
• 6:31
  1.3.
• 6:32
  What
• 6:32
  do
• 6:33
  you
• 6:33
  see,
• 6:33
  Charles?
• 6:33
  What's
• 6:33
  your
• 6:34
  experience
• 6:34
  with
• 6:34
  that?
• 6:35
  So
• 6:35
  most
• 6:35
  conventional
• 6:36
  lenders
• 6:36
  usually
• 6:37
  want
• 6:37
  a
• 6:37
  minimum
• 6:37
  1.2,
• 6:38
  1.3.
• 6:39
  I
• 6:39
  would
• 6:39
  tell
• 6:39
  you
• 6:40
  even
• 6:40
  that's
• 6:40
  on
• 6:40
  the
• 6:40
  low
• 6:40
  side
• 6:41
  because
• 6:41
  the
• 6:41
  problem
• 6:41
  is
• 6:41
  you're
• 6:41
  only
• 6:42
  three
• 6:42
  bad
• 6:42
  months
• 6:42
  away
• 6:43
  from
• 6:43
  a
• 6:44
  foreclosure
• 6:44
  at
• 6:44
  that
• 6:45
  point.
• 6:45
  Right.
• 6:45
  So
• 6:46
  that
• 6:46
  doesn't
• 6:46
  give
• 6:46
  you
• 6:46
  a
• 6:46
  lot
• 6:46
  of
• 6:46
  wiggle
• 6:47
  room.
• 6:47
  But
• 6:47
  conventional
• 6:48
  lens
• 6:48
  will
• 6:48
  be
• 6:48
  in
• 6:48
  the
• 6:48
  1.2
• 6:49
  to
• 6:49
  1.3
• 6:50
  range.
• 6:50
  If
• 6:50
  you're
• 6:50
  looking
• 6:51
  at
• 6:51
  deals
• 6:51
  that
• 6:51
  are
• 6:52
  challenged
• 6:52
  and
• 6:52
  they're
• 6:53
  going
• 6:53
  to
• 6:53
  need
• 6:53
  some
• 6:53
  work,
• 6:53
  you
• 6:54
  will
• 6:54
  need
• 6:54
  different
• 6:54
  financing
• 6:55
  sources.
• 6:55
  So
• 6:55
  a
• 6:55
  lot
• 6:56
  of
• 6:56
  times
• 6:56
  you'll
• 6:57
  dive
• 6:57
  into
• 6:57
  the
• 6:57
  bridge
• 6:57
  market
• 6:58
  or
• 6:58
  the
• 6:58
  hard
• 6:58
  money
• 6:59
  market.
• 6:59
  And
• 7:00
  when
• 7:00
  you
• 7:00
  get
• 7:00
  into
• 7:00
  those,
• 7:01
  they
• 7:01
  will
• 7:01
  take
• 7:01
  some
• 7:01
  deals
• 7:02
  that
• 7:02
  are
• 7:02
  negative
• 7:03
  DSCRs,
• 7:03
  but
• 7:04
  they're
• 7:04
  going
• 7:04
  to
• 7:04
  typically
• 7:05
  reserve
• 7:05
  enough
• 7:05
  money
• 7:05
  upfront.
• 7:06
  And
• 7:06
  that's
• 7:06
  something
• 7:07
  else
• 7:07
  you
• 7:07
  got
• 7:07
  to
• 7:07
  build
• 7:07
  into
• 7:07
  the
• 7:07
  underwriting
• 7:08
  to
• 7:08
  make
• 7:08
  sure
• 7:08
  you
• 7:08
  got
• 7:08
  that
• 7:09
  factored
• 7:09
  in.
• 7:09
  Otherwise
• 7:10
  you're
• 7:10
  going
• 7:10
  to
• 7:10
  be
• 7:11
  very
• 7:11
  surprised
• 7:11
  at
• 7:11
  closing
• 7:12
  when
• 7:12
  you
• 7:12
  realize
• 7:12
  you're
• 7:13
  quite
• 7:13
  a
• 7:13
  bit
• 7:13
  short.
• 7:13
  Yeah,
• 7:14
  absolutely.
• 7:15
  And
• 7:15
  I
• 7:15
  guess
• 7:16
  what
• 7:16
  are
• 7:16
  some
• 7:16
  of
• 7:16
  the
• 7:17
  other
• 7:17
  important
• 7:17
  metrics
• 7:17
  that
• 7:18
  you
• 7:18
  would.
• 7:18
  Say
• 7:18
  cash
• 7:19
  on
• 7:19
  cash
• 7:19
  return.
• 7:19
  That's
• 7:20
  a
• 7:20
  big
• 7:20
  one.
• 7:20
  So
• 7:21
  that's
• 7:21
  going
• 7:21
  to
• 7:21
  be
• 7:21
  how
• 7:21
  much
• 7:22
  of
• 7:22
  a
• 7:22
  return
• 7:22
  they're
• 7:23
  getting
• 7:23
  from
• 7:23
  cash
• 7:23
  flow.
• 7:24
  The
• 7:24
  larger
• 7:25
  the
• 7:25
  property,
• 7:25
  the
• 7:26
  lower
• 7:26
  that
• 7:26
  number
• 7:26
  typically
• 7:27
  goes.
• 7:27
  So
• 7:28
  if
• 7:28
  you're
• 7:28
  looking
• 7:28
  at
• 7:28
  a
• 7:28
  10
• 7:28
  or
• 7:29
  a
• 7:29
  20
• 7:29
  unit
• 7:29
  deal,
• 7:30
  you'll
• 7:30
  probably
• 7:31
  be
• 7:31
  able
• 7:31
  to
• 7:31
  find
• 7:31
  some
• 7:31
  deals
• 7:32
  with
• 7:32
  Double
• 7:32
  digit
• 7:32
  cash
• 7:32
  on
• 7:33
  cash
• 7:33
  returns.
• 7:33
  If
• 7:34
  you're
• 7:34
  looking
• 7:34
  at
• 7:34
  a
• 7:34
  200
• 7:34
  unit
• 7:35
  apartment
• 7:35
  building,
• 7:35
  you're
• 7:35
  probably
• 7:36
  finding
• 7:36
  6,
• 7:36
  7,
• 7:37
  8%
• 7:37
  because
• 7:37
  you're
• 7:37
  not
• 7:38
  getting
• 7:38
  most
• 7:38
  times
• 7:39
  you're
• 7:39
  not
• 7:39
  getting
• 7:39
  as
• 7:39
  good
• 7:39
  of
• 7:39
  a
• 7:40
  deal
• 7:40
  on
• 7:40
  a
• 7:40
  larger
• 7:40
  multifamily
• 7:41
  property
• 7:41
  as
• 7:41
  you
• 7:42
  are
• 7:42
  a
• 7:42
  smaller
• 7:42
  one.
• 7:43
  But
• 7:43
  the
• 7:43
  benefit
• 7:44
  is
• 7:44
  that
• 7:44
  you're
• 7:44
  getting
• 7:44
  scale
• 7:45
  and
• 7:46
  there's
• 7:46
  advantages
• 7:47
  with
• 7:47
  that
• 7:47
  scale.
• 7:47
  Yeah,
• 7:48
  absolutely.
• 7:49
  Cash
• 7:49
  on
• 7:49
  cash
• 7:50
  I
• 7:50
  think
• 7:50
  is
• 7:50
  one
• 7:50
  of
• 7:50
  the
• 7:50
  most
• 7:51
  important
• 7:51
  metrics
• 7:52
  that
• 7:52
  my
• 7:52
  investors
• 7:52
  are
• 7:53
  typically
• 7:53
  looking
• 7:53
  for.
• 7:54
  And
• 7:54
  then
• 7:55
  the
• 7:55
  internal
• 7:55
  rate
• 7:56
  of
• 7:56
  return
• 7:56
  would
• 7:56
  be
• 7:56
  another
• 7:57
  one.
• 7:57
  Yep,
• 7:58
  internal
• 7:58
  rate
• 7:58
  of
• 7:58
  return
• 7:58
  is
• 7:59
  definitely
• 7:59
  an
• 7:59
  important
• 7:59
  one.
• 8:00
  That's
• 8:01
  probably
• 8:01
  the
• 8:01
  end
• 8:01
  all
• 8:01
  be
• 8:01
  all
• 8:02
  for
• 8:02
  most
• 8:02
  investors
• 8:03
  if
• 8:03
  they're
• 8:03
  eventually
• 8:04
  looking
• 8:04
  to
• 8:04
  exit.
• 8:04
  If
• 8:05
  they're
• 8:05
  not,
• 8:05
  then
• 8:05
  the
• 8:05
  cash
• 8:06
  on
• 8:06
  cash
• 8:06
  return
• 8:06
  takes
• 8:07
  precedence.
• 8:07
  But
• 8:07
  it's
• 8:08
  interesting
• 8:08
  how
• 8:08
  market
• 8:09
  cycles
• 8:09
  kind
• 8:09
  of
• 8:09
  shift
• 8:10
  that
• 8:10
  demand
• 8:11
  as
• 8:11
  well.
• 8:11
  I
• 8:11
  felt
• 8:11
  like
• 8:11
  in
• 8:12
  2022
• 8:12
  most
• 8:13
  investors
• 8:13
  weren't
• 8:14
  focusing
• 8:14
  on
• 8:14
  cash
• 8:14
  on
• 8:14
  cash
• 8:15
  return.
• 8:15
  They
• 8:15
  should
• 8:15
  have
• 8:15
  been,
• 8:16
  but
• 8:16
  they
• 8:16
  weren't.
• 8:16
  And
• 8:17
  now
• 8:17
  a
• 8:17
  lot
• 8:17
  of
• 8:17
  them
• 8:17
  have
• 8:18
  probably
• 8:18
  realized
• 8:19
  that
• 8:19
  they
• 8:19
  need
• 8:19
  to
• 8:19
  be
• 8:20
  focusing
• 8:20
  on
• 8:20
  that
• 8:20
  because
• 8:21
  none
• 8:21
  of
• 8:21
  us
• 8:21
  can
• 8:21
  truly
• 8:22
  predict
• 8:22
  the
• 8:22
  future.
• 8:23
  Right?
• 8:23
  Absolutely.
• 8:24
  All
• 8:24
  very,
• 8:25
  very
• 8:25
  important
• 8:25
  things
• 8:26
  to
• 8:26
  look
• 8:26
  at.
• 8:26
  And
• 8:26
  then
• 8:27
  what
• 8:27
  else?
• 8:27
  I
• 8:27
  guess
• 8:28
  as
• 8:28
  we
• 8:28
  are
• 8:28
  like
• 8:28
  we're
• 8:29
  analyzing
• 8:29
  the
• 8:30
  income
• 8:30
  of
• 8:30
  the
• 8:30
  property
• 8:31
  would
• 8:31
  be
• 8:31
  another
• 8:31
  portion
• 8:32
  after
• 8:32
  looking
• 8:32
  at
• 8:32
  those
• 8:33
  data
• 8:33
  points.
• 8:34
  And
• 8:34
  again,
• 8:35
  I
• 8:35
  know
• 8:35
  I
• 8:35
  keep
• 8:36
  saying
• 8:36
  this
• 8:36
  but
• 8:36
  having
• 8:36
  a
• 8:36
  good
• 8:37
  property
• 8:37
  manager
• 8:37
  is
• 8:37
  so
• 8:38
  important
• 8:38
  as
• 8:38
  you're
• 8:38
  looking
• 8:39
  at
• 8:39
  the
• 8:39
  like
• 8:39
  what
• 8:39
  is
• 8:39
  the
• 8:40
  rental
• 8:40
  income
• 8:40
  for
• 8:40
  the
• 8:40
  area?
• 8:41
  What
• 8:41
  should
• 8:41
  you
• 8:41
  be
• 8:41
  able
• 8:41
  to
• 8:42
  anticipate
• 8:42
  and
• 8:42
  what
• 8:43
  else
• 8:43
  are
• 8:43
  you
• 8:43
  looking
• 8:43
  at
• 8:43
  as
• 8:43
  far
• 8:44
  as
• 8:44
  like
• 8:44
  value
• 8:44
  add
• 8:45
  opportunities?
• 8:45
  Charles?
• 8:46
  I
• 8:46
  guess
• 8:46
  like
• 8:46
  Laundromats
• 8:47
  is
• 8:47
  something
• 8:48
  I
• 8:48
  see
• 8:48
  quite
• 8:48
  often,
• 8:49
  you
• 8:49
  know,
• 8:49
  like
• 8:49
  the
• 8:49
  laundry
• 8:50
  machines
• 8:50
  is
• 8:51
  additional
• 8:51
  revenue
• 8:52
  opportunity.
• 8:52
  What
• 8:52
  do
• 8:53
  you
• 8:53
  see?
• 8:53
  You
• 8:53
  can
• 8:53
  see
• 8:54
  a
• 8:54
  lot
• 8:54
  of
• 8:54
  things
• 8:54
  and
• 8:54
  I
• 8:55
  think
• 8:55
  the
• 8:55
  nicer
• 8:56
  the
• 8:56
  property,
• 8:57
  the
• 8:57
  more
• 8:57
  things
• 8:57
  you
• 8:57
  can
• 8:58
  charge
• 8:58
  for.
• 8:58
  My
• 8:59
  approach
• 8:59
  might
• 8:59
  be
• 8:59
  a
• 8:59
  little
• 9:00
  different
• 9:00
  because
• 9:00
  I
• 9:00
  don't
• 9:01
  necessarily
• 9:01
  like
• 9:02
  factoring
• 9:02
  in
• 9:03
  other
• 9:03
  income
• 9:03
  is
• 9:03
  things
• 9:03
  that
• 9:04
  I'm
• 9:04
  going
• 9:04
  to
• 9:04
  increase.
• 9:04
  I
• 9:04
  always
• 9:05
  like
• 9:05
  that
• 9:05
  to
• 9:05
  be
• 9:05
  a
• 9:05
  bonus
• 9:06
  versus
• 9:06
  something
• 9:06
  I'm
• 9:06
  counting
• 9:07
  on.
• 9:07
  But
• 9:08
  you
• 9:08
  know,
• 9:08
  you've
• 9:08
  seen
• 9:09
  some
• 9:09
  people
• 9:09
  get
• 9:09
  very
• 9:09
  creative
• 9:10
  the
• 9:10
  last
• 9:10
  couple
• 9:10
  of
• 9:10
  years.
• 9:10
  I
• 9:10
  mean
• 9:11
  you
• 9:11
  definitely
• 9:11
  see
• 9:11
  laundry
• 9:12
  income,
• 9:12
  you
• 9:12
  see
• 9:12
  parking
• 9:13
  income.
• 9:13
  Sometimes
• 9:13
  it
• 9:13
  can
• 9:14
  be
• 9:14
  for
• 9:14
  properties
• 9:15
  that
• 9:15
  have
• 9:15
  a
• 9:15
  garage,
• 9:15
  sometimes
• 9:16
  it
• 9:16
  can
• 9:16
  be
• 9:16
  for
• 9:16
  covered
• 9:17
  parking
• 9:17
  on
• 9:17
  properties
• 9:18
  that
• 9:18
  don't.
• 9:18
  You
• 9:18
  can
• 9:18
  see
• 9:19
  people
• 9:19
  charge
• 9:19
  for
• 9:19
  pest
• 9:20
  control
• 9:20
  trash
• 9:21
  removal.
• 9:21
  One
• 9:22
  thing
• 9:22
  that's
• 9:22
  become
• 9:22
  very
• 9:23
  popular
• 9:23
  in
• 9:23
  the
• 9:23
  multifamily
• 9:24
  space
• 9:24
  in
• 9:24
  the
• 9:24
  last
• 9:25
  decade
• 9:25
  is
• 9:25
  valet
• 9:25
  trash.
• 9:26
  You
• 9:26
  know
• 9:26
  when
• 9:26
  you
• 9:26
  think
• 9:26
  about
• 9:27
  it,
• 9:27
  what
• 9:27
  is
• 9:27
  valet
• 9:28
  trash?
• 9:28
  Is
• 9:28
  somebody
• 9:28
  coming
• 9:29
  to
• 9:29
  you
• 9:29
  doing
• 9:29
  to
• 9:29
  Throw
• 9:29
  the
• 9:29
  garbage
• 9:30
  out.
• 9:30
  I
• 9:30
  always
• 9:30
  say,
• 9:30
  boy,
• 9:31
  but
• 9:31
  when
• 9:31
  did
• 9:31
  our
• 9:31
  society
• 9:32
  start
• 9:32
  needing
• 9:32
  this?
• 9:33
  But
• 9:33
  it's
• 9:33
  something
• 9:33
  you
• 9:33
  want
• 9:34
  now,
• 9:34
  and
• 9:35
  they'll
• 9:35
  pay
• 9:36
  for
• 9:36
  it.
• 9:36
  They'll
• 9:36
  pay
• 9:36
  a
• 9:37
  lot
• 9:37
  for
• 9:37
  it.
• 9:37
  Surprisingly,
• 9:38
  absolutely.
• 9:38
  Other
• 9:39
  things
• 9:39
  can
• 9:39
  be
• 9:39
  cable
• 9:40
  contracts.
• 9:40
  Some
• 9:41
  properties
• 9:41
  have
• 9:41
  cable
• 9:42
  contracts
• 9:42
  that
• 9:42
  they're
• 9:42
  gonna
• 9:42
  go
• 9:42
  in
• 9:42
  there
• 9:43
  and
• 9:43
  they're
• 9:43
  gonna
• 9:43
  upcharge
• 9:44
  the
• 9:44
  tenants
• 9:44
  on.
• 9:44
  They
• 9:44
  might
• 9:45
  charge
• 9:45
  them
• 9:45
  for
• 9:45
  renters
• 9:45
  insurance.
• 9:46
  They
• 9:46
  might
• 9:46
  charge
• 9:46
  them
• 9:46
  for
• 9:47
  a
• 9:47
  whole
• 9:47
  plethora
• 9:48
  of
• 9:48
  different
• 9:48
  things
• 9:49
  that
• 9:49
  could
• 9:49
  potentially
• 9:50
  be
• 9:50
  moneymakers.
• 9:51
  And
• 9:51
  those
• 9:51
  are
• 9:51
  things
• 9:51
  that
• 9:51
  you
• 9:52
  could
• 9:52
  add
• 9:52
  additional
• 9:53
  revenue
• 9:53
  streams
• 9:54
  into
• 9:54
  the
• 9:54
  property
• 9:54
  from.
• 9:55
  Very
• 9:55
  neat.
• 9:56
  And
• 9:56
  I
• 9:56
  love
• 9:56
  how
• 9:56
  you
• 9:56
  calculate
• 9:57
  it
• 9:57
  as
• 9:57
  bonuses.
• 9:58
  That's
• 9:59
  very,
• 9:59
  very
• 9:59
  wise
• 10:00
  of
• 10:00
  you
• 10:00
  to
• 10:00
  do
• 10:00
  that.
• 10:01
  The
• 10:01
  reason
• 10:01
  I
• 10:01
  do
• 10:01
  that
• 10:02
  is
• 10:02
  because
• 10:02
  I
• 10:03
  don
• 10:03
  a
• 10:03
  judge
• 10:03
  in
• 10:03
  the
• 10:04
  country
• 10:04
  that's
• 10:04
  going
• 10:04
  to
• 10:04
  give
• 10:05
  a
• 10:05
  judgment
• 10:05
  for
• 10:05
  those
• 10:05
  things.
• 10:06
  They
• 10:06
  would
• 10:06
  give
• 10:06
  a
• 10:06
  judgment
• 10:06
  for
• 10:07
  rent,
• 10:07
  but
• 10:07
  nobody's
• 10:08
  going
• 10:08
  to
• 10:08
  give
• 10:08
  you
• 10:08
  a
• 10:08
  judgment
• 10:08
  for
• 10:09
  those
• 10:09
  things.
• 10:09
  So
• 10:09
  I
• 10:09
  never
• 10:10
  like
• 10:10
  to
• 10:10
  count
• 10:10
  that.
• 10:10
  I'm
• 10:11
  going
• 10:11
  to
• 10:11
  increase
• 10:11
  those.
• 10:12
  Very
• 10:12
  good
• 10:13
  points.
• 10:13
  Wow,
• 10:14
  very
• 10:14
  interesting.
• 10:15
  So
• 10:15
  what
• 10:15
  else?
• 10:16
  As
• 10:16
  we're
• 10:16
  going
• 10:16
  through
• 10:17
  the
• 10:17
  journey
• 10:17
  of.
• 10:17
  Underwriting,
• 10:18
  then
• 10:18
  you
• 10:18
  got
• 10:18
  the
• 10:18
  opposite
• 10:19
  side,
• 10:19
  the
• 10:19
  expenses,
• 10:20
  Right.
• 10:20
  So
• 10:20
  you
• 10:20
  got
• 10:21
  to
• 10:21
  break
• 10:21
  down
• 10:21
  all
• 10:21
  your
• 10:22
  expenses.
• 10:23
  And
• 10:23
  one
• 10:24
  thing
• 10:24
  that
• 10:24
  I
• 10:24
  think
• 10:25
  people
• 10:25
  probably
• 10:25
  make
• 10:26
  a
• 10:26
  mistake
• 10:26
  on
• 10:27
  is
• 10:28
  sometimes
• 10:28
  they
• 10:28
  only
• 10:29
  account
• 10:29
  for
• 10:29
  what
• 10:29
  they
• 10:30
  see,
• 10:30
  which
• 10:30
  is
• 10:30
  a
• 10:30
  good
• 10:31
  starting
• 10:31
  point.
• 10:32
  So
• 10:32
  you
• 10:32
  have
• 10:33
  two
• 10:33
  types
• 10:33
  of
• 10:33
  expenses
• 10:34
  and
• 10:34
  two
• 10:34
  types
• 10:34
  of
• 10:35
  income.
• 10:35
  Also
• 10:35
  you
• 10:35
  have
• 10:35
  operating
• 10:36
  income
• 10:36
  and
• 10:37
  expenses
• 10:37
  and
• 10:37
  non
• 10:38
  operating.
• 10:38
  What's
• 10:38
  the
• 10:39
  difference?
• 10:39
  One
• 10:39
  goes
• 10:40
  above
• 10:40
  the
• 10:40
  line,
• 10:40
  one
• 10:41
  goes
• 10:41
  below
• 10:41
  it.
• 10:41
  And
• 10:42
  if
• 10:42
  you're
• 10:42
  trying
• 10:42
  to
• 10:42
  sell
• 10:42
  a
• 10:43
  property,
• 10:43
  where
• 10:43
  do
• 10:44
  you
• 10:44
  find
• 10:44
  that
• 10:44
  most
• 10:44
  people
• 10:45
  are
• 10:45
  trying
• 10:45
  to
• 10:45
  move
• 10:45
  things,
• 10:45
  Erica,
• 10:46
  above
• 10:46
  the
• 10:46
  line?
• 10:47
  Well,
• 10:47
  if
• 10:47
  you're
• 10:48
  selling
• 10:48
  it
• 10:48
  below
• 10:48
  the
• 10:48
  line
• 10:49
  because
• 10:50
  you
• 10:50
  want
• 10:50
  to
• 10:50
  make
• 10:50
  the
• 10:50
  value
• 10:51
  as
• 10:51
  much
• 10:51
  as
• 10:51
  possible,
• 10:51
  but
• 10:52
  a
• 10:52
  smart
• 10:52
  buyer
• 10:53
  needs
• 10:53
  to
• 10:53
  look
• 10:53
  at
• 10:53
  that
• 10:54
  and
• 10:54
  figure
• 10:54
  it
• 10:54
  out
• 10:54
  and
• 10:54
  say,
• 10:54
  okay,
• 10:55
  something's
• 10:55
  missing
• 10:56
  here.
• 10:56
  So
• 10:56
  what
• 10:56
  does
• 10:57
  that
• 10:57
  process
• 10:57
  look
• 10:57
  like
• 10:58
  for
• 10:58
  you?
• 10:58
  Well,
• 10:59
  what
• 10:59
  you
• 10:59
  want
• 10:59
  to
• 10:59
  do
• 10:59
  is
• 10:59
  you
• 10:59
  want
• 11:00
  to
• 11:00
  look
• 11:00
  at
• 11:00
  the
• 11:01
  numbers
• 11:01
  and
• 11:02
  a
• 11:02
  lot
• 11:02
  of
• 11:02
  times
• 11:02
  what
• 11:02
  you're
• 11:03
  doing,
• 11:03
  you
• 11:03
  know,
• 11:04
  similar
• 11:04
  to
• 11:04
  what
• 11:04
  Eric
• 11:04
  is
• 11:04
  saying,
• 11:05
  I
• 11:05
  very
• 11:05
  much
• 11:06
  recommend
• 11:06
  utilizing
• 11:07
  good
• 11:07
  property
• 11:07
  management
• 11:08
  who
• 11:08
  know
• 11:08
  the
• 11:08
  area
• 11:08
  well.
• 11:09
  One
• 11:09
  thing
• 11:09
  I'm
• 11:09
  going
• 11:09
  to
• 11:10
  say
• 11:10
  that's
• 11:10
  probably
• 11:10
  a
• 11:10
  little
• 11:11
  different
• 11:11
  than
• 11:11
  you
• 11:11
  hear
• 11:11
  many
• 11:12
  say.
• 11:12
  I
• 11:12
  hate
• 11:12
  the
• 11:13
  idea
• 11:13
  of
• 11:13
  using,
• 11:14
  you
• 11:14
  know,
• 11:14
  a
• 11:14
  certain
• 11:15
  percentage
• 11:16
  of
• 11:16
  the
• 11:16
  income
• 11:17
  as
• 11:17
  what
• 11:17
  your
• 11:17
  operating
• 11:18
  expenses
• 11:18
  should
• 11:18
  be.
• 11:19
  That's
• 11:19
  not
• 11:19
  a
• 11:19
  good.
• 11:19
  That's
• 11:20
  not
• 11:20
  a
• 11:20
  good
• 11:20
  result.
• 11:21
  It's
• 11:21
  a
• 11:21
  simple
• 11:21
  result,
• 11:22
  but
• 11:23
  it's
• 11:24
  not
• 11:24
  really
• 11:24
  great.
• 11:24
  And
• 11:25
  what's
• 11:25
  a
• 11:25
  more
• 11:25
  accurate
• 11:26
  metric
• 11:27
  is
• 11:27
  a
• 11:27
  per
• 11:28
  unit
• 11:28
  number.
• 11:28
  The
• 11:28
  problem
• 11:29
  with
• 11:29
  that
• 11:29
  is
• 11:29
  it's
• 11:29
  going
• 11:29
  to
• 11:29
  vary
• 11:30
  from
• 11:30
  area
• 11:30
  to
• 11:30
  area.
• 11:31
  So
• 11:31
  that's
• 11:31
  where
• 11:31
  it's
• 11:31
  important
• 11:32
  to
• 11:32
  know
• 11:32
  the
• 11:32
  markets
• 11:32
  you're
• 11:33
  looking
• 11:33
  at
• 11:33
  and
• 11:33
  know
• 11:33
  the
• 11:33
  numbers.
• 11:34
  And
• 11:34
  you
• 11:34
  need
• 11:34
  to
• 11:35
  start
• 11:35
  learning
• 11:35
  what
• 11:35
  things
• 11:35
  cost
• 11:36
  and
• 11:36
  you
• 11:36
  need
• 11:36
  to
• 11:36
  be
• 11:36
  able
• 11:36
  to
• 11:36
  build
• 11:37
  that
• 11:37
  into
• 11:37
  the
• 11:37
  underwriting.
• 11:38
  I
• 11:38
  know
• 11:39
  that
• 11:39
  the
• 11:39
  Southeast
• 11:39
  is
• 11:40
  generally
• 11:40
  going
• 11:40
  to
• 11:40
  have
• 11:40
  higher
• 11:41
  costs
• 11:41
  than
• 11:41
  the
• 11:41
  Midwest,
• 11:42
  but
• 11:43
  both
• 11:43
  are
• 11:43
  going
• 11:43
  to
• 11:43
  have
• 11:43
  lower
• 11:44
  costs
• 11:44
  than
• 11:44
  New
• 11:45
  York
• 11:45
  or
• 11:45
  California.
• 11:46
  So
• 11:46
  depending
• 11:46
  on
• 11:46
  the
• 11:47
  area
• 11:47
  you're
• 11:47
  looking
• 11:47
  in,
• 11:47
  you
• 11:47
  got
• 11:48
  to
• 11:48
  be
• 11:48
  really
• 11:48
  adjusting
• 11:49
  those
• 11:49
  costs
• 11:49
  to
• 11:50
  understand
• 11:50
  what's
• 11:51
  typical
• 11:51
  for
• 11:51
  that
• 11:51
  area.
• 11:52
  Another
• 11:52
  thing
• 11:52
  I
• 11:53
  would
• 11:53
  say,
• 11:53
  and
• 11:53
  this
• 11:54
  is
• 11:54
  probably
• 11:54
  a
• 11:54
  big
• 11:54
  one,
• 11:55
  Capex.
• 11:56
  So
• 11:56
  capex
• 11:57
  is
• 11:58
  generally
• 11:58
  put
• 11:58
  below
• 11:58
  the
• 11:59
  line.
• 11:59
  So
• 11:59
  it's
• 11:59
  not
• 11:59
  something
• 12:00
  you're
• 12:00
  going
• 12:00
  to
• 12:00
  see
• 12:01
  included
• 12:01
  in
• 12:02
  every
• 12:02
  set
• 12:02
  of
• 12:02
  financials.
• 12:03
  But
• 12:03
  you
• 12:03
  still
• 12:04
  need
• 12:04
  money
• 12:04
  to
• 12:05
  pay
• 12:05
  for
• 12:05
  that.
• 12:05
  Keep
• 12:05
  that
• 12:06
  in
• 12:06
  mind.
• 12:06
  If
• 12:06
  there's
• 12:07
  no
• 12:07
  money
• 12:07
  to
• 12:07
  pay
• 12:07
  for
• 12:07
  it,
• 12:08
  eventually
• 12:09
  you're
• 12:09
  either
• 12:09
  not
• 12:09
  doing
• 12:09
  the
• 12:10
  work
• 12:10
  or
• 12:10
  you
• 12:10
  have
• 12:10
  a
• 12:11
  contractor
• 12:11
  that's
• 12:11
  going
• 12:11
  to
• 12:11
  be
• 12:11
  placing
• 12:12
  a
• 12:12
  lien
• 12:12
  on
• 12:12
  the
• 12:12
  property.
• 12:13
  You
• 12:13
  don't
• 12:13
  want
• 12:13
  that.
• 12:14
  That's
• 12:14
  not
• 12:14
  good.
• 12:15
  Not
• 12:15
  good.
• 12:15
  Don't
• 12:16
  do
• 12:16
  that.
• 12:16
  Yeah,
• 12:17
  that's
• 12:17
  a
• 12:17
  red
• 12:17
  flag.
• 12:17
  So
• 12:18
  you
• 12:18
  got
• 12:18
  to
• 12:18
  budget
• 12:18
  for
• 12:19
  these
• 12:19
  things
• 12:19
  as
• 12:19
  best
• 12:19
  you
• 12:20
  can
• 12:20
  in
• 12:20
  the
• 12:20
  underwriting.
• 12:21
  And
• 12:21
  none
• 12:21
  of
• 12:22
  us
• 12:22
  have
• 12:22
  a
• 12:22
  crystal
• 12:22
  ball.
• 12:23
  Right.
• 12:23
  So
• 12:24
  it's
• 12:24
  certainly
• 12:24
  not
• 12:25
  like
• 12:26
  100%
• 12:26
  accurate
• 12:27
  because
• 12:27
  nobody's
• 12:28
  going
• 12:28
  to
• 12:28
  be
• 12:28
  able
• 12:28
  to
• 12:28
  do
• 12:28
  that.
• 12:29
  But
• 12:29
  you
• 12:29
  try
• 12:29
  to
• 12:29
  make
• 12:30
  reasonable
• 12:30
  assumptions
• 12:31
  based
• 12:31
  on
• 12:31
  the
• 12:32
  information
• 12:32
  in
• 12:32
  front
• 12:32
  of
• 12:32
  you.
• 12:32
  So
• 12:33
  that
• 12:33
  way
• 12:33
  you
• 12:33
  can
• 12:33
  make
• 12:33
  an
• 12:34
  informed
• 12:34
  decision.
• 12:35
  Very,
• 12:35
  very
• 12:35
  neat.
• 12:36
  So
• 12:36
  when
• 12:36
  you're
• 12:36
  evaluating
• 12:37
  expenses,
• 12:38
  you're
• 12:38
  questioning
• 12:39
  every
• 12:39
  line
• 12:40
  item
• 12:40
  and
• 12:41
  what
• 12:41
  do
• 12:41
  you
• 12:41
  find
• 12:42
  is
• 12:42
  typically
• 12:42
  off
• 12:43
  the
• 12:43
  most
• 12:43
  Great
• 12:44
  question.
• 12:44
  So
• 12:44
  by
• 12:45
  nature
• 12:45
  I
• 12:45
  tend
• 12:45
  to
• 12:45
  question
• 12:46
  everything.
• 12:46
  It's
• 12:46
  just
• 12:46
  how
• 12:46
  I
• 12:47
  am.
• 12:47
  Usually
• 12:47
  it's
• 12:47
  the
• 12:48
  repairs
• 12:48
  and
• 12:48
  maintenance
• 12:48
  of
• 12:49
  the
• 12:49
  turn
• 12:50
  course
• 12:50
  is
• 12:50
  people
• 12:50
  are
• 12:50
  trying
• 12:51
  to
• 12:51
  shift
• 12:51
  as
• 12:51
  much
• 12:51
  as
• 12:51
  they
• 12:52
  can
• 12:52
  below
• 12:52
  the
• 12:52
  line.
• 12:53
  Some
• 12:53
  people
• 12:53
  will
• 12:53
  get
• 12:53
  very
• 12:54
  creative
• 12:54
  and
• 12:54
  they'll
• 12:54
  shift
• 12:55
  maybe
• 12:55
  even
• 12:55
  more
• 12:55
  than
• 12:55
  that.
• 12:56
  But
• 12:56
  those
• 12:56
  are
• 12:56
  usually
• 12:57
  the
• 12:57
  two
• 12:57
  big
• 12:57
  ones
• 12:57
  that
• 12:57
  you'll
• 12:57
  see.
• 12:58
  Interesting.
• 12:59
  Yep.
• 12:59
  So
• 12:59
  what
• 13:00
  else?
• 13:00
  After
• 13:00
  you.
• 13:01
  I
• 13:01
  guess
• 13:01
  we've
• 13:01
  looked
• 13:01
  at
• 13:02
  different
• 13:02
  terms,
• 13:03
  expenses
• 13:04
  and
• 13:05
  analyzing
• 13:06
  income.
• 13:06
  Well,
• 13:07
  market
• 13:07
  comps,
• 13:08
  that's
• 13:08
  always
• 13:08
  going
• 13:08
  to
• 13:08
  be
• 13:08
  a
• 13:09
  big
• 13:09
  thing.
• 13:09
  Right.
• 13:09
  So
• 13:09
  you
• 13:09
  want
• 13:09
  to
• 13:10
  understand
• 13:10
  the
• 13:10
  market.
• 13:11
  So
• 13:11
  what
• 13:12
  are
• 13:12
  similar
• 13:12
  properties
• 13:13
  and
• 13:13
  similar
• 13:13
  units
• 13:13
  renting
• 13:14
  for?
• 13:14
  What's
• 13:15
  the
• 13:15
  typical
• 13:15
  occupancy
• 13:16
  rate
• 13:16
  for
• 13:16
  the
• 13:16
  market?
• 13:17
  Now
• 13:17
  we're
• 13:18
  recording
• 13:18
  this
• 13:19
  in
• 13:19
  September
• 13:19
  of
• 13:19
  2024.
• 13:21
  So
• 13:21
  as
• 13:21
  we
• 13:22
  record
• 13:22
  this,
• 13:22
  occupancy
• 13:23
  rates
• 13:23
  are
• 13:23
  very
• 13:24
  different
• 13:24
  now
• 13:24
  than
• 13:24
  they
• 13:24
  were
• 13:25
  a
• 13:25
  year
• 13:25
  or
• 13:26
  two
• 13:26
  years
• 13:26
  ago
• 13:26
  in
• 13:26
  many
• 13:27
  markets
• 13:27
  and
• 13:27
  they're
• 13:28
  very
• 13:28
  different
• 13:28
  than
• 13:29
  long
• 13:29
  term
• 13:29
  averages
• 13:29
  for
• 13:30
  these
• 13:30
  markets
• 13:30
  have
• 13:31
  been.
• 13:31
  So
• 13:32
  you
• 13:32
  want
• 13:32
  to
• 13:32
  look
• 13:32
  at
• 13:33
  the
• 13:33
  current,
• 13:33
  but
• 13:33
  you
• 13:33
  also
• 13:34
  want
• 13:34
  to
• 13:34
  look
• 13:34
  at
• 13:34
  the
• 13:34
  past
• 13:35
  to
• 13:35
  get
• 13:35
  some
• 13:35
  perspective,
• 13:36
  understand
• 13:37
  where
• 13:37
  you
• 13:37
  are,
• 13:38
  but
• 13:38
  also
• 13:38
  understand
• 13:38
  where
• 13:39
  you've
• 13:39
  been.
• 13:39
  So
• 13:40
  that
• 13:40
  way
• 13:40
  you
• 13:40
  can
• 13:40
  kind
• 13:40
  of
• 13:40
  predict
• 13:41
  where
• 13:41
  you're
• 13:41
  going.
• 13:41
  Yeah,
• 13:42
  absolutely.
• 13:43
  Cap
• 13:43
  rates,
• 13:44
  exit
• 13:44
  cap
• 13:44
  rates.
• 13:45
  So
• 13:45
  if
• 13:45
  you're
• 13:46
  buying
• 13:46
  a
• 13:46
  property
• 13:46
  with
• 13:47
  the
• 13:47
  goal
• 13:47
  of
• 13:47
  holding
• 13:47
  in
• 13:48
  perpetuity,
• 13:48
  an
• 13:49
  exit
• 13:49
  cap
• 13:49
  rate
• 13:49
  may
• 13:50
  not
• 13:50
  be
• 13:50
  that
• 13:50
  important.
• 13:51
  But
• 13:51
  if
• 13:51
  you're
• 13:51
  buying
• 13:52
  it
• 13:52
  with
• 13:52
  the
• 13:52
  goal
• 13:52
  of
• 13:52
  eventually
• 13:53
  selling
• 13:53
  it,
• 13:53
  which
• 13:54
  anybody
• 13:55
  listening
• 13:55
  to
• 13:55
  this,
• 13:55
  you're
• 13:55
  syndicating,
• 13:56
  that's
• 13:56
  probably
• 13:56
  what
• 13:56
  you're
• 13:57
  doing.
• 13:57
  If
• 13:57
  you're
• 13:57
  doing
• 13:57
  a
• 13:58
  jv,
• 13:58
  probably
• 13:58
  what
• 13:59
  you're
• 13:59
  doing.
• 13:59
  If
• 13:59
  you're
• 14:00
  using
• 14:00
  your
• 14:00
  own
• 14:00
  money,
• 14:00
  maybe
• 14:01
  not
• 14:01
  as
• 14:01
  much,
• 14:01
  but
• 14:02
  the
• 14:02
  exit
• 14:02
  cap
• 14:03
  rate
• 14:03
  and
• 14:03
  the
• 14:03
  importance
• 14:04
  of
• 14:04
  it
• 14:04
  can't
• 14:04
  be
• 14:04
  understated
• 14:05
  because
• 14:05
  next
• 14:06
  to
• 14:06
  the
• 14:06
  price
• 14:06
  is
• 14:07
  the
• 14:07
  second
• 14:07
  most
• 14:08
  important
• 14:08
  thing
• 14:08
  in
• 14:08
  your
• 14:08
  underwriting.
• 14:09
  You
• 14:09
  can
• 14:09
  literally
• 14:09
  get
• 14:10
  everything
• 14:10
  else
• 14:10
  wrong
• 14:11
  and
• 14:11
  like,
• 14:12
  that
• 14:12
  could
• 14:13
  make
• 14:13
  up
• 14:13
  for
• 14:13
  it.
• 14:14
  But
• 14:14
  it's
• 14:14
  also
• 14:14
  the
• 14:15
  one
• 14:15
  that's
• 14:15
  hardest
• 14:15
  to
• 14:15
  predict
• 14:16
  because
• 14:16
  again,
• 14:16
  none
• 14:16
  of
• 14:16
  us
• 14:16
  have
• 14:17
  a
• 14:17
  crystal
• 14:17
  ball.
• 14:17
  So
• 14:18
  the
• 14:18
  exit
• 14:18
  cap
• 14:18
  is
• 14:19
  the
• 14:19
  cap
• 14:19
  rate
• 14:19
  that
• 14:20
  you're
• 14:20
  planning
• 14:20
  to
• 14:21
  sell
• 14:21
  or
• 14:21
  refinance
• 14:22
  at
• 14:22
  in
• 14:22
  the
• 14:23
  future.
• 14:23
  So
• 14:24
  you're
• 14:24
  trying
• 14:24
  to
• 14:24
  make
• 14:24
  an
• 14:25
  educated
• 14:25
  guess
• 14:26
  of
• 14:26
  where
• 14:26
  prices
• 14:27
  might
• 14:27
  be
• 14:27
  in
• 14:27
  3,
• 14:28
  5,
• 14:28
  10
• 14:28
  years,
• 14:29
  however
• 14:29
  long
• 14:29
  your
• 14:29
  whole
• 14:30
  period
• 14:30
  is.
• 14:30
  And
• 14:31
  that's
• 14:31
  going
• 14:31
  to
• 14:31
  factor
• 14:31
  into
• 14:31
  the
• 14:32
  equation.
• 14:32
  And
• 14:32
  how
• 14:32
  do
• 14:33
  you,
• 14:33
  what
• 14:33
  do
• 14:33
  you,
• 14:34
  what
• 14:34
  helps
• 14:34
  you
• 14:34
  come
• 14:34
  up
• 14:34
  with
• 14:35
  that
• 14:35
  number?
• 14:35
  Great
• 14:36
  question.
• 14:36
  So
• 14:37
  most
• 14:37
  of
• 14:38
  my
• 14:38
  information
• 14:39
  that
• 14:39
  I
• 14:39
  get
• 14:39
  there
• 14:39
  is
• 14:39
  based
• 14:40
  on
• 14:40
  people.
• 14:41
  I
• 14:41
  speak
• 14:41
  with,
• 14:41
  other
• 14:42
  investors,
• 14:43
  brokers.
• 14:44
  I
• 14:44
  generally
• 14:44
  tend
• 14:44
  to
• 14:45
  listen
• 14:45
  to
• 14:45
  big
• 14:45
  money
• 14:45
  sources.
• 14:46
  I
• 14:46
  listen
• 14:47
  to
• 14:47
  institutional
• 14:48
  investors.
• 14:48
  I
• 14:48
  listen
• 14:48
  to
• 14:49
  family
• 14:49
  offices.
• 14:50
  I
• 14:50
  listen
• 14:50
  to
• 14:50
  people
• 14:50
  with
• 14:50
  a
• 14:50
  lot
• 14:51
  more
• 14:51
  money
• 14:51
  than
• 14:51
  me
• 14:52
  because
• 14:52
  I
• 14:52
  eventually
• 14:53
  know
• 14:53
  that
• 14:54
  what
• 14:54
  they're
• 14:55
  willing
• 14:55
  to
• 14:55
  pay
• 14:55
  is
• 14:55
  probably
• 14:56
  going
• 14:56
  to
• 14:56
  dictate
• 14:56
  where
• 14:56
  the
• 14:56
  market
• 14:57
  goes.
• 14:58
  So
• 14:58
  if
• 14:59
  somebody
• 14:59
  with
• 14:59
  a
• 14:59
  lot
• 14:59
  more
• 15:00
  money
• 15:00
  than
• 15:00
  me
• 15:00
  is
• 15:01
  saying
• 15:01
  that
• 15:01
  this
• 15:02
  is
• 15:02
  where
• 15:02
  cap
• 15:02
  rates
• 15:02
  are
• 15:02
  going
• 15:03
  to
• 15:03
  be,
• 15:03
  I
• 15:03
  usually
• 15:04
  listen
• 15:04
  to
• 15:04
  them
• 15:04
  because
• 15:05
  that's
• 15:05
  what's
• 15:05
  going
• 15:05
  to
• 15:05
  drive
• 15:06
  the
• 15:06
  market.
• 15:06
  Interesting.
• 15:07
  Very
• 15:07
  neat.
• 15:08
  And
• 15:08
  I
• 15:09
  speak
• 15:09
  to
• 15:09
  a
• 15:09
  lot
• 15:09
  of
• 15:09
  brokers
• 15:10
  as
• 15:10
  well
• 15:10
  because
• 15:10
  I
• 15:10
  think
• 15:10
  brokers
• 15:11
  do
• 15:11
  have
• 15:11
  good
• 15:11
  insight
• 15:12
  there.
• 15:12
  But
• 15:12
  I
• 15:13
  also
• 15:13
  take
• 15:13
  it
• 15:13
  with
• 15:13
  a
• 15:13
  grain
• 15:14
  of
• 15:14
  salt
• 15:14
  because
• 15:15
  obviously
• 15:15
  many
• 15:16
  brokers
• 15:16
  are
• 15:16
  going
• 15:16
  to
• 15:16
  go
• 15:16
  out
• 15:17
  there
• 15:17
  with
• 15:17
  the
• 15:17
  intention
• 15:17
  of
• 15:19
  they
• 15:19
  have
• 15:19
  to
• 15:19
  sell
• 15:19
  something
• 15:20
  to
• 15:20
  make
• 15:20
  a
• 15:20
  living.
• 15:21
  So
• 15:21
  I
• 15:21
  get
• 15:21
  that.
• 15:21
  But
• 15:21
  sometimes
• 15:22
  that
• 15:22
  could
• 15:22
  skew
• 15:23
  the
• 15:23
  cap
• 15:23
  rates
• 15:23
  a
• 15:24
  little
• 15:24
  bit
• 15:24
  more
• 15:24
  favorable.
• 15:25
  So
• 15:25
  I
• 15:25
  do
• 15:25
  listen
• 15:25
  because
• 15:26
  there
• 15:26
  is
• 15:26
  a
• 15:26
  lot
• 15:26
  of
• 15:26
  insight
• 15:26
  there,
• 15:27
  but
• 15:27
  I
• 15:27
  also
• 15:27
  get
• 15:28
  different
• 15:28
  perspectives
• 15:28
  just
• 15:29
  to
• 15:29
  hear
• 15:29
  what's
• 15:29
  out
• 15:30
  there.
• 15:30
  Good
• 15:30
  for
• 15:30
  you.
• 15:31
  Yeah.
• 15:31
  And
• 15:31
  I
• 15:32
  guess
• 15:32
  speaking
• 15:32
  which,
• 15:33
  how
• 15:33
  do
• 15:33
  you
• 15:33
  like
• 15:33
  stress
• 15:34
  test
• 15:34
  Your
• 15:34
  deals.
• 15:35
  What
• 15:35
  do
• 15:35
  you,
• 15:35
  how
• 15:35
  do
• 15:35
  you
• 15:36
  maybe
• 15:36
  manipulate
• 15:37
  some
• 15:37
  of
• 15:37
  the
• 15:37
  numbers
• 15:38
  within
• 15:38
  the
• 15:38
  underwriting
• 15:38
  process
• 15:39
  to
• 15:39
  make
• 15:39
  sure
• 15:39
  that
• 15:39
  if
• 15:40
  things
• 15:40
  did
• 15:40
  change
• 15:40
  that
• 15:41
  you're
• 15:41
  hedged
• 15:41
  for
• 15:41
  that?
• 15:42
  Great,
• 15:42
  great
• 15:42
  question.
• 15:43
  Well,
• 15:43
  there's
• 15:43
  a
• 15:43
  few
• 15:43
  ways
• 15:44
  that
• 15:44
  you
• 15:44
  don't
• 15:44
  need
• 15:44
  to
• 15:45
  stress
• 15:45
  that.
• 15:45
  So
• 15:45
  a
• 15:46
  popular
• 15:46
  one's
• 15:46
  a
• 15:46
  breakeven
• 15:47
  occupancy.
• 15:48
  So
• 15:49
  that
• 15:49
  means
• 15:49
  what
• 15:50
  occupancy
• 15:50
  does
• 15:50
  the
• 15:51
  property
• 15:51
  need
• 15:51
  to
• 15:51
  be
• 15:51
  at
• 15:52
  for
• 15:52
  you
• 15:52
  to
• 15:52
  not
• 15:52
  be
• 15:53
  able
• 15:53
  to
• 15:53
  pay
• 15:53
  the
• 15:53
  bills?
• 15:54
  So
• 15:54
  if
• 15:55
  that
• 15:55
  break
• 15:55
  even
• 15:55
  number
• 15:56
  is
• 15:56
  like
• 15:56
  85
• 15:56
  or
• 15:57
  90%,
• 15:57
  you're
• 15:57
  probably
• 15:58
  paying
• 15:58
  too
• 15:58
  much.
• 15:59
  If
• 15:59
  it's
• 15:59
  like
• 15:59
  65
• 16:00
  or
• 16:00
  70%,
• 16:01
  you're
• 16:01
  probably
• 16:01
  in
• 16:01
  a
• 16:02
  safe
• 16:02
  spot
• 16:02
  because
• 16:03
  it's
• 16:03
  unlikely
• 16:03
  that
• 16:04
  you're
• 16:04
  going
• 16:04
  to
• 16:04
  see
• 16:04
  properties
• 16:04
  get
• 16:05
  down
• 16:05
  to
• 16:05
  that
• 16:05
  level
• 16:05
  and
• 16:05
  stay
• 16:06
  at
• 16:06
  that
• 16:06
  level.
• 16:06
  If
• 16:06
  they
• 16:07
  do,
• 16:07
  it's
• 16:07
  probably
• 16:08
  a
• 16:08
  bigger
• 16:08
  issue
• 16:08
  that
• 16:08
  you
• 16:08
  need
• 16:09
  to
• 16:09
  solve.
• 16:10
  Another
• 16:10
  one
• 16:10
  is
• 16:11
  interest
• 16:11
  rate
• 16:11
  sensitivity.
• 16:12
  So
• 16:12
  for
• 16:12
  the
• 16:12
  last
• 16:13
  two
• 16:13
  years
• 16:13
  there's
• 16:13
  obviously
• 16:14
  been
• 16:14
  a
• 16:14
  lot
• 16:14
  of
• 16:15
  fluctuation
• 16:15
  with
• 16:15
  interest
• 16:16
  rates.
• 16:16
  I
• 16:16
  could
• 16:16
  only
• 16:17
  think
• 16:18
  of
• 16:18
  the
• 16:18
  couple
• 16:18
  of
• 16:18
  deals
• 16:19
  that
• 16:19
  I'm
• 16:19
  in
• 16:19
  that
• 16:20
  we
• 16:20
  had
• 16:20
  interest
• 16:20
  rates
• 16:21
  in
• 16:21
  the
• 16:21
  threes
• 16:21
  and
• 16:21
  fours
• 16:21
  when
• 16:21
  they
• 16:22
  first
• 16:22
  started
• 16:22
  and
• 16:22
  now
• 16:22
  they're
• 16:23
  in
• 16:23
  the
• 16:23
  nines.
• 16:23
  So
• 16:24
  interest
• 16:24
  rates
• 16:24
  have
• 16:25
  changed
• 16:25
  a
• 16:25
  lot.
• 16:26
  So
• 16:26
  you
• 16:27
  need
• 16:27
  to
• 16:27
  be
• 16:27
  looking
• 16:27
  at
• 16:27
  that
• 16:28
  now.
• 16:28
  If
• 16:28
  you're
• 16:29
  using
• 16:29
  fixed
• 16:29
  rate
• 16:30
  debt,
• 16:30
  most
• 16:31
  times
• 16:31
  that
• 16:31
  rate's
• 16:32
  not
• 16:32
  going
• 16:32
  to
• 16:32
  be
• 16:32
  fixed
• 16:32
  until
• 16:33
  you,
• 16:33
  you
• 16:33
  lock
• 16:33
  it,
• 16:34
  which
• 16:34
  with
• 16:34
  a
• 16:35
  lot
• 16:35
  of
• 16:35
  loans
• 16:35
  that
• 16:35
  will
• 16:35
  be
• 16:36
  closer
• 16:36
  to
• 16:36
  your
• 16:37
  closing
• 16:37
  date.
• 16:37
  If
• 16:37
  you're
• 16:38
  using
• 16:38
  floating
• 16:38
  rate
• 16:39
  debt,
• 16:39
  you
• 16:39
  want
• 16:39
  to
• 16:39
  be
• 16:40
  underwriting
• 16:40
  it
• 16:40
  to
• 16:41
  whatever
• 16:41
  the
• 16:42
  max
• 16:42
  rate's
• 16:43
  going
• 16:43
  to
• 16:43
  be
• 16:43
  with
• 16:44
  your
• 16:44
  rate
• 16:44
  cap
• 16:44
  because
• 16:45
  if
• 16:45
  you
• 16:45
  don't
• 16:45
  do
• 16:45
  that,
• 16:45
  you
• 16:46
  could
• 16:46
  wind
• 16:46
  up
• 16:46
  on
• 16:46
  the
• 16:46
  short
• 16:46
  end
• 16:47
  of
• 16:47
  the
• 16:47
  stick.
• 16:47
  Very,
• 16:48
  very
• 16:49
  good
• 16:49
  advice,
• 16:50
  Charles,
• 16:50
  because
• 16:51
  you
• 16:51
  know,
• 16:51
  I
• 16:52
  was
• 16:52
  in
• 16:52
  on
• 16:52
  a
• 16:52
  $1.725
• 16:54
  million
• 16:54
  building
• 16:55
  with
• 16:55
  a
• 16:55
  floating
• 16:55
  rate
• 16:56
  and
• 16:56
  did
• 16:56
  not
• 16:56
  understand
• 16:57
  what
• 16:57
  a
• 16:57
  rate
• 16:57
  cap
• 16:58
  was.
• 16:58
  And
• 16:59
  they
• 16:59
  pushed
• 17:00
  it
• 17:00
  to
• 17:00
  rate
• 17:00
  cap
• 17:01
  every
• 17:01
  single
• 17:01
  time
• 17:02
  they
• 17:02
  could
• 17:02
  and
• 17:03
  it
• 17:03
  raised
• 17:03
  64%
• 17:05
  within
• 17:05
  one
• 17:05
  year
• 17:05
  and
• 17:06
  three
• 17:06
  months.
• 17:06
  And
• 17:07
  that
• 17:07
  was
• 17:07
  pretty
• 17:07
  painful.
• 17:08
  I
• 17:08
  wish
• 17:08
  I
• 17:08
  would
• 17:08
  have
• 17:09
  known
• 17:09
  to
• 17:10
  underwrite
• 17:10
  and
• 17:10
  calculate
• 17:11
  the
• 17:11
  rate
• 17:12
  cap.
• 17:12
  Worst
• 17:13
  case
• 17:13
  scenario
• 17:14
  still
• 17:14
  made
• 17:14
  it
• 17:14
  work,
• 17:15
  but
• 17:15
  it
• 17:15
  would
• 17:15
  have
• 17:15
  been
• 17:15
  really
• 17:16
  great
• 17:16
  to
• 17:16
  know
• 17:17
  a
• 17:17
  little
• 17:17
  bit
• 17:17
  more
• 17:18
  on
• 17:18
  that.
• 17:18
  So
• 17:18
  good
• 17:19
  advice.
• 17:19
  Yep.
• 17:20
  So
• 17:20
  stress
• 17:20
  testing
• 17:21
  is
• 17:21
  definitely
• 17:21
  very
• 17:21
  important.
• 17:22
  Another
• 17:22
  thing
• 17:22
  you
• 17:22
  can
• 17:23
  stress
• 17:23
  test
• 17:23
  for
• 17:24
  is
• 17:24
  your
• 17:24
  income
• 17:24
  and
• 17:24
  expense
• 17:25
  projections.
• 17:26
  So
• 17:26
  if
• 17:27
  you're
• 17:27
  planning
• 17:27
  to
• 17:28
  do
• 17:28
  evaluate
• 17:28
  dealing,
• 17:29
  you
• 17:29
  think
• 17:29
  you
• 17:29
  could
• 17:29
  increase
• 17:30
  rents,
• 17:30
  it's
• 17:31
  probably
• 17:31
  worth
• 17:31
  running
• 17:31
  a
• 17:31
  different
• 17:32
  scenario
• 17:32
  or
• 17:32
  two
• 17:33
  and
• 17:33
  seeing
• 17:33
  what
• 17:33
  it
• 17:33
  might
• 17:33
  look
• 17:34
  like
• 17:34
  if
• 17:34
  you're
• 17:34
  off
• 17:34
  on
• 17:35
  those
• 17:35
  rent
• 17:35
  increases
• 17:36
  and
• 17:36
  you
• 17:36
  don't
• 17:37
  get
• 17:37
  the
• 17:37
  numbers
• 17:37
  you
• 17:37
  expected
• 17:38
  and
• 17:38
  another
• 17:38
  one's
• 17:39
  terminal
• 17:39
  cap
• 17:39
  or
• 17:39
  your
• 17:40
  exit
• 17:40
  cap.
• 17:41
  So
• 17:41
  that's
• 17:41
  probably
• 17:41
  the
• 17:42
  biggest
• 17:42
  one
• 17:42
  in
• 17:42
  multifamily
• 17:43
  or
• 17:43
  commercials.
• 17:44
  Because
• 17:44
  the
• 17:44
  thing
• 17:44
  is
• 17:45
  that
• 17:45
  has
• 17:45
  such
• 17:45
  a
• 17:45
  big
• 17:46
  impact
• 17:46
  on
• 17:46
  the
• 17:46
  sale.
• 17:48
  What
• 17:48
  do
• 17:48
  the
• 17:48
  numbers
• 17:48
  look
• 17:49
  like
• 17:49
  when
• 17:49
  that
• 17:50
  exit
• 17:50
  cap
• 17:50
  is
• 17:51
  50
• 17:51
  basis
• 17:52
  points
• 17:52
  higher
• 17:52
  or
• 17:52
  lower?
• 17:53
  And
• 17:53
  I'll
• 17:53
  give
• 17:53
  you
• 17:53
  a
• 17:54
  secret,
• 17:54
  it
• 17:54
  looks
• 17:54
  a
• 17:54
  lot
• 17:55
  different.
• 17:56
  So
• 17:57
  you
• 17:57
  definitely
• 17:57
  want
• 17:57
  to
• 17:57
  stress
• 17:58
  test
• 17:58
  that
• 17:58
  because
• 17:58
  that's
• 17:58
  going
• 17:59
  to
• 17:59
  be
• 17:59
  a
• 17:59
  big
• 17:59
  one.
• 17:59
  So
• 17:59
  then
• 17:59
  after
• 18:00
  stress
• 18:00
  testing,
• 18:00
  what
• 18:00
  else
• 18:01
  is
• 18:01
  it?
• 18:01
  It's
• 18:01
  financing.
• 18:02
  So
• 18:03
  one
• 18:03
  thing
• 18:03
  I
• 18:03
  think
• 18:04
  a
• 18:04
  lot
• 18:04
  of
• 18:04
  people
• 18:04
  don't
• 18:05
  truly
• 18:05
  comprehend
• 18:06
  is
• 18:06
  how
• 18:06
  important
• 18:07
  financing
• 18:07
  is
• 18:08
  to
• 18:08
  the
• 18:08
  commercial
• 18:08
  real
• 18:09
  estate
• 18:09
  market.
• 18:09
  Like
• 18:09
  I
• 18:10
  would
• 18:10
  literally
• 18:10
  say
• 18:11
  it's
• 18:11
  the
• 18:12
  single
• 18:12
  biggest
• 18:12
  driver
• 18:13
  in
• 18:13
  it.
• 18:13
  Yeah,
• 18:14
  absolutely.
• 18:14
  You
• 18:14
  know,
• 18:14
  location,
• 18:15
  location,
• 18:15
  location.
• 18:16
  A
• 18:16
  lot
• 18:16
  of
• 18:16
  people
• 18:16
  say
• 18:16
  those
• 18:17
  are
• 18:17
  the
• 18:17
  three
• 18:17
  most
• 18:17
  important
• 18:17
  words
• 18:18
  in
• 18:18
  real
• 18:18
  estate.
• 18:18
  I
• 18:19
  would
• 18:19
  kind
• 18:19
  of
• 18:19
  agree
• 18:19
  with
• 18:19
  that.
• 18:20
  In
• 18:20
  single
• 18:20
  family.
• 18:21
  What
• 18:21
  do
• 18:21
  you
• 18:21
  think,
• 18:21
  Erica?
• 18:22
  I
• 18:22
  agree
• 18:22
  in
• 18:22
  single
• 18:23
  family.
• 18:23
  And
• 18:24
  yeah.
• 18:24
  And
• 18:24
  on
• 18:24
  the
• 18:24
  commercial
• 18:25
  side,
• 18:26
  lending,
• 18:26
  lending,
• 18:27
  lending
• 18:27
  is
• 18:28
  definitely
• 18:28
  key,
• 18:29
  right?
• 18:29
  Yeah.
• 18:30
  You
• 18:30
  know,
• 18:30
  if
• 18:30
  you
• 18:30
  want
• 18:31
  to
• 18:31
  see
• 18:31
  the
• 18:31
  commercial
• 18:31
  real
• 18:32
  estate
• 18:32
  market
• 18:32
  come
• 18:32
  to
• 18:32
  a
• 18:33
  complete
• 18:33
  standstill.
• 18:34
  Yep.
• 18:34
  Watch
• 18:34
  financing
• 18:35
  dry
• 18:35
  up.
• 18:35
  And
• 18:36
  once
• 18:36
  that
• 18:36
  happens,
• 18:37
  it
• 18:37
  makes
• 18:37
  things
• 18:37
  very
• 18:38
  challenging.
• 18:38
  Deals
• 18:38
  don't
• 18:39
  get
• 18:39
  done
• 18:39
  anymore.
• 18:39
  And
• 18:40
  something
• 18:40
  to
• 18:40
  keep
• 18:40
  in
• 18:40
  mind
• 18:41
  on
• 18:41
  that
• 18:41
  is
• 18:41
  because
• 18:41
  they're
• 18:42
  lending
• 18:42
  for
• 18:42
  higher
• 18:43
  price
• 18:43
  points.
• 18:43
  So
• 18:43
  when
• 18:44
  they're
• 18:44
  lending
• 18:44
  for
• 18:44
  such
• 18:44
  high
• 18:45
  price
• 18:45
  points,
• 18:45
  you
• 18:45
  know,
• 18:46
  banks
• 18:46
  will
• 18:46
  only
• 18:46
  lend
• 18:47
  out
• 18:47
  a
• 18:47
  certain
• 18:48
  portion
• 18:48
  of
• 18:49
  their
• 18:49
  portfolio
• 18:50
  and
• 18:50
  their
• 18:50
  cash
• 18:51
  to
• 18:51
  commercial
• 18:52
  lending,
• 18:52
  commercial
• 18:52
  real
• 18:53
  estate
• 18:53
  lending.
• 18:54
  So
• 18:54
  especially
• 18:55
  like
• 18:55
  when
• 18:55
  you
• 18:55
  see
• 18:56
  smaller
• 18:56
  commercial
• 18:56
  banks,
• 18:57
  they
• 18:57
  only
• 18:57
  have
• 18:58
  so
• 18:58
  much
• 18:58
  ability
• 18:58
  to
• 18:58
  do
• 18:59
  commercial
• 18:59
  lending
• 18:59
  because
• 19:00
  it
• 19:00
  is
• 19:00
  such
• 19:00
  higher
• 19:00
  price
• 19:01
  points.
• 19:01
  So
• 19:02
  very
• 19:02
  quickly
• 19:03
  people
• 19:03
  can,
• 19:03
  banks
• 19:04
  can
• 19:04
  kind
• 19:04
  of
• 19:04
  max
• 19:05
  out
• 19:05
  on
• 19:05
  what
• 19:05
  they
• 19:05
  can
• 19:05
  lend
• 19:06
  to
• 19:06
  commercial
• 19:06
  real
• 19:06
  estate.
• 19:07
  And
• 19:07
  that's
• 19:08
  where
• 19:08
  we
• 19:08
  see
• 19:08
  the
• 19:09
  market
• 19:09
  dry
• 19:09
  up
• 19:09
  like
• 19:10
  overnight.
• 19:10
  I
• 19:10
  actually
• 19:10
  had
• 19:11
  a
• 19:11
  mentor,
• 19:11
  March
• 19:12
  2023.
• 19:14
  God,
• 19:14
  that
• 19:14
  was
• 19:14
  an
• 19:14
  interesting
• 19:15
  time
• 19:15
  in
• 19:15
  commercial
• 19:16
  lending.
• 19:16
  And
• 19:16
  my
• 19:17
  mentor
• 19:17
  had
• 19:17
  two
• 19:18
  office
• 19:18
  deals,
• 19:19
  large
• 19:19
  office
• 19:19
  deals
• 19:20
  that
• 19:20
  fell
• 19:20
  apart
• 19:21
  at
• 19:21
  the
• 19:21
  table,
• 19:21
  at
• 19:22
  the
• 19:22
  closing
• 19:22
  table
• 19:22
  because
• 19:23
  the
• 19:23
  lender
• 19:23
  did
• 19:24
  not
• 19:24
  want
• 19:24
  to
• 19:24
  move
• 19:24
  forward
• 19:24
  on
• 19:24
  them.
• 19:25
  So
• 19:27
  what
• 19:27
  do
• 19:27
  you
• 19:28
  need
• 19:28
  to
• 19:28
  know
• 19:28
  on
• 19:28
  the
• 19:28
  financing
• 19:29
  side?
• 19:29
  Well,
• 19:29
  you
• 19:30
  need
• 19:30
  to
• 19:30
  know
• 19:31
  basic
• 19:31
  terms.
• 19:32
  You
• 19:32
  need
• 19:32
  to
• 19:32
  know
• 19:33
  what
• 19:33
  type
• 19:33
  of
• 19:34
  LTV
• 19:34
  or
• 19:35
  LTC
• 19:35
  you're
• 19:35
  going
• 19:35
  to
• 19:35
  be
• 19:35
  getting.
• 19:36
  So
• 19:36
  your
• 19:36
  loan
• 19:36
  proceeds.
• 19:37
  You
• 19:37
  need
• 19:37
  to
• 19:37
  know
• 19:38
  interest
• 19:38
  rate,
• 19:39
  is
• 19:39
  there
• 19:39
  any
• 19:39
  interest
• 19:39
  only,
• 19:40
  how
• 19:40
  long
• 19:40
  of
• 19:41
  a
• 19:41
  term,
• 19:41
  what's
• 19:42
  the
• 19:42
  amortization
• 19:42
  period?
• 19:43
  Because
• 19:43
  these
• 19:43
  are
• 19:43
  all
• 19:43
  things
• 19:43
  that
• 19:43
  are
• 19:44
  going
• 19:44
  to
• 19:44
  factor
• 19:44
  into
• 19:45
  the
• 19:45
  equation
• 19:45
  with
• 19:46
  your
• 19:46
  underwriting.
• 19:46
  You
• 19:46
  need
• 19:47
  to
• 19:47
  think,
• 19:47
  what
• 19:48
  type
• 19:48
  of
• 19:48
  loan
• 19:48
  am
• 19:48
  I
• 19:48
  getting?
• 19:49
  Am
• 19:49
  I
• 19:49
  getting
• 19:49
  a
• 19:49
  short
• 19:49
  term
• 19:50
  loan,
• 19:50
  a
• 19:50
  bridge
• 19:50
  loan,
• 19:50
  or
• 19:51
  am
• 19:51
  I
• 19:51
  getting
• 19:51
  a
• 19:51
  long
• 19:52
  term
• 19:52
  loan?
• 19:52
  Now
• 19:53
  I'M
• 19:53
  going
• 19:53
  to
• 19:53
  give
• 19:53
  you
• 19:53
  some
• 19:53
  advice
• 19:54
  that
• 19:54
  I've
• 19:54
  learned.
• 19:54
  If
• 19:54
  you're
• 19:55
  buying
• 19:55
  a
• 19:55
  stabilized
• 19:56
  property,
• 19:56
  the
• 19:56
  answer
• 19:57
  to
• 19:57
  that
• 19:57
  question
• 19:58
  shouldn't
• 19:58
  be
• 19:59
  a
• 19:59
  bridge
• 19:59
  loan.
• 19:59
  There
• 20:00
  is
• 20:00
  a
• 20:00
  purpose
• 20:00
  for
• 20:00
  bridge
• 20:01
  loans,
• 20:01
  but
• 20:02
  that
• 20:02
  purpose
• 20:02
  is
• 20:03
  to
• 20:03
  buy
• 20:03
  properties
• 20:03
  that
• 20:04
  aren't
• 20:04
  stabilized
• 20:05
  at
• 20:05
  discounted
• 20:05
  prices.
• 20:06
  So
• 20:06
  you
• 20:06
  can
• 20:06
  go
• 20:07
  in
• 20:07
  there
• 20:07
  and
• 20:07
  execute
• 20:08
  a
• 20:08
  plan
• 20:08
  to
• 20:08
  get
• 20:09
  it
• 20:09
  stabilized
• 20:10
  and
• 20:10
  then
• 20:10
  either
• 20:10
  refinance
• 20:11
  out
• 20:11
  of
• 20:11
  the
• 20:11
  permanent
• 20:11
  debt
• 20:12
  or
• 20:12
  sell
• 20:12
  it.
• 20:13
  If
• 20:13
  you're
• 20:13
  buying
• 20:13
  something
• 20:13
  that's
• 20:14
  90%
• 20:14
  occupied,
• 20:15
  there's
• 20:15
  no
• 20:15
  good
• 20:15
  reason
• 20:15
  to
• 20:16
  go
• 20:16
  out
• 20:16
  there
• 20:16
  and
• 20:16
  be
• 20:16
  using
• 20:16
  bridge
• 20:17
  financing.
• 20:17
  Keep
• 20:17
  that
• 20:17
  in
• 20:17
  mind.
• 20:18
  Also
• 20:19
  very
• 20:19
  important
• 20:20
  to
• 20:20
  have
• 20:20
  a
• 20:20
  great
• 20:21
  commercial
• 20:21
  lender.
• 20:22
  And
• 20:23
  I
• 20:23
  work
• 20:23
  with
• 20:23
  several
• 20:24
  and
• 20:24
  I
• 20:24
  always
• 20:24
  encourage
• 20:25
  my
• 20:25
  clients
• 20:25
  to
• 20:26
  speak
• 20:26
  with
• 20:26
  more
• 20:26
  than
• 20:27
  one,
• 20:27
  especially
• 20:27
  on
• 20:28
  the
• 20:28
  commercial
• 20:28
  lending
• 20:29
  side.
• 20:29
  There
• 20:30
  are
• 20:30
  just
• 20:30
  so
• 20:31
  many
• 20:31
  different
• 20:32
  products,
• 20:32
  so
• 20:32
  many
• 20:33
  different
• 20:33
  things
• 20:33
  that
• 20:33
  you
• 20:33
  can
• 20:33
  do
• 20:33
  on
• 20:34
  the
• 20:34
  commercial
• 20:34
  lending
• 20:34
  sites.
• 20:35
  A
• 20:35
  little
• 20:35
  bit
• 20:35
  more
• 20:35
  creative.
• 20:36
  And
• 20:36
  so
• 20:36
  speaking
• 20:37
  with
• 20:37
  more
• 20:37
  than
• 20:37
  one
• 20:37
  lender
• 20:37
  is
• 20:38
  really
• 20:38
  important.
• 20:39
  So
• 20:39
  always
• 20:40
  have
• 20:40
  really
• 20:40
  good
• 20:40
  partners.
• 20:41
  Yep.
• 20:41
  So
• 20:42
  then,
• 20:42
  real
• 20:42
  world
• 20:43
  examples.
• 20:43
  So
• 20:44
  what
• 20:44
  are
• 20:44
  some
• 20:44
  common
• 20:44
  pitfalls?
• 20:45
  Well,
• 20:46
  one
• 20:46
  of
• 20:46
  the
• 20:46
  biggest
• 20:47
  things
• 20:47
  that
• 20:47
  I
• 20:47
  see
• 20:48
  is
• 20:48
  people
• 20:48
  not
• 20:49
  checking
• 20:49
  the
• 20:49
  property
• 20:50
  taxes.
• 20:50
  So
• 20:51
  in
• 20:51
  today's
• 20:51
  day
• 20:51
  and
• 20:51
  age,
• 20:52
  a
• 20:52
  lot
• 20:52
  of
• 20:52
  people
• 20:52
  want
• 20:52
  to
• 20:52
  take
• 20:52
  the
• 20:53
  lazy
• 20:53
  approach.
• 20:53
  You'll
• 20:54
  hear
• 20:54
  me
• 20:54
  frown
• 20:54
  upon
• 20:54
  that
• 20:55
  multiple
• 20:55
  times
• 20:55
  during
• 20:56
  this
• 20:56
  show.
• 20:56
  So
• 20:56
  this
• 20:56
  will
• 20:57
  just
• 20:57
  be
• 20:57
  one
• 20:57
  of
• 20:57
  them.
• 20:57
  But
• 20:59
  the
• 20:59
  challenge
• 21:00
  with
• 21:00
  taking
• 21:00
  the
• 21:00
  lazy
• 21:01
  approach
• 21:01
  is
• 21:01
  you're
• 21:01
  letting
• 21:02
  somebody
• 21:02
  else
• 21:02
  do
• 21:02
  the
• 21:02
  work
• 21:03
  for
• 21:03
  you
• 21:03
  and
• 21:04
  you're
• 21:04
  not
• 21:04
  confirming
• 21:05
  an
• 21:05
  assumption
• 21:06
  because
• 21:06
  you
• 21:06
  think
• 21:06
  the
• 21:06
  broker
• 21:07
  had
• 21:07
  it
• 21:07
  right
• 21:07
  or
• 21:07
  the
• 21:07
  seller's
• 21:08
  number
• 21:08
  is
• 21:08
  right
• 21:08
  or
• 21:09
  whatever
• 21:09
  it
• 21:09
  is.
• 21:09
  You
• 21:09
  got
• 21:10
  to
• 21:10
  erase
• 21:10
  that
• 21:10
  thinking
• 21:10
  from
• 21:11
  your
• 21:11
  head
• 21:11
  and
• 21:11
  you
• 21:11
  got
• 21:11
  to
• 21:11
  take
• 21:12
  the
• 21:12
  extra
• 21:12
  step.
• 21:13
  So
• 21:13
  you
• 21:13
  need
• 21:13
  to
• 21:14
  be
• 21:14
  contacting
• 21:14
  the
• 21:14
  tax
• 21:15
  assessor's
• 21:15
  office.
• 21:16
  You
• 21:16
  need
• 21:16
  to
• 21:16
  be
• 21:16
  asking
• 21:17
  them
• 21:17
  when
• 21:17
  is
• 21:18
  the
• 21:18
  reassessment
• 21:18
  going
• 21:18
  to
• 21:19
  happen?
• 21:19
  How
• 21:19
  do
• 21:19
  you
• 21:19
  calculate
• 21:20
  it?
• 21:20
  Is
• 21:20
  the
• 21:20
  sale
• 21:21
  going
• 21:21
  to
• 21:21
  bump
• 21:22
  that
• 21:22
  timeline
• 21:22
  up?
• 21:23
  Because
• 21:23
  these
• 21:23
  are
• 21:23
  all
• 21:23
  things
• 21:24
  that
• 21:24
  factor
• 21:24
  into
• 21:24
  your
• 21:24
  underwriting.
• 21:25
  If
• 21:25
  you
• 21:25
  have
• 21:26
  a
• 21:26
  tax
• 21:26
  consultant
• 21:26
  that
• 21:27
  you
• 21:27
  work
• 21:27
  with,
• 21:27
  you
• 21:27
  can
• 21:27
  reach
• 21:27
  out
• 21:28
  to
• 21:28
  them.
• 21:28
  They
• 21:28
  can
• 21:28
  be
• 21:28
  a
• 21:28
  great
• 21:29
  resource
• 21:29
  also.
• 21:29
  But
• 21:30
  you
• 21:30
  need
• 21:30
  to
• 21:30
  be
• 21:31
  doing
• 21:31
  that
• 21:31
  homework
• 21:32
  because
• 21:32
  there's
• 21:32
  times
• 21:33
  that
• 21:33
  I've
• 21:33
  seen
• 21:33
  tax
• 21:33
  bills
• 21:34
  double
• 21:34
  and
• 21:34
  triple
• 21:34
  on
• 21:34
  these
• 21:35
  deals
• 21:35
  and
• 21:35
  even
• 21:35
  a
• 21:35
  few
• 21:35
  times
• 21:36
  I've
• 21:36
  seen
• 21:36
  them
• 21:36
  quadruple.
• 21:37
  And
• 21:37
  when
• 21:37
  you're
• 21:37
  dealing
• 21:37
  with
• 21:37
  the
• 21:38
  six
• 21:38
  figure
• 21:38
  number,
• 21:39
  that's
• 21:39
  a
• 21:39
  big
• 21:40
  mistake.
• 21:40
  I
• 21:41
  think
• 21:41
  insurance
• 21:42
  can
• 21:42
  also
• 21:42
  equate
• 21:42
  to
• 21:43
  that
• 21:43
  kind
• 21:43
  of
• 21:43
  mistake
• 21:44
  these
• 21:44
  days.
• 21:44
  Definitely
• 21:45
  being
• 21:45
  proactive
• 21:46
  on
• 21:46
  your
• 21:46
  insurance,
• 21:47
  making
• 21:47
  sure
• 21:48
  that
• 21:48
  you
• 21:48
  are
• 21:49
  really
• 21:49
  getting,
• 21:49
  you
• 21:50
  know,
• 21:50
  because
• 21:50
  that
• 21:50
  can
• 21:51
  like
• 21:51
  make
• 21:51
  or
• 21:51
  break
• 21:51
  equations
• 21:52
  right
• 21:52
  now,
• 21:52
  unfortunately.
• 21:53
  So
• 21:53
  that's.
• 21:54
  Yeah,
• 21:54
  taxes
• 21:54
  and
• 21:55
  insurance,
• 21:55
  you're
• 21:56
  Absolutely
• 21:56
  right.
• 21:56
  So
• 21:57
  insurance
• 21:57
  has
• 21:57
  been
• 21:57
  very
• 21:58
  volatile
• 21:58
  in
• 21:58
  the
• 21:59
  past.
• 21:59
  I
• 21:59
  said
• 22:00
  insurance
• 22:00
  would
• 22:00
  not
• 22:01
  have
• 22:01
  fallen
• 22:01
  into
• 22:01
  that
• 22:01
  category,
• 22:02
  but
• 22:02
  I
• 22:02
  think
• 22:02
  you're
• 22:02
  100%
• 22:03
  right.
• 22:03
  The
• 22:04
  last
• 22:04
  two
• 22:04
  years,
• 22:04
  insurance
• 22:05
  has
• 22:05
  been
• 22:05
  very,
• 22:06
  very
• 22:06
  volatile,
• 22:07
  even
• 22:07
  when
• 22:07
  it's
• 22:08
  not
• 22:08
  expected.
• 22:08
  So
• 22:09
  you
• 22:09
  want
• 22:09
  to
• 22:09
  be
• 22:09
  checking
• 22:10
  those
• 22:10
  things
• 22:10
  to
• 22:10
  make
• 22:11
  sure
• 22:11
  you
• 22:11
  have
• 22:11
  solid
• 22:11
  numbers.
• 22:12
  What
• 22:12
  are
• 22:12
  the
• 22:12
  pitfalls
• 22:13
  that
• 22:13
  we
• 22:13
  see?
• 22:13
  So
• 22:14
  another
• 22:14
  pitfall
• 22:14
  is
• 22:15
  not
• 22:15
  budgeting
• 22:15
  enough
• 22:16
  money
• 22:16
  for
• 22:16
  capex
• 22:17
  or
• 22:17
  reserve
• 22:17
  money.
• 22:17
  I
• 22:18
  probably
• 22:18
  take
• 22:18
  a
• 22:18
  different
• 22:18
  approach
• 22:19
  than
• 22:19
  Moesh.
• 22:19
  I
• 22:19
  probably
• 22:20
  budget
• 22:20
  too
• 22:20
  much
• 22:20
  money.
• 22:22
  I'd
• 22:22
  rather
• 22:22
  do
• 22:22
  that
• 22:23
  and
• 22:23
  need
• 22:23
  to
• 22:23
  cut
• 22:23
  down
• 22:24
  than
• 22:24
  the
• 22:24
  opposite
• 22:24
  way.
• 22:25
  It's
• 22:25
  an
• 22:25
  unconventional
• 22:26
  approach,
• 22:26
  but
• 22:26
  it
• 22:26
  works
• 22:26
  for
• 22:26
  me.
• 22:27
  So
• 22:27
  I
• 22:27
  do
• 22:27
  that
• 22:28
  because
• 22:28
  there's
• 22:29
  two
• 22:29
  reasons
• 22:29
  why
• 22:29
  people
• 22:30
  fail
• 22:30
  in
• 22:30
  these
• 22:30
  deals.
• 22:30
  Three
• 22:31
  reasons.
• 22:31
  You
• 22:31
  run
• 22:32
  out
• 22:32
  of
• 22:32
  time,
• 22:32
  you
• 22:32
  run
• 22:33
  out
• 22:33
  of
• 22:33
  money,
• 22:33
  or
• 22:34
  both.
• 22:34
  So
• 22:34
  you
• 22:34
  want
• 22:34
  to
• 22:35
  do
• 22:35
  the
• 22:35
  best
• 22:35
  that
• 22:36
  you
• 22:36
  can
• 22:36
  to
• 22:36
  make
• 22:36
  sure
• 22:36
  that
• 22:37
  you
• 22:37
  don't
• 22:37
  run
• 22:37
  out
• 22:37
  of
• 22:37
  money.
• 22:38
  What
• 22:38
  time.
• 22:39
  But
• 22:39
  in
• 22:39
  this
• 22:39
  case,
• 22:39
  money.
• 22:40
  Yep,
• 22:40
  absolutely.
• 22:41
  If
• 22:41
  you
• 22:41
  run
• 22:41
  out
• 22:42
  of
• 22:42
  money,
• 22:42
  it's
• 22:42
  going
• 22:42
  to
• 22:42
  make
• 22:42
  it
• 22:42
  a
• 22:43
  lot
• 22:43
  tougher
• 22:43
  with
• 22:44
  any
• 22:44
  one
• 22:44
  of
• 22:44
  these
• 22:44
  deals,
• 22:46
  deals.
• 22:46
  This
• 22:46
  size,
• 22:46
  when
• 22:47
  you
• 22:47
  run
• 22:47
  out
• 22:47
  of
• 22:47
  money,
• 22:47
  too.
• 22:49
  So
• 22:49
  what
• 22:50
  is
• 22:50
  underwriting?
• 22:50
  Well,
• 22:50
  at
• 22:51
  its
• 22:51
  core,
• 22:52
  it's
• 22:52
  a
• 22:52
  mix
• 22:52
  of
• 22:52
  art
• 22:52
  and
• 22:53
  science.
• 22:53
  Maybe
• 22:53
  that's
• 22:54
  why
• 22:54
  I
• 22:54
  like
• 22:55
  it,
• 22:55
  because
• 22:55
  I
• 22:56
  have
• 22:56
  to
• 22:56
  admit,
• 22:56
  I'm
• 22:56
  not
• 22:56
  really
• 22:57
  a
• 22:57
  total
• 22:57
  science
• 22:58
  guy,
• 22:58
  but
• 22:58
  I'm
• 22:58
  not
• 22:58
  a
• 22:59
  total
• 22:59
  art
• 22:59
  guy.
• 22:59
  I
• 22:59
  like
• 23:00
  that
• 23:00
  blend
• 23:00
  and
• 23:01
  it's
• 23:01
  numbers
• 23:01
  driven.
• 23:02
  But
• 23:02
  it's
• 23:03
  also
• 23:03
  your
• 23:03
  market
• 23:03
  knowledge,
• 23:04
  your
• 23:04
  risk
• 23:04
  management,
• 23:04
  your
• 23:05
  intuition.
• 23:06
  One
• 23:06
  thing
• 23:06
  I
• 23:06
  think
• 23:06
  that's
• 23:06
  really
• 23:07
  influencing
• 23:07
  a
• 23:07
  lot
• 23:07
  of
• 23:07
  people's
• 23:08
  underwriting
• 23:08
  right
• 23:08
  now
• 23:08
  is
• 23:09
  their
• 23:09
  perspective
• 23:09
  of
• 23:09
  the
• 23:09
  market.
• 23:10
  My
• 23:10
  perspective
• 23:11
  of
• 23:11
  the
• 23:11
  market
• 23:11
  might
• 23:11
  be
• 23:12
  different
• 23:12
  than
• 23:12
  Erica's.
• 23:13
  So
• 23:13
  we
• 23:13
  might
• 23:14
  look
• 23:14
  at
• 23:14
  the
• 23:14
  same
• 23:14
  deal
• 23:14
  a
• 23:15
  different
• 23:15
  way.
• 23:15
  Maybe
• 23:16
  she's
• 23:16
  more
• 23:16
  bullish
• 23:17
  or
• 23:17
  bearish
• 23:17
  or
• 23:17
  maybe
• 23:18
  vice
• 23:18
  versa.
• 23:19
  And
• 23:19
  that's
• 23:19
  going
• 23:19
  to
• 23:20
  change
• 23:20
  it
• 23:20
  because
• 23:20
  if
• 23:21
  one
• 23:21
  person
• 23:21
  is
• 23:21
  looking
• 23:22
  at
• 23:22
  the
• 23:22
  same
• 23:22
  deal
• 23:22
  and
• 23:22
  they're
• 23:23
  using
• 23:23
  an
• 23:23
  exit
• 23:23
  cap
• 23:24
  of
• 23:24
  an
• 23:24
  8%
• 23:26
  and
• 23:26
  the
• 23:26
  other
• 23:26
  person's
• 23:27
  using
• 23:27
  a
• 23:27
  6%,
• 23:28
  who's
• 23:28
  going
• 23:28
  to
• 23:28
  be
• 23:28
  a
• 23:28
  lot
• 23:28
  more
• 23:28
  competitive
• 23:29
  on
• 23:29
  that
• 23:29
  deal.
• 23:30
  Right.
• 23:31
  Perspective
• 23:31
  definitely
• 23:32
  goes
• 23:32
  into
• 23:32
  it.
• 23:33
  So
• 23:33
  it's
• 23:33
  certainly
• 23:33
  an
• 23:34
  important
• 23:34
  piece
• 23:34
  of
• 23:34
  the
• 23:35
  process.
• 23:35
  Now,
• 23:36
  one
• 23:36
  thing
• 23:36
  I
• 23:36
  would
• 23:36
  tell
• 23:36
  anybody
• 23:37
  is
• 23:37
  it's
• 23:37
  good
• 23:37
  to
• 23:38
  have
• 23:38
  a
• 23:38
  basic
• 23:39
  understanding,
• 23:39
  but
• 23:40
  you
• 23:40
  don't
• 23:40
  need
• 23:40
  to
• 23:40
  be
• 23:40
  an
• 23:40
  expert.
• 23:41
  You
• 23:41
  need
• 23:41
  to
• 23:41
  understand
• 23:41
  what
• 23:42
  you're
• 23:42
  good
• 23:42
  at.
• 23:42
  And
• 23:43
  if
• 23:43
  that's
• 23:43
  not
• 23:43
  your
• 23:43
  role
• 23:44
  on
• 23:44
  the
• 23:44
  team,
• 23:44
  then
• 23:44
  get
• 23:45
  somebody
• 23:45
  on
• 23:45
  the
• 23:45
  team
• 23:46
  who
• 23:46
  can
• 23:46
  fill
• 23:46
  that
• 23:46
  role
• 23:46
  for
• 23:46
  you.
• 23:47
  That's
• 23:47
  what
• 23:47
  I
• 23:47
  do.
• 23:48
  I
• 23:48
  love
• 23:48
  my
• 23:48
  numbers
• 23:49
  partners.
• 23:50
  Very
• 23:50
  important.
• 23:51
  Excellent.
• 23:51
  Well,
• 23:52
  guys,
• 23:52
  we
• 23:52
  want
• 23:52
  to
• 23:52
  thank
• 23:52
  you
• 23:53
  for
• 23:53
  joining
• 23:53
  us
• 23:53
  for
• 23:53
  this
• 23:53
  episode.
• 23:54
  And
• 23:54
  once
• 23:55
  again,
• 23:55
  if
• 23:55
  you
• 23:55
  do
• 23:55
  want
• 23:56
  our
• 23:56
  commercial
• 23:56
  real
• 23:57
  estate
• 23:57
  success
• 23:57
  guide,
• 23:58
  you
• 23:58
  can
• 23:58
  text
• 23:58
  the
• 23:58
  word
• 23:59
  FREEDOM
• 23:59
  to
• 24:00
  33777.
• 24:02
  And
• 24:02
  we'll
• 24:02
  wrap
• 24:03
  up
• 24:03
  for
• 24:03
  this
• 24:03
  one.
• 24:03
  Thanks,
• 24:04
  guys.