Episode 6 | Market Update

00:00

You’re listening to Real Investor Radio with Craig Fuhr and Jack BeVier, where we cover advanced real estate investing topics to help you stay ahead of the curve in your real estate investing business. Hey, welcome to Real Investor Radio. This is Craig Fuhr and I’m here with Jack BeVier. And today we’re gonna do episode six and episode unlike episodes up until now, we’re gonna kind of go around the horn today. Jack consumes a lot of information from really great resources that I don’t think a lot of investors privy themselves to, and I like to try to consume as much for these episodes as possible prior to. So one of the things that we like to do every now and again is just, man, let’s just talk about what we’re seeing in the news. Some of these great news stories that we’re seeing from better sources, honestly, and spend a little time on each and talk about how they impact everyone who’s listening.

Craig

00:53

So, one of the articles that you sent a couple days ago was this one from Housing Wire. By the way, if you’re not members of Housing Wire, you might wanna check it out. It’s great, great content. And this one was entitled Small and Mid-Size Home Builders didn’t quite meet their expectations in May. The article points out that for the first time in a few years, sentiment amongst the National Home Builders, their confidence is actually in positive territory for the first time in over a year. Housing starts are actually says they’re up 21% from April and up 5% from May of 22 to about 1.63 million units. But that said, a lot of the building right now, Jack, is going on in the Sunbelt states, and what we’re seeing is not much building going on at all on the Eastern in the, in sort of the Northeast and Eastern seaboard. So what do we want to get across in terms of this article here?

Jack

01:52

Yeah, sure. So I think that it’s, I think it’s important to keep an eye out on what the home builders are doing. The publixs obviously though they are more active in, you know, the most active in, in certain geographies from a flipper’s point of view and real estate investors’ point of view. I, I try to follow the small and medium home builders whenever I can. And so this particular housing wire article, you know, made specific mention of them and I think that, you know, frankly, there’s a lot of similarities between what affects the small and medium sized home building market and what affects, you know, the main street real estate investor market. Sure. So, yeah, one of the things that the article pointed out was that, as you mentioned, the sentiment is up. And I think that that generally reflects, you know, overall positive optimism about American real estate.

Jack

02:34

And frankly, you know, the fact that we’ve got such a supply constrained environment right now Yeah. Because of the low interest rates and all the refinancing has meant that there’s not a lot of inventory hitting the market these days. And home builders are a source of inventory, right? Like they, they’ve got lots in production, they are buying house, you know, buying land years ahead of when they’re actually planning to put projects into place. And so home builders are uniquely positioned to be able to bring unique new supply to the market. And so certainly they don’t wanna like flood the market with a bunch of new building though, if that drives prices down. So they’re kind of tapering it out right now. Yeah.

Craig

03:10

Something

Jack

03:11

That the article alluded to that I, that kind of rang true for me as well was that they saw a little bit of a downturn recently in the timeframe, I think about

Craig

03:21

5%.

Jack

03:22

Yeah. And that was, I think that, you know, what I think best explains that is really just mortgage rates. I think it’s interesting, you know, mortgage rates ticked back up in May to that 7% range, which is what we, where we were at in the third and fourth quarter of last year, which is when home builder sentiment wasn’t as as strong. And I, I think that we’re really seeing that that rings true. That I I think that the consumer right now, the home buyer is watching interest rates today more closely than, than I’ve ever noticed. Yeah. Like when, when mortgage rates change by twenty five fifty basis points, the phone, you notice it, you know, like there is a material difference in terms of demand for mortgages. And so I think that that is affecting, you know, we’re, I think the home builders and flippers right now are, are riding that kind of mortgage curve right now.

Jack

04:08

So, which means that if we see a downtick in mortgage rates, there’s a lot of pent up demand. There’s just this battle going on right now that we were talking about. Yeah, yeah, yeah. Between affordability and household formation, right? Like it’s, it’s not very affordable to buy a house right now, but we still wanna have a baby and so we need to go buy a house and at a certain point you just buy the damn house because we’re about to have a baby and we can’t be in our parents’ basement anymore. And so they’re watching, you know, the home buyers watching for any downtick in mortgage rates to be able to jump into the market and, and buy a house.

Craig

04:43

You know, one of the things we talked about in the last episode was this sort of seller capitulation on pricing, right? And builders are sellers. And one of the things that this article points out, which I find interesting is, I’ll read it here, it says, builder pricing activity remained mixed. One third of the builders reported raising either most or all some of their base prices up from 30% in April, and 19% of the builders lowered most or all of their base prices in April. Do you find that at all surprising? Yeah. In this market where we’ve got high interest rates that these builders are actually still raising their prices. I

Jack

05:21

Think that’s a regional thing. I think that that’s much more, I think that that’s, I think that if you, if they broke down that data, you’d probably see that that’s very geographically focused based off of, you know, frankly just based off of affordability. So the, the more affordable segments of the market, you can still increase prices because that affordability, you know, component of household formation is, is less of a factor, whereas the, the higher end markets, you know, I bet, I bet a lot of that, I bet a lot of those decreases are California, Arizona, and hi, you know, higher in Texas. Yeah. Stuff

Craig

05:52

Like that. Yeah. Can you speak at all? Do we wanna speak at all to sort of this lack of builder interest in a lot of formation in sort of the Northeastern states, you know, eastern seaboard states?

Jack

06:05

Yeah. Yeah. So, you know, just

Craig

06:06

Exactly where we are right now, by the way.

Jack

06:08

Yeah, yeah. So, so the Sunbelt, you know, has been where a lot of, not only in migration from the northeast the north has, and the, you know, the West coast has been happening for tax reasons, for weather reasons. And at the same time, they’re also giving out permits. You know, the, the municipalities are issuing permits in those areas, in those states generally at a much, much higher rate than the, the north, you know, the bluer states. And so the, the states are all too happy right. To issue, to issue permits, to like accept all of this new money coming into their, their tax system

Craig

06:40

At really high levels. I will tell you, just as an anecdotal point here, there’s a house that was being built right next to mine and the builder who was just a small infill builder, a guy who’s well known in Howard County, been around a long time. His foreman and I were having a conversation one day and he said, I don’t think we’re gonna be in the business much longer. Why is that? He goes, the house that you’re looking at right here, the one that’s being built next to mine, $60,000 in permits.

Jack

07:06

Yeah. Yeah. And

Craig

07:07

So one wonders why these guys would move to, you know, their business and operations and really scale in states that are a much better climate for building. And that’s what we’ve seen a lot in those southern states, obviously.

Jack

07:19

Yeah. We started doing some infill new construction when Covid hit, or just before Covid and then throughout Covid, but man, to get a permit, it was just a ridiculously long process. We’re in the blue state of Maryland and even though there’s, you know, community development, they want the new construction. Sure. Just the, just the way that bureaucracy, bureaucracy is set up, it’s extraordinarily difficult to, you know, we were waiting for 18 months for one permit on a completely entitled as of right, you know, public water and sewer lot. It’s just kinda

Craig

07:48

Mind blowing when you were, when you were looking at lots, were these lots raw? Were they ready to go?

Jack

07:54

As of right. Like they’re on public water in sewer. So like, you know, it’s like an old house got torn down or it was a, a lot that was like bought by the neighbor and then eventually they just didn’t want the neighbor yard anymore. So they sold it off and it was, you know, and it was as of right. You know, build a house

Craig

08:08

On it. Weren’t getting any subdivisions

Jack

08:09

Or anything. No, we have done some of that stuff though. And that’s what we, you know, had to do to find margin in 2019, 2020, we started doing more and more of that. So we have a number of those that are in the pipeline. They’ve just taken a really long time to get through the permitting process. Do

Craig

08:22

You feel like it’s still a viable business?

Jack

08:24

Yeah, I’ve come to the conclusion that in blue states in like more difficult permitting states, it’s a nice piece of the business, but in and of itself it is. So up here it is so unpredictable as to when you’re gonna get your permit. It’s frankly, practically impossible to build a, a business model around infill lots. Sure. We fund some guys in our lending business down in, down in North Carolina, in Georgia, in Florida, in Texas. And that’s all they do. Like everyone I was just talking about, they, South Carolina, all they do is infill lot and they can

Craig

08:59

Go find a few lots. Yeah. They ready, ready to go.

Jack

09:02

They, they find a bunch of lots. Yeah, sure,

Craig

09:03

Sure, sure. Like let’s say you go into a neighborhood and there’s, there’s maybe three empty lots right there. Yeah. We’re not talking about going into a place and doing 50 houses at once.

Jack

09:11

No, no. Yeah. Just infill like Yeah. Spotlight, spotlight deals and, but they’re able to find enough of them and they’re able to get permits on a predictable enough basis that they can actually put a business model behind it. And that’s all they do. You know, they do 200 deals a year of spot lots. Yeah. Because there’s that predictability of the permit system and you just don’t have that at the northeast. One of my best friends is a builder in a DC suburb Washington DC suburb called Prince George’s County. Prince George’s County has a bill that looks like it’s gonna stall. But was the news for the past six months about putting a new construction townhouse moratorium in place for two years? So like, just, Hey, yeah, we don’t want any more townhouses. We think that there’s too much sprawl going on. What we really want is kind of core mixed use, you know, in transit areas.

Jack

10:00

Yes. You know, we don’t want any more cars, basically. Right. Like we wanna build next to the transit hubs. So we either want, like, we either want like downtown Bethesda, you know, like we want the, this like, you know, this vibrant mixed use community or we want, you know, half an acre mansions and nothing in between. And that, you know, leaves out the entire affordable segment of the market. But, you know, you’ve got an area of, you know, the DC suburbs, which is one of the, it’s one of the more affordable areas in terms of if you wanna be in the DC suburbs Yeah. And actually commute Absolutely. To a, to a federal job. And, but the, you know, the city council, well it was particular city council people, their attitude was that hey, just, we just, you know, complete nimbyism, you know, and so when you have that sentiment, right, like that bill didn’t end up passing, but it had a lot of momentum. And when you have that kind of sentiment in the political environment, what are businesses gonna do? Set up shop like, dude, you, you just told me you were gonna shut, like shut down for two years, a whole segment of the, you know, from the 300 to $700,000 price point. ’cause that’s townhouses in PG County. Yeah. Like, we’re not gonna build any of that stuff. So like the new entry price point for PG County is gonna be seven 50. The,

Craig

11:08

The mind blowing aspect of that is if you look at one of the hottest growing, some of these articles have pointed out that while some of these builders for single family residential are, are missing some of their marks, the hottest asset class right now for construction is multifamily. And if you look at the master plan of say Howard County, Maryland, where I live, it is all about density. It’s all about changing density. And so one county south, which is the one you were just speaking of, prince George’s County, it is mind blowing to me to think that they’re trying to take out density, right. That like, we don’t want any townhouses which are dense. We’d much rather have either what you were saying, which is like a mixed use, which is probably retail on the bottom, maybe some office and then multi-family. Yeah. And then multi-family upstairs.

Craig

11:57

But that’s generally always located like on the main thoroughfares, right. The route ones, things like that. You’re not gonna see that out in Western Howard County or out, you know, where the, where the McMansions are. And so I would caution, I wouldn’t caution, I would, I would recommend that anybody who’s listening right now, just take a look at the master plan in and around the cities of where you live. And you’ll find that almost every single one of them is addressing primarily a massive affordability gap and a density issue. And so I don’t know if you wanna speak to that at all as sort of as the opportunity there. Yes.

Jack

12:32

Yeah. There’s an interesting, like, so for example, if that, if that bill had passed, right? And this townhouse moratorium gets put in place there, there’s essentially we’ve just eliminated new supply of affordable housing, right? In the county. Right. Probably actually a phenomenal opportunity for flippers, right? Because you don’t have this new construction, new supply competition anywhere near you. And so your ability to beat the streets and find deals, you know, you’re probably gonna see those $400,000 houses go up in value because they don’t have any competition until you get to 800. Right? And so the flips, right? And then, and then you get a, then you get that flip premium or that flip premium expands even, right? Because it’s, you can have this well-maintained house, but if you want something pretty, you don’t have new construction over your head as a competitive alternative, you know, the flip house ends up getting even more of a premium.

Jack

13:22

Conversely, if you’re in a market like the sun, if you’re in markets like the Sunbelt where they are handing out a lot of new construction permits, that’s something you have to look you. That is something that you have to keep an eye out for, right? Because you do have new construction, which tends to sell it, even the premium to some flips. Sure. And if there’s a bunch of new supply of new construction coming into the market, coming into your sub-market that may elongate your days on market may mean that you should step your game up a little bit on the renovation side to really try to distinguish your product. Yeah. ’cause if you put out just a nice clean, you know, builder grade rehab, you’ve got this new construction that’s gonna, you know, that that’s gonna be competing with you and you’re gonna, you might elongate your days on market there.

Craig

14:05

I have a very good friend who’s in Knoxville, Tennessee, came from Baraboo, Wisconsin, where he was doing a lot of infill. He could walk into, he could buy a lot that was basically ready to go, no, no, what’s the word? No development on the lot needed. Right. Nothing on the dirt. So the dirt was ready to go. He could walk into his permitting office, show him the permits, and literally get the permit that day, walk out the next day and have dumpsters on the lot and be ready, you know, excavating, why did he move to Knoxville, Tennessee, same exact thing. Hmm. And so he’s in these great neighborhoods, starter homes that are very nice, you know, you and I would live there, be happy to live there, half acre lots. He’s selling in that sort of four to $600,000 range and he’s walking into the permit office getting the permit that day and building the next, yeah.

Jack

14:51

Yeah.

Craig

14:52

So it’s unheard of in, in most areas of the northeast to be able to do something like that. Or even out west, right? And so, yeah, keep an eye on what your builders are doing and keep an eye on, on sort of their confidence in the market. All right. So second topics, solar panels, who would’ve ever thought we’d be going into this? But there are real tax advantages, especially for landlords here. So go ahead and speak to that.

Jack

15:16

Yeah, so this is a rabbit hole. I found myself crawling down a couple weeks ago. Did a lot of work on it, you know, for our own portfolio we’re always looking for interesting tax opportunities to, you know, to saving in taxes, you know, short term or long term. And so what I came across is that the, someone mentioned to me that, you know, the, the tax solar panels had become a lot more affordable because of the tax credits now made available by the Inflation reduction act. And so part of the inflation reduction act where we, where we print money, is that the, one of the new credits in there is a, makes it a lot easier to afford solar panels on your house. And everyone always thinks about that from the homeowner’s perspective, right? Almost never. Rarely, if ever, from the landlord’s perspective. Yeah.

Craig

16:06

Sort of from the investor’s perspective,

Jack

16:07

Right? Yeah. Yeah. And the reason of that is because the math was always just not very interesting, right? Like you could get, you know, there was state tax credits, there’s some federal tax credit, but when you looked at what the energy savings that you were gonna get, the return it, you know, and you just translated it to dollars, you know, the return on the investment that you had to have was just not that interesting. And I think that the math has changed on that materially with the inflation reduction act. And I haven’t heard a whole lot about it in the news. I think that we’re gonna hear more about it because I think the math is pretty compelling. If anyone can beat this up and you know, ex you know, explain to me why I’m wasting my time down this rabbit hole. I would, I would appreciate that you would save me a bunch of time. But so far what I’ve been able to find is that you can, if you install a solar panel on your house, and I’m gonna talk about from the landlord’s perspective here. Sure. So this house is a business, right? So you install a solar panel on your house for doing so, 30% of the cost of the installation of that system, you can get in a federal tax credit, not a deduction, but an actual credit. I

Craig

17:11

Believe that’s called the I T C, the investment Investment tax credit.

Jack

17:14

Exactly. Yeah. So immediately 30% of the system you can get back on your taxes in, you know, the next year there’s an additional 10% adder if more than 50% of the solar system components are sourced in the US domestically in the United States.

Craig

17:32

Not always easy to find.

Jack

17:33

No, not always easy to find as many

Craig

17:34

Of them are produced in China. Yep. Don’t let me get started. But

Jack

17:37

You know, this is a, you know, to, to support domestic production of solar. You know, I guess that’s why they put the 10 in there. And it seems in my conversation with a lot of solar providers, you know, vendors, they’re all, all putting a set of SKUs on the bench, you know, and one I was most recently talking to, you know, those domestic components probably cost an extra 5%, but you’re gonna get a 10% credit. So it’s worth doing. Sure. And so, you know, you just ask for the American stuff so you get an extra 10% there. So now 40% of the system is recoverable in a federal tax credit. And then if you’re in a low income area and you have to look at, if you can go to, we’ll put the link in the show notes. Yep. There’s a link to recent that the energy department put out there to that, that kind of puts this into fairly consumable English.

Jack

18:21

But if you’re in a low income area, you can get an additional 20% tax credits. Now we’ll be up to 60% of the cost of the system in year one federal tax credits. Now that 20% though is not as of Right. Like you have to, you have to apply for that low income designation. And the regs on that application process are actually not even yet published. They’re gonna be published in the third quarter. Okay. That’s the recent department of energy guidance. So that’s something that I am currently waiting for is seeing what those regs are gonna look like. But on paper it looks like if you’re is located in a low income census tract or you’re renting to folks who make 80% or less of area I median income, which is anyone who’s working with a housing choice voucher program, for example, that you may be able be maybe able to get that 20% credit as well. So now we’re up to 60% just

Craig

19:11

For the installation or the cost of the installation.

Jack

19:14

Labor and materials. Got it. Yeah. The whole, the whole system cost. Yeah. So add to that, there are often state tax credits, they’re state incentives. Maryland has two, you know, I just happen to be speaking about Maryland, but you can find your state incentives very easily. I post a link for that as well. I’ve got a link that has all the state’s incentives. Maryland’s got a thousand dollars. So that’s, you know, roughly, you know, between five and 10% of the system costs as a Maryland tax credit. And then there’s also, Maryland’s got an additional incentive for the actual energy production that you make. So now we’re up to like the 70 ish percent range. And then additionally the unit itself is eligible to be depreciated. And because it is now, you know it’s an improvement that you’ve made to the property. So you can depreciate that improvement. And we are still in, for those who are not familiar from the Trump tax code, they instituted bonus depreciation, an acceleration of bonus depreciation. So your five and your 15 year property, this is a bit misunderstood. Most people just depreciate their rental portfolio across like a

Craig

20:18

27 year type.

Jack

20:19

Yeah. But, and that’s the default, right? If you just hand your stuff to your accountant, they’ll just do a straight line adjustment and ’cause it’s easy, right. But it’s actually the case that within that house, not everything is that full amortization period. There is a certain level of your components that are able to be depreciated over five years. Another set of components that are able to be depreciated over over 15 years. And so the five and 15 year property, which in our house is, ends up being about 20% of the improvements can be depreciated, was able to be depreciated a hundred percent in year one. That’s called a hundred percent bonus depreciation. So if you ask, if you ask your accountant about, hey, I understand there’s this thing called a hundred percent bonus depreciation, they’ll be able to explain that, apply that, and if

Craig

21:06

He doesn’t, then you need a new note. Yeah, you should. But quickly, let’s take a, a standard Baltimore row house and let’s say you just said that all of the improvements that we put into that in-house,

Jack

21:17

All of the improvements of the real estate, so including the bricks and roof and not just the work that you do, but the entire, you know, with the cost to construct the house. So you just say, Hey, I paid $150,000 for this house. Got it. Well I paid, let me use a different number. I paid $200,000 for this house. Depending on the square footage, you may say that $160,000 of that is improvements and $40,000 of that is land. I gotcha. So of that $160,000, in our case, roughly 32 20% of that $160,000 of improvements was five and 15 year property and therefore eligible to be depreciated in year one. So you get this, you know, when you add a unit to your rental portfolio and using the numbers I just talked about, you get a year one $32,000 deduction. You know that that concept is a reason why multifamily syndicators who are sometimes allocating depreciation to their side of the ledger, or just generally folks who are adding a lot of rental real estate, one of the main drivers since the Trump tax code has been to get an allocate this bonus depreciation allocation. Sure. Because whatever else you were doing that was taxable probably got wiped out by this bonus depreciation. So there’s been a lot of not paying taxes.

Craig

22:28

I was gonna say I know a lot of guys that have added a lot of properties to their portfolios and have paid zero in federal taxes.

Jack

22:33

Yeah. And one of the other, you know, features of the Trump tax code was that you can, even if that drives your taxable income negative, that’s fine. Because now you’ve created a net operating loss tax term, net operating loss where your actual taxable income is negative and you could carry forward into the future that net operating loss for an unlimited amount of time. So it didn’t matter how many, there was no losing it. Right? Like generate as many losses as you want through depreciation, you could carry forward, carry it forward to offset your future income forever. And so that was a big driver behind a lot of multifamily syndications and behind a lot of commercial real estate purchases. And for the folks who were adding a lot of rental units, it was an opportunity to offset your taxable income with this bonus depreciation. So it’s been a hundred percent bonus, but that law is winding down.

Craig

23:26

Oh, it is.

Jack

23:26

There’s a sunset to that bonus depreciation idea. And so it’s winding down from a hundred over the next five years. A hundred was last year and now it’s gonna be, this year it’s, it’s 80%. So of that five and 15 year property you can offset, you can bonus appreciate 80% of it. Next year it’ll be 60, then 40, then 20. And then you’re back to having to just do five 15 and 27 and a half year property. I see. So all that to say, the $15,000 solar system that you put on your house, you can bonus depreciate 80% of that in year one. So that would be a, in this case, $12,000 deduction in year one. If your marginal tax rate’s 40%, that’s $4,800 of taxes that you’re not paying this year for 2023 as a percentage of the total cost of the system makes up most of the rest of the gap that we were just talking about. Sure. So between the 30% investment tax credit, the 10% domestic bonus, the 20% low income bonus, if you get awarded that, your state incentives and then bonus depreciation, solar panels are damn near free after tax right now.

Craig

24:41

So I’m looking at the report from energy.gov, which again, we’ll post in the notes, show notes, which can be found@realinvestorradio.com slash notes for the episode. And so they mentioned two specific tax credits here. The, the itc, which is the one you just spoke of, investment tax credit, and then the P T C, which is the production tax credit, which says here the production tax credit is a per kilowatt hour tax credit for electricity generated by solar and other qualifying technologies for the first 10 years of a systems operation. It reduces the federal income tax liability and is adjusted annually for inflation. Can you speak to that?

Jack

25:24

Yeah. So you have to choose one or the other. Oh. So the investment tax credit is the upfront. Alternatively, if you say, Hey, you know what, I’m building a solar field in Phoenix and this thing is gonna crush, it might make more sense on a net present value basis to do the production tax credit.

Craig

25:40

I should have read further here. It says, generally project owners cannot claim both the I T C and the P T C for the same property, although they could claim different credits for co-located systems like solar and storage, depending upon the further guidance that you mentioned that’s coming in the third quarter.

Jack

25:56

Yeah, yeah. So, so when they were writing these credits, you know, people were thinking about solar farms, right? Yeah. Like it was like, Hey, I got a field and I’m gonna put a solar farm in it and you know, let’s incentivize that, you know, putting money into the grid. There’s this concept of solar community where you produce solar electricity and then you can actually sell that electricity to folks who opt into your program to be a part of your solar community program. But it was never really conceived of, it’s never, it was never really conceived that for, for business purposes that a landlord might put a unit on his house. One of the reasons that I say that is that in a hurdle here is that you can’t, you know, say, say you put this solar panel in your house, you can’t, well, at least in Maryland, this is a state by state thing, so you have to look at your state regs on this. And there’s probably some states that do allow it, but at least in Maryland can’t start sending my tenants a bill for the electricity that’s been generated. Which is, which, you know, damn Right. Right. Because that would be amazing, right? Yeah, yeah. Because you know,

Craig

26:55

Now you’re the electric

Jack

26:55

Company. Yeah. Now we’re, yeah, exactly. We’re the electric company, the solar panels almost free, and I’m the electric company. Like that would be pretty awesome. We would put solar panels on every single one of our house tomorrow. Yeah. So in our case, in the, in the case that I’m studying here, which is a rental portfolio that where we can’t do that direct billing, I’m gonna be using it. I think as you know, assuming I get that 20% allocation of the low income side, I’m gonna be using it as a incentive for, for my tenants to stay in the unit longer and to make the property more leaseable.

Craig

27:27

Why? Because it’s,

Jack

27:28

It’s super helpful from affordability point of view, right.

Craig

27:31

Because it reduces their overall monthly payment.

Jack

27:33

Yeah. So, you know, do you, do

Craig

27:34

You know by how about how much Yeah.

Jack

27:36

Call, so call it like a six kilowatt hour system, which is like a, you know, normal sized row house roof

Craig

27:43

That’ll run a house. Yeah.

Jack

27:44

It’s called that like $80 a month of electric savings in that range. That’s very, very ballpark. Sure, sure. No one yell at me in the notes for that. Yeah. But, but you know, it’s, it’s a, you know, but for someone who’s, you know, who’s sort

Craig

27:55

Of low income, maybe you want a voucher, I mean that’s groceries for, you know, a week and a half, right?

Jack

27:59

Yeah, exactly. Exactly.

Craig

28:01

It’s not an insignificant thing.

Jack

28:02

Yeah. So, you know, obviously big disclaimers on this is not tax advice. We’re not tax consultants, we’re not legal consultants. Consult, consult your blah, blah, blah, blah,

Craig

28:10

Blah. Do we need to say that every episode or can we just, like, that’s a flat out Yeah. We’re not tax consultants.

Jack

28:15

Yeah.

Craig

28:16

Especially me, but, but no

Jack

28:17

One’s really talking about it and I right now yet I think there’s a yet behind that. I think there could be some really interesting applications of it. Obviously they put it in place because they wanted it to be used. And so

Craig

28:28

Would you recommend that, that anybody, look, I’m gonna go out guy listening to this podcast, I’m excited ’cause I’ve kind of looked into solar a little bit without these regs being out until the third quarter. I mean, is do we, do we jump into this right now or do we wait? Well,

Jack

28:42

If you’re, yeah, I mean, even without the low income, the, the, those regs in the third quarter only apply to the low income aspect of it. So if you’re not counting on that additional 20% tax credit or your house just isn’t in a low income area, then it doesn’t apply. Everything else is ready to go. Like you can put, and, and it significantly decreases the, you know, certainly you could on the turnover, put a solar panel in, not even on the turnover, just, you know, you could go put a solar panel in and know that you’re gonna be generating roughly $80 a month of electricity. You should be able to charge a higher amount of rent for that. And that incremental rent is your return on the net dollars here. So there’s, you know, obviously there’s individual math to do based off of the house and your location and your, whatever your marginal tax rate is. But with the, the point is, with the addition of these new incentives, the math has become much more compelling than it was before. I did this analysis probably five, 10 years ago, and at the time I was like, ah, we could do it, but our return is like 5%. And at the time, like the treasury was 5%. Yeah. And so I was like, ah, it’s just not a very compelling investment case unless you really just wanted to have a green, you know, unless you really wanted to a strategy

Craig

29:51

To be green.

Jack

29:51

Yeah. Strategy to be green or, or you know, or belief, you know, true believer on that from that point of view, which obviously is a good thing to do, but just on a purely economics basis, there wasn’t a compelling financial case to be made. Whereas I think the financial case is a lot more compelling today.

Craig

30:08

I wanna be green, but it would cost me too much money. But now I’m really thinking about being green, I think is what we just heard from Jack there. So that report, by the way, is from energy.gov and it’s called Federal Solar Tax Credits for Businesses. Again, we’ll put the link in the show notes for you, but that’s, it was updated in June of 2023. So it is very current. So check that out. Before we click the mics on for this episode, Jack said, Hey man, I think I wanna step up on my soapbox. I don’t, I have no idea where he is going with this, but flipping activity. You said you wanna talk about flipping activity and so soapbox is ready and go.

Jack

30:45

So, so Adam, so whenever there is an article about flipping, I click on it, period, hard stop. And often it’s the case where I’ll see, we’ll see these articles where it’s like top 10 markets in the country to flip houses. Flipping activity is up, flipping activity is down. And I read these articles and they drive me absolutely bananas because while the data exists to do really interesting analysis on the flipping market, I feel like most of the data providers who do that kind of analysis fall short in that they make this generalization, they make two fundamental errors in the underlying data set, which means that the analysis is meaningless and not actionable. And not, frankly, not very interesting. What they call a flip is a property that is bought and then resold generally within a 12 month period. Sure. But pick your timeframe and that’s it.

Jack

31:41

And usually they also overlay by an L L C, but that’s it. They don’t put a, so if you buy a house for a hundred and then you resell it for 120, they call that a flip. Sure. I don’t call that a flip. I call that a wholesale that’s called wholesaling. Flipping is when you buy a property and then you do some work to it to add some value and then you resell it. Sure. One of the reasons that flipping, you know, as a is a somewhat of a negative connotation to it in certain circles is the idea that if it was just, if you’re just buying a property for a hundred, sitting on it for a while and then reselling it for a higher amount, you’ve either scalped the market in some way or you’re speculating, but you’re not adding value, no value. But flipping is the act of adding value to a property to get it to its full potential.

Jack

32:25

So you’re taking something that is depreciated and then bringing it up to, you know, new condition or like new condition. And so, but the data analysts aren’t drawing that distinction between the concept of wholesaling, between the business model, which is a completely different business model, right. Of wholesaling, which is more like trading houses. Absolutely. And flipping. So when we do our, and, and so when we do our, our analysis of flipping markets, we draw, I, I picked an arbitrary number year of a minimum difference in the, between the purchase price and the resale price of at least $60,000, which I think is even pretty low. But it gets out most of the wholesaling activity. Sure. Which is, you know, usually in like the 10 to maybe $30,000 range. So

Craig

33:08

You’re saying you’ll take a look at a market house was purchased for a hundred sold for a buck 60, you’re considering that’s the value add at that point. The person obviously bought it, did some renovations, sold

Jack

33:20

It, probably did something. Yeah. And if it’s only a $60,000 spread between purchase and sale after, after holding costs, transaction costs on both sides commissions. Yeah.

Craig

33:27

We’re not saying they did. Well,

Jack

33:28

That’s a pretty light flip, right? Like the vast majority of flips are, you bought a house for a hundred, you put 50 grand into it, you sold it for 2 25. You know, the, the spread between the purchase price and the sale price, which is the two numbers you see in the public record are usually over a hundred thousand dollars. Like that’s a bread and butter flip. And so it kills me because then they’ll, because then the article, the analysts will draw these conclusions that these are the best markets because these are where the biggest margins are. And they’ll say, you know, whatever city in Connecticut has an average $140,000 flipping profit and they use the word profit. That fricking drives me insane because we know that there was, there’s work that was done, we spent a lot in rehab in there. It’s,

Craig

34:15

It’s the H G T

Jack

34:17

V, it’s the H G T. That’s right. Right.

Craig

34:18

Flip this house version of profit where Sue and Sam Yeah. Bought the house for a hundred and they put a hundred into it and sold it for 300, which means they made a hundred thousand dollars profit

Jack

34:31

Check. Yeah, exactly. Which is what got everybody into the flipping business in the first place was that those lies over numbers. So it destroys me because then they’ll say, Hey, here’s the top 10 markets, and you just see a list of of markets that have old houses in them, and it’s like, well, yeah, you know, that’s $140,000 average because all the houses are built in 1910. Like, because it’s in the northeast, right? Sure. So it makes the northeast look like there’s like these amazing outsized returns that you can get when that is often not the case because those people are doing $90,000 rehabs. Whereas if you’re in, you know, if we’re, if you’re in, you know, working on houses that were built in the two thousands in Florida and Georgia and Texas, and you know that, that you’re doing $30,000 rehabs. And so as a result, the analysis is rendered completely meaningless, right?

Jack

35:17

Like it’s, it’s, it’s, it’s useless. Meaningless and just click bait for people who don’t understand. And it’s a shame because you could do it just one level of more sophistication and by doing, drawing the distinction between wholesaling and flipping and then making some kind of adjusted analysis based off of even just the year built, right? Like they’ve got the public record data of the year built and the square footage you could say, and, and this would be also very imperfect, right? But if a house is built in two thousands, well then a flip is let’s just assume that that $30 a foot of work needed to be done. Sure. And if you are have a built, those built in, the fi house was built in the fifties, that’s $60 a foot of needed, $60 a foot of work needed to be done. If it was built in 1910, that $90 a foot of work needed to be done.

Jack

36:00

And that would be wrong, right? Like it’s obviously a, a, you know, still a very broad brush, but it would at least give you some adjusting factors to maybe zoom in zero in on where there are interesting flipping opportunities and where or not, I think that even in a different approach to analyzing flipping markets would be not based off of any of those numbers that I just talked about. Because the rehab is unknowable, the situations are unknowable, you know, we don’t know if it was well-maintained or really decrepit, you know, a deal that may look like a grand slam could have been actually a loser. So perhaps that’s the wrong way to look at the analysis completely. Instead, maybe we should be looking at where are there markets where there are people who are doing between three and 20 flips a year at a high volume. Right? Okay. If there, if a, if a market’s, I would argue that if a market’s dominated by, if you look at the flips and who does the flips and those LLCs, it was their first one. And the market is dominated by people who are doing their, by LLCs who are doing their first flip or their second flip, that’s probably not a great market. ’cause there’s a ton of newbies in here, you know, probably bidding stuff up, buying weights

Craig

37:08

For, for way too much.

Jack

37:10

Conversely, if you’ve got a market dominated by entities that are doing very high volumes, you know, hundreds a year, IBU probably right? That, that’s also probably not a very interesting market for a main street real estate investor. But hey, if, but if, you know, but if the median, if the median flipper did eight flips last year, and there’s, you know, and the middle of that bell curve is, you know, is is thick, right? Yeah. In terms of like the quantity of flips that were being, that are, that are being done by those folks, that’s an interesting place to go. And I just think that, you know, you could, you could, you know, take this idea down a bunch of different paths. I just think that there, with, with as much data as we have, there is really interesting analysis that can be done on that data. Yeah. And I don’t think yet that, I think that there’s like a leveling up in terms of sophistication to identifying really to, to using data in really interesting ways that would make a difference. Not just, you know, not just clickbait, not just meaningless clickbait, which it’s being used

Craig

38:08

As now. When, when you and I were working together back in that 2015 16 era, we had a list of what we considered to be flips. And not only Maryland, but I think it was across the country, if I’m not mistaken. And when we sort of sorted the list by number of flips per year of that L L C or investor, let’s say the overwhelming majority, I think I would say probably 90%, I was kind of shocked to believe it was like one flip a year, one to two flips a year. You remember?

Jack

38:40

Yeah. By, by, by number of entities. Yes. By quantity of flips, I think it’s more like 50 or 60%. Okay.

Craig

38:46

50 to 60% of those LLCs that were pulled to about one to two flips per year. Yeah. Correct. And then, so that’s one thing that I, I kind of actually, I was a little surprised by that actually that there were so many investors out there just doing that one to two flips, more importantly at this stage, you know, several years later who are the real aggregators of that data. Like where can I go and find that data?

Jack

39:11

Yeah. I answer that one question, but one thought is that you, you see a high number of one and two flippers because that’s the learning curve, right? Yeah, yeah, yeah. Like nothing, no books, no courses, nothing prepares you for a flip like doing a flip. Oh,

Craig

39:24

That’s so true.

Jack

39:25

And so like you get your ass handed to you on the first always. Almost always. I did not

Craig

39:30

By the way.

Jack

39:31

Yeah, yeah, yeah. I was gonna say, you’re gonna tell me about your or you peak.

Craig

39:35

Yeah, I peaked on 20 years ago. I did my first flip. I’ve been looking for that flip ever since.

Jack

39:40

Yeah. So you, yeah. You either blow up or get addicted on the first one. Right. But most people blow up on the first one if you make it through the second, by the time you’re done, you’re third, you’ve pretty much hit your, like you’ve, that’s, that’s the vast majority of the learning

Craig

39:53

Curve right there. It’s the entire solution set of problems that you’ll run into. Yeah. Like at least 98% of that.

Jack

39:59

Yeah. Yeah. You’ll, you’ll get a random curve ball from that point after, but you’ve seen 98% of the problems in those first three. Yep. And it either puts you out of the business and puts such a bad taste in your mouth. You just say, Hey, it’s just not for me. I’m just, you know, I’m gonna go back to whatever I was doing elsewhere. Or you say that was fun and you get addicted to it and then you’re in the business,

Craig

40:16

You build a real business around it. Yeah.

Jack

40:17

Yeah.

Craig

40:18

The first three by the way are generally, and you know, probably not speaking to many of the listeners of the show here, but the first three, for those of you who remember, they’re like art projects that’s like they’re each, they’re one-offs. You know, the first one you go way too far. The second two, you’re like, you learn some stuff, but it’s still not a business at that point. Right? Yeah. You’re lucky to make money

Jack

40:36

By the 30th. You have standard sets of SKUs for tile and backsplash and flooring and maybe you have two or three combinations of them, but it becomes

Craig

40:44

Contractors that actually show up stuff

Jack

40:46

Like that. Yeah, exactly. Sorry, your, your question.

Craig

40:49

So the second question is for the people who really want to get into the data Oh yeah. Find those spreads, you know, where can they find that data?

Jack

40:58

Yeah, sure. So we license, there’s three national aggregators of the data, which is really kind of all the source data, right? It’s problem with aggregating this data is that every county and or municipality has different protocols for how they collect the data. Yeah. They collect different data, they collect it in different formats. And so some of them have APIs, some of them don’t. And so Black Knight Core, CoreLogic and Adam are the three aggregators of the national data. Black Knight and CoreLogic are direct aggregators to the municipalities. And then Adam gets its data from one of those two because of an F c C rule, which was part of allowing a merger to happen. So I can’t remember if it was Black Knight or CoreLogic bought somebody who was the third aggregator. And for that merger to go through the F C C required that, that the acquirer licensed that data to Adam so that there’s a third in the space, a third provider in the space. And so all the data solutions now, those three entities then license, they collect all the data, they standard, they aggregate it, they standardize it. And I’m talking about assessor recorder data, some foreclosure like court records as well. Stuff that

Craig

42:10

We would generally be able to find publicly online. Yeah. Ourselves. However, these guys just put it all into one nice basket

Jack

42:16

For you. Yeah, exactly. Yeah. And then they license, so those companies then license it to, you know, hundreds if not thousands of other data companies who then are putting it in whatever particular format that they want, display the, the data. And you know, Zillow doesn’t go aggregate it from the, from the, all the counties. They just license the data set from either Black Knight or CoreLogic. So you can go direct to them, to those companies, to Black Knight and CoreLogic. Each of them have some like more direct to consumer or you know, anybody listening to this would be, they’re what they consider consumer. Yeah. Products. CoreLogic is ListSource, black Knight has a couple different ones right now. And if you go to their websites, you can, you, you can find those. Now they’re not cheap and they generally are presenting those in a very standardized format that doesn’t give you a whole lot of flexibility to do unique queries on the data. If you want to actually license the data from them, the national set of assessor and a Quarter data, it’s very expensive. It’s a six figure annual licensing agreement. And each of the data companies who you may be buying your current data from downstream are paying those six figure annual licenses to, to Black Knight, CoreLogic, or Adam. And can you

Craig

43:30

Mention a few of who of those companies?

Jack

43:32

Yeah, so Prop Stream is a very popular one. Property Radar is coming out with a competitive project product to prop Stream. Right now ListSource is the CoreLogic one. A lot of folks use that batch leads, you know, there’s dozens, right? Sure. But those are some of the bigger names. And you can even just access some of the free data, you know, just by going on Zillow. But of course you can’t query that in any interesting ways. We actually, we do Nash license the national assessor and recorded data so that we can pull it for our own marketing purposes in, in our lending company. And so I’ll also, you know, query that data ourselves just to, you know, ’cause I’m a nerd and I like researching that stuff. Yes, you are.

Craig

44:10

Are we ready to put the soapbox away?

Jack

44:12

Yep. I’m all good. I’m all good. So anyway, yes. This is a call to,

Craig

44:15

This might be a reoccurring segment by the way.

Jack

44:16

This is a call to data providers out there to step up their game on the analysis that’s being done. Don’t make it just meaningless, you know, meaningless click bait for flippers. But you know, there’s some really interesting stuff that can be done. And for all the young data analysts out there or folks who can write a little SQL code, which is all you really need, there’s I think a lot of really interesting opportunities to kind of step up the data analysis game in single family real estate. Awesome.

Craig

44:42

Alright, so the fourth and final topic of today’s show is opportunism in private lending. You wanted to speak about this a little bit?

Jack

44:49

Yeah, so I, I saw an article that I thought was really interesting announcing a joint venture between Redwood, which is a publicly traded mortgage reit. They do a lot in the kind of the alternative credit space, including in private lending and residential real estate through their subsidiary called corevest, which does bridge lending and long-term financing. So it, it announced, this article announced a joint venture between Corvet slash Redwood and Oaktree, which is a humongous asset manager, $175 billion of assets under management, you know, private equity and, and wealth management firm. And so this, there, the joint venture is being formed, it’s said to do, you know, up to a billion dollars of lending, so in including the debt that they’re gonna raise. So I kind of, you know, with that billion dollars, I kind of presumed that it was gonna be, you know, 700 million, $750 million of, of debt and then call it $250 million of equity. And it’s an 80 20 joint venture. So oak tree’s putting up 80% of the money, Redwood Corevest is putting up 20% of the money. So they’re putting up 50 million oak tree’s, putting up 200 million. And the goal is to do bridge lending for multifamily and new construction. Which is interesting because three, four years ago that was, well, like, that was an incredibly liquid competitive market. Frankly not that interesting to get into

Craig

46:15

From a lending standpoint.

Jack

46:16

From a lending standpoint, because you’re competing with, with banks Yeah. For that stuff, you know, five to $25 million loans on, you know, multifamily, new construction or now built to rent is, is using that kind of financing

Craig

46:28

A very, very mature lending space.

Jack

46:30

A very mature lending space. Yeah. And to have a, a joint venture between, you know, a corevest and, and Oaktree Oaktree tends to be looking for a little bit more opportunistic returns. Sure. It’s not the cheapest money out there. Right. You know, right. Means that they see an opportunity in this segment. This, this wasn’t in the article, but it’s, you know, in the five to $25 million bridge space for these like larger bridge projects. And so I think that that was really interesting ’cause it speaks to something that we’ve talked about on the show before, which is the banks who would otherwise, who have otherwise dominated that space. You know, the, the local and regional banks, you know, that that was their bread and

Craig

47:07

Butter, it was their bread and butter.

Jack

47:09

Absolutely. But they’re all being forced to pull back right now because of, you know, all the crap that happened 60 days ago. Yeah. I

Craig

47:15

Mean you’re seeing a massive, massive contraction. And obviously we’ve talked extensively about the, the local banks are, are really disappearing at a, at a rapid rate. And even the regional banks are pulling back now contracting in in their terms, right?

Jack

47:28

Yeah, yeah, exactly. I mentioned a buddy of mine who’s a builder nearby. He’s got a longstanding relationship with a big regional bank and like literally a 30 year relationship borrowing from this bank and the, the banker’s calling him up and being like, Hey buddy, you know, we love you. We do, we love you. Yeah. And everything’s great.

Craig

47:45

Don’t get me wrong here. But,

Jack

47:47

You know, on that next deal, like, you know, are you sure you wanna move forward right now? Like if it’s gonna be a lower loan, you know, it’s gonna be a little bit lower loan to cost and the cost of capital’s gonna be higher than what you’re used to. And to the point where he’s like, you know, not that excited about moving forward. So, you know, a clear message even to core customers that they wanna pull back in terms of their exposure, in terms of their loans period, and particularly their exposure to commercial real estate. And so in the wake of that, in the wake of that pullback, you see this opportunism, this opportunism in private lending, you know, a a joint venture between Oaktree and Corevest who are very smart. They get the space, they know exactly what they’re doing and they’re coming in to fill that void. Right. So they’re gonna be, how

Craig

48:28

Does that look?

Jack

48:28

They’re, they’re, yeah. So they’re gonna be offering basically the same capital. Right. Hold

Craig

48:32

On one second. How does it look? Tell me what the relationship looks like between the 30 year relationship with the banker now in terms of capital, you know, what’s that relationship look like? You know, two years ago in terms of what this guy would walk into his bank and get two

Jack

48:46

Years ago is best buds. You know, you know, best buds, you know, super competitive situation. They loved the business and then they’ve been a great pay the entire time. You know, like it’s, they were bosom buddies two years ago and today, you know, they still showing up, you know, to the crab feast or whatever, but the banker’s still, but he’s like, but you know, it’s not his decision, right? This is coming down from on high. Like he’s doing the best he can as the loan officer, but it’s not his call. It’s a CFO’s call. He

Craig

49:11

Might be do willing to do the loan, but it’s gonna be at a much higher, much higher interest rate. And it’s, and they’re probably not gonna come even close to, you know, it’s

Jack

49:19

Lower advance rate. Yeah, yeah, yeah, yeah. Lower advance rate, higher cost to capital. And it’s, and it’s not his call, you know, it’s the CFO’s call, like of course

Craig

49:27

It’s the loan committee, man. Don’t, don’t shoot the messenger. Yeah,

Jack

49:30

Yeah, exactly. So, you know, they’re just, you know, tell

Craig

49:32

Me what the relationship would look like now with corevest, you know, what’s that gonna look like? So

Jack

49:36

Yeah, they’re gonna come in and they’re gonna offer similar to what the bank was offering before in terms of advance rates, you know, in the 75 L T C eight maybe, maybe L 80 L T C, but probably in that 75% L T C range is gonna be the sweet spot. Yeah. And they’re gonna be two, 300 basis points higher than what the bank was before. Maybe only 150 basis points higher than what the bank is now. But it’s, you know, it’s gonna be a double digit, you know, it’s gonna be, it’s gonna be a double digit interest rate number. And will it

Craig

50:07

Be easy? Will it be that, will it be like it’ll be, we get what you’re doing here? It’ll

Jack

50:11

Be the same as the bank. I mean, yeah, maybe a little less, maybe a little less, a little bit more real estate focused, a little less what was your p and l focused? But it’ll be a, but it’ll be predictable, right? It’ll be a 45 day closing process, which is fine. You know, that’s, that’s what they’re looking for. Sure. And, but it’s that, I mentioned this the last, last episode that, but they’re, they’re gonna be, they’re basically charging though a liquidity premium, right? Like this isn’t about the underlying index. This isn’t even about how much risk we think we’re taking. This is, I’ve got money and your banks don’t, and as a result, I’m gonna come in and I’m gonna charge you a little bit more for that 150 basis points, 200 basis points more. But you’re gonna say yes, because the deal still works and your other banker is waffling and you don’t trust him to show up at the closing table. And you’re right about that. You shouldn’t, like, he may not. So if you want a predictable, you wanna predictable partner to come to the closing table, it’s gonna cost you an extra 200 basis points. That opportunism in private lending is absolutely happening. This is a, this is an institutional example of that happening. Sure. That fact pattern, by the way though, is absolutely also true for main street fix and flip investors. Yeah, yeah.

Craig

51:21

I was just about to say, let’s take it down to the, to the single guy level, but you know, that’s absolutely happening at that level as well.

Jack

51:26

Yeah. So the, the balance sheet local, you know, hard money lender, you know, for lack of a better term, has been able to increase their interest rates because the institutional national competition has been increasing their interest rates and you get a better service level or can get a better service level or higher loan to cost from that local guy. Sure. And so, you know, the, the opportunities in local private lending, there’s opportunism there as well to get a little bit of a liquidity premium because the, the institutional capital is backed off. Certainly. And, and certainly what I said about the commercial real estate side goes for flippers as well. The banks are, the banks are really pulling back from that as at the same time. And so, you know, it’s changing the dynamic. You know, they, they relationships are moving around right now, right? Yeah.

Jack

52:12

Like the guy who, if you got a term sheet six months ago and you haven’t gotten one since, you should go get one because it will be different. And it may surprise, it may, may be materially different both in terms of rate, but it also in terms of advance rate that will, could affect your cash flow. And so you think that you need to bring, you know, 30 grand to the table for this deal and turns out you need to bring 60 and maybe you don’t got it, or that puts you on tilt. You know, it’s so hard to find a deal right now. Getting surprised two weeks before closing when your relationship has the nature of your relationship has changed, is a rude awakening. So I’d you know, absolutely encourage everybody to, if you think you got a bank, you think you got a banker in your pocket. Hmm. Double back on that

Craig

52:55

Man. I would love to hear from anyone who is getting that call from their bank, because I’ve had that call from the bank, two banks. And it is a most unpleasant experience when you’re sitting on several deals and you’ve got a longstanding relationship with a bank where you’ve paid on time, you’ve paid ’em back, everybody’s happy, they take you out to lunch, you’re getting the perks of the relationship and then one day you don’t have that relationship and it’s literally a phone call. And I’d love to hear from people who are listening in right now who are getting those phone calls because I think more of those phone calls will be coming.

Jack

53:28

Yeah. We’ve absolutely experienced that ourselves on the, the refinancing rental properties side, you know, the new properties that are coming off the pipeline right now, we wanna go refinance them. We spent nine months ago, we spent a bunch of time last summer calling banks and figuring out who was still active, who was still lending at the time. They still had cheap deposits. Sure, sure. It’s been a bad month, bad nine months for us. Sure has. And so we compared the term sheets that we got nine months ago to the same set of term sheets today. And it’s like before they were like, there was this tight clustering of like what your advance rates and your cost of capital was gonna be. And now it is just spraying all over the wall. Like people have dropped advance rates by 15 points, they’ve increased cost of capital by 200 points and it’s completely bank by bank like, and surprised us in, you know, surprised us in some ways that we weren’t expecting. Who have

Craig

54:19

You seen sort of locally, and I, you know, it’s obviously a nationwide show, but have we seen any local banks that are just literally out of the flipping business yet?

Jack

54:28

Oh yeah, absolutely. There’s been the banks that went from, there was a lot of banks that were like on the edges, they would do lower loan to cost and they just went straight. No, now they’re just out. So it’s that, you know, which is driving that liquidity premium argument, right? Yep. Before there was 10 bids and today there’s, today it’s literally maybe five and those five aren’t very good. Yeah.

Craig

54:48

And they’re not excited about it

Jack

54:49

Either. Yeah. And they’re not excited about it either. Yeah. So the market is not only more conservative, but it’s also thinner. You know, there’s, there’s fewer yeses and you know, when you’re real fighting really hard to find deals these days, you’re willing to pay a little bit more for Yes. For a confident yes. Sure.

Craig

55:04

Alright, so that’s the show for today. That’s the around the horn, the, the news that’s fit to here and that you guys should know about. Hope you enjoyed it. All the show notes will be@realinvestorradio.com slash notes. I’m Craig Fuhr.

Jack

55:17

Jack BeVier. Thank you Craig.

Craig

55:19

Hey man, thank you. We’ll talk soon. See you guys again. Take care.