Tyler is a partner at Atlas Real Estate Capital, a boutique commercial real estate debt and equity firm based in Sarasota, FL. Over the past 7 years, he has originated over $1 billion in transactions across multifamily, self-storage, mobile home parks, retail, office, industrial, and hospitality assets. Before joining Atlas, Tyler was a Senior Vice President at Marcus & Millichap Capital Corporation in Cleveland, OH. He holds an Economics degree from Ohio Wesleyan University, where he was a four-year letterman in golf. Tyler and his wife, Katie, enjoy golf, tennis, and water sports in their free time.

Here’s some of the topics we covered:

  • Tyler’s Background In Multifamily
  • The Real Reason You Should Always Charge an Acquisition Fee
  • How Starting Passively Can Launch Your Multifamily Career
  • Why Office Real Estate Is Crashing Faster Than You Think
  • Expert Opinions on The Current State of The Market
  • The Hidden Forces Driving Cap Rates
  • A Lending Industry Shakeup Is Closer Than You Think
  • How to Build Unstoppable Connections in Multifamily
  • The Alarming Gap Emerging in Debt Coverage Ratios

To find out more about partnering or investing in a multifamily deal: Text Partner to 72345 or email Partner@RodKhleif.com

Full Transcript Below

01:20:09:03 – 01:20:31:25
Rod
Welcome back to lifetime cash flow to real estate investing. I’m Rod Khleif and I am thrilled that you’re here. And this interview is so freakin long overdue, I can’t even begin to tell you so I’ve got Tyler Carney to board with us here today is with Atlas Capital and he is the lender, actually the broker loan broker that almost all my Warriors used, my coaching students used for financing.

01:20:31:27 – 01:20:36:15
Rod
And he lives in Sarasota, so there’s no frickin excuse that he hasn’t been on the show yet. How are you guys?

01:20:36:15 – 01:20:37:22
Tyler
Right. Good to see you again.

01:20:37:24 – 01:20:45:13
Rod
Likewise. But, well, he’s always at, our boot camps and whatnot. That’s why I said good to see you again. Because we. How many of those have you done?

01:20:45:20 – 01:20:56:14
Tyler
Man, it’s been a lot. Man, three years now, and, and 2 or 2 or three a year. Warrior and then 2 or 3. Yeah. Boot camp. So.

01:20:56:19 – 01:20:57:01
Rod
Right. Yeah.

01:20:57:01 – 01:20:59:11
Tyler
So we’re we’re starting to become friends, right?

01:20:59:11 – 01:21:15:19
Rod
Yeah. Yeah. I hate to admit it, but it’s true. Yeah. So. So, Yeah. But anyway, yeah, we do a couple of warrior events. 2 or 3 sometimes, actually, warrior only events for our students. And then I have a big boot camp that I do every year live. And, I think this year, actually, I’m going to give a hint away.

01:21:15:19 – 01:21:21:17
Rod
I think this year is actually going to be LA, rather than Orlando, which has been the last few years. But anyway, back to you.

01:21:21:20 – 01:21:23:07
Tyler
That’s exciting. Is it?

01:21:23:10 – 01:21:25:01
Rod
It’s a pain in the ass is what it is.

01:21:25:03 – 01:21:25:29
Tyler
Yeah.

01:21:26:02 – 01:21:27:20
Rod
It’s logistically it’s a pain in the ass.

01:21:27:20 – 01:21:30:07
Tyler
Exciting for the wife. Yeah. I think for something.

01:21:30:07 – 01:21:31:27
Rod
Yeah, it’ll be fun. It’ll be fun.

01:21:31:27 – 01:21:33:19
Tyler
It’s, It’s my new baby.

01:21:33:19 – 01:21:35:17
Rod
Yeah. Bring the new baby. Yeah, that’ll.

01:21:35:18 – 01:21:36:03
Tyler
Be.

01:21:36:06 – 01:21:46:23
Rod
Why don’t you talk about your background? I mean, you’ve done some significant commercial real estate as well. Sure. And, talk about your background a little bit. And, and we’ll take it from there.

01:21:46:25 – 01:22:24:18
Tyler
Yeah, sure. Well, 33 years old now. Started really out of college when I was 23 as an analyst, for a mortgage broker in Cleveland, Ohio, Jim Leonard and Brock Walter, who were my all time mentors and still friends to this day. But really started knowing absolutely nothing, and really underwrote deals for them, as they made deals, by making deals, they bought deals, advised clients on, mostly life insurance company financing at the time.

01:22:24:20 – 01:22:49:20
Tyler
And my friend Chris Littler and I, who both went to Ohio Wesleyan, started in the business together. So it’s been ten years in the business for me. For ten years now. Invested in deals, finance, over a billion in deals. Been a GP in my own deals, been an LP and plenty of deals. And really seen a lot of different angles.

01:22:49:20 – 01:23:07:00
Rod
Sure. And those of you that are brand new, GP means, he’s one of the operators who put the deal together. LP means a passive investor in general, partner versus limited partner. So, talk about a couple of the deals you did before we get into financing. I mean, we’re going to we’re really going to dig into financing today.

01:23:07:00 – 01:23:10:26
Rod
But you did, didn’t you do a brand new one here somewhere?

01:23:10:28 – 01:23:39:28
Tyler
I done ground up. Probably the most recent GP deal was, a deal in Indianapolis 155, unit value add, multifamily deal. Okay. We bought it in 2022. Renovated, like 90 out of the 155 units. Got it to appraise for 20 million when we bought it for ten. Wow. So paid all of our investors back in this market.

01:23:39:29 – 01:23:40:22
Rod
Fighted or sold.

01:23:40:22 – 01:23:43:06
Tyler
35355 ten. Hold it. Yeah.

01:23:43:06 – 01:23:43:22
Rod
Fantastic.

01:23:43:28 – 01:23:47:09
Tyler
But to pay your investors back today, you know, that’s like a miracle.

01:23:47:09 – 01:23:51:22
Rod
So it. Miracle is the right word. There’s a ton of distress right now. Yeah.

01:23:51:24 – 01:24:17:20
Tyler
So we were we were stressed for two years, right? Right. And and really not making any money. And then, the way our waterfall right works is all of our, deferred entry. All the money we make, the GPS comes after we pay the LPs back. Right. So now we’ve paid him back, and we exhale and we cash flow so that it’s like.

01:24:17:23 – 01:24:20:03
Rod
Did you have a preferred return?

01:24:20:05 – 01:24:25:02
Tyler
We didn’t have a preferred return, but we paid 100% of their capital back first.

01:24:25:02 – 01:24:31:05
Rod
Okay. And and when there was no. So there was no return on their capital, it was all repayment of capital.

01:24:31:07 – 01:24:32:09
Tyler
So then we have a split.

01:24:32:11 – 01:24:57:06
Rod
Let me explain. Let me explain what you just said. So in very typical in a, syndication, you’ll have what’s called a preferred return. And so the limited partners, they bring in the equity, it’s called equity. It’s basically just the cash, you know, in the capital stack versus the debt. So the limited partners, in general, partners that bring in the equity, will get a that that equity will get a preferred return.

01:24:57:06 – 01:25:23:11
Rod
Anywhere from 5 to 8% is common. We do 7 or 8% on our deals. And then after that there’s a split. And so what, Tyler just did was, you know, and so in those deals that preferred return is return on capital. And so what Tyler did is a little different in that, he they basically said, we’ll pay you back all your money before we take a dime, which is obviously very appealing to an investor.

01:25:23:13 – 01:25:43:28
Rod
And but that means that every penny that came out of that property was a return of capital. Okay. So it wasn’t just the liquidation event. Any cash? Right. During that period of time also was a return of capital, which is actually, you know, they’re both great. They’re both great models. And and so you have a split after that.

01:25:43:28 – 01:25:45:17
Rod
What sort of split did you have after that?

01:25:45:17 – 01:25:46:07
Tyler
50, 50?

01:25:46:07 – 01:25:47:26
Rod
50? Yeah. That’s good. Yeah.

01:25:48:01 – 01:25:54:03
Tyler
The devil’s in the details of all these things. Since this my first syndication, we didn’t charge very many fees.

01:25:54:05 – 01:25:56:27
Rod
No acquisition fee. Right. Oh, wow. Yeah. So you I.

01:25:56:28 – 01:26:01:03
Tyler
Really but when you’re starting out, I don’t, I don’t suggest no.

01:26:01:03 – 01:26:12:06
Rod
Acquisitions. No no no no. Let’s talk about that a little bit. So yeah, you know we typically charge 3%. And on our last deal that was $600,000. I mean, one acquisition fee can be life.

01:26:12:06 – 01:26:17:29
Tyler
But to be fair, your experts and Rod’s borrowed a lot of deals over, over, 35 years.

01:26:17:29 – 01:26:20:14
Rod
Whether is that we we Babyface.

01:26:20:14 – 01:26:21:00
Tyler
Tyler.

01:26:21:06 – 01:26:23:04
Rod
Yeah. No no no. But no no no.

01:26:23:04 – 01:26:26:21
Tyler
We well I at the beginning you kind of you do what you can that’s.

01:26:26:24 – 01:26:28:01
Rod
All. That’s it. You put things together.

01:26:28:01 – 01:26:30:01
Tyler
Again we do an actually you know.

01:26:30:03 – 01:26:43:22
Rod
Yeah. So and here’s why you should do an acquisition fee. Just for those of you that are learning, that may be the only money you make for 2 or 3 years. And that was the case with you. That was the one you made for two years. Yeah. And if you’d have made it, if you’d have taken it.

01:26:43:25 – 01:26:48:21
Tyler
And actually would have been our working capital, which. Right. Shit happens.

01:26:48:21 – 01:26:52:25
Rod
Well, yeah. Sure does. You know, so you didn’t raise any operating reserves?

01:26:53:02 – 01:26:55:05
Tyler
We did, but we still needed you.

01:26:55:05 – 01:26:55:25
Rod
Still needed more?

01:26:55:25 – 01:26:57:16
Tyler
Yeah, always. Everybody still needs.

01:26:57:17 – 01:27:00:19
Rod
Yeah. You underestimate the operating reserve. So what?

01:27:00:19 – 01:27:11:08
Tyler
I know 80 is nice, but we we needed all of that cash. We. Yeah, it ended up the partners lent cash for a while until we paid the people their money back.

01:27:11:08 – 01:27:32:01
Rod
Well, it’s good that you had the ability to do that, right. And and, so, yeah. Take an acquisition fee. It’s a 3 to 5% of the purchase price. And, because again, that may be the only money you make until you reposition the property, but then, you know, then you make the big money, but, you know, that’s how this business works in the syndication front.

01:27:32:03 – 01:27:41:27
Rod
And, and so it didn’t you did a ground up thing, though. I want to know. Tell me about the ground up. When here in Sarasota we’ve done. I was jealous of that one.

01:27:41:29 – 01:27:57:09
Tyler
We’ve done, several ground up deals, with different partners, mostly in self-storage and apartment buildings. So I started out as an LP with a guy, Jeremiah Boucher, who’s been on the podcast.

01:27:57:10 – 01:27:59:26
Rod
Really? I didn’t know you were with Jeremiah’s. Yeah. Guy.

01:27:59:27 – 01:28:12:07
Tyler
Yeah. Both on the mortgage banking side, and on the investing side, I’ll be darned. So he has done a lot of ground up in New England. And I’ve LP done a lot of that.

01:28:12:07 – 01:28:16:07
Rod
He, he and I were actually in a mastermind together a long time ago. Yeah, yeah, yeah.

01:28:16:10 – 01:28:28:06
Tyler
Know. He’s definitely a big hero and mentor of mine. So if you notice, there’s a theme. I have some a lot of great mentors. You, Jeremiah, you know, you know myself. So a lot of.

01:28:28:06 – 01:28:33:21
Rod
That’s what you do. You surround yourself with people that think what you think is hard is easy. You know, that’s the peer group you want.

01:28:33:21 – 01:28:35:19
Tyler
Jeremiah. Thanks for that. I do is.

01:28:35:19 – 01:28:42:10
Rod
Easy. Yeah. Yeah. So. Right. Exactly, exactly. And we all know better. Right? Right.

01:28:42:13 – 01:28:56:20
Tyler
So, he taught me to do ground up, and then I, partnered with a guy here in Florida with more ground up self-storage and then, partnered with that same partner to do ground up multifamily here in town.

01:28:56:21 – 01:28:57:08
Rod
No kidding.

01:28:57:09 – 01:29:10:10
Tyler
Okay, most of it’s been growing up in the mortgage banking business, surrounding myself with mentors and networking, then partnering, at first and then becoming a bigger partner later. Once I knew it.

01:29:10:11 – 01:29:13:10
Rod
Was just a natural progression. That’s a very wise progression. Actually.

01:29:13:10 – 01:29:19:01
Tyler
Took me ten years, like, And it doesn’t have to take anybody ten years. I just that’s how it works for me.

01:29:19:02 – 01:29:49:27
Rod
Oh, well, you’re very analytical, very deliberate. Careful, guy. And it’s, it’s, you know, that that’s. And I will tell you, it’s it’s a common pathway, you know, if you’ve got some extra money and, to invest passively in somebody. Deal. And, learn the business behind the scenes a little bit, and, you know, like, with my investors, I try to, although I’ve slacked off a little bit, I try to teach them as I’m going through a deal and make it as much education as reporting what’s happening with the deal that they’re investing in.

01:29:50:05 – 01:29:52:07
Tyler
That’s it. Yeah. And that’s how I learned.

01:29:52:07 – 01:30:20:14
Rod
Yeah. That’s that’s and you get to see the behind the scenes stuff. Well let’s let’s shift to financing. Yeah. I mean, we are we are in a very interesting place, financially, economically in this country. You know, I believe we’re actually already in a recession. Yeah. And, we were just talking about it briefly before we started recording in that, you know, I, I told you about the post I did on office debt that that that debt.

01:30:20:16 – 01:30:43:27
Rod
Seriously challenge. Yeah. That debt is, is almost as bad as it was in oh eight and nine. Yeah. When I lost 50 million bucks and, you know, and I know there’s a ton of distress in the multifamily space as well. I mean offices is is cratered because everybody’s working from home since Covid, but but multifamily I mean, I’ve seen a ton of deals being sold for debt plus fees.

01:30:43:27 – 01:31:01:05
Rod
Yeah. And they still don’t pencil. They still don’t make sense. Because they don’t cover. No, they don’t debt cover. Exactly. And so, you know, there’s going to be a reckoning in these lenders as they start taking these properties back, which they’re starting to do. They’re going to have to take haircuts and there’s going to be deals.

01:31:01:05 – 01:31:23:12
Tyler
So that’s it. Yeah. So big picture in in the economy right now. The biggest distress we’re seeing is this debt cover. And that really doesn’t matter if you have an office building, a multifamily building, or if you’re have even self storage is later and projections and lease up, especially in states like Florida and Texas.

01:31:23:12 – 01:31:27:05
Rod
Here, let me let me talk about debt cover for a second and give a little education out of.

01:31:27:05 – 01:31:27:20
Tyler
To oh we’ll.

01:31:27:20 – 01:31:28:00
Rod
Go ahead.

01:31:28:02 – 01:31:39:17
Tyler
Yeah. Go ahead. So basically, if we can simplify debt, cover down, what’s the payment and what’s the NOI as the relationship to the payment.

01:31:39:24 – 01:31:43:07
Rod
Net income, that relationship to the payment mortgage payment.

01:31:43:07 – 01:31:55:21
Tyler
If it’s a positive we have something to talk about. Negotiate something good. If it’s a negative, we better have a story on when it’s going to become positive really quick.

01:31:55:23 – 01:32:15:01
Rod
Let me give a little more clarity okay. So it’s called the debt service coverage ratio. And and let me give you an example of it. So let’s say you and let’s it’s it’s an annual calculation. And so let’s say your net income for a property is $125,000 for the year. We’re just gonna use simple numbers. So 125,000 in net income okay.

01:32:15:04 – 01:32:17:08
Rod
But your debt is 100,000 a year.

01:32:17:13 – 01:32:18:14
Tyler
Your payment.

01:32:18:16 – 01:32:33:29
Rod
Payment. Yeah. Debt payment. For the for the year, your mortgage payments annualized is 100,000. So 125,000 in income, 100,000 in debt. That’s a 1.25% debt service coverage ratio, which is kind of the standard in the industry to meet. I mean, it goes it goes up and down.

01:32:34:00 – 01:32:36:09
Tyler
You’d want more of a buffer ideally.

01:32:36:11 – 01:32:44:22
Rod
Right. Well, yeah. And and in, you know, and there’s, there’s, there’s some flexibility there in market and tertiary markets. That’s right.

01:32:44:25 – 01:33:08:22
Tyler
But but most importantly, you know, we got to be above, one with some buffer. Right. And when interest rates went from the 2%, 3% to 7%, 8%, 9% on bridge lenders to 12%, then, the debt cover ratios didn’t really matter because the rents couldn’t keep up with.

01:33:08:25 – 01:33:30:17
Rod
So so we’re seeing deals where, you know, there are properties being marketed for the the debt that’s on them now. And those properties had a lot of equity put into them. So there’s millions of dollars getting wiped out of people that invested in these deals. And they’re being marketed for the debt and even just being sold for the for the debt, you know, which was, you know, two, two years.

01:33:30:17 – 01:33:37:03
Tyler
And then as they’re being sold for the debt, you put on 80% new loan and then that loan doesn’t.

01:33:37:03 – 01:33:41:26
Rod
And it doesn’t it doesn’t cover. Right. It still doesn’t cover because the prices that are still seen.

01:33:41:26 – 01:33:54:08
Tyler
I see that a lot in Texas, Florida really the Carolinas. I’m seeing that happen really more than open trades in multifamily right now, which is pretty wild.

01:33:54:12 – 01:34:05:04
Rod
Yeah. Trades is is a is a sale. That’s that’s the nomenclature. You know, when you get in this business, you got to learn all the acronyms in the nomenclature, like NOI and trades, and you know, and when you.

01:34:05:04 – 01:34:09:14
Tyler
Start in a business, you feel like an idiot because you don’t know all of them. Yeah.

01:34:09:14 – 01:34:17:22
Rod
Well my bootcamp. Yes. My, my. Sorry to interrupt my boot camp. I’ve got a glossary at the end of the manual that’s got them all. You just got to memorize them. That’s the bottom line.

01:34:17:24 – 01:34:20:18
Tyler
The key is don’t get discouraged. Yeah, right.

01:34:20:21 – 01:34:35:12
Rod
How do you do? Well. Right, right. One bite at a time. You know, you know, Tyler talked about, you know, being a newbie, never having done anything ten years ago. And, you know, Michael Jordan once threw his first basketball, you know? So, that’s that’s how it works.

01:34:35:14 – 01:34:49:09
Tyler
And all the way. Jim Leonard, on my third day in the office, he he told me, the way you take a picture of a building is terrible. Let me come down and show you how to take a picture of a building. Wow.

01:34:49:16 – 01:34:55:23
Rod
Okay, okay. That’s that’s micro right there, baby. Okay. All right. So it’s, like, ready.

01:34:55:23 – 01:34:56:29
Tyler
Great upbringing. Yeah.

01:34:56:29 – 01:35:19:09
Rod
That’s that’s awesome. Talk about, your opinion of today’s market. I kind of gave you my opinion. I think the shit’s going to hit the fan, I really do. And, in commercial real estate. And it’s already affecting single family as well, from what I’m hearing, you know, sales are way down. I mean, I get a lot of hate when I talk about this online because they there’s, you know, it’s geographically specific.

01:35:19:09 – 01:35:22:25
Rod
Yeah. But give give your opinion of the marketplace right now.

01:35:22:25 – 01:35:40:10
Tyler
And let me just kind of chart big picture or what I’ve seen for for ten years. So, ten years when I started in the business and when I was an analyst, the ten year U.S. Treasury was 2% or less than 2%. And it was.

01:35:40:16 – 01:35:42:00
Rod
Explain why that’s important.

01:35:42:07 – 01:35:46:27
Tyler
When we look at that in a sector. So the ten year today is 4.5%.

01:35:46:27 – 01:35:48:17
Rod
So it was 2%. Now it’s four and a half.

01:35:48:19 – 01:36:13:22
Tyler
So it’s doubled. The environment has completely doubled. Why does that matter. Because anybody who puts their money in commercial real estate is risk adjusting the test against United States Treasury bonds. Easy, easy lingo. You could make 4.5% today with perceived no risk.

01:36:13:24 – 01:36:14:15
Rod
With a bond.

01:36:14:15 – 01:36:15:15
Tyler
With a bond.

01:36:15:17 – 01:36:24:02
Rod
So you needed the air quotes with the perceived no risk. By the way, although I believe now with Trump in office, it’s probably, probably is no risk. Right.

01:36:24:02 – 01:36:57:01
Tyler
But so 4.5% for no risk. So you a mortgage lender better make six and a half, 7 or 8% because it’s more risky to lend to you than to lend to the government. Right. And then to buy commercial real estate, you got to do hopefully even better than that. Yeah. So this macro picture, every person that I know, is still used to that owns a building today, is still used to the value of that 2% U.S. Treasury.

01:36:57:03 – 01:37:02:03
Tyler
And so I see cap rates really, really sticky in the marketplace.

01:37:02:10 – 01:37:03:08
Rod
What do you mean by sticky?

01:37:03:08 – 01:37:12:18
Tyler
Sticky means sellers don’t want to sell for a higher cap rate. Then. Or accept that the cap rate used to be six and now it’s eight.

01:37:12:18 – 01:37:38:24
Rod
By the way, he’s talking about the capitalization rate and a little more education because we’re using a lot of things that, a lot of, you know, more technical jargon, jargon and, the capitalization rate it was, was put in place for investors to determine, to basically compare different asset classes, to compare office to retail, to, self-storage, to to multifamily.

01:37:38:27 – 01:37:58:12
Rod
And the biggest factor that affects cap rates is risk. And now a lot of factors affect it. But the biggest one is risk. And it’s and it’s counterintuitive. The higher the cap rate, the lower the value. And so when he says they’re sticky, it means that the sellers aren’t aren’t making they’re they’re not lowering the prices yet.

01:37:58:15 – 01:37:58:28
Rod
Okay.

01:37:58:28 – 01:38:00:26
Tyler
And and which is interesting.

01:38:00:26 – 01:38:05:04
Rod
But because was in many cases they can’t right.

01:38:05:10 – 01:38:07:17
Tyler
Because it might be lower than their.

01:38:07:22 – 01:38:08:27
Rod
Than their debt. Yeah. Yeah.

01:38:09:02 – 01:38:26:03
Tyler
Yeah. So I’ve, I’ve seen a massive massive stalemate for like two years. Right. I mean we might have our best year ever but industry wide you know brokers, mortgage brokers, banks right. The transactions are just far, far less.

01:38:26:09 – 01:38:44:19
Rod
Not I thought it was like literally 90% less sales than than than historical like over the last, you know, prior to two years ago, sales are down 90%. Is is one article I read. Yeah. And and which is staggering. And then and then you couple that just.

01:38:44:19 – 01:39:15:05
Tyler
Relative to the last ten years. Right. We’ve had such a strong seven years. But from 20, you know, 13 on was such a strong time and commercial real estate of trades. Oh, sure. And and refinances. All of those things are positive. Yeah. And new construction and new construction lending. Yeah. And all of these things kind of have to do with each other, because like, for example, there’s less trades there.

01:39:15:07 – 01:39:18:00
Tyler
It’s also really hard to get a construction loan today.

01:39:18:02 – 01:39:32:10
Rod
Very hard. I mean, Merrill, my my syndication attorney in real estate contracts, attorney owns 9000 units. And he’s got land that he hasn’t been able to get. I couldn’t get a construction loan on. And I mean, he is about as solid as you can get.

01:39:32:10 – 01:39:41:21
Tyler
Yeah. Which actually, it kind of helps my business a little here in Florida because when it’s hard to get a construction loan, you have to hire an expert to get a construction though. So we’ve done.

01:39:41:24 – 01:40:03:13
Rod
So. So let’s explain. Let me in fact, let me give you a shout out. Okay. So, the reason that my warriors use Tyler so much is he’s a broker. And so, you know, because lending is very complex. I wouldn’t even begin to try to select, a final loan on a on a property myself. And I’m an expert in that end.

01:40:03:16 – 01:40:37:12
Rod
You know, I would use Tyler to identify the best loan product for a particular situation under the current economic situation, certain current economic, place that we’re at. So, so, you know, that’s the value of utilizing someone like Tyler rather than going directly to a lender, because not only is he going to tell you the best lending situation to go to, but he’s also going to help position you in the best light to actually get you approved with that lender, you know, and so, you know, that’s the value work examples.

01:40:37:12 – 01:41:00:00
Tyler
Yeah. Just real quick. So, a lot of people think, you know, hire broker to get the best rate. Right. Well that and and residential real estate that might be true. And commercial real estate, there’s just so many more factors. So we just talked about our waterfalls. Right. When are we paying people back. When do we plan to sell.

01:41:00:02 – 01:41:02:26
Tyler
And what is this event that’s going to happen?

01:41:02:29 – 01:41:07:06
Rod
Well, liquidation event liquidation. So that’s a sale or a revitalized.

01:41:07:09 – 01:41:19:25
Tyler
So when this event happens, the most important thing from lending perspective is actually not the rate, not the term, not the amortization. It’s the prepayment penalty.

01:41:19:26 – 01:41:20:21
Rod
Right.

01:41:20:23 – 01:41:45:13
Tyler
Because during your liquidation event, are you going to be tied up for another word, yield maintenance. We’ll talk about yield maintenance in SAC or is that a 0% prepayment penalty or something you can get out of quickly any of the recent and sell or pay your investors back. So real quick yield maintenance like.

01:41:45:15 – 01:41:54:10
Rod
Oh no, no no no, let’s not go that technical. Basically there’s there’s yield maintenance and there’s the fees. They’re basically prepayment penalties. So let’s just keep it simple. Like they don’t have.

01:41:54:14 – 01:41:54:26
Tyler
Strong.

01:41:54:26 – 01:42:12:03
Rod
Ones and they’re very expensive. I mean, you know very often you’ll see a step down situation where the first two years it’s 5%. It goes to for the second two, three, two, one. And it we’re talking big numbers here. So you know you’ve got to factor all that in when you’re considering the debt.

01:42:12:05 – 01:42:19:13
Tyler
You know as you might be only in the debt for a year or two. Right, right. And then you have an event you hopefully.

01:42:19:16 – 01:42:38:27
Rod
Sell or refinance. Yeah. For you invest and you’ve got to you’ve got to, factor all that in, when you’re determining the debt, you’re going to go with. Because if you’ve got a high prepayment, you’re going to you’re, you know, very often you can’t refinance or sell. So, that’s why a lot of, people use bridge debt in that scenario.

01:42:38:29 – 01:43:00:01
Rod
The problem is bridge debt got abused in the 20 in 2020, 21, 22, because Fannie Mae and Freddie Mac, which is what we call conforming debt, lowered their loan to value. And a lot of operators, you know, in bridge that was easy to get in. A lot of operators use bridge debt to get higher loan to values, because you could get higher loan to values in the higher the loan to value, the better returns.

01:43:00:01 – 01:43:02:03
Rod
You can show an investor for the cash in a deal.

01:43:02:07 – 01:43:11:18
Tyler
That’s it. Yeah. And you know, just even a little technical. Fannie and Freddie didn’t really lower their loan values. They just stuck to their debt cover requirement.

01:43:11:19 – 01:43:12:25
Rod
Oh that’s what it was okay.

01:43:12:26 – 01:43:15:16
Tyler
And when they stuck to their debt cover requirements.

01:43:15:18 – 01:43:17:07
Rod
The the value went down.

01:43:17:07 – 01:43:35:08
Tyler
You could find the under value went down and you could find a bridge lender to say we’ll give you a negative debt, cover a loan for a while because you think you’re going to make it positive. And then operators, they either couldn’t do that or rates went up.

01:43:35:08 – 01:43:54:27
Rod
Oh, there’s so many things that happened. I mean, yeah, besides just rates. I mean, there are a lot of bridge debt lenders that are really getting their butts handed to oh sure, now in a big way. And, and that have held off on foreclosing because of foreclosing hits their balance sheet. I mean I, I there’s some very common that they’re, they’re, they’re just extending the loans.

01:43:54:27 – 01:44:02:02
Rod
They’re, they’re doing loan modifications, deferrals in the, in the catch phrase in the lending industry has been extend and pretend. Right.

01:44:02:02 – 01:44:03:19
Tyler
Yeah. That’s been for a few years.

01:44:03:19 – 01:44:04:22
Rod
Yeah.

01:44:04:24 – 01:44:07:22
Tyler
But and I’d say that’s coming to a reckoning this year.

01:44:07:22 – 01:44:29:29
Rod
It’s. Yeah. This year and next year I that’s, that’s the point I think the but like I say the shit’s going to hit the fan and, and so you know they’re going to take these properties back in. They are not in the property management business. They’re not in the hold on the assets business. No. And you know, when this happened in oh eight, nine, you know, there were lenders financing new buyers to come in and, you know, credit creditworthy borrowers.

01:44:30:01 – 01:44:46:12
Rod
They were actually financing the deals just to get them off their books. And so you’re going to see that again. You can see auctions. Auctions are going to be big again. And candidly, I, I personally believe you’re going to see some significant bank failures because a lot of commercial real estate debts held by small and regional banks.

01:44:46:12 – 01:44:49:14
Rod
Yeah. And and, a lot of office debt is. Yeah, as well.

01:44:49:15 – 01:44:51:22
Tyler
It’s already seen a lot of consolidation in that.

01:44:51:23 – 01:44:53:07
Rod
In the, in the bank space.

01:44:53:07 – 01:44:57:09
Tyler
In the bank space. Yeah. Yeah. Big banks eating up smaller REITs.

01:44:57:09 – 01:45:20:21
Rod
Right. And and and guys that’s, that’s why someone like Tyler is, is so, valuable is because, you know, he’ll take you know, he’ll take you to a bank or a credit union or a conforming loan, like Fannie Mae or Freddie Mac or a life insurance company or even CMBS commercial mortgage backed securities because, you know, just depends on the deal.

01:45:20:21 – 01:45:47:10
Rod
It depends on the numbers. It depends on the location. It depends on your exit strategy, depends on the borrowers group. But, you know, it depends. It depends. It depends. And so you need somebody like a like a Tyler to do that. And that’s why like I say most of my warriors using. But so back to I guess we kind of talked about it, but just your overall global or not global, just U.S economic outlook.

01:45:47:14 – 01:45:48:15
Rod
Yeah.

01:45:48:18 – 01:45:49:14
Tyler
Crystal ball.

01:45:49:14 – 01:46:02:29
Rod
Yeah. The crystal ball thing, which of course nobody knows, but but do we guess, I mean, you know, I see it again. I see, I see paint on the horizon for commercial real estate. It’s already here. But I mean, more pain. Yeah.

01:46:02:29 – 01:46:16:25
Tyler
So, yeah, I think it’s quite a reality. How many people are figuring out how hard it is to really run these properties and run a business? That’s the long period of time.

01:46:16:25 – 01:46:32:26
Rod
That’s the other piece. You know, it’s not just the the debt, inflation is caused all the, everything to go up, right? I mean, we’re paying now for a maintenance supervisor in the $30 an hour range. It was never that high before. Okay, on the.

01:46:32:26 – 01:46:35:07
Tyler
Same asset where you’re struggling on.

01:46:35:07 – 01:46:58:06
Rod
Insurance, and insurance is way up. Taxes are up. Yeah. You know, the cost of of material is way up. Yeah. I mean, inflation affects everything now. Luckily inflation also affects rents, but it hasn’t caught up. Mean we used to have we have what’s called an, an expense ratio. And that’s basically the total income on the property, less the property related expenses, not the debt.

01:46:58:08 – 01:47:06:14
Rod
And that expense ratio, the average has always been 50%. Right. Okay. Well, it’s higher than that now. Right. And and so a lot higher. And that’s killing a lot of people.

01:47:06:17 – 01:47:07:15
Tyler
In.

01:47:07:18 – 01:47:10:03
Rod
Texas and Florida. You know, I mean, you.

01:47:10:07 – 01:47:10:29
Tyler
In Ohio or.

01:47:10:29 – 01:47:29:00
Rod
Ohio. And so that’s that. So it’s not just the debt that’s causing a lot of distress. It’s also the increased expenses and costs. And and so again, all of this is going to have to reach an equilibrium. And there’s going to be a tipping point. And that equilibrium is going to be painful when it happens. And there’s no question my.

01:47:29:01 – 01:47:31:23
Tyler
My crystal ball is actually some pain. Yeah.

01:47:31:23 – 01:47:32:24
Rod
Oh there’s got to be. Yeah.

01:47:32:25 – 01:48:05:14
Tyler
And having not been through a recession but having a lot of great mentors. Yeah I actually think they know more than I can know because they say things that will happen that I always am like, oh, they said that was going to happen. And one of the big things they say is just if there’s 100 people in commercial real estate that will go down to 20 people and knock up to 100 people, and you’ll call me one day and you’ll say, I can’t believe this, this wave.

01:48:05:15 – 01:48:16:02
Tyler
And I just think it it’s amazing how competitive this game is. Yeah. And how it how big the winds are and how massive their losses are.

01:48:16:02 – 01:48:17:24
Rod
Yeah. Well, there’s no question in all of this.

01:48:17:24 – 01:48:18:10
Tyler
What my.

01:48:18:11 – 01:48:31:29
Rod
No, there’s there’s no question in all of that. And I’ll tell you you know, the expression I’ve heard is, is, you know, when the, when the water recedes, you see who’s naked, and, and there’s a lot of naked, a lot of ugly naked.

01:48:31:29 – 01:48:32:05
Tyler
Yeah.

01:48:32:08 – 01:48:35:23
Rod
There, like, a lot of things you can’t go and see naked. Yeah, but but.

01:48:35:23 – 01:48:36:27
Tyler
You can’t, you can’t unsee.

01:48:36:27 – 01:48:45:21
Rod
But but yeah, I know there’s a lot of a lot of operators in trouble. And, you know, I hate it. They’re having to they’ve never, they’ve never been through.

01:48:45:29 – 01:49:01:08
Tyler
And advising on as a mortgage broker is really rough. Yeah. Because guess what? We don’t get paid on those. So yeah, it you know, you’re advising a tough situation. We advise every time no matter what. Yeah. And but it’s not fun.

01:49:01:08 – 01:49:01:16
Rod
Yeah.

01:49:01:23 – 01:49:05:20
Tyler
And guess what. Some of them are my LP deals. Yeah. We’re all feeling.

01:49:05:20 – 01:49:20:23
Rod
Them. Yeah yeah, yeah. Well I’ve, I’m, I’m in deals with an ex partner. That’s our you know he is he has ran these things into the ground and we’ll see how it all shakes out. But, you got to send some bridge that It happens. It is. It is what it is. I’m an expert and and it has happened to me.

01:49:20:23 – 01:49:36:18
Rod
So. So, you know, but, But we recover, we we pull back. I mean, we get back to it, but it’s painful. And, but but again, you know, when I lost everything in oh eight, nine, I just hid under a rock for a while. This time I’m ready.

01:49:36:22 – 01:49:40:20
Tyler
And I’m excited a lot. But I’m always impressed with your perseverance.

01:49:40:20 – 01:49:53:16
Rod
Well, yeah. I mean, listen, I just for a few months, and then I built another few months. Yeah, yeah, but but the point is, I got crushed by that wave. I’m surfing this one. Okay. And and, you know, I see a lot of opportunity this time.

01:49:53:19 – 01:50:02:10
Tyler
And this is, see this time you probably identified I have some pain ex-partner over here. Right. But I’m not going to let that affect my mojo. An opportunity.

01:50:02:10 – 01:50:20:15
Rod
Now. You know, it slows you down a little temporarily, but you don’t let it. You know, the other thing is let’s let’s do this. Let’s let’s just pivot for a minute. You know, my warriors, my coaching students, by the way, I don’t you don’t even know this, but, we discovered we are somewhere between 260 and 270,000 units.

01:50:20:15 – 01:50:37:04
Rod
Now, why in the warrior program in seven years? I’m very proud of you. Yeah, I’m very proud of that. But the thing I wanted the mention is we are doing tons of other asset classes. I think you do know this. I mean, yeah, we’ve got thousands of self storage units. We’ve got, you know, a ton of senior housing going right now.

01:50:37:11 – 01:50:41:17
Rod
And I’m getting into that and probably raising money for a senior housing deal here next week.

01:50:41:19 – 01:50:47:02
Tyler
I’m seeing a lot of creative smaller deals. Right, right. Mobile home park.

01:50:47:02 – 01:50:49:23
Rod
Student housing, built, being built or purchased.

01:50:49:26 – 01:50:52:06
Tyler
In be creative ways.

01:50:52:06 – 01:50:59:29
Rod
Hotels, hotel conversions and hotels, hotel conversions to multifamily hotels. Yeah. I mean, you.

01:51:00:05 – 01:51:01:03
Tyler
Mean basically.

01:51:01:05 – 01:51:01:22
Rod
In the warrior.

01:51:01:22 – 01:51:02:22
Tyler
Group? In the warrior.

01:51:02:25 – 01:51:03:01
Rod
Group?

01:51:03:01 – 01:51:07:08
Tyler
Yeah. Get really creative. Yeah. And that’s what you gotta do.

01:51:07:11 – 01:51:10:27
Rod
Well, and not just creative, but but again other asset classes.

01:51:10:29 – 01:51:11:21
Tyler
I mean by.

01:51:11:24 – 01:51:12:26
Rod
Oh okay. Yeah yeah yeah.

01:51:12:26 – 01:51:29:01
Tyler
So I mean they’re all looking for multiple family every day. Right. But it’s been challenging to find them because of the cap rate that we just talked about. Right. And so they have been really creative in using their underwriting skills and finding other niches.

01:51:29:01 – 01:51:44:25
Rod
Yeah. Yeah. Well we’ve got I know we’ve got our warrior event coming on May 31st and June 1st. I’ll be a few hundred warriors there and you’ll be you’ll be doing some some presentations there. That’s, Merrill on the syndication attorney will be doing some presentations. I’ll be doing some presentations. But we you know what we discovered, guys.

01:51:44:25 – 01:52:07:09
Rod
And the reason I implemented these warrior only events is we discovered my most successful warriors. Coaching students are the ones that are the most connected in the warrior community. And so we started doing strategizing how to facilitate those connections. So like we do zoom breakout rooms and speed dating between warriors, we connect warriors by state, and and we and we do these warrior only events where they can.

01:52:07:12 – 01:52:21:21
Rod
The biggest thing there is networking. And that’s because it really is who, you know in this business, even more than what you know. And, and, and I tell my new warriors that it’s like, get as connected as you can because, that really is the secret to success. Would you agree with that?

01:52:21:27 – 01:52:37:19
Tyler
Yeah. Yeah. I mean, so I’m going to go back a little bit. It’s 20, it’s 2021. I’m at Marcus and Millichap and just started my own little small firm without a lot of confidence at the time.

01:52:37:23 – 01:52:39:04
Rod
Okay.

01:52:39:06 – 01:52:46:15
Tyler
I went to your mastermind, right at the beginning of the year and the first part of the year and the boardroom. The boardroom.

01:52:46:15 – 01:52:51:16
Rod
Oh, wow. Oh, that’s right here in Sarasota. I remember now that you brought your wife. Yeah, yeah, yeah.

01:52:51:16 – 01:53:11:24
Tyler
So I gave a quick little short speech, and, then you came up to me, you seemed impressed, and you said, would you like to give come back to these type of events? I do a bunch of different ones that I didn’t know the difference between boardroom and warrior and whatever, but I knew the energy was all the same at all of them.

01:53:11:26 – 01:53:29:08
Tyler
And then you looked into me and I had six or 7 or 8 warrior friends and customers and already all already before I knew you. Then I joined the warrior program, and it’s been big for just as much. It’s big for me as I give back to, you know.

01:53:29:08 – 01:53:33:06
Rod
So it’s nice of you to say thank you. Yeah, yeah. So I used to host the master.

01:53:33:07 – 01:53:46:27
Tyler
Woodworking, like you just said. Yeah, it’s the whole key because there’s really keys. There’s really experts in that room on a wide, wide range of topics. Yeah. Marketing, sales. Find.

01:53:47:02 – 01:53:50:22
Rod
And I actually, we got two people going to the warrior event teaching I this.

01:53:50:22 – 01:54:16:22
Tyler
Time I got. That makes me a little nervous, but, I’ll definitely be taking notes there. We need to do it more in my business. Fundraising deal, finding broker relationships. All of these people are working on constant deal and everybody’s a highly motivated person. Some of them, some of your warriors are still have highly successful careers.

01:54:16:22 – 01:54:23:09
Tyler
And they’re investing. Yeah, some of them invest full time. Yeah. But it’s always an inspiring, right?

01:54:23:10 – 01:54:42:26
Rod
Oh, well, I appreciate that. Yeah. No, it it it it really is who you know. And you just, you know, that’s it. If you’re really serious about this business, get into groups in your local market, meetup groups, real estate investor association groups. I just got invited to speak in Memphis and I may go, even though I dog Memphis all the time, but, I may go.

01:54:42:26 – 01:54:47:02
Rod
I literally just got invited last night, to speak at one of those things. And it’s a friend, so.

01:54:47:03 – 01:54:55:27
Tyler
Well, you’re the king of groups. Not even only real estate groups, but groups where you elevate your success. People are better than you are. Hey,

01:54:56:00 – 01:54:58:20
Rod
Napoleon Hill calls the power of the mastermind your.

01:54:58:20 – 01:55:00:07
Tyler
Picture with all of your,

01:55:00:09 – 01:55:02:10
Rod
Lanyards. Yeah, yeah, yeah, yeah, I.

01:55:02:15 – 01:55:05:18
Tyler
I, I had to say I got inspiration and copied you.

01:55:05:19 – 01:55:06:20
Rod
Oh. Did you. Oh, good.

01:55:06:20 – 01:55:13:07
Tyler
So I got, you know, one of those, medal trophies in my office, but it’s all my lanyard.

01:55:13:07 – 01:55:14:13
Rod
So I’m very nice. Yeah.

01:55:14:14 – 01:55:15:07
Tyler
That’s fun.

01:55:15:10 – 01:55:36:18
Rod
You know? Yeah, I tell people, you know, I talk about the difference between college and specialized education in my boot camps, and I just picture where I’ve got literally hundreds of lanyards and and badges from masterminds, boot camps, workshops and everything else that that I’ve been to. And I was just going to I was starting to say I used to host the largest multifamily mastermind really in the world.

01:55:36:21 – 01:55:53:03
Rod
You know, the members of that probably now have 15 billion in assets. And I just it was it was just too much work and I couldn’t maintain do it. I may I may go back to it, maybe do a once a year meeting. But it was awesome. And I’d forgotten that you that you came to one here in Sarasota.

01:55:53:03 – 01:56:16:18
Rod
It was a lot of fun, but it was called the Multifamily Boardroom. But, so, you know, I have a lot of listeners that are sitting on the sidelines. They’ve got a job, may not be a rat race job, but they know they want more. They’ve got a W2 job. They may even like that job, but they don’t have the ability to have the financial freedom and time freedom that they want.

01:56:16:20 – 01:56:24:21
Rod
What would you say to those people that are listening that are, you know, considering possibly doing this as a side hustle? You got any words of wisdom for them?

01:56:24:23 – 01:56:32:24
Tyler
Oh, man, it is possible for anybody. Anybody. And never give up. Yeah.

01:56:32:27 – 01:56:36:19
Rod
Yeah. That’s it. And and actually get started okay.

01:56:36:19 – 01:56:41:15
Tyler
And get started and don’t give up on. That’s right. Yeah. Get started is probably more important than.

01:56:41:17 – 01:56:44:16
Rod
Yeah. And and you know and you’re going to have.

01:56:44:23 – 01:56:54:26
Tyler
The key and you seriously you as quirky as you are. No offense. Yeah. You’re the king of getting started. Well, and never giving up.

01:56:54:28 – 01:56:59:29
Rod
Know I thank you. And and, you know, the key is you’re going to have setbacks.

01:56:59:29 – 01:57:02:08
Tyler
You know what Rod’s doing, but he’s always moving.

01:57:02:10 – 01:57:23:21
Rod
Well, that’s very true. You know, it’s really funny you say that. I want to come back to what I was just going to say. Well, you know, my daughter was at JFK, and, you know, this is just funny. And she was sitting at a gate, and I happened to walk by, and she saw me from behind, and she knew it was me just from my gate because of my intense presence when I walk.

01:57:23:24 – 01:57:38:08
Rod
No, not just the size, but just the way that I walk. She said she recognized my walk anyway, but but, you know, you’re going to have walls drop in front of you. And when that happens, if you’ve done your goals, if you come to one of my boot camps, the first thing we do is goal setting on steroids.

01:57:38:10 – 01:57:54:23
Rod
How the hell do you get anything? You don’t know what it is. You don’t know what you want with clarity. It’s got to be measurable and you got to know why you want it. And so, you know, if you know what it is you want and why you want it, when you have one of these walls drop in front of you, you just change your approach with your focus on the goal.

01:57:54:23 – 01:58:12:10
Rod
And when another wall drops in front of you, change your approach with your focus on the goal. And that is the secret to success is it’s never going to be a straight line. But if you stay focused on that outcome and you change your approach when you have a setback or you get your nose bloodied, you get knocked down, focus on that outcome and just change your approach.

01:58:12:10 – 01:58:13:15
Rod
Success is inevitable.

01:58:13:18 – 01:58:13:28
Tyler
And that’s.

01:58:13:28 – 01:58:14:16
Rod
I know, and.

01:58:14:17 – 01:58:25:13
Tyler
I know there’s a lot of time you spend on your boot camp on the technical skills. And I do think those are important. And I’m one of the experts who do technical, technical Analy Capron oh.

01:58:25:13 – 01:58:28:15
Rod
Yeah, yeah, yeah, of course. Of course. It’s not just mindset.

01:58:28:20 – 01:58:40:14
Tyler
However, that’s how it’s getting. Yeah, I think the mindset is the training that everybody really needs. And to the point I mean, I have a mindset coach. We meet every three weeks.

01:58:40:14 – 01:58:41:01
Rod
Oh no kidding.

01:58:41:03 – 01:58:50:02
Tyler
Yeah. Good for you. Really important because I know that I have to sharpen those skills, even though it’s kind of a little corny or whatever you might.

01:58:50:05 – 01:58:58:09
Rod
Some people may think it’s corny. I mean, I’ll be honest, that’s the reason I had 50 million, lost it and got back. You know, is is the mindset stuff.

01:58:58:12 – 01:59:02:01
Tyler
But I have to sharpen those skills every.

01:59:02:02 – 01:59:09:05
Rod
And on my warrior program, every every warrior gets high performance coaching from a certified high performance coach. It’s the same thing. It’s not just the technical.

01:59:09:05 – 01:59:09:23
Tyler
The same thing.

01:59:09:24 – 01:59:22:25
Rod
And and you know, you come to one of my boot camps, you’ll leave so freakin juiced, you’ll be coming out of your skin because I spent time on it and, you know, and it’s it, you know, the technical is important. I know you think it’s more important. I think the mindset is more important.

01:59:22:25 – 01:59:24:01
Tyler
I think the mindsets more.

01:59:24:01 – 01:59:25:21
Rod
Oh, you do good. Okay, good. All right.

01:59:25:23 – 01:59:26:24
Tyler
I think it comes first.

01:59:26:24 – 01:59:44:08
Rod
Yeah it does. It’s. Yeah. Because you can have all the knowledge. You know, there’s a reason, you know that there aren’t as many college, professors and librarians that are successful in business because you actually have to go do it. Yeah. Right. And so, sure, you know, that’s that’s the key to this,

01:59:44:10 – 01:59:46:02
Tyler
And and it doesn’t go perfectly.

01:59:46:03 – 02:00:11:09
Rod
No, no, no, no, I mean, and, you know, yeah, everybody sees this success of successful people online not recognizing all the, all the, all the work it took that, you know, I mean, you know, it’s it’s I’m not going to say it’s easy, but is it freakin worth it? You better frickin believe it’s worth it. Yeah. You can grind for a few years like most people want to live the rest of your life like most people can’t.

02:00:11:11 – 02:00:19:20
Rod
So why two last names? What’s up with that? Would you explain that? I mean, I happen to know the answer, but. But why don’t you explain it to my listeners? Because it’s very, very unusual for a guy.

02:00:19:24 – 02:00:38:21
Tyler
Yeah. It actually isn’t even, me and my wife. It’s my mom. So it’s one more generation. My mom just retired from a big athletic career and had a huge, successful career. And she wouldn’t give up her last name in 1980. So that’s why we have, carny to board.

02:00:38:26 – 02:00:40:08
Rod
Interesting. Okay.

02:00:40:08 – 02:00:55:08
Tyler
Okay. So big. Big. My mom has been big success, and, then just mentioned Jim Landon and Brock Walter grew up in Ohio. And before I came down here to Florida, in this business, and.

02:00:55:10 – 02:00:56:21
Rod
You have two kids.

02:00:56:21 – 02:00:57:23
Tyler
Now, just one case.

02:00:57:23 – 02:01:03:24
Rod
One month. Oh, that’s right, that’s right. Okay, listen, I knew you had one brand new one. Yeah. That’s right, just the one. Yeah.

02:01:03:26 – 02:01:08:18
Tyler
And Katie. Katie and I, met at Ohio Wesleyan, and we’ve been married for three years.

02:01:08:21 – 02:01:17:22
Rod
Nice, nice. So in the financing realm right now, what is what’s the most challenging piece of that for you?

02:01:17:24 – 02:01:22:05
Tyler
That’s a great question. Yeah, I think we started to touch on it.

02:01:22:06 – 02:01:24:29
Rod
Well we did debts coverage ratio. But if there is that it.

02:01:25:00 – 02:01:54:25
Tyler
Yeah I mean it is it. But but I think the most challenging piece is that debt coverage ratio is a math problem that’s very, very hard and hits you right in the face. Right. But you don’t really necessarily feel that debt cover ratio because you think that the property is worth so much more. So lining up the person’s expectations with the reality of what that actually is is a wild difference, right?

02:01:54:25 – 02:02:01:27
Tyler
So it used to be, you know, you get hired for construction and loan and you go try to find them 70.

02:02:01:27 – 02:02:03:21
Rod
Five to get higher interest.

02:02:03:24 – 02:02:05:03
Tyler
Rate. Right. Hired.

02:02:05:03 – 02:02:06:15
Rod
Somebody hired. I’m sorry.

02:02:06:18 – 02:02:34:11
Tyler
Somebody hires man to get you to find him a construction loan. Right. And we go get quotes for 75 or 80% loan to cost. And we see where they came in, and that was fine. Well, today they don’t come in at 75 or 80% loan to costs. They come in and wildly different numbers between 15 million, 16 million, 13 million, 12 million, 12.7 million.

02:02:34:17 – 02:02:35:13
Rod
On the same deal.

02:02:35:13 – 02:02:36:01
Tyler
On the same.

02:02:36:01 – 02:02:37:01
Rod
Deal, different lenders.

02:02:37:01 – 02:02:38:28
Tyler
Different debt coverage ratios as.

02:02:39:00 – 02:02:39:05
Rod
Well.

02:02:39:05 – 02:02:59:09
Tyler
Got it requirements different ways they look at it, different lenders stress in it. And so how do you explain that to somebody? Well that’s tough. That’s a lot of that’s a lot going on. And for somebody it’s some of my customers been in this business for 30 years. This is the first two years that this math problems are coming up.

02:02:59:09 – 02:03:05:18
Rod
No kidding. So what what causes the disparity in the coverage ratios? Is it just the way they under each one underwrites differently?

02:03:05:18 – 02:03:12:03
Tyler
Let’s say pinnacle Bank wants to underwrite to a 10% vacancy factor. And you have it at five.

02:03:12:05 – 02:03:21:01
Rod
Right? Right. And that’s that’s painful. That’s painful. When you explain that to one of your clients, you’re like, hey, I can’t help it. This is the way they’re underwriting. I don’t want.

02:03:21:01 – 02:03:21:22
Tyler
To stress it.

02:03:21:22 – 02:03:36:27
Rod
Yeah. It’s called it’s called stress testing. So that’s what he means when they say the banks wants to stress it. So they they want to assume the worst. And, you know, and, and banks are obviously a very, very conservative, and they’re getting their asses handed to them right now because they a lot of them weren’t conservative.

02:03:37:04 – 02:03:39:00
Rod
That’s up. And so, you know, and how.

02:03:39:00 – 02:03:39:16
Tyler
Can you blame.

02:03:39:16 – 02:03:55:17
Rod
Them now. And this is what happened in oh eight and nine as well. You know, they’re like ostriches. The heads are in the sand butts sticking out in the, in the open. And and, you know, and this is, this is a this is a recurring cycle theme with lenders. Just so you know, there’s.

02:03:55:17 – 02:03:59:05
Tyler
A another one of my mentors telling me about this recurring theme.

02:03:59:11 – 02:03:59:28
Rod
There you go.

02:03:59:28 – 02:04:01:25
Tyler
This is, this is this is why we hang out.

02:04:01:27 – 02:04:20:05
Rod
Yeah, this this is, this is nothing new. I mean, is that you could you could do well to set your watch to this stuff, and and like I said, that’s why I know, I know there’s going to be auctions. I know there’s going to be lenders financing deals. I know there’s going to be there’s going to be some upset and there’s going to be some bank failures and some more consolidations, because there’s a lot of debt come and do.

02:04:20:05 – 02:04:36:22
Rod
So if there was ever a freaking time to get into this business. Hello. It’s right freaking out. That’s, So get your ass to one of my boot camps or pick another vehicle if you’re going to do some other asset class and go learn it. Maybe buy businesses. There can be incredible opportunity to buy businesses. 80 million baby boomers getting old.

02:04:36:25 – 02:04:52:27
Rod
Are you still getting old and getting cold? That was my line. But, you know, that’s where I’m getting into senior housing as well. I think there’s an incredible opportunity there. But listen, I appreciate you coming down here, bro. That’s been a lot of fun. We’re going to we’re going to do this. We’re going to do this at least once a year for sure moving forward.

02:04:52:27 – 02:04:54:17
Rod
But, anyway, I appreciate you, man.

02:04:54:18 – 02:04:54:25
Tyler
All right.

02:04:54:25 – 02:04:55:16
Rod
Man, thanks.