Latest / Real Investor Radio Podcast / Ep 71 | 2025 Market Changes, Economic Cycles, Operational Excellence, Adaptability, Borrower Needs

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Ep 71 | 2025 Market Changes, Economic Cycles, Operational Excellence, Adaptability, Borrower Needs · Real Investor Radio Podcast

• Craig Fuhr (00:12) Welcome back to Real Investor Radio. I'm Craig Fuhr with Jack BeVier. Jack, it's good to see you. It's our special holiday edition, No guest. Jack BeVier (00:18) Yes sir, good morning, good morning. kicking off the holiday season, it's cold. Craig Fuhr (00:25) It did get cold. We are no guests here where Jack and I are just riffing on sort of the year. Sort of a recap of what we saw over 2024 and maybe some predictions what to look out for as a real estate investor in 2025. Jack, we spent all of the last episode. I encourage everybody to go back and take a listen about your trip out to Scottsdale for IMN. some of the things you learn from better investors out at the conference over the last couple of days, literally, you just got back last night. And I think the general tenor was, you know, people are just sort of a little, you know, trying to feel their way through a tough time transactionally. Transactions are obvious. Finding great deals right now is still difficult for most. You know, we feel like the money's gonna be there for you for these deals. If you find good deals, better operators are figuring it out. But one of the takeaways for me on the last episode, Jack was, you know, it's time to get good at operations and it's time to get, to get really good at finding deals because you know, it may stay like it may, may be a tough transaction environment for the next several months. Jack BeVier (01:40) Yeah, definitely. And I feel like the real estate investor is kind of getting it from both ends right now. You got like a, you got a weak consumer. So houses are not exactly flying off the shelf, like showing activities low. And then you've got a higher interest rate environment. We thought we were headed back down, but now we've come back up. So it's not like you can go refinance and get a whole, you know, get a bunch of cashflow. So there's deals are becoming a lot, lot of deals are becoming debt service coverage constrained. Craig Fuhr (01:49) Yeah. Yeah. Jack BeVier (02:08) when you go to refinance, which is tough for your liquidity, right? Like real estate businesses, real estate, it's a capital intensive business. runs on cash. If you can't get access to your cash, you can't go buy more houses. so then, you know, how do you, how do you, how do you make payroll? Right? So, it all starts with that finding great deals. So that's still ends. That's still remains the Holy grail right now. But, you know that, so that's like, that's table stakes, right? Craig Fuhr (02:34) Sure, always has been. Jack BeVier (02:36) But the capital markets environment isn't doing anybody any favors to make it easier right now. Craig Fuhr (02:41) My thesis, Jack wrote down here at what does 2025 look like for real estate investors? And I wrote down three things, better operators are going to prosper. You better, because one, you will have figured out how to either run your rental portfolio effectively and efficiently. You will have figured out how to find deals in a tough deal finding environment. And that alone, at least it was for me, Jack, back in 2004, five, six, seven, eight, when I became really great at finding houses and putting in the value with our great contracting staff to make beautiful houses, that seemed to attract a lot of equity. I did most of my deals, as you know, little to no of my own money. because I had so many people coming out of the woodwork saying, now there's a guy that kind of knows what he's doing. You know, I'm willing to be the equity guy on that. And then finding the debt through a company like Dominion or some other private lender was generally very easy. So my, my, my thesis for 2025 is better operators, guys who really know their businesses are going to prosper because their access to equity will probably be a lot easier. And then finding the debt is generally fairly easy still in this market. What do think about that? Jack BeVier (04:02) Yeah, no, think that I think that's totally fair. the thing that I think the big risk factor, the big pitfall is going to be cashflow, because it's been a, it's been a tight environment. It's, it's just getting tighter. and liquidity for selling houses is now lower rates, less predictable than it was not that you can't sell houses, but like, it's just, it's, you know, showings are longer home inspection reports are pickier. Craig Fuhr (04:10) Mm. Are we still finding though, Jack, mean, guys are Dominion properties is still putting out great product for sale rather than just for rent, even though you do both. Are you still finding though that houses that are rehab nicely that where you go in and do a really nice job, are they still selling quickly or you are or have showing times, days on market gone up considerably? Jack BeVier (04:51) they're still selling there's, know, and they're still selling, you know, within 30 days, but it's not the first weekend, right? Like it's not definitely, it's not definitely the first weekend. and, and I still, you know, there's this adage that your first off is your best offer. I think that usually, and that's like been annoyingly true. so I, I still kind of think that that's a useful heuristic. the, so the, the offer is the offer market though is, is thinner, right? There's fewer, you're getting fewer showings and fewer offers on even a beautiful house in the right location. and of course I'm speaking on a relative basis, right? This is relative to like the market two years ago, or even 12 months ago. but, we haven't seen, we've maybe seen a little down taken prices. I think that that's something that we're going to see in the data. Craig Fuhr (05:32) course. Hmm. Jack BeVier (05:43) that comes out, it won't come out until January or February, right? But like the, the October, November contracts, I think are lower, like on a nominal basis than, than the August, September contracts. no, I don't think it's a time to be pushing value. Like I'm pricing competitively right now and like trying to get to offers competing against each other. Sometimes it works. Craig Fuhr (05:56) It's not a time to be pushing value. Jack BeVier (06:08) you whereas before you were like, you know, a year ago, you could, if you priced a little aggressively, you were like gonna get a bidding war. And I, you know, a lot of people use that strategy very effectively. right now I'm pricing aggressively to, make sure I get an offer in the first 30 days. so yeah, it's a, it's a, it's a tighter mark or a, a more difficult market. Craig Fuhr (06:27) So in the last episode, we talked about sort of, you know, folks, whether or not they're bearish or bullish on a Trump presidency. And I don't know that we need to get into all the ins and outs of that. But obviously, they're, you know, they're looking to some austerity in terms of trimming down the size of government. Who knows whether or not they can get Congress in line with trimming down the size of the budget, which obviously is up, you know, 50 % since 2020 and the massive spending increases that happened as a result of COVID post COVID. We'll see if whether or not they can get tighten the purse on from a congressional standpoint or not. Hopefully they will because I think that all of that additional spending is only led to the inflation that we see today. But guys like Warren Buffett, Jack, you know, hoarding cash right now, selling off major positions and Apple and Bank of America. And this is guy who generally doesn't sell much. I think he's in the strongest cash position he's ever been in some $350 billion sitting in cash right now. He also owns about 4 % of the of the bond market right now, larger than what the Fed owns right now. And then JP Morgan Jamie Dimon said back in 2008 that he would never be caught in a, in a position like that again, where he couldn't go out and buy when the market was presenting buys. And so they're sitting on close to a trillion dollars in cash right now. And I think that speaks to a lot of what a guy I'd been listening to a guy by the name of Ed Dowd, look them up. Do W D used to be a black, black rock. hedge fund manager, big macroeconomic guy, he owns a company called Finance Technologies now. And one of the things that he's kind of sounding the alarm on Jack is three major economic factors that are just really flashing red right now. And they are credit spreads, the yield curve, and S &P volatility. And we can get into the importance of each of those. But basically, he's saying, you know, credit spreads are historically tight right now. And the what that really means is that there's there might be more exuberance in the top of a market, people really not judging the risk of the market accordingly. And so they're just keep they just keep plowing in the yield curve, which is something that you and I have talked about previously on episodes. Jack BeVier (08:43) Yeah. Craig Fuhr (08:53) has been inverted, where the two years giving off more than the 10. And so like, if you take a look at history, anytime there has been a yield curve, an inverted yield curve, I should say, there's, it's always been followed by a recession. And it's something that I think a lot of us have been waiting on over the past year or so. But frankly, when you put in an additional two and a half trillion dollars of government spending into any market, you know, that staves off a recession pretty good. And then finally the S &P volatility, is historically low right now, which again just means that there's a lot of folks that are just still plowing in money to it, not really basing the risk that might be associated with the S &P right now. And frankly, you know, four companies basically controlling the S &P right now. So... Any thoughts on that and sort of what what that portends for the next six to 12 months? Ed Dowd saying that he sees a massive pullback of crisis proportions, maybe by March of next year. And Trump will have basically two years to figure that out or else, you know, you're going to see a change in Congress or, you know, a change in the House and a change in the Senate in the midterms. And that'll make him basically a lame duck for the following two. Jack BeVier (10:06) What's he saying is the trigger and what's gonna happen? Like a stock market crash or correction, not crash, but. Craig Fuhr (10:13) Well, I think it was more of a banking sector. So if we take a look at the beginning of 2024, there were the you know, a couple major banks that failed kind of got memory hold. The Fed stepped in bailed them out. But you and I you and I have talked briefly on previous episodes about the office market right now. We're seeing a lot of volatility and multifamily right now. And a lot of banks are sitting on that paper. And so I just think he sees it as a banking slash stocks, you know, correction, he's saying of somewhere between 30 and 50%. Jack BeVier (10:51) Wow, that'd be something. So I just read, I promise this is related. So I just read Ray Dalio's book, The Changing World Order, which, have you read that? I highly recommend. Craig Fuhr (10:59) yeah. I've, if you're not, if you're not inclined to read the entire book, he did a video compendium series that really outlines it spectacularly well on YouTube. All you have to do is look it up on YouTube where he narrates the entire thing. And it's done with graphics. And it's very compelling. I listened to it a few times. It's a lot to take in. for a guy of limited intellect like myself, Jack, for I'm sure you remembered it all. But what was your takeaway on that? Jack BeVier (11:33) I found it very convincing that which is disturbed, which was very disturbing. So like, you know, for those who haven't read it, the he basically is looked back into history and tried to look for patterns of look for patterns of economies and countries and empires over literally over thousands of years, right? Like, he's looking for like, is there something like fundamental going on here? Or we Craig Fuhr (11:38) very disturbing. Yes. And it wasn't just it wasn't just subjective. It was this is empirical mathematical, sort of historical facts that he went through. It wasn't just some guy just conjecture. Go ahead. Jack BeVier (12:05) Yeah, yeah. Yeah, yeah. So he's compiling the like, you know, best macroeconomic data that we have going back thousands of years and looking for patterns in behavior. And he found them. He found a long-term debt cycle and short-term debt cycles that he goes into a bunch of detail that we won't go into right now. Go watch the video. And, you know, but the kind of the Cliff Notes conclusion here is that we've done all this before. This is nothing new. There's nothing new about what we are going through right now. The details are like, are different, but this rhymes very much with stuff that has happened, many, many times before. that, yeah. And, and that, and that there's something about human nature. Craig Fuhr (12:49) going all the way back to the Ottoman Empire. Jack BeVier (12:56) that leads to patterns in economic cycles, right? And fundamentally, we are the same monkeys that we were a thousand years ago. And if you just, just on a different time scale. Craig Fuhr (13:08) It usually starts with some sort of world war, where the monetary policy and sort of the world monetary policy is then figured out at via like a Bretton Woods. We'll use most recent one, obviously, where you know, the world is weary of war, they don't want to get back into war, they there's one winner. And that winner then has a world reserve currency. Jack BeVier (13:21) Yeah, it was the most recent one. Craig Fuhr (13:34) And the further you get away from the war, the more the empire tends to get a little lazy. They start outsourcing the they start using monetary policy to print more money. And the politicians obviously have no appetite for austerity. And and, you and in the case of like, say, you know, Great Britain, Jack BeVier (13:51) Yeah, we can't balance a budget. I that's not new. Craig Fuhr (13:58) you know, who really was the shipping power of the world back then, they start outsourcing their their shipbuilding to other to other countries. And those countries then become powerful. And so the analogy Jack BeVier (14:12) They become ascendant. Yeah, they become the ascendant countries or economies. Craig Fuhr (14:15) Very good. And so in our case, the analogy would be between us and China, obviously. so I think and I think that when you take a look at the videos or you read the book, Principles of the New World Order by Ray Dalio, what you find is an amazing parallel between where we find ourselves today, internally and externally. with where these empires of the past have found themselves. So go ahead, Jack. Jack BeVier (14:42) Yeah. And we're, and the conclusion is that we're pretty weird. We're pretty late cycle in this pattern. yeah, I he splits it into like six parts and we're like solidly in like five or like five, five and a half. and, and the, and the thing is that they, they generally conclude with, a, with some currency devaluation or series of currency devaluations because we can't balance the budget. Craig Fuhr (14:48) Yeah. Yes, we are. Jack BeVier (15:08) So we need to print money. We need to either, you know, so you tax, you tax the rich to try to help balance the budget, but that's just a short-term effect. doesn't, it doesn't change the underlying like trajectory of the economy. those, those macro factors are, still pushing, are still working against, the, the, in our case, the United States, relative to the other ascendant powers in the world. And so, you know, I think that we'll probably see higher taxes at some point, but that'll just be, that'll stave things off for a couple of years. But ultimately the question is like, if, and, well, I guess the argument is when not if, the us dollar ceases to become the world's reserve currency. but that'll only happen like, right? Like that may not happen for decades, decades and decades. Right? So we're not planning our businesses off of that. But in the meantime, The stuff that happens before that is an increase in taxes and potentially a series of devaluations of the currency to try to fix the underlying budgetary issues, right? Because balancing a budget is not politically palpable, but inflation is a tax on everybody. so in print and printing money, no one really like the U S consumer doesn't really understand that. No one gets pissed off, you know, as pissed off as they should, about printing money. Craig Fuhr (16:22) Mm-hmm. Jack BeVier (16:24) But it's a tax because it's just a tax on everybody and it's a, know, and you, and you do it by handing out money. Right. So it's a very political, you know, way to be political. You can be politically popular. Yeah. Pretty expedient way to, deal with budgetary issues, but it's ultimately weakening the, the, know, the fundamental reserve currency. And I just think that's going to happen. Right. Like that. So, so I'm, I'm expecting over the course of the next 10 years, right. Like we're going to see. Craig Fuhr (16:33) Polarically expedient. Yes. Jack BeVier (16:51) a series of increases in taxes and periods of high inflation slash money printing to deal with rolling over our debt, right? To enable to just kick the can and kick the can and kick the can until eventually we kick the can so much that in 2100, you know, the U S dollar is no longer the reserve currency of the world. but that leads me to, that leads me to, to think that like, so, so investing in hard assets is like, So, hey, what are you going to do? So what are you going to do about it? Well, like, I'm, you know, I'm always so freaking pro real estate, but like, this is one of the reasons why is that invest in hard assets, like, because that's a hedge, you know, because the, whatever the denomination is that house is got like fundamental intrinsic value as, as shelter. whatever, you know, whether we're trading in us dollars or raspberries, like the house has some value. and that's one of the reasons I like space. Craig Fuhr (17:41) Right. But let's be honest, one of the things he does talk about is not just a decline in the value of the dollar, but a decline in the value of all assets. And that may be temporary, but that's not to say that real estate or your stocks or your 401k couldn't be revalued as well in a down... Jack BeVier (18:03) Well, so the, but it's better for stocks because, it's better for stocks and hard assets than it is for cash and bonds, especially long dated bonds, like long-term bonds. because if you're, know, you, if you've got, you invested in a 30 year mortgage, like if you were the lender on a 30 year mortgage, and the value and the currency just keeps being printed, it makes it easier to repay, right? Like your purchasing power keeps going down. Well, the big loser there is the one who made the 30 year loan or the one sitting in cash as the, as inflation erodes the value of that cash. So it's, you know, it suggests, you know, to not get into long-term bonds. It suggests to, and to, and to get into hard assets and, or the stock market, though you've got to have the, you know, the stomach to ride the volatility of the stock market. Craig Fuhr (18:52) Why would guys like Buffett and Jamie diamond be sitting on so much cash right now? Jack BeVier (18:57) Yeah. So I feel like that's like, suggests that there, this is more of it. That's more of a short term that they think that they've got a shorter term view that they're going to be better deals. which is super interesting. I'm like, I mean, my eyebrows certainly raised based off of what you're, what you're talking about there. is, you know, those, they're not dumb. and they're not, they're not putting it in the hard assets, right? They're not like hunkering down. They're getting ready to go on the offense. sounds like, so, worth paying attention to. Craig Fuhr (19:20) Yeah. Which, which leads me back to, you know, sort of the main street investor. if there's a downturn coming, I just think that means better deal flow. think it means, you know, you know, good things for, for the average investor Jack. but only if that investor is sitting on some cash or has access to cash. Jack BeVier (19:44) Yeah, true. I agree. Weaker consumer scary, right? Though, like if that happens, the consumer is going to feel poor. Craig Fuhr (19:52) Well, let me stop you there. Let's just speak from an investment standpoint. You know, we, lend, you know, millions of dollars every month to real estate investors, Jack, in a downturn, Dominion's not closing their doors. You know, even though, even though we made their main, obviously you're, you're sort of repricing the risk and sort of figuring out, okay, I've got this investor. He's got a great deal, single family house in some great neighborhood, some highly desirable neighborhood. He's getting it for a great price. He's going to put some value into it. You're still landing on that, right? Jack BeVier (20:24) yeah, two borrowers that can make their payments though, right? Like liquidity, liquidity matters, you know, Craig Fuhr (20:28) course, yeah. All things being equal, you know, you've got to have a good borrower, you got a solid borrower knows what he's doing good credit, you know, has any what's the one thing the bank worries about the most? How do we get paid back? And so let's assume that that's the case. You know, companies like Dominion still lend in in tough times. Yes. Jack BeVier (20:47) Yeah, definitely. We, we continued to lend in the downturn in 2008, 2009, 2010. It's not like you just cause you were, we were underwater on a chunk of our book, but that didn't. Yeah. Yeah. And the faults were way up and we were working through all that stuff, but that didn't mean, but stuff, you know, not, but not every single loan was in default. Right? So we were getting payoffs. Craig Fuhr (20:57) prior to the downturn, right. Jack BeVier (21:11) from the most liquid borrowers, right? It was the folks who had the operating capital to withstand it and just take the law, you know, take the, you know, take their lumps and sell the property where the market cleared and moved on. But we couldn't just like hoard that cash. Like we needed to continue to lend to, to keep the lights on, right? Like that's how we, that's how we make money. and so, yeah, we continued to lend all throughout the downturn. We were just trying, we were catching a falling knife the whole time, right? Cause Craig Fuhr (21:23) Right. Jack BeVier (21:39) we were trying to peg where value was going to be within the next 12 months. And we were fortunate that, you know, lending at 70 % loan to value generally meant that it was, that you could make that work as long as people didn't trail the market down. But yes, to answer your question, yeah, like we continue to, we continue to lend. We will continue to lend. Yeah. Craig Fuhr (21:57) Having gone through that, how does that prepare you for the inevitable next time it happens, Jack? mean, how do you, you went through a lot. I mean, I remember vividly you telling me about what it was like for you and Fred to go through 2008, nine. How does that prepare you and Dominion for what would be the inevitable next downturn? Jack BeVier (22:19) Yeah, it very much informed, I very much informed our credit culture and perspective on, appropriate risk taking, the, you know, what we, you know, we ended up finding there was a lot of, there was all, there was lenders that would talk about like, I've got the, I've got a lot of relation. You know, I'm really, I've got relationships with my borrowers, you know, and that's, and, know, I lend based off a character. and when the downturn happened, those guys got Craig Fuhr (22:40) Yeah. Characters out the door, baby. Jack BeVier (22:46) Those guys got tossed the keys. Character showed itself. And, we had, we had a lot, we had a lot of the faults and, not, but not the entire book. Everyone was underwater. A hundred percent of borrowers were underwater in that period of time. but not everybody tossed us the keys or not. Everybody was underwater. Everybody was not making was, was losing money. Everyone was losing money, but not everybody tossed us the keys or forced us to foreclose. and what we ended up finding was that Craig Fuhr (22:49) Yeah. Absolutely. Jack BeVier (23:14) FICO and like having a decent FICO and filing your tax returns and having some of your skin, some of your cash into the deal were the three primary determinants of, of character. That's what, that's what really, that's actually what really quantified character and FICO does actually does a pretty decent job of, of quantifying that. Craig Fuhr (23:29) How did- How did a company like Dominion ride out that storm with the, I would assume hundreds of loans that you had made versus like a bank like Slavi, let's say there was a tiny local bank here in Baltimore that made hundreds and hundreds of loans to real estate investors like myself. You've been in business for 110 years, Jack. And so how did they not weather the storm, but you guys did, was it because of the regulatory environment that they were pressured under and Dominion and a company like Dominion is not? Were you guys just smarter? Like how did that, how, how did you fare so well, but they did not come and frankly, 13,000 other small banks across the country that have all gone out of business since then. Jack BeVier (24:16) Yeah. Yeah. I think it was two things. one is so the, the pat on my back, I'll do that. I'll pat myself on the back and then be like, me, here's the other side though. so the pat on my back is I think we, rolled our sleeves up and worked with borrowers and we were operational about the real estate and understood the business more. And I think we did a good job of proactive loss mitigation to try to encourage people not to, not to trail the market down and And sometimes that was like, you know, being aggressive about it, like, Hey, like, no, like, you know, this is what you need to go do. not just, Hey, we're not, know, we suggest that you drop the price. but then, but, but the other side of that is that the banks are regulated. so, if we had, if you had marked our balance sheet to market in the second half of 2008, Craig Fuhr (24:51) Right. Jack BeVier (25:04) A significant portion of our equity had been wiped out. and if we were a bank, they probably wouldn't have let us continue to operate. Now we were still cashflow positive because we could take the losses to equity over many, over a long period of time, but we actually, but we amortize those losses over, or we recognized those losses over years. So they all happened within like a 20, you within like a 24 month period, but we, wrote them off for the next four years after that. Craig Fuhr (25:28) Yeah. Jack BeVier (25:32) And so we would just worked our way. And so we just didn't make money for many years, right? Cause we would like we'd make, cause we would make money that year, but then we'd write off some of those, you know, enough, some 2008 losses and then we'd make money the next year, but then we'd offset it and write off the 2008 losses. then, you know, then the next year, the 2009 losses. And we just did that for like four years in a row. And if we were a bank, they probably wouldn't, they might not have let us continue to exist if we had been forced to mark our losses to market all at once. Craig Fuhr (26:03) How much do you think Jack that one of the things I love that Fred says often on the company calls is that he still believes that this is very much a relationship business. Not so much in that, Hey, if you've got a great relationship with your lender, the loan is a done deal. More that it's really time for better lenders to really understand the businesses of the borrowers. And even in this very competitive environment that we're in, lending environment that we're in, Jack, I mean, we have no lack of competitors in this business, but how much do you think it's really going to be important over 2025 for the average loan officer account executive to really understand the business of the borrower? Jack BeVier (26:47) Yeah, so I think that that's actually like our biggest focus in 2025 is getting is getting excellent at that aspect of it. Because the operating environment is more difficult and and cash flow is harder right now. In 2021 it just didn't matter right like you didn't need to know like like the. Craig Fuhr (26:55) I do too. Why now, Jack? Why is it so important now? Yeah. If you fogged a mirror and had a decent deal, it was going to be just fine. Jack BeVier (27:14) Yeah, exactly. Exactly. But, and, and liquidity was yeah. And liquidity was just not liquidity. Liquidity wasn't an issue. So nothing ever went sideways. you know, it's become more, it's become more important to have, for your lend for lenders to understand the practical realities of boots in the ground, particularly with permitting issues and cost increases. and, there, but stuff was still moving and now stuff's moving slower. Craig Fuhr (27:17) Even if you had a crappy deal, would work out. Hmm. Jack BeVier (27:40) and, and there's, and there's kind of nowhere to run with this higher interest rate environment. And so I think cash flow pressure liquidity is that pressure is becoming more ubiquitous. Like that's becoming the theme of, of guys who are having a more difficult time. And, I mean, if your attitude is, if your attitude is like, you know, Hey, we're gonna, we're gonna default you because we're at the maturity date, which some lenders do. then you know, they're screwed, right? Like if you're a borrower in that, in that, in that environment, you're just, you're just going to get, you're going to get screwed. and so we're trying to be very proactive about, under like monitoring rehab progress, right? Like, Hey, we're 50 % through the loan, but you haven't taken a draw yet. Like getting that guy on the phone and be like, Hey, what's going on? Like trying to figure out like early in the, you know, early in the issue, if there's, know, if there's an issue, if there's something that we need to do, some restructuring that we need to do, rather than wait to the maturity date and he's out of, he's completely out of cash for him to then just stop making payments. Right. So we're trying to like really be proactive about communication. because I think that there's a lot of, because I think that cashflow pressure is what puts people down, right? It's not that the market. Real estate prices don't go down and kill people. It's the lack of liquidity that really creates the wave of defaults first. And I think that's what we're keeping our eye out. Craig Fuhr (29:00) I, I've been on the phone with a few borrowers that appear to have their marketing operations in gear. And I'll get a call from a guy and we'll do a loan for single family house, small multifamily, something like that. Three weeks later, I get a call, hey, I've got another one on the books. Can you guys do it? Yeah, super interested. But what we find in some of these cases is that they just don't have the liquidity. They might have the down. They don't have the liquidity for the interest reserves or the interest that we would look for in terms of liquidity to make the payments, or maybe they don't have the operating capital for the rehab, you know, draws. And so I couldn't agree more. I think the better operators, Jack, are going to figure out the deal flow. You know, look, if you're a guy and you've got it and you know what you're doing, you've been doing this for 10 years and you say to yourself, we're gonna do 25 houses next year. you're probably gonna do 25. The question is, is whether or not you'll have the liquidity to do the 25. Jack BeVier (30:00) Yeah, I think that's absolutely the case. And it's super frustrating, right? Like if you've gotten the deal flow aspect of things down, like you just want your damn deal funded, right? And you don't want to be asked like, Hey, what you know, hey, but I think it would be a mistake. But I think it would be a mistake. And it's really hard to be introspective about your own business and say like, Hey, but do I have the cash flow to make it through all of this successfully? Craig Fuhr (30:06) so true. Right. Jack BeVier (30:26) In an environment where it's not selling on the first weekend with multiple offers and no financing and inspection contingencies. That's not the environment. Like you're gonna have. Yeah. Yeah, exactly. Yeah. Like you, you, you, you worry about where you're pricing the house right now. And then the closing process is not going to be less than 30 days. It's, know, you may have to sell it, the thing a couple of times and make payments all along the way. Craig Fuhr (30:35) where you might be chasing the sale price down, you know, rather than. Jack BeVier (30:53) And, and keeping rehab, you know, keeping the rehabs moving quickly is, important, right? Like if you run out of cash and you can't progress your projects, you're killing, you're hurting yourself because you're just ended up, it takes longer. So you're paying more money and interest and you just, you bleed slowly and you don't realize that in real time, right? You just make the payment and you know, you're, if you're managing off of your bounce off of your bank account and like, how much cash do I have in the bank account? And that's what I'm going to do for the next, you know, planning out the next two weeks. You'll look back at the end of the project and be like, my God, like I didn't make any money. Craig Fuhr (31:24) Yeah, what did I just spend the six months of my life on to make 10 grand on a deal, right? Jack BeVier (31:28) Yeah. Yeah. And that's just, and that's, that's demoralizing, right. And that pushes guys out of the business. So we're truly trying to encourage people to like, you know, think about their cashflow planning, not just, know, you did you, did you get a great deal? Yes. Congratulations. That's super freaking hard right now. Like congratulations that's on, but Hey, capitalism doesn't care. Right. That's table stakes. do you have the cashflow to make it through this project is the, is the the second order question that I think is going to distinguish success in 2025. I think that's going to separate the wheat from the chaff in 2025 in terms of operators. Craig Fuhr (32:06) cashflow often come doesn't always come right out of the borrower's pocket. comes from friends, family and fools as my old mentor used to like to say and that's why part of my you know, my number one bullet point on my 2025 thesis for better investors is to be a great operator, really be able to sell your deal. If you don't have the cash, the liquidity needed for that fifth deal, when you're already working on number four, you better be a good enough sales guy and have a really great operation to be able to go to someone with deeper pockets and say, Hey, you know, I need some liquidity for this. This is what I'm willing to give in terms of your return on that. Because I think when you have that, you know, a better lender who understands your business like Dominion Financial is going to step up and lend you the debt on it. Correct. Jack BeVier (32:59) Yeah, it's going to be an interesting year for sure. I think it's a, it's a harder operating environment. There's more risk to it. I am nervous that not everybody is seeing it that way or behaving the way that you're talking about, but I couldn't agree more. Craig Fuhr (33:12) I think with any new administration, there's always going to be some glass broken. But I just see the changes, the dramatic changes that Trump is suggesting in his administration. There's look, it could turn out great. It could be the best thing that ever happened to the country to have smaller government to really trim down the budget to close up some agencies that that really are doing nothing like the Department of Education, send it all back to the states. However, there's going to be a tremendous amount of glass broken. And I just think that for the investor market that could create some serious opportunities. Look, we're in the backyard of DC here, Jack. There are 2 million people who work for the federal government in and around DC. Some of the richest counties in all of America are around the DC and 695 Beltway. And so, Jack BeVier (33:53) Yeah, I was gonna say. Mm-hmm. Craig Fuhr (34:08) If you're looking to, you know, do what Elon and the vague want to do with a Doge and get rid of half of those people, there's going to be a lot of empty houses, man. There's going to be, it's going to create a lot of broken glass and broken glass, blood in the streets is what makes people rich. If you are prepared to take advantage of that. Jack BeVier (34:18) Yeah, it's going to. Yeah, no, that's fair. completely agree with that. Cache is going to be into circling back to your original point about Warren Buffett and JP Morgan. know, cash is going to be king in that operating environment. Craig Fuhr (34:39) I'm calling all of my better borrowers over the next week or so, Jack, and I'm really diving into what is your plan for 2025. Let's talk about your marketing. Let's talk about your goals and let's talk about the cash that you have in place to be able to take down that many deals, whatever those deals are. mean, we, you know, we, talk with guys that are, you know, building 40, 50 houses a year. We talk with guys who are buying small to midsize, multifamily. We talk with guys who do hundreds of family houses a year. And I really want to understand their businesses from an investor standpoint. And I think that's one of the unique things about our company, Jack, the company that you and Fred have created is that you're not just lenders, you guys understand the business because you're in the business. And I think there's very few lenders out there who come at it with that unique perspective. Jack BeVier (35:28) Yep, we'll see. We'll try to distinguish, continue to try to distinguish ourselves in 2025. Craig Fuhr (35:32) Jack's being modest right now, I just, it's an interesting time. We hope you guys have enjoyed this very special holiday episode, Jack. And we'll see you guys again in 2025. Jack, we have some amazing guests that are lined up over the next several weeks, and I don't have that list in front of me, but I know you have a couple that you're really excited about. Maybe we should preview that real quick, and then we'll end this episode. Jack BeVier (35:47) yeah, I'm psyched. Yeah. Yeah, I'm really excited. We've got somebody from a Zellman and associates, Tony, Tony McGill, who is a partner there. They're like the preeminent research analyst for home builders, and all things housing research, huge MNA investment bank, and publish incredible research. so I'm really excited to have Tony on. then, we've got Peter Lineman, who is a professor from the university of Pennsylvania, Wharton school. He's a real estate professor there. He, when I went, I went to Wharton 20 years ago and he was like the, he's like the rock star professor. He's like the guy who everyone wants to get in his class. can't get in there. Everyone's trying to audit it and you just literally there's no seats in there in the room. and he, he's continues to be a consultant. He publishes a quarterly newsletter. That's a deep dive into all things real estate. So Craig Fuhr (36:46) street. Jack BeVier (36:47) Yes, super ex. I'm really excited to have him on as a guest. So that'll be a lot of fun. Craig Fuhr (36:54) Well, it's been a great 2024 with real investor radio. I would encourage everyone to go back and check out some of the episodes that we've had with really, really top notch investors. It's just been such a joy. Jack, thank you for the time that you put into it. Gab, our producer, it's been great. We're going to finish up this year end episode here and we'll look forward to much, much more in 2025 as we all continue to get better and make it through the next year. It's going to be a wild, wild year. I'm sure. Jack, great seeing you. Jack BeVier (37:30) Absolutely. Pleasure as always. Craig Fuhr (37:32) See you all next time on Real Investor Radio. Take care.