Mastering HUD Loans and SEC Compliance in Multifamily Deals

Unlocking Lifetime Cash Flow: Legal Insights and Market Realities with Merrill Kaliser

In this episode, I sit down with my good friend and real estate attorney Merrill Kaliser, a seasoned pro who’s not just a lawyer but also a commercial real estate investor with thousands of units under his belt. Merrill brings a unique perspective blending legal expertise with hands-on investing experience, especially in multifamily and commercial real estate.

Key Takeaways You Can’t Afford to Miss:

• HUD Financing Is a Game Changer:
  Merrill breaks down why HUD loans, despite their complexity and long approval timelines (we’re talking 13 months here), offer some of the best financing terms in the market. Think 40-year amortization, 6.09% fixed interest locked in for decades, and up to 87% loan-to-cost financing. This is unheard of in conventional lending and can massively boost your cash flow and deal viability. But be ready for the paperwork and patience because it’s not for the faint of heart.
• Contracts and Due Diligence Are Your Best Defense:
  The letter of intent (LOI) and purchase and sale agreement (PSA) are where deals live or die. Merrill stresses the importance of having a sharp contracts attorney review every detail. These documents protect you from surprises like unexpected vacancies or hidden liabilities. Due diligence isn’t just a checkbox, it’s your shield. Get every piece of documentation from rent rolls to insurance claims before you commit.
• Loan Documents Are Complex and Onerous:
  Don’t underestimate loan agreements. Even so-called “non-recourse” loans often come with “bad boy” guarantees that can put your personal assets at risk if you trigger certain clauses. Merrill and I both agree: always have an attorney negotiate and review your loan docs to avoid nasty surprises.
• SEC Compliance Is Critical for Syndicators:
  If you’re syndicating deals, the SEC is watching closely. Merrill’s firm specializes in SEC compliance to keep syndicators out of trouble. The SEC is complaint-driven and making examples of those who slip up. Do it right from the start and hire the right legal and CPA partners, follow the rules, and document everything.
• Market Trends and Economic Outlook:
  Despite high interest rates and inflation, the central U.S. markets like Texas, the Midwest, and Florida remain strong. Inventory is high now, but new construction is slowing dramatically, setting up a supply shortage by 2026-2027. San Antonio and Dallas-Fort Worth are booming with population growth, making them prime markets for multifamily investments. Austin’s market has cooled due to high prices, but nearby cities like San Antonio are picking up steam.
• Senior Housing and Alternative Assets:
  We also touched on senior housing, memory care, and alternative investments like car washes and Airbnb rentals. Senior housing is a tough but potentially lucrative sector that lives or dies by the quality of the operator. It’s a space I’m personally excited about, especially with the aging population and current market gaps.
• People, Processes, Systems, and Data:
  Merrill nailed it when he said, “People, processes, systems, and data” are the pillars of success. Even the best systems fail if the data input is garbage or the team isn’t committed. Your onsite team’s work ethic and integrity can make or break your investment.

If you’re serious about multifamily or commercial real estate investing, you need a top-notch contracts and SEC attorney like Merrill Kaliser. Don’t cut corners on legal advice. It’s your best protection in this business. And remember, the market is always shifting, so stay informed, stay prepared, and keep pushing forward.

In this exciting episode of Lifetime Cash Flow through Real Estate Investing, Rod talks with his friend. His friend is Merrill Kaliser, an SEC attorney. They have a great conversation filled with legal insights, market trends, and practical investing advice. Merrill shares his journey from bankruptcy law to building over 9,000 units. He talks about navigating SEC scrutiny and avoiding legal issues. He also discusses the big opportunities in senior housing and Texas development. They explore myths about HUD financing. They discuss the important role of operators. Success depends on people, systems, processes, and data. This episode is a must-listen for serious investors who want to scale smart and stay protected.

Here’s some of the topics we covered:

• Merrill’s Background In Real Estate & Being an Attorney
• Behind the Scenes of Merrill’s Most Profitable Property Deals
• What Really Happens Inside a Top SEC Law Firm
• What Every Investor Needs to Know About SEC Legal Protection
• Recourse vs Nonrecourse Loans and Why It Could Make or Break You
• How Interest Rates Are Shaking Up the Real Estate Game
• Merrill’s Unfiltered Breakdown of Today’s Economic Landscape
• Why Senior Living Could Be the Sleeper Asset Class of the Decade

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

Full Transcript Below

01:20:09:06 – 01:20:28:12
Rod
Welcome to another edition of Life Time Cash, folks. Real estate investing. I’m Rod Khleif, and I’m thrilled you’re here. And I have a real treat for you guys today, okay? I have a great friend who’s also my real estate and SEC and contracts attorney here today, and we’ve never done an interview because he’s usually in Dallas. But I’ve got my warrior event this weekend.

01:20:28:12 – 01:20:46:20
Rod
He always speaks at my events. And so we’re like, hey. Or I was like, hey, it’s about damn time we get you on the podcast. So his name is Merle Callister with Callison Associates, and, he and I give each other a lot of shit, which we said we were going to try not to do on this podcast, but, it’s we have a lot of fun, candidly.

01:20:46:20 – 01:20:47:28
Rod
Well, welcome to the show, brother.

01:20:48:03 – 01:20:49:16
Merrill
Thanks for, Yeah, thanks for having me.

01:20:49:17 – 01:21:06:01
Rod
Of course. So why don’t you, you know, you’re not a typical real estate attorney. I mean, you’re in, what, 9000 plus units and you’re a commercial real estate investor and developer and everything else. So why don’t you give a little background, though? I know there’s a quite a background.

01:21:06:01 – 01:21:35:20
Merrill
Sure. So actually, I’m a southern boy. I’m from, Georgia. For those of, you that don’t know me, born in Augusta, Georgia. Moved to Texas in 72. My dad was in the military and, stayed in Dallas off and on ever since 1972. So I could hear myself a Texan law school, went to Washu. Enjoyed it, enjoyed the Midwest, came back to Dallas and started practicing corporate bankruptcy.

01:21:35:20 – 01:21:42:08
Merrill
That was very exciting. First little case was, small little oil company called Enron. That those.

01:21:42:08 – 01:21:46:24
Rod
Of you that are young, that don’t know what that is, that was a how many billion dollar bankruptcy.

01:21:46:24 – 01:21:48:20
Merrill
It was the largest bankruptcy case ever file.

01:21:48:25 – 01:21:49:28
Rod
It was in history. Yeah.

01:21:50:00 – 01:22:14:20
Merrill
Over billions. Right. And then worked a little bit on, some of the blockbuster bankruptcies and some other bankruptcies, and then ultimately got into representing some clients, that were building multifamily. And it was very interesting. We would help them when there were, financial issues and pre bankruptcy, help them work it out. They would remove a GP and step in and finish the projects.

01:22:14:20 – 01:22:29:18
Merrill
Liked it, created my own firm and created a real estate in SEC. Kind of boutique law firm in North Texas and hired two great, lawyers. They’ll actually be at your event. They come from. Yeah, they’re very excited. They’ve never been.

01:22:29:18 – 01:22:30:13
Rod
That’s awesome.

01:22:30:13 – 01:22:46:01
Merrill
So I need help. Yeah. Everybody that shows up. You got a huge crowd, right? But. Yeah. So I’ve been doing that, for 17 years and got into commercial real estate, did residential like everybody did back in 2000.

01:22:46:02 – 01:22:47:22
Rod
In a big way, though. Talk about that.

01:22:47:24 – 01:23:11:20
Merrill
Yeah, we did a few, partnered with some hedge funds, had a couple good partners. And we, we acquired about a 1300 homes in DFW in Houston in 2011 and 2012. Wasn’t our money, it was their money. But, we acquired them, created some software that gave us a little bit of an edge. And then we renovated, property management, which was a whole nother experience.

01:23:11:21 – 01:23:34:00
Merrill
Not a big fan of being my own property manager, but we did it. And, that was sold to another fund. And then we kind of did a rinse and repeat with two very large funds, in the US and expanded to Indianapolis, Saint Louis, Kansas City and, San Antonio. And then, kind of got tired of doing that with large, PE firms.

01:23:34:00 – 01:23:49:07
Merrill
It was not easy. Yeah. And, it’s never good enough. And then, my wife, talked to me one day and said, why aren’t you doing multifamily like all your clients are? And, I argued with her, as I normally do, and then she was right.

01:23:49:10 – 01:23:50:03
Rod
As she normally.

01:23:50:03 – 01:23:54:03
Merrill
Is. Yes, she is, and she might be in here, I don’t know. Yeah. Staring at me.

01:23:54:06 – 01:23:54:14
Rod
Right.

01:23:54:15 – 01:24:17:25
Merrill
But, I, we got into multifamily, 20, 19 and then had a little bug that came around and created some opportunities. The bug meaning Covid, right. And, since then, some with partners. I don’t own 100% of anything, so I don’t like to say they’re mine, but I’m a GP and an investor in. It’s about 7700 or so we’ve sold to them.

01:24:17:28 – 01:24:18:13
Rod
Okay.

01:24:18:13 – 01:24:22:13
Merrill
And then we have some Airbnb like a lot of people do some rental properties.

01:24:22:14 – 01:24:24:11
Rod
Real nice stuff on the lake if I recall.

01:24:24:12 – 01:24:25:21
Merrill
Is it is when the lake is.

01:24:25:21 – 01:24:27:13
Rod
Up. Right. Okay. Okay.

01:24:27:15 – 01:24:46:04
Merrill
That’s the great thing about Airbnb is, the city of Fort Worth has decided that, they were going to use the water for that lake, which is interesting because it is 60 miles, east of Dallas, which means you have to go across Dallas to get to Fort Worth and Smith. Fort worth has a pipeline that sucks water out of this.

01:24:46:09 – 01:24:56:12
Merrill
Oh, boy. So we’ve had a lot of good rain. So I’m very excited about this season. Our software helps us out too, because we measure the the depth, every morning through,

01:24:56:14 – 01:24:56:23
Rod
Oh, no.

01:24:56:23 – 01:24:57:23
Merrill
Kidding. But we take it you’ve.

01:24:57:23 – 01:25:01:10
Rod
Got, you got like, software developers on your team, right? We do. Yeah. Yeah. That’s cool.

01:25:01:10 – 01:25:12:26
Merrill
Well, so we rent boats. Okay. We rent, pontoon boats and jetskis the crazy thing is, a pontoon boat for a day is twice as much as renting the four bedroom, three bath house.

01:25:12:26 – 01:25:13:18
Rod
On the water.

01:25:13:21 – 01:25:15:27
Merrill
Yeah, so it’s a big part of.

01:25:16:00 – 01:25:17:00
Rod
Center for you. Okay.

01:25:17:05 – 01:25:22:09
Merrill
It is when the water’s up. Right when the water’s down. Then we have nice grass, where the boat dock is.

01:25:22:17 – 01:25:22:19
Rod
So.

01:25:22:23 – 01:25:26:23
Merrill
Yeah, it’s a lot of fun, but, and then we do some, express car washes.

01:25:26:25 – 01:25:32:00
Rod
Oh, that’s right, you’re in your washes now, too. Yeah. And you’re but you’re you’re bringing some stuff out of the ground, too. Yeah.

01:25:32:03 – 01:25:54:03
Merrill
Oh, I forgot about that. Yeah, that’s actually a big one. So, yeah, we just put, we just, broke ground on 372 doors in spring, Texas. Right. And this will be interesting when they talk about this, this weekend, but, everybody’s talking about tariffs and how they’re affecting, potentially affecting project costs. Right. So we broke ground 60 days ago.

01:25:54:03 – 01:26:22:07
Merrill
We’ve poured slab on four buildings already, and we’ve got two towers up already built for the elevator shaft. These are four story garden style, right? We’re coming in as of today, about 2 million under budget. And that’s 2 million under our low budget. And this is locking things in at today’s pricing. And so this fear of tariffs dramatically affecting new construction, a lot of it seems to be just kind of made up in the media.

01:26:22:07 – 01:26:40:04
Merrill
There will be some small price increases if they stay, but the labor is coming in significantly less because construction has been added at a halt in a lot of areas. Stand still in a lot of fear, especially in Texas, because there’s a lot of growth. And then interest rates came and everybody stopped. Well, we’re just kind of pushing through.

01:26:40:10 – 01:26:44:02
Merrill
Not easy right? We’re pushing through. And so the.

01:26:44:04 – 01:26:47:15
Rod
Catbird seat because these these these subs don’t have you work.

01:26:47:17 – 01:26:54:12
Merrill
Exactly. So the geeks just want to get them paid. Oh yeah. And so the markups aren’t as high not nearly as high as they were in the past.

01:26:54:12 – 01:27:09:07
Rod
So just just to interrupt. So so the GCS want to get them pay because they don’t want to lose their quality. So 100%. So you see guys and this is very very common. You know when there’s dry spells, the last thing in the world a general contractor wants is to lose their subcontractors because they live or die by them.

01:27:09:12 – 01:27:11:09
Rod
Absolutely. So yeah. Wow. Good for you.

01:27:11:16 – 01:27:16:02
Merrill
So well it’s not done. And we still have 22 months left. Yeah, but, we’re.

01:27:16:02 – 01:27:17:05
Rod
Excited to have more than one.

01:27:17:12 – 01:27:18:17
Merrill
Without you. I only got.

01:27:18:17 – 01:27:20:18
Rod
Two. One. Oh. Oh. Okay. There you go. Sorry.

01:27:20:23 – 01:27:23:21
Merrill
We got another one. And that one’s through HUD financing.

01:27:23:24 – 01:27:24:16
Rod
Oh. That’s cool.

01:27:24:16 – 01:27:34:16
Merrill
And a lot of people think HUD financing is oh, you’re doing low income housing. No, this has got nothing to do with low income. HUD actually provides financing for certain development projects. Not easy.

01:27:34:18 – 01:27:45:26
Rod
Let me interject something, guys. We never talk about HUD financing because it’s not easy. It typically takes six months to a year to get number one. But it is the best financing by far. Explain why.

01:27:45:29 – 01:27:49:01
Merrill
So I wish it took 6 to 12 months. This one took 13.

01:27:49:01 – 01:27:49:21
Rod
Oh no kidding.

01:27:49:28 – 01:28:11:13
Merrill
And keep in mind we pivoted. We were already on the path for conventional financing and the lenders just went pencils down. This was about two years ago. So then we pivoted to HUD. You have to qualify for HUD properties, got to be in a certain location, got to have really good projections for the next 3 or 4 years on, on inventory.

01:28:11:16 – 01:28:31:10
Merrill
So if the projections don’t look like 3 to 4 times, the shortage of projections. Right. You can’t go there. Oh no. Not even when I’ve been talking about rents. Then they go into rent. So you go through different studies that you pay for different surveys. We’ve done blast radius surveys because we have gas lines within 100 yards of the property.

01:28:31:13 – 01:28:39:23
Merrill
Big one in Houston that hasn’t been used for 50 years. Wow. We still have to provide a shield in case it is ever used.

01:28:39:23 – 01:28:57:20
Rod
Oh my God. Yeah. This is this is an example of government overreach and waste of I mean, they’re massively cutting HUD. I mean the payroll on HUD, I mean the human resources there a lot of them are out the windows. It’s going to be even worse. But yes. Yeah, but but it’s still talk about the quality of the finance.

01:28:57:20 – 01:28:57:22
Rod
Yeah.

01:28:57:22 – 01:29:20:17
Merrill
So when it was all said and done, I can say this because I’ve posted about it. We ended up getting it’s almost embarrassing because I don’t think a 6.09% loan is a great rate. It’s a great rate right now. Yeah. I was representing clients who were getting 3% with HUD three years ago, but we locked in at 6.09%.

01:29:20:19 – 01:29:21:11
Merrill
40 years.

01:29:21:15 – 01:29:22:00
Rod
40.

01:29:22:00 – 01:29:22:29
Merrill
Years, 40 years.

01:29:23:00 – 01:29:27:02
Rod
Holy shit. I thought it was 35. Was the max 4040 years.

01:29:27:02 – 01:29:28:15
Merrill
Wow. 40 year, 40 year.

01:29:28:15 – 01:29:34:00
Rod
Guys, the interest rate isn’t as relevant when you add an extra frickin ten years on the back gate, right?

01:29:34:00 – 01:29:35:04
Merrill
It’s like a four and a quarter.

01:29:35:04 – 01:29:35:26
Rod
Wow.

01:29:35:26 – 01:29:38:24
Merrill
So we got 40 years. Now there’s a ten year step down.

01:29:38:27 – 01:29:52:00
Rod
Other. Oh, yeah. So, so so what that means, guys, is, is there’s a ten year prepayment penalty where the where the prepayment steps down over a ten year period. And it is significant. So he’s not going to be selling and refinancing that thing for ten years.

01:29:52:00 – 01:29:52:29
Merrill
We are. But that’s okay.

01:29:53:00 – 01:29:53:16
Rod
Oh you are.

01:29:53:17 – 01:29:57:28
Merrill
Yes. Because we’re in at a very low basis. And so now.

01:29:58:00 – 01:30:00:01
Rod
You’re going to pay the step down. Well.

01:30:00:01 – 01:30:16:17
Merrill
Well we’ll see what the market is like when we stabilize okay. But we’re at a very good price point a very, very good price point. Okay. Lower than we could have ever imagined. Not only were those that just those terms, we have 87% loan to cost.

01:30:16:20 – 01:30:39:18
Rod
Okay, that’s the other big thing. Guys, I want you to rehear what he just said. They were able to borrow 87% of the entire project cost. Purchase price? Yeah. You know, cost in the deal, which is unheard of. I mean, unheard of. So this is why HUD is fantastic. It’s just very hard to get very cumbersome, very, you know, a lot of reporting you have to do after the fact as well.

01:30:39:24 – 01:30:40:19
Merrill
That’s even better.

01:30:40:20 – 01:30:41:02
Rod
Okay.

01:30:41:04 – 01:31:02:28
Merrill
Yeah. So we have that step down. But what’s interesting with HUD is so right now we’re 6.09%, right. We have a one time opportunity to lock in at a different rate after construction is completed. So let’s say for whatever reason, the rates come to the ten year drop because HUD follows the ten year. Right. So let’s say the ten year is drop down to 3% or 2%.

01:31:03:00 – 01:31:21:23
Merrill
We can lock in the flip side to that. And this is why you got to know everything ahead of time. The flip side of that is when you lock in you’re paying your prepay, your penalty. Oh, so you’re locking in and that gets added to your basis. So it’s a numbers game. You’ve got to see if it’s worth it for you to lock in at a lower rate.

01:31:21:25 – 01:31:32:12
Merrill
So it’s only $8,500 to lock in, but it could cost us 2.5 million. Wow. In additional, loan amount, because they would finance back in that prepay.

01:31:32:19 – 01:31:50:20
Rod
Yeah. So, guys, we’ve never talked about this, which is why I’m allowing him to go into a little more detail on HUD, HUD financing. And, and I’ve never really talk about it because most of the people on the show are new or newer, you know, except my students, they have a lot of deals. And there’s a I think there’s some HUD stuff being done by a couple of my warriors as well, but it’s not common.

01:31:50:25 – 01:31:54:22
Rod
But it’s fantasy stick debt. So you’ve got another one coming on the ground too, right?

01:31:54:22 – 01:32:06:23
Merrill
Yeah, we have another. We have actually two others. But yeah, we went HUD on the second one. And to be honest with you, we haven’t closed on it yet. We’re waiting. Okay. That HUD project, the terms aren’t as good.

01:32:06:25 – 01:32:07:08
Rod
I see.

01:32:07:08 – 01:32:08:27
Merrill
It’s on a project by project basis.

01:32:08:27 – 01:32:09:14
Rod
Interesting.

01:32:09:14 – 01:32:21:02
Merrill
And it has a little bit. It has some a retail component to it, which made HUD a little more complicated. So by waiting a little bit, just in the last month and a half, two months, conventional lenders are opening up again.

01:32:21:03 – 01:32:21:19
Rod
Okay.

01:32:21:20 – 01:32:37:17
Merrill
And so we’re getting terms that are less egregious than HUD meaning there’s no ten year prepay. Got it. The challenges obviously equity. Right. Because I’m not raising money. Yeah. Not going to get 87% loan to price. You’re going to get 65.

01:32:37:17 – 01:32:40:10
Rod
And that’s that’s a big deal. It is. Yeah.

01:32:40:10 – 01:32:58:17
Merrill
What was the project down in Houston was great. We didn’t have to do anything. There are family offices and equity groups that essentially troll all of the people that are approved by 2 to 4 dealer. I think that’s the the the statute. Right. And so they came in with 90%.

01:32:58:19 – 01:32:59:14
Rod
No kidding. Yeah.

01:32:59:20 – 01:33:00:21
Merrill
I mean, it was.

01:33:00:23 – 01:33:05:03
Rod
Because they know how they know how how meticulous it is.

01:33:05:07 – 01:33:05:25
Merrill
You have reserves,

01:33:05:29 – 01:33:12:18
Rod
You know, might be the word and and and so they know how incredibly conservative that those deals are.

01:33:12:21 – 01:33:35:01
Merrill
And when you finish construction, there’s no personal guarantee, just a completion guarantee. So the rest of the loan is non-recourse. Wow. After construction. But and you have so many required reserves and then you have a we have a line of credit on top of that that we can tap if we need to. That’s required. So we would have to have a nuclear fallout to, to lose the deal.

01:33:35:01 – 01:33:35:04
Rod
Yeah.

01:33:35:05 – 01:33:37:13
Merrill
Then the housing is not the worst of my issues.

01:33:37:15 – 01:33:55:26
Rod
So let’s talk a little bit. Let’s shift gears here for a minute. So let’s talk a little bit about your practice. I know that, I mean, I’ve used you for SEC work, and talk about what all you do and because it’s, you do every piece of what needs to be done in the multifamily. Well, really in any asset class space.

01:33:55:26 – 01:34:14:18
Rod
Sure. In the commercial real estate space and, you know, our, my warriors are now doing every asset class. I mean, we’ve got. Yeah, we’re I think we’re pushing 270,000 units of multifamily under my tutelage, which I’m incredibly proud of. But but, you know, we’ve got a ton of senior housing happening right now. I’m raising money for a senior housing project starting next week.

01:34:14:19 – 01:34:15:09
Merrill
I know.

01:34:15:11 – 01:34:33:04
Rod
Oh, you know, I know all about it. Yeah. So, and then, you know, a lot of student housing, thousands and thousands of self storage units, larger storage units, you know, mobile home parks, hotel to multifamily conversions, mixed use industrial flex space. I mean, more are doing all of it.

01:34:33:04 – 01:34:36:11
Merrill
They’re developing too. You all that are developing. Right, right, right.

01:34:36:14 – 01:34:52:04
Rod
So and by the way, most of them use Merrell, because, you know, he takes really good care of of my warriors. But so talk about what all is involved in a real estate transaction so people understand why they need you.

01:34:52:07 – 01:35:08:25
Merrill
Sure. Well, from the get go, you’re going to find an opportunity or someone’s going to bring you an opportunity, right? You’re going to do some sort of analysis on it. You’re not going to do a deep dive most likely, but you’re going to do some sort of analysis of back of the napkin analysis, depending on your your expertise, your expertise level.

01:35:08:28 – 01:35:26:12
Merrill
But once you’re ready to make an offer or submit a term sheet, you’re either going to go through your broker or a lawyer or both. And that’s kind of where we get involved. Typically our clients or people that have talked to us in the past, we tell them, send us your term sheet before you send it out.

01:35:26:14 – 01:35:36:14
Merrill
Kind of a free look technique and give you legal advice on a free look, but we’ll mark it up to the extent you’re missing some some terms now that you can add or not add, it’s always dictated.

01:35:36:14 – 01:35:38:19
Rod
This is the long term sheet we’re talking about.

01:35:38:21 – 01:35:41:10
Merrill
This is this is the term sheet to make an offer on.

01:35:41:18 – 01:35:42:03
Rod
The other.

01:35:42:06 – 01:35:45:14
Merrill
Asset. Yeah. The other okay. Yeah okay I use those terms okay.

01:35:45:14 – 01:36:03:00
Rod
Sorry. It’s the letter of intent. Guys. You know, in, Merrill is not free. Okay? And I will get in if and when I teach my bootcamps. One of the big things I tell you is you always, always, always use an attorney to write the contract or to review the contract. And again, Maryland attorneys are not free.

01:36:03:00 – 01:36:19:01
Rod
So what’s used is in a letter of intent. It’s called an Loi. And it spells out the major deal points on a deal. So you you negotiate that, you sign that. And then we let you let the attorneys fight it out over the purchase and sale agreement called the PSA. And by the way, in this business, you got to learn the acronyms too.

01:36:19:03 – 01:36:22:06
Rod
And that’s so the Loi and PSA. Please continue.

01:36:22:07 – 01:36:44:25
Merrill
Sure. So your letter of intent is the most binding, non-binding piece of paper that you will ever see. It says non-binding all over it, right? God forbid someone decides to change a term in the PSA. It is like someone just press the yeah, the nuclear button. Right. So, as we tell clients or potential clients, it’s non-binding, but these need to be the terms that you’re agreeable to.

01:36:44:26 – 01:36:53:13
Merrill
Once it’s signed, you’re going to go to a PSA purchase and sale agreement. So we typically don’t charge clients or non clients to review an ally.

01:36:53:15 – 01:36:54:03
Rod
Oh that’s nice.

01:36:54:03 – 01:37:20:29
Merrill
Because you’re going to submit a bunch right. The likelihood of you getting your first Loi selected is pretty slim. If you’re selected the first time, you probably overbid on the property. Yeah. Or offering to overbid on the property. But it also helps generate a, a relationship with, non clients. So you go loi once you otherwise accepted, then you do a PSA person seal agreement that’s typically between 40 and 50 pages long.

01:37:21:02 – 01:37:26:20
Merrill
Very detailed documentation. I wish clients read every single item in it, but they just don’t.

01:37:26:20 – 01:37:27:09
Rod
That’s why you’re.

01:37:27:09 – 01:37:39:13
Merrill
There. So we point out all the gotchas, things that you wouldn’t even think about. Like you’re buying a, a multifamily. What happens if there are 40 vacancies instead of 20 vacancies right now? How is that accounted for?

01:37:39:13 – 01:37:40:06
Rod
Right.

01:37:40:08 – 01:37:56:03
Merrill
You know, part of it is going through due diligence. You’re gonna have a long due diligence period 60 days, typically maybe 90 if it’s a quick sale. You have 30, right. But you’re going to be very specific in the PSA on what type of due diligence you expect the seller to give to you. And also.

01:37:56:09 – 01:38:11:28
Rod
You mean the documentation. Absolutely. Yeah. So what you do, guys, is, is when you do your due diligence, you request documentation from the seller through the broker. If there’s a broker and you know, we’re talking about rent rolls, panels, you know, any inspection reports, anything they have on the property.

01:38:11:28 – 01:38:12:10
Merrill
Insurance.

01:38:12:10 – 01:38:26:26
Rod
Claims insurance. Yeah. You name it. The whole a whole litany of things. You get that list, by the way, it my bootcamp. My warriors have it as well. But but you know, you want to, you know, ask for everything basically. And the due diligence doesn’t start until you have all that stuff.

01:38:26:29 – 01:38:34:07
Merrill
So so yeah, we, we make sure at least in our essays not only did not start doesn’t start to have every single piece.

01:38:34:07 – 01:38:34:24
Rod
Oh wow.

01:38:34:24 – 01:38:55:28
Merrill
Unless the the purchaser who can be our clients on does represent the seller sometimes. Occasionally we represent both if we know both parties and they agreed to do a waiver of conflict. Right. But that’s only on very special occasions where we know everybody can play well in the sandbox. Right. It’s very important that they get all the due diligence because you can’t really talk to a lender unless you know exactly what’s going on.

01:38:55:28 – 01:39:12:19
Merrill
Right? They’re going to talk to a lender ahead of time just to get an idea of what’s out there. So we go to the PSA. You negotiate the PSA. Once the PSA is signed, then the clock ticks. You know, now you start your due diligence. Occasionally you negotiate a free look period for 7 to 10 days.

01:39:12:19 – 01:39:31:00
Rod
But back in the day when the whole thing deals were flying through so fast, that was about the only way to protect yourself is to do a free look upfront and have your earnest money go hard or nonrefundable almost immediately. And so, you know, that was the strategy you do in LA, why you negotiate it. Once it was signed, you get a free look.

01:39:31:00 – 01:39:42:26
Rod
And while the PSA was being negotiated and you go in there and pretty much do a full blown due diligence, because once the contract was signed, your money was nonrefundable or hard. So yeah, it is. That’s not the case anymore. Right?

01:39:42:26 – 01:39:59:17
Merrill
I was gonna say it’s rare that you have nonrefundable money right now, right? That will change. Yeah, but right now it’s rare. So you’re going through that, then you’re going to go and start negotiating with the lender or talk to a lender about various terms. Right. A lot of people don’t realize is the lenders now going to do due diligence on you?

01:39:59:18 – 01:40:12:17
Merrill
Sure. So one, they need the due diligence on the property. And two, they do the due diligence on the borrower. Right. And the borrower could be one, 2 or 3, hopefully not more than 3 or 4. Right. We talked about that in the past. You won’t have too many gaps in a deal or KPIs.

01:40:12:17 – 01:40:29:28
Rod
We call them key principles in my sphere, yes, but they’re the people are the loan guarantors. There are people to sign on the debt. There’s GGP general partners that orchestrate the thing, put it together. But then you’ll have, you know, a small number of people that actually sign on the loan, the KPIs. Okay. Agreed.

01:40:30:01 – 01:40:37:00
Merrill
So we help and we help one help with negotiating the loan docs. We’re going to review the loan docs make changes. The loan.

01:40:37:06 – 01:40:52:18
Rod
Interjects. By the way, guys, these loan docs are very detailed and very complex and in some cases very onerous. Okay. And so it is critical that you have an attorney review those as well. They are contracts as well.

01:40:52:20 – 01:40:56:26
Merrill
There is not really a non-recourse set of loan docs. The bad boy bad let.

01:40:56:28 – 01:41:16:17
Rod
Let me explain. If you haven’t heard the you know what, if you don’t know non-recourse means there’s recourse. If the full recourse is if they foreclosed, they can come after you. If there’s a deficiency judgment after the property is sold in foreclosure, ask me how I know, okay. And then non-recourse means when they foreclose, all they take is the property.

01:41:16:20 – 01:41:28:12
Rod
But but, some of the clauses in the loan documents can make making, you know, a loan go full recourse if you miss some detail. In the, in the process. Right. Yeah.

01:41:28:12 – 01:41:33:27
Merrill
So in just to clarify, even more recourse is personal guarantees. Personal liability.

01:41:34:00 – 01:41:34:16
Rod
There you go.

01:41:34:16 – 01:41:54:05
Merrill
So you have non recourse but with what are called bad boy bad girl guarantees. Right. So basically that’s a recourse loan. Right. Because you get to a point where you’re hoping the loan is not non-recourse, you’ve already triggered your bad boy bad deal guarantees, which makes it, for the most part, a full recourse loan.

01:41:54:05 – 01:42:11:29
Rod
And there’s a lot of that happening right now. Guys, I’ve you know, I’ve been talking about this. There’s a ton of property being sold for the debt right now. And it’s not even penciling out. Meaning it doesn’t even make sense because the interest rates are so high. And, you know, it’s called debt plus fees. So lenders haven’t been taking haircuts too much yet.

01:42:12:01 – 01:42:18:14
Rod
You know, their catchphrases extend and pretend, but that’s going to change. You know, at some point it has to. And so. Right.

01:42:18:16 – 01:42:26:01
Merrill
Yeah. And every, every lender, we’re you and I’ve talked about this, probably 65% of our work right now is loan workouts and loan modification.

01:42:26:01 – 01:42:27:02
Rod
Loans and trouble. Yeah.

01:42:27:03 – 01:42:49:18
Merrill
Right. And it rain. It goes the gamut. Some just say I don’t care, I’m going to foreclose. Right. Others are working. I just saw a term sheet that really blew me away from the lender. A big lender, who has not acted this way on other deals, is doing a forbearance of interest payments for over a year.

01:42:49:20 – 01:43:12:28
Merrill
Okay. They’re granting forbearance till May of 2026 and and an option to extend to 2027. They like the property okay. They understand where it is. The GP’s have to put half $1 million in to just have an interest reserve. It’s a $27 million loan. And very pleasantly shocked that this lender took that position.

01:43:12:28 – 01:43:16:16
Rod
Yeah. So forbearance is you’re going to pay it, but you don’t pay it right now.

01:43:16:20 – 01:43:17:00
Merrill
It’s going to be.

01:43:17:08 – 01:43:38:02
Rod
Easier to get it onto the loan. Yeah. Well hopefully you guys are seeing the importance of a good contracts attorney. And I want to share something with you. Yeah. So about 20 years ago, you know, I was renting about 800 houses, many of them with an option to buy. And I got accused of not allowing my renters to buy and in fact, I got slammed in a newspaper at the time.

01:43:38:02 – 01:44:00:09
Rod
And and so I was renting these houses with an option to buy, and people paid 2 or $3000 for the privilege of that option. And if they didn’t pay their rent, they got evicted. Hello. And if they got evicted, they didn’t get their 2 or $3000 back. But the article said something like real estate mogul steals families, homeownership dreams and has smiling family of four on the cover failed to mention they were $5,600 behind in rent.

01:44:00:09 – 01:44:18:06
Rod
Right? You know, it was a total hit piece with a all just completely filled with bullshit. But we all know about fake news these days and how much we see is complete B.S. you know, and, but I got to experience it firsthand. So the article said I’d only sold about 12 houses to on this rent own program.

01:44:18:06 – 01:44:41:17
Rod
I actually sold 157 of them. But I was holding properties and land trusts at the time, which was this strategy you use to have anonymity and asset protection and all that. And I had some ex partners that tried to discredit me, that the reporter found in my divorce paperwork where my ex and I were fighting, you know, it was it was a largest divorce, I believe, at the time by attorneys fees at this time back in 2000.

01:44:41:19 – 01:44:58:21
Rod
And but they, you know, so they were trying to discredit me in the divorce proceedings and they this reporter found a couple partners and they trashed me. But the partners ended up apologizing in writing that they had failed to communicate with me. You know, everything in the article was bullshit. And and it was all debunked. But it wasn’t a fun time for me.

01:44:58:21 – 01:45:20:12
Rod
Sure. So the state attorney general at the time was running for governor, and he opens up an investigation on me because they teach him to do that. You know, pick a high profile article or case and make yourself look good, like you’re tough on crime and all that. And they literally spent two years crawling up every orifice in my body, you know, and looking at all my contracts.

01:45:20:15 – 01:45:40:10
Rod
And they were completely satisfied with how I did business, didn’t have me change anything. And how I did business. I was, you know, was dropped. I was completely exonerated. But it wasn’t a fun time to go through that. You know, that’s why I brought this up, you know, because, you know, I was completely exonerated after two years, and they didn’t let me change anything because the contract was so well written.

01:45:40:13 – 01:45:59:02
Rod
And I’m talking about the importance of having a great contracts attorney. In fact, the contract said that the deposits were nonrefundable, I think in like 18 places and large type and everything else. But again, that’s the importance of having a good attorney to help you with your contracts. You know, again, everything in the article was bullshit and I was completely exonerated.

01:45:59:02 – 01:46:18:29
Rod
But, but, you know, it’s no fun when you go through an investigation like that. But so the point is, get a great contracts attorney. So the point is get a great contracts attorney. And, you know, and and, you know, attorneys have a stigma, you know, greedy, blood sucking, you know. Oh, yeah. Yeah. You especially. But no, I’m kidding.

01:46:18:29 – 01:46:38:26
Rod
But but, you know, I, I just want to flag this for you guys because, I will tell you, take the time to, to memorialize everything. You know, our business is a partnership. Business as well. And I’ve had some failed partnerships, like the two I just mentioned. It was because of a lack of communication. Every single time these guys, I couldn’t reach them, they wouldn’t return my calls.

01:46:39:01 – 01:47:08:16
Rod
But the point is, you want to write everything down? In fact, one of the things that that I have in my free book section at Rod’s Links is the questions you should ask before you get into a partnership. It’s a free book because, you know, you get caught up in the emotion of stuff and you want to ask all the hard questions and document everything you know, like you talk about, you know, when you get into a general partnership, creating a memorandum of understanding, documenting who’s doing what and, and the different roles and what the splits are.

01:47:08:16 – 01:47:18:05
Rod
So there’s no animosity. And guys, I will tell you, it always comes back to the written what’s written down. So, just wanted to flag that.

01:47:18:07 – 01:47:38:03
Merrill
Well, just to touch on the contract stuff. Right. So we didn’t we didn’t talk about it. But the other aspect of what we do with clients is all of the SEC work, which is probably your largest contract and the contract that gets you, if not done properly, in the most trouble. Yeah. Civil and criminal.

01:47:38:03 – 01:47:39:01
Rod
Right.

01:47:39:03 – 01:47:43:19
Merrill
And when you have a market that’s fluctuating like it is now.

01:47:43:19 – 01:47:48:03
Rod
And you have a nice way to put it, and I am and the SEC makes examples of people, they.

01:47:48:03 – 01:47:49:01
Merrill
Make examples.

01:47:49:09 – 01:47:49:19
Rod
And.

01:47:49:25 – 01:48:20:04
Merrill
You have investors that probably were not sophisticated enough to make the decisions, even though they were qualified under the SEC. They go in and they will find, I’m going to argue, a sub subpar lawyer that will go and try to tear through these documents to find some. Gotcha. And these are 60 page documents that are coupled with presentations that are done online, and emails that go out talking about these opportunities.

01:48:20:07 – 01:48:34:10
Merrill
And so our job, as you know, SEC lawyers and representing syndicators is to make sure that our clients don’t get themselves into trouble. Right. You can’t force them not to do things, but we warn them, you know how I am. I tell everybody.

01:48:34:14 – 01:48:49:23
Rod
Every time you’re on stage, you bring this up and and like I said, the SEC is complaint driven and they are. And they’re getting complaints now because their deal’s going south and there’s going to be some there’ll be some people in the paper that they make examples out of and could get.

01:48:49:25 – 01:48:50:13
Merrill
They already are.

01:48:50:14 – 01:48:51:04
Rod
Oh, they already are.

01:48:51:04 – 01:49:04:04
Merrill
There they are. And and I mean, my advice when we have clients, either you’re going to listen to what we tell you guys to do with respect to the SEC, with respect to advertising and marketing, right? Or we’re not going to represent.

01:49:04:04 – 01:49:04:17
Rod
You real.

01:49:04:17 – 01:49:06:19
Merrill
Good. And that’s fine. And we’ve terminated clients.

01:49:06:19 – 01:49:06:28
Rod
Have you?

01:49:06:28 – 01:49:17:19
Merrill
Well, yeah. Because they also look at the law firm and because the typical client may say, well, that’s what my lawyer said. And even as a lawyer, you’ve got to document your correspondence with clients. But it is.

01:49:17:19 – 01:49:22:20
Rod
You mean the SEC will look at your law firm is what you meant? Yeah. Now got it. Yeah. Yeah. I didn’t track that for a second. Yeah, yeah.

01:49:22:20 – 01:49:44:27
Merrill
And so it’s not just the SEC that people need to be aware of. Every state has their own securities board. Right. And so if the SEC jumps in that’s one thing. Sometimes the lawyer will just file a complaint with the state board, which typically follows the SEC rules, but they’ve got their own set of penalties. Well, and so all of this can be avoided if you just do it right.

01:49:44:27 – 01:49:49:11
Merrill
Do it right, hired the right partners to do it. Make sure you’ve got a CPA. Also, you’ve got.

01:49:49:13 – 01:50:11:22
Rod
Great legal representation, which is you know, I’ve really never had a, an attorney on the show that I can recalled. And I highly recommend Merrill. By the way, it’s Callisto Law.com. Yes, sir. Michael icr Law.com. And, you know, let him know that you saw him on the podcast. If you if you, get his help.

01:50:11:25 – 01:50:31:11
Rod
But, yeah, I, I don’t typically recommend people highly recommend him. And, you know, they’ve done a great job for me, and that’s why he speaks at every one of my events. The virtual events, the live events and everything else. And these warrior events. That’s this weekend. Tomorrow. Well, we’ve got several hundred of my warrior students that are going to be here.

01:50:31:11 – 01:50:58:00
Rod
And he’s doing two presentations. So. And, you know, one of the things, you know, one of the big things we have to do is protect my warriors. And so we’re talking about, you know, mitigate, mitigating problems and things that they might be dealing with. And, you know, I think out of 270,000 units, I think we’ve only lost one deal so far, and we’ve got a couple that are struggling.

01:50:58:02 – 01:51:21:05
Rod
I’ve even got some that are struggling, but, you know, I’m really proud of that. And hopefully it’ll remain that way. But, you know, these are crazy times. You know, with the interest rates as high as they are, adjustable rate debt, you know, the payroll for you in Dallas for, for new construction, is down, but payroll for, for, existing apartments is way up.

01:51:21:05 – 01:51:42:05
Rod
It’s crazy. And taxes are up and insurance is up, and it’s killing people, myself included. We were gassed, you two. Yeah, we’re gasping for air. And so, you know, hopefully things will turn hopefully, you know, just to stay in recent news that I forgot what department it was, tried to shut down Trump’s tariffs. I’m like, oh, my God, you got to be freaking kidding, right?

01:51:42:12 – 01:51:54:07
Rod
Jesus. There’s these politically driven morons. Because, you know, people are like, oh, the tariffs are going to ruin us. No, he’s negotiating, for Christ’s sake, you dumbass. And I mean, he’s playing chess, not checkers.

01:51:54:12 – 01:51:55:12
Merrill
It did get appealed.

01:51:55:15 – 01:52:09:24
Rod
Yeah, I know, I know, I saw that temper. God. Let’s hope, let’s hope hope. The Supreme Court steps in and shuts that shit down. Because, I mean, that’s the best thing in the world for this country. And if they shut that down and be like, oh my God. But, yeah, don’t get me started. Got a little excited there.

01:52:09:26 – 01:52:26:08
Rod
But anyway, so, you know, one of the things you’re talking about this weekend is the current state of the Union is typically ask you to do that and just give your opinion on what’s happening macro, economically and in the country and even worldwide sometimes. What, you want to speak to that for a minute?

01:52:26:08 – 01:52:29:04
Merrill
Sure. I’ll get my lawyer. Disclaimer.

01:52:29:04 – 01:52:29:16
Rod
Okay.

01:52:29:16 – 01:52:48:23
Merrill
So not only is this not legal advice, I am not an economist. Okay. Nor do I play one on TV. However, I, I do follow 5 or 6 different economists regularly, as I know you do as well. And so what I try to do is put together a combination of, of what we’re seeing. And then it’s very interesting.

01:52:48:23 – 01:53:10:07
Merrill
And the cool thing is we have AI that allows us to pull a lot of information together. And then you see some where a lot of the economists are very similar. Yeah. And doesn’t mean that that’s a guarantee. Like we all know that we’re sitting in an environment with higher interest rates, high cap rates, potential instability with respect to tariffs.

01:53:10:09 – 01:53:11:09
Merrill
That’s just part of AI.

01:53:11:10 – 01:53:19:11
Rod
Part of the process would be that that housing is is really in trouble at this point. People are like, oh no it’s not. Well, yeah it is. So

01:53:19:19 – 01:53:42:05
Merrill
And I agree with you. What was interesting, though, in all of the different, forecasts, is everybody is very bullish on the central part of the United States. The Midwest is doing well. Interesting. Texas is still doing well. Florida is still doing well. The the storms in Florida haven’t helped the cost, of course. But that will even it’s out.

01:53:42:05 – 01:53:53:05
Merrill
It’s not like it’s unexpected in Florida. Right. But it certainly doesn’t help. Right. What what I found the most interesting was following inventory levels.

01:53:53:07 – 01:53:53:18
Rod
Okay.

01:53:53:22 – 01:54:13:24
Merrill
And so, like, in Texas, where I’m from and a lot of investments are in Texas, inventory levels are very high. So rents are stagnant to maybe climbing 2 to 3%, which right ten years ago that was normal 2%, 3% growth. That was normal. But we’re coming off of times where you had 1015 nine seven.

01:54:13:28 – 01:54:18:10
Rod
Oh I Tampa 30 yeah, 30% rent growth in one year.

01:54:18:10 – 01:54:22:27
Merrill
Yeah. And I remember when Tampa was number one in the country, right. And that wasn’t that long ago.

01:54:22:27 – 01:54:23:27
Rod
Right.

01:54:23:29 – 01:54:35:03
Merrill
But what we’re seeing, what we’re seeing on the inventory levels, and this is why we’re very bullish on construction right now, is Q3 of 2026 in DFW in Houston, not Austin.

01:54:35:03 – 01:54:36:00
Rod
No new inventory?

01:54:36:01 – 01:54:53:01
Merrill
No, because no one is starting. So people have to pay attention. So you don’t just look at, you know, the cost of housing, blah, blah, blah. Where is the population going? We are still and I’m not bragging about DFW. It’s a very hard marker to get into, but we’re still bringing in 120, 250,000 people.

01:54:53:01 – 01:54:53:29
Rod
In Tonio as well.

01:54:53:29 – 01:55:11:19
Merrill
Each year San has slowed a little bit, but but Austin is the one that’s really dropped off because it’s become so expensive to live in Austin and there’s a ton of inventory. So people are moving now to San Antonio. They can actually commute from San Antonio to Austin, right, and have a much better house and a much better affordability level.

01:55:11:19 – 01:55:27:20
Rod
Yeah, I’ve got two assets in San Antonio. I love that market. I know, I mean, it’s it’s hurting a little bit right now, but I’m so bullish on it. There’s so many people moving there and they know it’s coming. You can see all the highway infrastructure and the billion spent on the airport and everything else. And you know, DFW as well.

01:55:27:22 – 01:55:29:25
Rod
We’ve got assets. I’ve got assets there like you do.

01:55:29:26 – 01:55:40:06
Merrill
Yeah. So San Antonio is the third largest city in Texas. Yeah. And the most affordable, behind that would be El Paso. Okay. But moving to El Paso was a lot different than now.

01:55:40:06 – 01:55:41:12
Rod
San Antonio is a.

01:55:41:14 – 01:56:01:24
Merrill
Different market, right? But yeah. So so one of the things we’re looking at, we’re we’re in an area I didn’t talk about this one with you, but it’s up in, Sherman, Texas. We’ve got 57 acres zoned for multi, a lot of multi. We’re doing it in phases across from a typical story. Huge chip, manufacturing plant to building a 30 by hour plant right across the street from us.

01:56:01:25 – 01:56:29:09
Merrill
Wow. So that’s exciting. But what’s more exciting is looking at the at the city’s forecast for inventory. They’ve got 8500 to 25,000 people moving in over the next two years, and another 20,000 with all this growth that’s coming into the small town. That’s 65,000 people right now. Wow. They’re showing inventory in Q3 somewhere like, excess inventory of 100 units.

01:56:29:12 – 01:56:31:16
Merrill
And then it’s and then it just drops off.

01:56:31:16 – 01:56:32:03
Rod
Wow.

01:56:32:03 – 01:56:51:01
Merrill
And so there’s this huge deficit. Great for us because we’re starting to break ground there. We’re seeing some of the same stuff in Houston. So when we come online and into 2027, yeah it’s great. But the problem we have with that is lenders and a lot of the equity they look at today. Yeah they literally.

01:56:51:01 – 01:57:06:14
Rod
They have no shocks me. Honestly honestly, you know because they’ve been doing this for a long time. They’ve seen the dips in the valley. You know, the peaks and valleys and what’s, but yeah, but, you know, it’s funny how they they’re like ostriches when shit happens. Right?

01:57:06:21 – 01:57:29:24
Merrill
100%. Yeah, 100%. Well into I think today, there’s going to be a report on, inflation. Okay. And it’s funny because I can look back two weeks ago, the markets are not pricing in any rate cuts for the next year, I can’t remember. There was a number that came out yesterday. There’s a 65% chance that there’s going to be a rate cut in July.

01:57:29:26 – 01:57:50:21
Merrill
How do you go in two weeks from no rate cut to maybe a rate cut in July? So it does make it difficult. And I get it for savvy investors potentially lenders to not really know what’s going on. Sure. Like on the, the, the car wash, type product that’s cash flowing already or the cash flows very quickly.

01:57:50:24 – 01:57:57:20
Merrill
That’s a different type of lender. You get conventional lenders that love that. Why? Because they get deposits. It’s all about deposits, right.

01:57:57:21 – 01:58:00:26
Rod
So so you just you’re talking about a local bank? Yeah. In that regard, yeah. The local.

01:58:00:26 – 01:58:01:08
Merrill
Or regional.

01:58:01:08 – 01:58:05:18
Rod
Banks are those same with same with senior housing. You can use local banks as well.

01:58:05:19 – 01:58:18:19
Merrill
So and I’m not exactly sure what type of senior housing we were looking at like memory care. Right. Right. Pre-COVID and I had some partners I think I may have told you this. We mapped it out, had PMS, we had process in.

01:58:18:19 – 01:58:19:26
Rod
Place, but then, well.

01:58:19:26 – 01:58:29:07
Merrill
We were about to pull the trigger and then all the news about what was going on in new Jersey, where the senior living facilities people were dying. And like, even if we wanted to do.

01:58:29:07 – 01:58:29:29
Rod
It, you could.

01:58:30:06 – 01:58:31:21
Merrill
I we couldn’t raise a dime.

01:58:31:21 – 01:58:48:19
Rod
We couldn’t raise a dime. But I got to tell you, it’s a good thing because a lot of a lot of, Alf’s and memory care went down the tubes. I’m one of the. I mean, there’s a lot of them that are empty right now, so there’s opportunity there. It’s something I’m very excited about. I don’t know if you knew this, but I got my Alf administrator’s license here in Florida.

01:58:48:22 – 01:59:08:24
Rod
Like 15 years ago. I did a three day. I mean, I believe in senior housing. I love I love the elderly. And, you know, I was I got the domain name affordable senior housing. And I was going I started I put a started putting a team together, spent quite a bit of money on it and then then A08 hit and I was done and I backed out and, you know, had to go through all that.

01:59:08:24 – 01:59:16:16
Merrill
I mean, in if you do the model, we looked at the model of actually building houses.

01:59:16:19 – 01:59:17:18
Rod
Oh yeah. Yeah I know, I know.

01:59:17:19 – 01:59:18:16
Merrill
So you go through.

01:59:18:18 – 01:59:21:08
Rod
Reno’s Jean Reno’s model. Yeah. Where you do residential.

01:59:21:08 – 01:59:42:04
Merrill
So we, we looked into that. That’s that’s what we did. We went to the attended. It went to that. Me too. Rest of soul. But exactly. Yeah. But we looked at that and it was very what I found interesting because, you know, we’ve got software and I’m very, very data driven. Right. Every single little town in DFW had completely different requirements as far as density.

01:59:42:04 – 01:59:42:12
Merrill
Yeah.

01:59:42:19 – 01:59:58:27
Rod
And how many how many people you could put in one of these. Right. But you know, there’s you know, what we learned is there’s federal laws about that. Yes. But but, you know, you don’t want to take on a county and just life’s too short for a small little facility. What we’re talking about here, guys, is where you take a house and you turn it into assisted living facility.

01:59:58:27 – 02:00:16:24
Rod
There was a guy that we’re both friends with that passed from Covid. Actually, his name was Jean Guarino. And it was it’s really called a residential. Senior housing is what they called it. And I went to his three day course with, my ex partner and, you know, it was very seriously considering it and didn’t, didn’t pull the trigger on it.

02:00:16:24 – 02:00:18:04
Rod
But it’s a unique model.

02:00:18:04 – 02:00:26:07
Merrill
It’s hard. It’s it’s hard to not get excited about something like in, in some of the areas of Dallas, we looked at where they’re paying $8,500 a bed a.

02:00:26:08 – 02:00:27:08
Rod
Block per month.

02:00:27:10 – 02:00:39:26
Merrill
And you, in theory, could double up two beds in a room and you charge only $6,000 per bed, but you’ve got eight rooms, right? And it’s legal. And so it’s.

02:00:39:28 – 02:00:41:24
Rod
Hard not to get excited about the numbers for.

02:00:41:29 – 02:00:49:18
Merrill
A theory cash cow. But then the medical that you’ve got to have that’s available, the round the clock, the liability.

02:00:49:18 – 02:01:11:04
Rod
Yes. I mean nobody wants anything to happen to grandma and and and none of us do. And I will tell you, you know, like it like this. We’re looking at senior housing right now. I’m very, very excited about it, actually. And the the whole thing lives or dies by the quality, the operator. And so we spent time, interviewing an operator that we really liked, a couple of weeks ago that will likely go with.

02:01:11:07 – 02:01:32:08
Rod
But, you know, it all lives or dies by the operator. Same with multifamily. It all lives or dies by the quality of the team you have on site. And you know much more than even the management company. I learned this when I took over these 23 assets. My partner ran into the ground, you know, that it really was, it and we had one of the largest management companies in the country that flat out sucked.

02:01:32:08 – 02:01:36:19
Rod
But if we had a good onsite team, no problem. Right. They kicked ass.

02:01:36:21 – 02:01:41:04
Merrill
Makes or breaks a deal. Yeah, we’re the same way car washes any type of business, right?

02:01:41:07 – 02:02:00:05
Rod
It’s all. Every business is nothing but systems and people. You get the right systems in place, which you typically typ usually have in the multifamily, but it’s the people you know. If you have people that aren’t willing to, you know, have a horrible work ethic or, you know, they’re not willing to roll up their sleeves and and treat the property like their own, you know, you’re not going to do well.

02:02:00:05 – 02:02:01:00
Rod
And, but but.

02:02:01:02 – 02:02:03:16
Merrill
We had one more component to that. We call it.

02:02:03:18 – 02:02:04:02
Rod
Okay.

02:02:04:03 – 02:02:13:17
Merrill
People processes, systems data. Well did you have the right people. The right process is the racist. The systems are relevant. If the data being put in by the people is not.

02:02:13:21 – 02:02:14:21
Rod
Garbage in garbage.

02:02:14:21 – 02:02:35:17
Merrill
Right? You look at your report at the end of the month and it says your occupancy is, you know, 96% because some agent leasing agent is putting in whatever numbers he or she wants to look good. And then you actually do a deep dive and it’s 82% that’s a problem. So you don’t just rely on the systems. You don’t just rely on the data at all.

02:02:35:17 – 02:02:37:23
Merrill
For we have a chart in our office. No that’s.

02:02:37:23 – 02:02:55:11
Rod
Cool. No, I completely agree with you. I completely agree with that. Yeah. Well, it was great to see you, brother. And to great to see the boss who’s here. You can’t see she’s in the background here. But, his lovely wife, Kim. But, anyway, we’ll we’ll see you tonight at the cocktail reception for the Warriors. And we’re going to have a kick ass fun time this weekend.

02:02:55:13 – 02:03:10:21
Rod
Thanks for watching, guys. And again, check Merrill out if you have any interest in learning, you know, and, getting some help. You know, if you’re serious about this business, I don’t waste his time if you’re just screwing around. If you’ve got a deal and you’re, you know what you’re doing, then then then reach out to him, please.

02:03:10:21 – 02:03:13:11
Rod
But, anyway, see you on the next round. Thank.

Disclaimer: This summary and transcript was edited with the assistance of AI and reviewed by Rod Khleif and his team to ensure accuracy and relevance.