Latest / Real Investor Radio Podcast / Ep. 116 | The Real Estate Market Is Frozen: Who Survives and Who Wins?

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Ep. 116 | The Real Estate Market Is Frozen: Who Survives and Who Wins? · Real Investor Radio Podcast

• Jack BeVier (00:00) Hey everybody, this is Jack BeVier and David Moses back with another episode of Real Investor Radio. David, great to see you, sir. David Moses (00:08) To see you. Jack BeVier (00:10) Dude, pleasure as always, though. These are man, these are super, super interesting times. I have lots of thoughts. I'm getting lots and lots of feedback from the market, both in terms of like from our borrowers as well as just our peers in the Maryland area, other flippers and landlords. And I'm wondering like how much of the feedback that I'm getting is just like a regional thing or like isolated situations versus how like kind of broad, broad based. You know, the drama is right now. I feel like there there's a lot of macro that is working against us as real estate investors right now. What are what are you seeing? What are your thoughts? David Moses (00:50) Yeah, I I it it's it's it's getting bloody. I th I think to whatever degree a particular market is surviving it, I think they are surviving the macro forces that are, you know, on them. I I I don't Jack BeVier (01:05) Mm-hmm. David Moses (01:06) you know, I I think that's really what what it is. I think because it's so ubiquitous, it's it's likely that everyone's experiencing the issues and then on the other side of things you have, you know, some markets that maybe didn't get too overheated, markets that for whatever reason are surviving it. Jack BeVier (01:28) What are the what are the when you say the issues, what specifically are you thinking about? David Moses (01:32) So I we're having issues. I mean it w selling things, renting things. It seems like the market is s stagnant. It it's there are probably affordability concerns on the renting side as well as the buying side. and then people have to make the decision to stay put. you know, the i where it's it's not a supply demand issue. I'm optimistic because we don't have this oversupply. Like I'm not thinking, my God, it's 2008 again or 2000 even 2006 again. where we're heading into a catastrophe. Because I just don't see we haven't built anything. I don't see supply. It's basically just people are just I can't afford to, so I won't. that's that's kind of where I'm looking at. Jack BeVier (02:17) Now do you think that that is a do you think that that is a broader trend that is going to happen? Or is it just like, hey, interest rates went up sixty days ago and no one wants to be the first guy to get a seven handle mortgage rate? And so people are just like kind of throwing a tant the market's like throwing a tantrum right now and just like doesn't wanna write, you know, doesn't wanna offer right now because n you know, because they They got pre-approved based off a six and a half and then like they blinked their eyes and all of a sudden it was seven. And now they're just like, you know, what they want what they wanted and they're just gonna sit out until they can have what they thought they could, you know, what they deserve. David Moses (02:55) I think that's I think that's right. We have we have a market where people who are, you know, they're in a need situation, like they need to move. I think they're making those decisions because they have to. they're taking that seven plus percent mortgage rate. They're taking you know, they're they're maybe paying a little bit more than what they think they should pay. But it can't right, it can't be both. Like either either you're sitting on the sidelines because you think rates are gonna come down and you'll be able to afford more house. Or you're sitting on the sidelines because you think rates aren't going to come down, but the property values will come down and that will cure the cure the issue. No one's ever been Jack BeVier (03:35) Yeah. David Moses (03:35) really good at betting on the latter of those two things. But I don't necessarily think that in in a for a short period of time we're not gonna experience and we're gonna experience some distress when it like I've been saying this for I think we've all been saying this for a while. It's like you see market times kind of ballooning, but property values aren't going down. Well, that that would only happen in a Jack BeVier (03:55) That's what I was gonna ask you. Are are you seeing are you seeing price drops to go along with? David Moses (03:59) Yeah, I I'm seeing price drops. But for forever we weren't seeing any price drops. We were just seeing, you know, people were just stubbornly waiting. market times were kind of ballooning, and that was just what was happening. And there weren't any there weren't any deals to be had. But now I think I think there I I think we're going through a correction. but I still think it's distress that's leading you know, kind of leading the charge there. I I don't I don't think you have people who are willing to make the conscious decision that, you know, this is the new normal and they're gonna have to s and they're gonna have to sell their property at a 10% or whatever percent discount when they don't have to. I think those people are kind of still holding out. The stress is still leading. Like it's still, you know, people who have to, or people who are just looking at it and making a math decision and saying, Hey, I'm paying two mortgages. I I you know, I'm gonna carry this thing. It's gonna cost me ten percent to carry this thing until it's done. I'm just I'd rather just take the hit now. but I don't think anyone's taking any like massive hits unless they really, really have to. Jack BeVier (05:04) So devil's advocate, not saying I necessarily believe this, but let's play with the idea. Aren't we just penting up aren't we just like compressing demand or pending up demand right now because everyone's like pe you know, the same number of households still wanted to be formed, right? Still wanted to transact. They just in the past 60 days decided that they didn't want to be the first person to get you know, they they just didn't want to pay that much for their mortgage. But They're kind of really just pending up demand because at some point they're gonna have to transact or not or just choose not to form a household, which seems like a you know, there should be an adjustment period. But if you're like gonna, you know, put a ring on it and go have a kid, like you know, you're not gonna not do that because of a couple hundred dollars a month. It may take you a little bit of time to reset your expectations because you used to qualify for a $400,000 house and now you only have to qualify for a $360,000. But I mean man, a couple more months of pain right now in terms of like low, low and no showing activity. That four that same four hundred thousand dollar house is gonna be priced at 360. So like is it just like like devil's advocate, it's a low, it's a couple months of low transaction activity, but the market doesn't have more than three or four months of liquidity to not transact. And then prices will be forced to reset Prices will be forced to reset in a, you know, four month period, four or five month period. And so do you have enough well, either prices are reset or interest rates will come back down. And people are making the bet. You know, people are just like sitting on their sidelines right now, not transacting, praying it's the former, right? If you're a seller, you're praying it's the former that interest rates come back down so that you don't have to take that price drop. But if it ends up being the latter, You take the price drop and then people transact at that lower price because that's the same payment for them. and you just hope that you don't, you know, and you pay you know, you end up paying late fees and default fees if you if you can't service your hard money loan for a couple months because you've run yourself out of cash. But like does does does this all just get itself worked out, you know, by January, February? There was a lot there. David Moses (07:15) well well here's here's a couple of things. So January is when, you know, the law goes into into place that regardless of what teeth it has, the the perception is still you're a big institutional investor. You shouldn't own single family. the trend is gonna be away from that. they're gonna do something. They're gonna make some some changes to what they do. they're not just gonna go well we'll just trade with each other and and just keep on keeping on. I th I think they're going to if not divest, they're just not gonna buy more or they're gonna go through their normal pairing of you know, of houses they don't wanna have on the balance sheet and then they're going to not replace those. E either way, I think is a distinction without a difference. You have that you you have that Jack BeVier (07:58) You're talking about the you're talking about the the the institutional landlords, the three hundred and fifty plus landlords. David Moses (08:04) that that pen you know what? I gotta p I gotta put us on hold for one second. Sorry. my son's my son's calling and I know why. Jack BeVier (08:10) Cool, no worries. David Moses (08:11) Sorry, I just had to make sure my son was not sitting at the bus stop all by himself with nobody to pick him up. And he was not, he just wanted to make sure he was having sushi tonight. So first world problems. Jack BeVier (08:24) That's awesome. That is a great reason for your son to be calling. The there's many, many, many alternatives that are much worse. So that's good to hear. David Moses (08:31) Truth. All right. So sorry, go let's go back. your question w was essentially Jack BeVier (08:36) You were talking about the the institu you you were referring to the institutional landlords, you know, the capital I institutional landlords, those with three hundred and fifty or more properties. You think they're gonna pull back? They're not they haven't been that active. Maybe they are in your backyard. They're not they're not around now. David Moses (08:51) Well, I I I it's not it it to me, it's like you would think they would be the first ones to start taking advantage of those, you know, Jack BeVier (08:58) Mm. David Moses (08:58) little blips downward in the market and the the long market time. You think they would they have the balance sheet, the capital to just go in and say, yeah, I'll I'll I'll go ahead and pay you eighty cents on the dollar, you know, and fine. That's that sound that sounds good to us. and there's probably not gonna do that. There there there's gonna be a lot of selectivity in in what they do. And you have like guys like us who are in the market going, I'm I'm never buying at eighty cents on the dollar. That's not gonna happen ever. So I'm at seventy. I'm at, you know, seventy to seventy five, sixty five if it's a maybe a low lower value property. So so I wasn't in that I wasn't in that world. I wasn't gonna take advantage of a little blip anyway. I'm only looking for distress. Right. So I'm gonna I'm gonna find the irrational seller who's like, my God, this is two thousand eight. I need to take a huge haircut to get out from under this and I need to move, you know, move on. And then you have houses where they're physically distressed, and that's a that's a different scenario altogether. but other than irrational sellers, I think you have you're you're going to have, I think you're right, you're gonna have a pullback. You're gonna have people saying, Yeah, all right, I'm gonna pay 360 instead of four hundred. and I'm gonna have the same payment. And if I If I if interest rates go down, bonus, because now, you know, now I'm even better. But the people who are sitting on the sidelines going, you know, I want that four hundred thousand dollar house, but if interest rates came down a percent, I would go buy a five hundred thousand or a four hundred and fifty thousand dollar house. And so now it's like all those things whirling around in a potential buyer's head who doesn't have to make a buy decision. They're just sitting on their hands and saying, I don't you know, I yeah, I can afford it, but I want I want a house that is like I'm gonna buy a house, what, three times in my life. I wanna make sure that it is the biggest, baddest, best house that I can possibly afford. And at a seven percent interest rate, I don't care what kind of a haircut or what kind of a discount I can get on the house because I, you know, I'm not in a financial position to go buy the four fifty house. house anyway. So I'm just gonna sit and I'm gonna wait until interest rates come back down because I think this or the Jack BeVier (11:15) Yeah, so like if you're a if you're a buyer and you're just transacting on the buy side, right? You're a first-time homeowner, your the houses that you thought you could buy, the houses haven't repriced yet or haven't repriced enough to to offset the new mortgage pre-approval that you got that just came down by like, you know, 10% or whatever, right? So those people are just throwing a tantrum on the sidelines. They want to transact, but they're just like, no, they're going through the stages of grief. And the houses haven't repriced yet, so they can't get what they want. So they're just sitting out for a while and choosing to rent for a little longer or choosing to maintain both of their leases for a little bit longer. But eventually they'll transact. Of course, everyone eventually transacts, but like, but they'll transact as soon as either interest rates come down or prices come down to accommodate the higher interest rate. But they'll be transacting as soon as the market adjusts. So like. I'd argue that that like that there's a there is some pent up demand from that. But that doesn't mean that like it'll be that doesn't mean that it'll be to the seller's benefit. It could be the buyer's just gonna wait until they can take it out of your ass, you know? Now, if you're both if you're a if you're not a first-time home buyer and you're on both sides of the transaction, right? You're selling a house and buying a new house because of a relocation, you just need to make sure that you're getting you that you're entering at the same place, right? If you're selling at the lower price, that you're also buying at the mark to market lower price. So and as long as you like don't screw that up, and there's an opportunity even, right? To like maybe get it get get your house off you know, or you know, underneath the wire in the old mar you know, old market at old values, if you can somehow, you know, get chosen before prices readjust and then hang out for a little bit or go cherry pick the distress from the sellers who really want to transact. You could even like there's a little bit of a trade there in these like moments of transition. but then if you're a s just a pure seller, like a real estate investor, you know, flipper, you know, if you're a flipper I'm talking about now, then right now you're just David Moses (13:16) Mm-hmm. Jack BeVier (13:18) getting crushed by carry and you're and you're praying that interest rates come down and you're hoping that The clearing here doesn't have to happen via a price reduction. And you're just watching your bank account go down month over month over month at the moment, right? It's just kind of like a frozen market at the old prices and there ain't much activity at the new prices, even. At least what I'm that's what I'm seeing is like it's not like the market's falling as much as it's just paused. And the question is, are interest rates going to come down before the fall kind of like continues? David Moses (13:51) Yeah. I and I think that's I think that's right because if you're gonna put your house on the if if you're a flipper or you're an investor, you know, you're looking to sell something, you know, you you're gonna have to be patient to get whatever today's market rate actually is. You know, you're just gonna have to sit and be patient and that's just the way it goes. Or you're gonna have to take a you know, a major haircut. because things just don't transact quickly. but we're buying like we are focused very intently on buying occupied properties, like rented properties. Because people who are not w like if you have a property that's rented and you still have to sell, you're you're probably taking a haircut. Right. Because you're not you're not Jack BeVier (14:38) Yeah. David Moses (14:39) eating carry every day. Right. Yeah that's just not happening. You're you're you don't you don't really have I mean maybe of a nominal carry cost because Of whatever the different the delta is between your rent and and your you know and and your monthly cost. But if you've got a t a paying tenant and you're on the market to sell right now, you either have your head in the sand and you've no idea what's going on, or you've got some other reason. you know, I guess there are a few people out there who are like, they lived in it and then they rented it out for a little while and now they have to sell before they have to wind up with a capital gain. i there's a little of that going on. But r really for me it's like if I can buy an occupied house at seventy or eighty cents on the dollar, even eighty cents on the dollar, an occupied house is okay. I don't have the risk of I don't have that that carry risk of having to turn over the property and get a tenant in there at whatever the market rate for a tenant is because t you know, same thing is happening on the lease side, right? I'm I'm sitting and waiting for tenants to pay market and I'm not necessarily willing to take a big discount on the rent. But I can I can play with those numbers, right? I can I can say, okay, I'll give you two months free, right? At least I got the place occupied. but I want a market rate for my rent. I'll give you whatever. I'll give you a break in year one, year two, it's gonna bump up and you gotta sign a two year lease. What whatever it is, I can play with all that. but if I can buy something that's already rented at yesterday's rates, and they're paying a good tenant, and I can buy it at a discount. I I'm buying that stuff right now because even if even if we're heading into a correction, if I've got a paying tenant and it and it pencils, I'm okay with that. I c I can I can wait it out. because I'm really all I'm really doing is taking advantage of the fact that they can't wait it out. Jack BeVier (16:19) Yeah, so what's that's what I was gonna ask. Like if they got a paying a ten paying tenant, they're less interest rate sensitive. Like what is the what's the underlying reason behind the motivation that you're seeing those sellers decide to transact at seventy, eighty cents in the dollar? Just frustration, David Moses (16:33) You so Jack BeVier (16:34) just tired, just tire pure tired landlord. Like just get this thing off. It's found money. David Moses (16:36) Yeah, they're it's it's a t i it they they just don't wanna deal with it. They they can't manage it anymore. They don't wanna I mean they're j or they're they they see some other opportunity. You know, investors often transact on one side because of something completely different that they're gonna do with the cash on the other. and and that, you know, maybe they have their own business that they wanna invest money in or they need the capital and they need to, you know, shore something up that's broken or falling apart. W whatever it is. but I think, you know, th the guy who had a couple of rentals in his portfolio, right? Where now he's having to feed those rentals every month. And the thing that he was doing that was making him money to socket away into rentals isn't doing what it was doing before. And so kind of like the reverse happens. And he says, Okay, I'm out. of of this rental game because I I'm just I can't feed this thing every month or if I e even if I can, I've got trapped equity. I need to get whatever of it out that I need. and and that's I think there's a little bit of that going on. Very rarely is it that I'm hearing people say, I think the market's gonna take a big dump and real estate market is going to take a big dump and I want to get liquid, you know waiting for that. I that's a kind of an interesting it'd be interesting to hear that, but that's not that's not what I that's not what I'm hearing. People are considering selling because it is a side thing for them. and and it is it is just something that they don't want to deal with anymore. Like it's not as easy as they thought it would be. it's not as lucrative as they thought it would be. They're they're looking at the return on investment and saying, okay. They're looking on their return on equity and saying this makes no sense. Jack BeVier (18:25) So like the past sixty, ninety days I would consider to be a major shift in just showing activity and how you know demand in the market. And you know, so people want a time how to play it optimally, right? But you have to get the to to to play this hand, you know, optimally, you have to have a view on, I think you have to have a view on where interest rates are gonna go. What's yours? David Moses (18:49) so I think that to whatever degree politics plays a role in interest rates, I think the tenure at five plus is dangerous because at that point it becomes like let's just let's fast forward. The AI data center build outs are, you know, let's just say slowing down or Not really, you know, th all the AI infrastructure that is kind of propping up GDP, propping up investment activity, as that dies down, as people decide, I have, I I'm financing those things. I have, I'm sitting on cash. Why wouldn't you, or I'm sitting on equities, why wouldn't you take money out of the market and buy treasuries at five plus percent? Jack BeVier (19:38) Dude, I was gonna say I was gonna say the I was gonna say the exact same make the exact same point. At five and a quarter, the tenure, I'm like, huh, that seems really high to me. Like, like like I c I kinda like I kinda like that. Like we're going into AI, which is supposed to be like technology is ultim ultimately deflationary. Like the idea I don't think that the Iran war has is like, you know, it's not gonna last forever. And that's the only that's the main reason that. CPI is where it is. And certainly I think that if CPI, if if owner wasn't using owner's equivalent rent, we're seeing I mean we're seeing real estate prices fall right now, right? Like rents are flat. Rents are flat to down. Real estate prices are flat and more down than flat. Like, but owner's equivalent rent is not show is not ticking negative in those CPI calculations. I'm like, dude, the spread between what I consider to be actual, like real, you know, can affect with monetary policy inflation versus the tenure, or even even versus so far. but then like, you know, look like the idea that that's gonna stay there for, you know, for a 10 year period, you know, I'm like, yeah, that's it feels like a pretty good investment opportunity at five and a quarter. David Moses (20:51) Yeah, I'll bet the under on that particular, you know, situation. Jack BeVier (20:54) Yeah. Yeah, I'll take the under on five and a quarter. Yeah. I guess, you know, you the devil's advocate there could be that like, but we can't get our budget in control and we're gonna have to print our way out of our out of our social benefits programs issue. I think that's a fair counterpoint. David Moses (21:08) Well, but the more we print, the more that interest you know, the more the more that interest hurts at five and a quarter, right? Like eventually you know, I Jack BeVier (21:14) Yeah, yeah, yeah. David Moses (21:16) just we we we aren't I don't think we are a country that can sustain five and a quarter long term at our current debt. That's just not It that I I just anyway, I I I think the bet in the market is going to be Yeah. Jack BeVier (21:30) Yeah, yeah. It it it suggests we're gonna print our way out of it. Yeah. But that's like the that's is the is the market front road front running our our up politics, you know, our dysfunctional politics political system that the market's like it's five and a quarter because you guys are going to print your cause you guys can't get along and you're gonna print your way out of this. So you know what? Five and a quarter is the right number. Hmm, maybe David Moses (21:52) Maybe. But but I think look, you the proof is in the pudding. You go see you'll see what investors do and as they exit equities and and buy and start buying, obviously that's gonna likely bring treasuries back down by itself. But you know, 'cause obviously as as as those become more attractive to move into, you know, supply and demand does does play a role there. Jack BeVier (22:18) I wanna I wonder if the open and AI and the anthropic IPOs being delayed, like that they haven't happened yet, is there like a pent-up thing? Cause I feel like there's like a psychological thing where everyone wants to get involved in those IPOs, or at least or at least there's a segment of society that's really excited about getting involved in those in those IPOs. And so like until you have the until you don't get an allocation, you kind of want to be liquid. And so you got you just got cash sitting in the bank account or bat cash uninvested in other stuff because you're like Because if I get an allocation, I really want to participate. And like, is it actually just like keeping money on the sidelines? Like is it is it big enough that it is it such a big I big sexy IPO set of IPOs that it's actually like got the psychological effect of putting money on the sidelines? David Moses (23:03) Maybe, maybe. you know, and and what's the argument against putting it in Jack BeVier (23:04) I don't know. I'm not sure if there's enough scale. David Moses (23:06) treasuries, right? If you're you're putting it in treasuries and you think you're gonna get some opportunity, then liquidating those treasuries becomes a concern if you think rates are going up even more. so Jack BeVier (23:15) Mm-hmm. David Moses (23:16) I the market doesn't seem to be betting right now that rate, you know, that that that the tenure is going to drop. or that that the tenure is more attractive than what equ whatever equities are gonna do. And that that's not what the market is is currently doing. But as it goes up, Jack BeVier (23:30) And what's and what's your view? David Moses (23:32) huh? Jack BeVier (23:33) And what's your view? Are the is it going up or is it stay is it staying where it's at? Is it coming down? David Moses (23:37) I I'm I I think if we if if we're sitting here next time next year, same time, and the tenure is still above five, I'd be very surprised. Jack BeVier (23:49) If it is, where do you think real estate prices will be, broadly speaking? You know, just you know, single family houses, multifamily cap rates. Let's just talk about those. David Moses (23:57) I I I think in I think varying degrees there's gonna be a significant reduction. I I think the way I would actually gauge it is I look at I would look at rents, right, in those markets and I would see I would try to predict what rents are gonna do. i if rents are going to if rents are gonna drop and like precipitously drop, then or say like to say Let's say they're gonna drop even five percent. Right? I would I would be very, very bearish on real estate values. I just I I I would be. it's Because it's not Jack BeVier (24:36) The young David Moses (24:37) at that right now there's no investor to prop it up. Right. The the big guys are getting out or pulling back or at least taking a pause. And the little guys who are there to scoop up the deals when they happen are sitting here going, These those these deals don't pencil. Current rent, like I have to bank on rent appreciation over the next few years to get them to pencil. And everyone has been willing to make that bet. Everyone for the last what? Jack BeVier (25:03) Yeah, husband. Has been, yeah. David Moses (25:05) Yeah, f everyone's been willing to make that bet. I'm not willing to make that bet anymore. If it doesn't pencil now, I'm not buying it. Jack BeVier (25:11) Yeah, it's interesting. Like how we we're like the market's giving all these like counter counterindicative signals, right? Like if if if the ten years at five and a quarter, it's because we believe we're gonna have sustained inflation. If we're gonna have sustained inflation, then rents, you would expect rents to be going up, but we're seeing not none of that right now, right? Like people are neither pricing in rent increases nor they increase pricing in decreases in interest rates. It's it's this like little dead zone. David Moses (25:38) But I would but but then but then what is that like? It goes back to the fundamentals, right? It goes back to supply and demand. Right? We're not creating more supply, and this is only going to put more stress on that. Households will be formed, people are still being born, people are still getting married, people are still getting divorced, like things are still happening that require the creation of households. And if we're not creating housing units. To absorb those households, then it's just it's just a matter of time where like rents and values can only drop so much. They they can only drop so much. Jack BeVier (26:22) Mm-hmm. David Moses (26:23) Be you know, just because it's just still even if you don't believe there is any longer a housing shortage for whatever reason that may be, or or if that's market specific to your s you know, to your specific market or sub market that you invest in. I still think that it that in the long run it is We are not oversupplied in i in in virtually anywhere. Jack BeVier (26:46) Yeah, I agree with that. And and so you're saying that and so you're saying that housing prices aren't gonna come down? David Moses (26:53) I I think I think they will come down. It it w in fact I think they'll come down more than they probably should. Right. And Jack BeVier (27:00) Mm, mm-hmm. David Moses (27:01) and that and that correction is like that's where you want to take advantage and and make a buy, right, when you see that happen because rents will rebound. If rates go down, you know, values will rebound too. I I don't know. I mean, y like like you said, you can't you can't have rents going down. and inflation staying high for an extended period of time. It just doesn't make any sense. Jack BeVier (27:25) Yeah, agree. Yeah, yeah, I agree. The only the only other the only other variable that for some reason economists, at least housing economists these days, don't talk about as much as I think they should. And I've said this before on previous episodes of this podcast, is that that consumption everyone holds consumption as if a household was a unit. Households are not a unit of measurement. You could have a household of one, you could have a household of 17. So household is a useless measure, you know, per square ca housing consumption per capita expressed in per square foot, you know, square feet per capita. That is a consumption measure. And so there is a there is a spring in consumption to that that that can absorb some of these shocks in both directions where you don't end up you you end up with roommates, right? Roommates end up being the solve. The consumption per capita of housing goes down, right? Like we were compu consuming twelve hundred square feet, and now the consumption goes down to a thousand square feet and no new houses got built. There's just more people with roommates than there was before. And the r and that allows the rent to go up, right? Because that allows the rent per square foot to go up because now there's three incomes in that house instead of two incomes in that house. And so it's still affordable or it's the same level of unaffordable as it was before because you have more humans to to feed the to feed the meter there. so I always like I always I can't help myself but I always I feel like that that idea is not in enough in the analysis of you know housing affordability. we we are David Moses (29:00) So so what's what's the measurement? Is it is it bedrooms? Jack BeVier (29:02) I think it's I mean it's bedrooms and or square feet per capita. Housing consumption per square feet. Yeah. Yeah and and it's not like a it's not like it's like if you consume less square feet you're poor. Like in New York they s consume far less square footage than they do in, you know, Mississippi or whatever. But like so you y you know, it's not not direct, you know, not necessarily, you know, square footage is not necessarily a luxury good, you know. so anyway, I I think that that that that is the mis miss the under the underestimated David Moses (29:34) Misconception here. Jack BeVier (29:35) or the you know the underappreciated spring that can solve this supply demand curve is consumption. David Moses (29:42) Yeah. I I I think another I mean it so part of that is is roommates and another part of it is just the delay in the formation of households and and that that is Yep. Jack BeVier (29:49) delay exactly yeah the the the kid in the basement we and we're seeing that very much so right now right like the delay in household formation right now is directly you know explained by the kid in the basement which is higher which is lower consumption per capita because if the kid had left when he was 23 mom and dad would be consuming three thousand you know two thousand square feet per capita but since the kid's in the basement they're cons you know every it's you know it's sixteen hundred square feet per capita in that particular house David Moses (30:18) And and at what point does you know, at look, at some point that corrects itself one way or the other, right? Either either the kid leaves and finds, you know, Jack BeVier (30:26) Can David Moses (30:28) well, okay, in in in a normal market, to whatever degree it's abnormal, like to whatever degree it's not just you know, kids just don't you know, they just really want to live with mom and dad. You know, to whatever degree that's normal, okay, fine. But then there's the there's Jack BeVier (30:44) If you're David Moses (30:45) like Jack BeVier (30:46) if you're in Italy, if you're in Argentina, that is normal. Like, you know, there's a David Moses (30:48) That's normal, right? Jack BeVier (30:49) fifty year old guy living with his mom. That is normal, as n as you know, as could be. David Moses (30:54) Compl completely normal. Yeah. So but but to whatever degree normal, you know, that is normal here, Jack BeVier (31:01) Yeah. David Moses (31:01) there's still a period of time where it's not normal. But there people are making a choice that they wouldn't otherwise make. And and one something's gotta give. Either that child is going to move out and form a new household, or those parents are going to say, I I would have been downsized by now. I don't need to take care of all this house, you know. I I need to make a change. So but what does that all ultimately kind of cater itself to? Because we we do have an over we we have been oversupplied in the large, expensive, newer houses. Right. We we have we have been because that's the only thing that made sense it that it made sense to build. Jack BeVier (31:43) Yeah. David Moses (31:44) We are undersupplied in the smaller, you know, in in in the smaller, on the smaller end. And I would argue that. To whatever degree your housing is relatively affordable, right? You're in an area that maybe isn't as desirable, right? But it is relatively more affordable than wherever else around it, I think they're getting a they're getting propped up by this too, right? They're they're getting, Jack BeVier (32:16) Yeah. David Moses (32:16) you know, people are choosing to live in areas that they wouldn't otherwise choose to live in, right? And that is a result of, you know, that that's that's a result of the monthly payment per square foot of the space that they're renting. So those things are but but again, I think it goes back to we are not oversupplied other than in certain markets, in certain certain segments of certain markets, certain types of product in certain markets, but we're not generally, you know, oversupply. Does that mean go buy everything under the sun? No. I I think you you have to be very specific of what you buy and you want to buy into those things that tend to be more stable, those things that are catering themselves well right now to the rent still staying stabilized because you have a shift from the more expensive rent, right? In the more expensive rent areas into the lower rent. That's creating more demand in those areas, even if the overall demand is low. Right. But again Th we're all this is all predicated on the market on freezing. Right? Like like it to the extent people are just like, I'm not even thinking about moving for the next six months because I don't know what's I don't know what's gonna happen. I don't wanna rent a new place and commit to that. I might wanna buy. I I might interest rates might do this, housing prices might do that. Whatever it is that is freezing people, that that will thaw. And the question is where are you gonna be when it thaws? That's why I like I like, you know, it stuff that's cash flowing right now. I'm gonna buy something that already has a coupon to clip. Cool. I'm I'm good with that. I I I don't even need to buy in at it at a some gigantic discount. I want a good tenant that pays on time. And if I can verify that that's what's going on, I'm gonna jump in, I'm gonna start, I'm gonna and I'm gonna buy those, you know, and I'm gonna buy the extremely distressed stuff. Jack BeVier (34:09) What kind of spread are you looking for in terms of is it like area specific? in terms of like what spread you're looking for in terms of the cost of you' cap rate above cost of capital? Is the cost of capital your reference point right now? Are you using are David Moses (34:22) No, I I'm Jack BeVier (34:22) you using today's DSCR rates as your as your floor? David Moses (34:25) No. No, because you know, as as as our friend Danny Catan always says, cost basis is permanent, financing is temporary. I I what I'm looking at is I have a line of credit with the bank. The bank's actually about to increase that line of credit significantly. And I can take that and I can put stuff on at significantly lower like I'm I'm borrowing at six right now. I would be borrowing at five and a half if I had been smarter. about the floor of the of the note, but like I'm I'm I'm borrowing at like you know a I'm I'm borrowing at a margin below prime. And so I think and obviously prime goes up, I'm I'm still fine because I'm at my floor. But if I'm buying and I that's where I'm penciling Jack BeVier (35:10) How much cushion David Moses (35:11) it. Jack BeVier (35:11) and how much cushion are you giving yourself on yesterday's real or on today's real estate values, whatever? You know, thirty days ago's David Moses (35:17) Five Jack BeVier (35:17) real estate values, how much cushion on the to the downside are you giving yourself on that cost basis David Moses (35:22) so Jack BeVier (35:22) argument? David Moses (35:23) if I'm buying two hundred K less, two hundred K and less in my market, I'm buying at seventy cents on the dollar and I haven't really changed that tune. I might be changing what I'm willing to buy, but not really like I'm not gonna buy more expensive stuff. I'm kind of shying away from the more expensive stuff, but I'm still at seventy cents on the dollar. Jack BeVier (35:42) Would you buy seventy cents on today's like on the on the comp that cleared yesterday? You you'd still buy a seventy on that? Okay. David Moses (35:46) Yeah, I think so. Yeah, I'm still I'm stuck I'm still basing it on today. Yep, I'm still basing it on today. and and at seventy cents on the dollar, I'm yeah, I'm I'm making a a little bit of a bet, right? But I look if the if the if the market drops five percent or ten percent on a house that's rented, that's penciling, that that I can afford to carry. I mean, I'm not I'm fine with that. I I'll wait that out. Those are you know because I don't see a yes, I do see a correction coming in the market, I do see housing prices going down, but I don't see that lasting. Cause there has to be a a fundamental supply demand issue for that to last for a significantly long period of time. You know, I I mean unless you have a deflationary Jack BeVier (36:26) Yeah. Extreme. David Moses (36:28) environment, and that's just a different world altogether. But if we're if we go into some deeper session, right, rates are kind of are coming down anyway. Right. And and then I'm going to be sitting there with you know, we go into some giant recession, I'm I'm just gonna be refinancing that stuff into like, you know, five, four, three, whatever percent, you know, and and I'll be fine. That that that won't that won't bother me. So yeah, I do think we are gonna but it it's also about gearing up, right? It's also about making sure that our underwriting is more sound, right? I I how how many times out of out out of call it ten deals that go bad, how many times out of that 10 is I didn't predict what the market was gonna do correctly. And how many are I up on the underwriting of this deal. Jack BeVier (37:17) Yeah, you just got it wrong in the first place. Yeah. It's the latter. It's the latter. David Moses (37:19) Yeah. I and I think that's it's it's it it's almost always the latter. Like I've I I've just never been in a situation where look, if the difference between a good deal and a bad deal, or a a a success and a failure is one percent of cap rate or interest rates that are then y you know, you you're you're you're you're betting too tight to begin with. Jack BeVier (37:42) Yeah, exactly. You're betting too tight to begin with. Yeah, exactly. That's super interesting. I think we have a we have a slightly different or we're taking a slightly different posture in terms of like what well, so I'll just tell you. We would argue that this is you know, we we'd argue that this is a liquidity issue. The market is frozen, it's throwing a temper tantrum right now. The problem is that it's You know, we're four plus years into this rate tightening cycle. It is having its intended effect of s of soaking up, you know, of vacuuming up the excess money that was printed. And no one really zooms, no, no one people rarely zoom out to realize that, no, over the course of the next six, you know, over the course of an eight-year ten, you five to ten year period, it does that. It does over the course of a year or two, it does not. You kind of barely notice, you know, like you can't really see it. You can't really. But act, but give it five years, and that's exactly what it does. And we're just five years into, or you whatever, four and a half years into a rate tightening cycle. And so the money that was handed out in 2021 to everybody who decided to buy assets, whether they were talented operators or not talented operators, a whole bunch of people just got in and got handed a bunch of money. And now we've spent the next four the next the subsequent four and a half years vacuuming it back up. In you know, blunt is in a blunt instrument you was used to hand it out, and now a blunt instrument is being used to vacuum it back up. And that is going to lead to dislocation because not all operators are created equal, and not everybody treats their liquidity in an equal way, manages their the liquidity of their business in an equal way. And so because of and and this is like just like this might just be the straw that broke the camel's back. Right. Like this, this Iran war seven and a half percent interest rate environment might just might be the the the this it's just a might just be this a straw that breaks the camel's back, which another six months would have done also, you know. You know, another six months of higher interest rates would have done also. But this is just like insult to injury, you know? And so we are very focused on being the most liquid one in the room and Less concerned about where specific markets are going, more concerned about, hey, how do I die identify the situations where liquidity is the reason for the distress? And so providing the liquidity leads to the opportunity, leads to the outsized return. Where like where the numbers are no brainer, you you you structure a deal where the numbers are no brainer, you're just, you know, you're you're taking almost, you know, getting overpaid for liquidity. As opposed to necessarily, yeah, I guess get getting overpaid for liquidity. And for us, that leads to like that is easier to deploy in a debt context or you know, a debt or a preferred equity context. but I do think that it's going to lead to some real estate opportunities as well, particularly but but only, but only in the most affected markets, right? Like, so like if I didn't have the low end of Baltimore in my backyard. I think I'd probably be going with your strategy. I'd probably be like, hey, let's just focus on like it pencils really well, it covers, we're buying it at a discount. We're gonna dollar cost average. And we think that this is gonna be a time where our dollar cost averaging is like slightly advantageous, but I'm always just a buyer of American real estate. I happen to think that like we're gonna have like Washington, DC is significantly affected right now. The low end of Baltimore is falling right now. And like I want to pick some. I do think that there's going to be some spots. And they're different. There are different phases, right? Like DC's a full year, year and a half ahead of where Baltimore is right now. Like the Baltimore story today is what DC was felt like a year and a year, year and a half ago. so like just because the macro is hitting us all at the same time doesn't mean that the underlying market fundamentals were the same, we're all in the same starting conditions, right? So I mean, these interest rates in DC right now is just kicking it kicking a dog when he's down. You know, like that that market was getting its ass kicked and then you did this to it, backbreaker, you know. so we're kinda we're kind of gearing up for that and trying to stay liquid for those human situations that where that that where you can get paid for having liquidity to solve a pr a specific, you know, human problem, you know, preservation of equity problem. David Moses (42:07) Yeah, I mean I I look I think that's I think that's a a an absolutely fair and correct way to go about it. I mean I I would look at it like The the elephant in the room is that is that foreclosures are going up. Right. And and a I I think an argument could and and on the multifamily side that debt's resetting to a a wildly more expensive environment than it was before. So Jack BeVier (42:35) Yeah. There's a lot of people really excited about the multifamily reset again. You know, people were were excited for three years ago and it just kind of didn't everyone just kicked the can and now it's like, no no no no, it's really gonna happen this time. David Moses (42:48) It and maybe and maybe it will really will happen and that will favor Jack BeVier (42:50) And maybe we will. David Moses (42:51) that will favor the liquid. you know, all all those things are are right. But I think that if you have the ability to borrow at reasonable rates, a hundred percent of your investment and it pencils, then I think there's a it's difficult to convince me in this environment that I'm making a big blunder. Jack BeVier (43:16) Mm-hmm. I heard that. Yeah. David Moses (43:17) Right. be because I over time, though like I could be looking at cheaper prices, you know, six months from now. For sure I could be looking at cheaper pricing six months from now. But I'm basically just doing the same thing. I'm just gonna have I'm at that point, I'm basically saying I'm I'm not willing to make an investment if there's not a significant amount of appreciation involved. Like I'm I'm penciling that in. If you're if you're making that decision and saying I'm not gonna buy now because they'll there will be better deals in the future, I'm thinking of it from an appreciation standpoint. I'm gonna have a better deal six months from now relative to what that dirt is really worth. and and then I will like my my I'm gonna get the cash flow, right? Because I'm not gonna buy without it. But I'm gonna have that, I'm gonna have that cherry on top, which is which is gonna be which is gonna be the equity's gonna be significantly increased in a shorter period of time because of a correction, a rebound, whatever, you know, whatever. And I think that's a, you know, I think it's a wise decision to make. But at that point, I'm just gonna say, Okay, I'm a buyer of more things because more things pencil. Or I'm gonna Jack BeVier (44:34) Yeah. David Moses (44:35) buy her the same amount of things, but the the things I'm going to buy are going to pencil better. w whatever whatever the argument, you know, whatever whatever the strategy, I I I just think as long as we are buying with debt, right, and we are able to buy at significant discounts, right? The win is in the buy. Always has been, every deal we've ever made that we thought was great, you know, was because we bought it right. It wasn't because you know, we we bought it and found out that s somebody wanted to buy it for a different use or a different reason. Like we we we knew what the we knew what the best use for that dirt was. And you know, it is what it is. But we will we won because we bought it right. And I think there will be look, liquidity, where does liquidity really, really, really help today? I think is in the non financial investments. So buying at the courthouse steps, right? Buying Jack BeVier (45:33) Mm-hmm. David Moses (45:34) at the tax sale. Buying you know, from what whatever it is, right? Like that it where it must be a cash transaction. Jack BeVier (45:42) Mm-hmm. David Moses (45:43) And if you're financing it, you can't finance it for at least some period of time. Like you like I'll lay out my cash today to go refinance it out in a week or a month. Right. But In Michigan, if I buy a foreclo at the foreclosure sale, I six months, they have a redemption period. And it and I could get paid off. And if I get paid off, I'm getting like a paltry amount of interest. And okay. Right. But if I'm buying at a discount to the note, I you know, then there's there's white meat there. If I'm buying but again, you need cash. Right? You need cash. So that that distress and and that's really up to banks. Like banks are still here. Most banks are still bidding their debt. Right. So if you know if they're bidding their debt, there's no there's no delta between what you're putting in and what you're gonna get paid back. Right. That's you know. Jack BeVier (46:38) Are you DSCR loans or resi consumer loans too? Or I mean of of course it's both, but like are you seeing an uptick in foreclosures? David Moses (46:48) I haven't seen a DSCR loan foreclosure that I've Jack BeVier (46:51) Really? David Moses (46:51) looked at to bid on. I I just most of those things I think transact between those lenders and those and and and and their existing customers. I I I would I would guess, you know, when when you're seeing a discount, right? When you're see seeing somebody just like, Hey, I'm gonna go to the courthouse steps, I'm you know, I'm I'm a bank, I'm a lender, I'm just gonna go throw it up at the at at my debt and it's gonna get bought. That's a different story. I I I really wouldn't know those things. But but stuff that's Jack BeVier (47:14) yeah, no. Yeah, no. I we're David Moses (47:16) I see like, hey, this is a deal, this is a discount, it's the lender's going directly to the people that they wanna sell it to and Jack BeVier (47:22) Yeah, we're we're seeing DSCR loans go back at the courthouse steps to the lenders because those lenders because you know, because there's not capitulation in that segment of the market, right? Like there's not the psychology of you know, because I bet in 2006 the banks weren't letting go either, you know. But by 2009, they were letting go. It at you know, at even dumb numbers, you know, because it was long it the the psychology of it had changed. They The guy who made that bad investment decision had moved to another bank. And now the new guy came in and was just like, Hey, you know, I didn't create this situation, but it is what it is. We have to take these losses. You know, you have to wait for that cycle of humans to move around so that the new guy can can just go through the process of actually manifesting the losses. David Moses (48:05) What a lovely time that was. What what an absolutely lovely time that was when you could you know, I I got absolutely hammered by the Great Recession. Like absolut like I was a kid. I had a bunch of bank debt and it was you know, I was buying stuff on on on, you know, all all kinds of loans and and yeah, it was it was a disaster. When I started buying again, the first deal was a Bank of America deal where Bank of America was paying a three thousand dollar commission on a house they were selling for fifteen hundred bucks. Like the irrationality of that is Jack BeVier (48:40) Just to get it off the books, yeah. Crazy. David Moses (48:42) Just to just to get it off the books. I ha you know, banks where I was under contract to buy it and the bank got taken over and then came to me with a better price. I'm like, I was gonna buy. Jack BeVier (48:56) What did when what what year did you get back in? David Moses (48:58) I got back in in twenty ten and like yeah, like tw twenty ten, end of twenty ten was really where I started to get back in. Jack BeVier (49:07) Yeah. David Moses (49:08) did a lot in twenty eleven and twelve and then started to kind of Jack BeVier (49:13) But you'd seen like s ma I mean, by twenty ten there was massive capitulation, right? Like they're selling houses for fifteen hundred bucks and paying three grand. That's like crazy, right? Like I don't I don't think I I don't feel like we're we're not there yet. I don't think we're gonna David Moses (49:21) Yeah, I couldn't get in in two thousand nine. Yeah. Jack BeVier (49:25) get there anyway. But like, you know, even even if this was the new normal David Moses (49:27) No, there's no there's no supply. There's there's just no supply. You can't like Jack BeVier (49:32) Yeah, yeah. David Moses (49:33) rates are only gonna like people are only gonna sit on the sidelines for so long until they see a deal and they're like, Okay, this this has to be bought. R rates weren't insane back then. Like they were you know, but they weren't they weren't amazingly great either. but nobody was financiable then. That's also the other thing is that there is a wild amount of capital available To investors to take advantage of a dip in the market, such that you're probably not going to have a bloodbath in the market because they're not all gonna get out. And even if they do, you know, e even if many, many of them get out or they tight, like they're gonna tighten. They're still just it's a business now. Then it was n nobody was nobody's financing besides Fannie and Freddie to buy houses. Nope, nobody. Hard money lenders, and that was it. Jack BeVier (50:19) Yeah. I agree. I th I'm I'm very concerned about the I'm very concerned about the guys who paid 2023 prices for house 2023 and 2024 prices for houses, myself included, and borrowed money at 2023 and 2024 rates and believed the debt service coverage ratio calculation as if it was like a real Death service ratio ratio calculation David Moses (50:46) A real thing. Jack BeVier (50:47) and not just P I T I. And in a f in a in a if if rates stay anywhere around, if they don't come down a hundred if they don't come down a hundred, hundred and fifty basis points, if they stay, if they don't come down at least a hundred basis points, more than that, if they don't come down at least a hundred and fifty basis points, and I'm not sure that that's like I don't have the case that that's that that no rates are gonna come down 150 basis points. I I'm not sure that I think that this is the new normal, but I don't think that it's no, where we should be is a hundred and fifty basis points lower than here. and so the folks who David Moses (51:20) What was the five year what was a five year on February twenty eighth when the war started? Jack BeVier (51:24) I c I you know what I I will I have a website for that. I'll keep David Moses (51:27) Yeah. Jack BeVier (51:28) talking and looking up at the same time. so like the folks David Moses (51:30) I I I wanna say it was probably three point I'm gonna say three point four. Jack BeVier (51:35) The what give me a date? David Moses (51:37) three point six. The f the the five year Jack BeVier (51:40) I'm what they David Moses (51:41) February twenty eighth. Jack BeVier (51:43) Twenty twenty four. David Moses (51:45) No, no, twenty twenty s twenty twenty six. Jack BeVier (51:48) twenty twenty six. Geez, okay. yeah, just this year. It was the five year was three point five. David Moses (51:56) Three point five. Okay. And was this five years a day? Five something? Jack BeVier (52:01) Yeah, yeah. so much higher. Five. Today David Moses (52:04) Mm-hmm. Jack BeVier (52:04) the five year is five. Yeah, it's five on the five on the nose. Yeah. Five two. 150 basis points. David Moses (52:07) Okay. So it was three and a half. It is five. You're looking for a hundred and fifty basis point change. What has happened between February twenty eighth and today to get us where we are today? It's the war started, war in Iran started. Right. And let's just say we we went from like we went from first to third when it comes to like AI infrastructure spending. Which is we talked about we've talked about this on on forked AI. That's that's a capex cycle, right? That's not that's not the new norm in terms of your expenses that you're gonna be realizing as as a company going forward. Like this is all build out. And so you take those two things out of the equation, data center build outs and AI infrastructure investing slows down and the war ends. Why is it completely ridiculous to expect The five year to come down close to where it was. Jack BeVier (53:03) I don't think it I don't think it is ridiculous that to to say that. yeah, I don't think it's ridiculous to say that. I really don't. In my heart of hearts, I think that's probably where it should have been. And I was whining about the six and a half percent DSCR rates, but now they're freaking, you know, they they all have a David Moses (53:19) Seven. Jack BeVier (53:20) seven handle on them. but the seven handle stuff like requires price decreases. Or requires an interest rate bet to not pay a significant or not, you know, to not require a significant decre discount to the yesterday's V in order to make that pencil. Because 150 basis points is a is a big is a big number. It's the it's the 2023 prices, 2023, 2024 prices, real estate prices that are nowhere, no sight of getting, you know, it was the date the rate, when everyone was saying, hey, we're gonna, you're gonna, you know, keep buying, date the rate, like industry, you know, rates are gonna come back down. That's just not happened. And it's been three, it's been three years now. It has not happened in any, in any form or you know, form or way. And those people, I'm nervous, I think that, you know, I'm like I'm curious. I'm curious how like how much because values have not bailed them out. So like real estate values have not bailed them out. I don't not believe that David Moses (54:16) And rents haven't. Jack BeVier (54:17) values are going to bail them out. Rents have not can you know, rents have not bailed them out. I do not believe that rents are going to bail them out. So when do they get tired? You know, at what point do they get tired? At what pace do they get tired? I think the new I think the the you know the the foreclosure activity that we're gonna see is just there's gonna be a s just a certain pace of attrition of tired landlords that say, you know what? There's no money in this deal. I made a bad decision. Whatever. I only had th you know, twenty five grand stuck in the thing and it. I'm walking for my twenty five and I hope they don't pursue me, pursue my credit. You know. but like I'm not doing this anymore. David Moses (54:54) I don't know. Jack BeVier (54:55) Or I don't have the turnover money to go turn over this thing and I'm s not gonna just bleed operating expenses, though, you know. I'm not gonna just pay this mortgage David Moses (55:02) I I look I think Jack BeVier (55:04) for nothing. David Moses (55:05) I I think you have the operators, the real operators, who are going to tighten their up and they are going to they're gonna they're gonna say, Okay, like I've I was also buying in twenty eleven that you know, knocked it out of the park many, many times over. And this was just a bad time. I'm gonna I'm gonna I'm gonna buy my way out of this. I'm going to buy things at better, you know. Jack BeVier (55:29) Yeah. Dollar cost average my way out of this, yeah. David Moses (55:32) You got that, you got that guy. And then I think you have the the guy who's like, it. There's no way I'm going to allow my credit to take a hit over this $150,000. I'll feed it for as long as I I need to feed it, whatever. Right. Or I'm just going to sell it at whatever my debt is and get out from under it. you know, if if I if I can do that. I think you have that, you know, kind of that part of things. I don't see I don't I don't know. I mean I I certainly don't know, but I think that the majority of my worry is really more in the low down payment homeowner who bought in you know, twenty twenty three, twenty twenty four, had to drive for Uber and lift and Uber Eats and God knows what to just make ends meet. And at that point they're gonna see there's no end in sight. Like I'm gonna work myself into the grave to what? To pay for this house. Like I think that person is more likely to give up and say, it, I'm gonna go rent. And that I think is where the majority of the foreclosure is going to come from or people who twenty three, twenty four they overbought, they had No down payment or very, very little into it. and and they're gonna give up. and then I and then fraud, right? Like there's ton of fraud in in the in Jack BeVier (57:00) Yeah. David Moses (57:01) in the D S C R world and even in the Fannie and Freddie world, that those things the will hit the fan there because, you know, th those people never had the wherewithal to do what it is that they were doing. So Jack BeVier (57:15) We've seen we've seen defaults primarily, I would call it like at the you know, at the book at the barbell, where it's like it's the there it's a very high percentage on on a default rate percentage, you know, in a product that has a foul four to five percent default rate, the guys who have a hundred who have two hundred plus houses, the default rate is materially higher than that. Right. So it's like the guys who couldn't handle the operations of scale, operations at scale. They just they built they built a you know it was their own little pyramid scheme, you know, fuel fueled David Moses (57:48) House of Cards. Yep. Jack BeVier (57:50) by yeah, fueled by more and more debt, and it just fell down. and they were, you know, I call it velocity, like the pace of their increase all looks like did a couple deals, you know, did, you know, did one deal, did four deals, did sixteen deals, did sixty-four deals, did two hundred and seventeen deals, you know, year year, year, you know, year after year after year. And then and then 18 months later, blue, you know, all the stuff is like headed to the hor towards the steps. That's just like a classic pattern that is like emer emerges in the data. And then the very little guy who really just didn't know what he was doing and took out this loan and believed the PI, you know, believed that it covered and then didn't have savings to the turn, you know, got had a didn't do proper tenant screening, has his first turnover and it's a twenty five thousand dollar turnover and they just don't have it. Like they just don't they don't got it, you know, like And and they just say, I'm done. I'm not I can't I can't pay rent and a mortgage and they toss the keys. David Moses (58:40) But both of those but both of those are they don't got it. But but but both of those situations you described are they don't got it, right? Like like Jack BeVier (58:48) Yeah. David Moses (58:49) the guy who's got it maybe took him to two hundred before he he was belly up, right? It was too because because it was just more than he could handle. Right? It's just more more than he can handle. But I think there are many, many, many investors who are gonna just they're gonna tighten they're gonna tighten up. And things will happen in the market that will help them. Right. It is not going to cost quite so much to paint a unit or to carpet a unit from a labor perspective. Right. Like I Jack BeVier (59:20) That has started. That has started. Yeah, we're seeing that. David Moses (59:24) right, like I'm I'm already getting phone calls from people, hey, can I can I do this for you? Can I do that for you? you know, and I think that's gonna continue. I I are those prices gonna like I hesitate to say that the prices are gonna come down, but let's just say that if you're savvy and you have your together and you run a very tight operation, you will you will, you know, the same way you're going to well, let let's just call it we we aren't really we aren't really taking losses on the on the real estate side, right? We're giving back gains. Jack BeVier (1:00:02) Mm-hmm. David Moses (1:00:02) Right. Like it it just it's just a correction from it shouldn't be here. Like it prices should not have gotten to this point. And the same thing is true in the trades. Like there are just it should not Jack BeVier (1:00:11) Yeah. David Moses (1:00:12) an electrician shouldn't be making a hundred and like almost as much as my lawyer makes. Like that just shouldn't happen. Jack BeVier (1:00:17) Yeah, yeah, like they were making forty bucks an hour and now they're making eighty bucks an hour. Will they work for seventy bucks an hour? Yeah, goddamn right they're gonna work they'll work for seven if they if it's the only David Moses (1:00:25) For sure. Jack BeVier (1:00:26) work, for sure. You know, like they're they're fine David Moses (1:00:28) Exactly. Exactly. Jack BeVier (1:00:29) working for that. They just I mean, no no one wants to, but give it back, but David Moses (1:00:32) No. You know, you get used to it. You get a lifestyle, but that's that's the way it is. And we'll get you know, and I and I think that will help. Like there will be some help there. I still I still think that there will be look, tenant leases are a year, right? They're or a two years or three years. Like they're not month to month mo most of them. If you have month-to-month leases, if you are out like if I can make one PSA, if you have month-to-month tenants, get them on a lease of as long a duration as you can have them on right now or Yeah, like to the point where you would consider removing them if they're bull significantly below market right now, if they will not sign a lease. Because you're not going to be able to ride this out if you are losing month to month tenants to the house next door that is in a little bit better shape and is a hundred dollars a month or two hundred dollars a month cheaper. You have to get these people on, you know, locked in to whatever today's lease rate is, right? I may not be saying that six months from now if rents continue to to fall. but you know, I am not betting rents are going up in the next six months. Certainly I am not betting that. Jack BeVier (1:01:37) And you think that I hear your point. I I hear your point. We've always operated where we just like we lock in a first two years and then we let it roll month to month. Cause like, I don't know, I just feel like the the conflict you kind of can't put a price on it. Like if someone wants out of their lease and they like want out of their lease, well, I work with a lot of low income. So like I'm not working with somebody who's making six who's making who's got like multiple six figure income and I can like Hold their feet to the fire. Yeah. Like the cre David Moses (1:02:07) yeah, if they want to leave, they're leaving. Jack BeVier (1:02:11) the the the guarantee is just not worth enough for me to act for for the least term for to actually be teeth for me. So like frankly, everybody's month to month. Like, like like I I I'm I'm screening for people David Moses (1:02:20) Yep. No, and in a low income scenario. Jack BeVier (1:02:23) who want to stay for a long time, but from a practical perspective, if someone moved in and then wanted to move out like two months later, they can make my life hell enough. Or and or bang up the property enough and I have so little recourse that I would just let break, you know. So like David Moses (1:02:38) It's true. But but think of it you you're thinking of it like think of it in the inverse, right? Someone who is not someone who is willing, right. The difference between somebody who's willing to sign a two year lease and Jack BeVier (1:02:49) Yes. Yes, yes. David Moses (1:02:50) the s person who's like, No, I want to stay month to month, it gives you a a significantly important predictive measure on whether you're gonna wind up with a vacancy in the next six months. Jack BeVier (1:03:01) Yeah, and I'm with that. Yeah. Like handing out we'll like we'll do like hey, you know, hey, we'll you replace the carpet or like hey, we'll repaint this room, or you what, we're gonna redo this bathroom or something as like you know, you know, we'll make some Capex upgrades for for a lease extension. It's a good signal that like, you made the play you they get to pick out their vanity and so it's now it's their vanity and they signed a two year lease and you're like, you what, they ain't going nowhere. Like they picked out their own vanity, they just re up the two year lease. I I I I completely agree with your point. David Moses (1:03:31) Yeah, and I'm not dropping rents to get people to sign longer term, but I will lock it in. Like that's my that's our thing. It's like, hey, you know what? You sign for two years now, I'm gonna lock in your rate today for the next two years. And do you really think with the price of groceries and the price of gas and the price of everything going up, do you really think that you're gonna come out behind on that? Because I'm willing to take the Jack BeVier (1:03:58) I'll take the downs. Yeah. Or give away the ups. Yeah, yeah. Give away David Moses (1:04:00) Yeah, I'll I'll I'll take that. Yep. Jack BeVier (1:04:02) the ups, yeah. David Moses (1:04:02) And and and people are people respond to it. you know, but again, it you're really just trying to gauge what is the likelihood that they're, you know, getting the out of there anytime soon. you know, if they're sitting on the sidelines waiting to buy Jack BeVier (1:04:11) Yeah, it's the more interesting answer. David Moses (1:04:13) a house, hey, I got a house for you. You know, it's like it's it you don't have to move. It's like it's right here for you. Jack BeVier (1:04:20) So given this whole thing that we described, like what is your let's let's wrap on this. What is your what would be your strategy or what is your strategy right now in terms of like, what are you doing about the inventory that's on the market right now that's not selling? How are you managing your rental portfolio? Are you more inter are you interested in more interested in rentals or flips, certain category? Like, write me your investment thesis for the next eighteen months. David Moses (1:04:43) So I am starting to just the stuff that I've renovated, I'm I'm I'm just I'm taking the hit and I'm saying, you know what, I'm just gonna rent it. Like I'm I'm I'm not willing to take a significant discount. I'll rent it and I'm and I'm looking for s Jack BeVier (1:04:57) What if it's a five hundred thousand dollar house? David Moses (1:05:00) no well I don't I don't really Jack BeVier (1:05:02) Like what's the n what's the number bel what's the number at which you're like I'm just taking my losses or where you can't David Moses (1:05:07) It yeah, I I think I think really above let's call it four hundred. I'm I'm not Jack BeVier (1:05:12) Mm-hmm. David Moses (1:05:13) you know but again it does depend. I have a seven hundred and fifty thousand dollar house that I just rented out for five grand a month. You know, it Jack BeVier (1:05:19) Hmm. David Moses (1:05:21) I I I don't owe seven hundred fifty, but I like I you know, it's a it's a it's a decent house. It wouldn't sell. I put it on the market and I had two people wanted to rent it and you know, at The other thing to be said for that price point is you find that person who's on the sideline saying, Maybe I'll buy, but I'm not ready to do that right now because I think interest rates might do this, or I think this might do that. And I'm renting that out for five grand. That's less than what their mortgage payment and that's less than what their P I T I would be if they bought it at seven plus percent. So that's my buyer, right? Like that is Jack BeVier (1:05:52) Yeah. Yeah. David Moses (1:05:54) my that's my buyer in a year where I can say, Hey, you know what? I'm willing to sell you at today's market rate. And because I don't want the vacancy. And to deal with the market and all that stuff, I'm giving that away. And I don't have a commission to pay. So here you go. You know, you get the advantage of it. and so yeah, so I like I think that's that's the slow sell. Like we're we're we're even in the higher end of the spectrum where people have the ability to buy, but they're just sitting on the sidelines. That's your buyer, you know. A lot of times that that becomes your buyer. I'm not gonna do any like lease to owns at that rate, but like, you know, that's more like the the cheaper stuff. but yeah, I'm turning a lot of a lot of things that I thought, my god, this was like like I have a actually you you have the note on it. I got a deal in Southfield that I, you know, I probably It it at at the price I'd be willing to take, I'm still making eighty to a hundred grand. I'm just not willing to give much of that away. And Jack BeVier (1:06:50) Mm-hmm. David Moses (1:06:51) so I'm you know, I'm probably gonna DSCR it and just put a renter in and call Jack BeVier (1:06:56) Mm-hmm. David Moses (1:06:56) it a day, you know, because that's 'cause I'm not like I'm I'm very much allergic to taking a big haircut unless I made a big error. Right. Like if I if I'm taking a a haircut because I misgate I misjudge the market. Like I just I I thought this house was this or that. And then the market feedback is not your price too high. It's your layout sucks or there's this or that going on that are things that I thought the market would be fine with, but they're not. All right. So it's like when one of those things those are things I'm more willing to take a haircut on because Those are real reasons. Those are things that like I misjudge the market and I'm willing to take a haircut to what it's actually worth. Jack BeVier (1:07:40) Yeah. David Moses (1:07:40) But but to take the irrational sale, like where this house is great and there's no reasonably decent feedback that I'm getting that tells me that I mispriced it. you know, like the just not ready to make a decision right now. I get a lot of that. hey, you know, I I they really like They're they they need wider hallways, right? Like they need like very specific things that just whatever. Like like those aren't those aren't I priced the house wrong. Jack BeVier (1:08:10) Yeah. Yeah. David Moses (1:08:10) you know, but yeah, if I price the house wrong, fine. But I've got a few that I've that I was, you know, that I really was hoping to sell that now I'm you know and and the good news is on the ones that I win, I get long term long term capital gains. You know, it sucks on the ones that I Jack BeVier (1:08:25) Yeah, sure. David Moses (1:08:26) lose because it's nice to just take the haircut. But but I also get I also get the bonus depreciation now on things that I've bought in the last, you know, year or whatever. Jack BeVier (1:08:36) And then you and you're and then you're buying occupied rentals that just that penciled as long as they're at a discount and they cover. And then what about flips? Are you going back in at lower bases yet? Or are you cooling your heels and waiting for the as is market to readjust? David Moses (1:08:51) So I'm buying very, very selectively. I'll buy something that I think is a good flip. And what I mean s by selectively, it's not just that I'm buying at a discount, but it has to check all of the boxes. Like corner lot has a basement, has all the things or will by the time I'm done with it have all of the things that would be considered premium in that market. And I'm still making a very good cause I I'm much more concerned. with that, like I'd I'd rather have the right, the very right product, the very best product. Right. not just a bigger discount. Right. I I Jack BeVier (1:09:24) The liquidity, 'cause it means liquidity. Yeah. Right. David Moses (1:09:28) don't want just a bigger I I I don't just want a bigger discount. I want a bigger discount. Jack BeVier (1:09:31) Right. Yeah, yeah, yeah. David Moses (1:09:32) You know, I want the same discount, but I want the house that is going to be the quick mover. you know, and that because whatever, a year ago, two years ago, three years ago, you know, when there was no when there was no supply and huge demand and Everything with people were just I have to buy a house, you know, and because they had to buy a house or because they really, really wanted to buy a house, they were willing to, you know, kinda like compromise on some things. and I think we gotta be more careful now. I think everybody's gotta be very careful about what they buy and what the market wants. You're not gonna buy something. Yeah, if if n if if you're like half the houses in the neighborhood have no basements, don't buy a house with no no basement. Buy the house with a basement. If none of the houses have basements, okay. you know, Jack BeVier (1:10:15) Yeah. David Moses (1:10:16) then you know, but but those are those are the types of things where we're very, very, very concerned with what we are buying on that side. Again, i if it's a rental and a traditional rental and it's a good rental for that neighborhood, I'm not like, you know, being super, super uber picky about, you know, this and that. But but for my flips, Jack BeVier (1:10:36) Dude, I got David Moses (1:10:37) yeah. Jack BeVier (1:10:38) I got two on the market right now that like they're just sitting there. They're just sitting there. One of them, there's nothing well, I know what well, there's something wrong with both of them. Nothing is like obviously wrong. They all like three months ago, they both would have sold immediately. I just like just kind of missed it and like hit you know, they hit the market and like right when things started to languish. And so one of them, and so the question is like, hey, do you take you know, so we went, we were like, hey, this is what it's it should sell for. know, the houses are both really nice. We took I took one price drop down to like it's definitely gonna move here. Like, you at the at the at the like, hey, it's definitely gonna move here number. not like fire sale. I'm still fine. I'm not making as much as I would have liked to, but I'm like really don't want to take another hit. Not all not regardless of my basis. I just like to your point, I just feel like I'd be underselling the house if I like dropped it further. Like I I'm I'm getting into the I'd rather just rent it range David Moses (1:11:29) When Jack BeVier (1:11:32) at that point. But so, you know, that said, there's a bunch of downsides to keeping it as a rental. I'm gonna have to refinance based off of maximally the la last list price, right? I'm not getting more than that. So I'm gonna end up sticking cash into these refi, into both of these refines. I don't really want to do that right now. I'm trying to be liquid. So we're looking at these two houses. Two, there's we have like six in the market, but these two in particular are like thorns in my side. And the one. We're bigger than everybody else, but we don't have a finished basement. And finished basements are popular in this location. And so we probably should have. Like we should we should have. We we didn't, you know, but but 90 days ago, I didn't need to finish that basement because I was bigger. David Moses (1:12:12) No. Jack BeVier (1:12:13) And today it's like, no, you up. You should have just finished that basement because you didn't create, you didn't check all the boxes to your point. You didn't check. I just we we didn't check all the boxes at the time. We didn't need to. Now you screwed up. But rather than take another price drop, I'm just gonna go finish that basement. You know, because like my next price drop is gonna cost is gonna cost me more than that basement. And my next price drop's gonna cost me more than that basement. And frankly, I don't really value days on market right now, right? Interest mortgage rates are this astronomically high amount. Like, who gives a Like, take it off for like 30 days. These are not a valuable 30 days because of where mortgage rates are. So I'm putting a little bit of like value in the optionality of Hey, while I go improve this property and make it a more liquid product, I'm I've also got some downside potential to mortgage rates. And maybe I'll get lucky, you know, and I'll finish the basement, make it more liquid, and I'll be in a market that's got a bit more showings. So we're doing that on one. And then on the other one, we did a gray, you know, we did a the the gray everywhere rehab. And like given the location, you know, we should have put a little bit more color. into the know gray was grey gray gray throughout was not the not the move and we probably should have changed that color palette about a year or 18 months ago but like we were still using it 120 days ago and so i'm gonna go paint the I'm gonna go paint the kitchen to match one of the accent walls we did in the in the master bedroom in the primary bedroom so David Moses (1:13:36) For sure. Jack BeVier (1:13:37) you know again with the idea of like hey pull it off for a couple weeks go try to make it special go try to get you know do something to like make this thing stand out and put it back out and you know, if I get it back out onto the market before November, I I don't feel like I'm like shooting myself in the foot with respect to the holiday season, you know, wasting my time there either. So having to like, you know, do a little bobbin and weaving to try to get this stuff to move right now. David Moses (1:14:00) So agree with all of that. I would I would say that un understanding that The market is what it is. I'm looking at the competition and I'm saying, okay, their house is not nicer or their house is nicer. Their house is better priced or their house is not better priced. Right. Because the market's gonna bear what it's gonna bear, but it's not like I I'm not gonna expect that guy to all of a sudden take a huge haircut. If he does, he does. But I'm not gonna expect that. And I'm not gonna, I'm not gonna bet on that. That's a bet I've lost. before and I'm not willing to lose it again. But the but keeping an eye on your competition is something w we didn't do two years ago, three years ago, four years ago. Cause it just Jack BeVier (1:14:48) Barely. Yeah. David Moses (1:14:49) it was a it was a waste, right? It was just Jack BeVier (1:14:51) Yeah. David Moses (1:14:51) a waste of time. but now yeah, looking at the competition and saying, you know, how can I be better than them? Looking at what's sold versus what wasn't sold and seeing what the differences are. it you know, that becomes very important. And then the marketing s aspect of it is also more important than it's ever been. It's like having the right agent who's gonna call those people back, who's gonna basically figure out, hey, how can we make this work? You didn't like this, what if we changed this? Right? I had I had a showing where the they said the trees are too close to the house. Look like the trees are too close? Like they're overhanging the roof. And I'm like It's a very solvable issue. I can't wide in the hallways, but I can solve that issue. I can remove those trees from right next to the house and everyone will be, you know, so why you know, those are the types of things where it's really digging into the feedback, which we never used to do and saying, Okay, can we fix this? Can we make this work for you? you know, and and it and even if you don't get a sale out of it, you you get more information. Which I think is is you know, it's necessary. We're we're really not we we were for so long we've gotten so you know pampered by a market that just doesn't you're just like, you got a house? I'm I I got a buyer, let's let's do this. And now it's you know, now it's like, no, no, no. I want this, this, and this. And but we're at that frozen part where it's like the buyers who are really serious, who are really in the game and serious about buying. You gotta you gotta engage in that conversation with them and you gotta engage their probably insufficient representation to work that through and say, okay, how can we make this a deal? and that's real estate. That's really it's it, you know, you you change from being a you know a flipper to actually like, okay, how do I actually make a a good product? Right, 'cause that Jack BeVier (1:16:45) Mm-hmm. David Moses (1:16:45) guy who was overbuilding the houses and making everything phenomenal, he's still doing just fine. Right. Like like he's Jack BeVier (1:16:52) He made less along the way, but he's fine. Yeah. David Moses (1:16:54) he's fine. He's he he's he's totally fine. And because he because he got he basically it's about the pride that he puts into it. It's not a production, you know, situation. So we have to be we have to be like that, especially if we're gonna pull back, right? If you're not gonna buy as much, then you sure better take something do something with that time. And actually make the make the stuff better that you're doing. and and I would tell my Jack BeVier (1:17:15) Yeah, super fair. David Moses (1:17:17) trades the same thing. You know, it's like, yeah, you know, I I don't need to have this done by next week because I don't have a buyer knocking down my door. I want it done right. I want you to give me, you know, yeah, I'll pay you what you're asking, but I want a few extra shower heads. And I want a a a a pot filler over the stove and I want it right. So it's like not just asking Jack BeVier (1:17:37) Yeah. David Moses (1:17:38) for cheaper prices, but it's also ask for more if you're if you're doing a flip, you should be asking for more out of your trades. You know, I yeah, painter, I want, I want these three accent walls, right? I I want that, you know, I want to change this color scheme up and, you know, I want to make this house pop. And those are the types of things that, you know, we just didn't have to think about. We just didn't have to think about it. And now now we gotta think about it. Jack BeVier (1:18:03) We used to do that though. Or yeah, that was that was we had good at that stuff and then it just didn't matter for like four years. Didn't matter. David Moses (1:18:10) Yeah, and what what's the point? You know? The trades are just like, Why are you asking me to do this? This is stupid. No one cares. Jack BeVier (1:18:16) Do we used to pride ourselves on like we would pan Baltimore Baltimore's got, you know, row houses, they've got these David Moses (1:18:23) Cough for ceilings. Jack BeVier (1:18:24) No. What's the piece of wood that your floor sits on? Joists. but David Moses (1:18:29) Choice. Jack BeVier (1:18:30) so like the joists go from brick brick pocket to brick po pocket, and yeah, they're like set apart. And so we would pride ourselves on running the ductwork through those and panning it so that to so that there were no bulkheads, right? To eliminate the bulkheads. Cause you know, in these like, you know, low ceiling basements or David Moses (1:18:47) Short basements. Jack BeVier (1:18:48) like small square footage houses, like The bulkheads end up taking like a significant, you know, amount of like, you know, they get rid of the square corners, you know, you you're the furniture doesn't like quite sit quite right. But if you pan it all, it's a total pain in the ass for the HVAC guys to do that and do that well. But but the product's just just nicer, right? It's just like definitely it's definitely nicer. and yeah, you're absolutely right. We're gonna we're gonna have a shift back towards those that those details are gonna really make a difference now. Buyers are in no rush right now. No rush. David Moses (1:19:18) that's right. And there and and what happens in every in every down cycle, in every correction, there's a flight to quality. That's that's what it is. So be be that quality. Jack BeVier (1:19:28) Yeah. Absolutely. I'm I'm to yeah, towards that end, I'm interested in like from the r and the rental market specifically. You're talking about buying those turnkey rentals. One of the things I kicked myself we failed to do when we were in Atlanta in two thousand eleven to two thousand fourteen, and at the same time failed to do in Baltimore, in the Baltimore metro, is that we kept buying we kept buying the the low end stuff at better and better cap rates, giddy about the cap rates that we were getting. But we failed particip. Yeah, but David Moses (1:19:58) And you got a bunch of houses. Jack BeVier (1:20:00) we yeah, but yeah, but you end up with you end up with a a portfolio in the hood, you know, or you a portfolio of of of houses that you know, we sold like Atlanta at like 120, 130 grand up a unit. And like if we had if we had gone up market and bought the lower cap rate stuff that just barely covered, but like before didn't cover it all, but now barely covered, but did, we would have made a lot more dollars. Right? Like we if We would have made significantly more dollars, especially for our energy. if we had been, I don't know, if we had been oper, if we had gotten, we reset the math in our head, right? Got gotten rid of this like, I need to be buying at a nine cap and just bought the stuff that was a five at a seven, we would have made a lot more money bought in the stuff buying the stuff that was a five cap and now we're buying it a seven than buying the stuff that was an eight cap or was a seven cap and now we're buying it at a ten. But at the time that ten cap was like too good to be true. But we left we left dollars on the table there for sure. David Moses (1:21:00) much of how mu how much of it I I I'm I'm I have to admit I'm guilty of this. How much of it was door count too? The guy could buy five instead of three. Jack BeVier (1:21:10) Yeah, I just had limited limited dollars. Yeah. Or just money didn't go that far, you know? Yeah, in those houses. Yeah. I I completely agree. David Moses (1:21:17) And there was you know, in our heads it was like, well, there's economies of scale and you know, all all of but really like door count, you know, the guy who has fifty houses free and cleared today that bought, you know, when they were two hundred and they're now five hundred, man, I envy that guy. Jack BeVier (1:21:34) Yeah. Yeah. We've still made like doing the math on it, we've still made significantly more money in appreciation than we had cash flow. Like David Moses (1:21:45) For sure. Jack BeVier (1:21:45) we always used to we we've always like, no, we're cash flow guys, we're cash flow guys, we're cash flow guys. Well, what that really what that really well we we took that too far, right? Like we we became that and what we should have been was value investors that have to make cash flow work, you know, and like so like that it covers should have been the bar, not that it covers at a one eight instead of a one four. I should have used that it covers as the b as the bar and we would have done a lot better. David Moses (1:22:15) And that's honestly that's what I I don't think that has changed. Like I think that still I think that logic goes forward. I just think you gotta be you gotta be realistic about about what what that cap rate really is. You have to price in a a rent Jack BeVier (1:22:30) Yeah, honest about dispense ratios. Yeah. David Moses (1:22:32) Yeah. Honest about expense ratios and really honest about just the desirability of the product. Because Jack BeVier (1:22:42) Yeah. David Moses (1:22:43) If you're wrong on the expense ratios, but like like having a quality product does cure a lot and it cures Jack BeVier (1:22:49) Yeah, that's fair. I I don't David Moses (1:22:52) it way faster. Jack BeVier (1:22:54) Because it's liquid, because the quality product is liquid and the product is not. And so, like, yeah, you can you can get, you know, you can pay a little bit too much and it doesn't cover, and you realize on the turnover you haven't made any money or you're giving it all back, and you can decide, you can make a conscious decision to pull the ripcord and turn the thing over and sell it retail if it's a quality product, if it's a liquid location. But Those are not even options. Like I got rentals that we turn over, and I'm just like, yeah, this is a forever rental. Like I would have to gut this thing to like get it actually sold. So this is just it's just a forever rental. And we're gonna grow it's gonna turn over every three years and we're gonna groan every time we hear the address. And that's our bed because we we David Moses (1:23:33) That's just the way it is. Jack BeVier (1:23:35) didn't, you know, we we didn't spend the money on the front end. And now we're living with this forever. Like this is just the bed that we made. Yeah. David Moses (1:23:43) Or you just bought a house. I mean, or or a location, right? Like, like that is you can't move the house. And and when you buy that house, it's like a you know, a ranch with like somebody put some stupid like additions. Additions are my favorite things to to to stay away from now. Like if if somebody else built an addition, it's almost never done right. And there's almost no reason for me to buy at any price. That's like, but Jack BeVier (1:24:03) Yeah. David Moses (1:24:04) it's but it's fifty cents on the dollar. I was like, is it is it fifty cents a dollar? Because Jack BeVier (1:24:07) Yeah. David Moses (1:24:08) you comped it to a bunch of houses that are the same size. Is it really fifty something? Jack BeVier (1:24:11) Yeah, yeah, that they they they were properly built that size. This is not properly built that size, yeah. David Moses (1:24:16) No, this is not this is not that. Jack BeVier (1:24:18) This is sixteen hundred plus three hundred, not nineteen hundred. Yeah. David Moses (1:24:23) That's right. Right. And and the basement is not under the addition and the you know, there are additions that are done right, like that makes sense, Jack BeVier (1:24:30) Yeah. David Moses (1:24:31) you know, or or that you know, but but like it's just not usually the case, you know. Jack BeVier (1:24:35) Yeah. Especially in that nineteen in that older vintage. Yeah. More more more more not. More not. David Moses (1:24:42) I mean because because what is the best case scenario? The best case scenario is that the addition is the part that's decent and the rest of the house is garbage. Jack BeVier (1:24:51) That's right. Yeah, yeah. All right, David, David Moses (1:24:53) So yeah. Jack BeVier (1:24:54) pleasure as always chatting with you. Good to get your thoughts on the market these days. It's hearing a hearing a lot of debate, a lot of different you know, posturing from folks about what to do right now. Hearing people get out of the market altogether, right? Like change up, be like, hey, it's too hard out. I'm not gonna I don't I'm not gonna stomach it or I don't wanna stomach it. So it's good for everyone to, I think, take a take a moment to pause, reevaluate, decide how they're gonna play the next 12 months out because it's not so obvious right now. So Thanks for getting your thoughts on that, man. David Moses (1:25:23) Do sir. Jack BeVier (1:25:24) All right, pleasure as always. Hope hope everyone enjoyed that episode of Real Investor Radio. We will see you next week. Thanks, guys.