The government has proved that they can't really do housing. The politicians don't really understand how to help the renters. So what's your rule of thumb? Because we know it's not just cap rate, but everybody who gets started in real estate like I got to have the high cap. Well So first of all, I'm a long-term hold guy.

so I don't really care about cap rate. How about Airbnbs? Is that a bubble? Well, there's a couple things. there's a bunch of Lone maturities that are coming due and people need relief. They're going to lower rates this year I believe at least three to six times I don't know how many.

but but I do think that they're going to have to. Are you going to buy the dip on? San Francisco I Still believe rates today are decent 5 6% My whole career was 5 6% What we just got through was a gift, you know? Ah, I See and so you don't think we're going back I Don't welcome back to another episode of the Meet Kevin Show Today we have the honor of interviewing or confronting as we like to say: Ken Mroy you've got over 200 sorry2 billion dollar uh under management in your SP you've got 300 people working for you in Property Management development I mean tell me, is everything about to crash? Are we screwed? No, of course not. No, No. All right.

so what is like, where's the opportunity right now? Where? Where are you guys shopping like? What are y'all looking for? Is it? Do we need to build? Do we need to find distressed people? Where are they? Where's the blood in the street? Sure. Well, I I think there's a few things you know I always look for what's the single point of failure for somebody debt right? So that's certainly one of them. some of sometimes with some of the syndicators you know in the last, say five six years um, they don't really understand Property Management that's another one. Um, they don't.

It's always structured right and sometimes they rushed and got managed money. you know, like Wall Street or whatever. So you have all those things. So you have loan maturities Equity maturities.

you have the interest rates and you have Property Management kind of swirling around. so depending on your experience level, uh, you know those those those those are going to be where the do The Dominoes fall. Yeah, no. Do you Are you seeing dominoes falling on property management? Oh for sure.

Okay so let's let's go through these one at a time. So there's Property Management Equity debt. Uh, and uh, the fourth one which is interest rates essentially. So tell me.

Property Management I Think most people when they think of buying units, the first thing they think is oh, sort by cap rate I'll buy the highest cap and then they might not necessarily realize that the two cap might be a little easier to manage than like the 15 cap. You might need a gun at one of them to collect the rent. What? What do you say to people like what do you look for I'll tell you a great story. We had a guy call us one day before he closed so you can imagine he had a really good project in San Diego that was completely full.

Yeah, did a 1031 exchange into a bigger project in he selling the San Diego one. Okay, okay, calls us one day before so he doesn't even really know what he's buying. So I go out there and I'm like this is a problem Oh B Area low occupancy. you know, lots of deferred maintenance, etc etc.

etc. So you know that's what I'm talking about. People think they can just move their money and then the property management often times is the last decision. Yep, when they really need to get them involved in the beginning, Are these rents right? Yep.

Are the expenses right? Does it Cash flow? You know. Is this a good area? But so that is one of those things and so what, You've what we've got Kevin In the you know. Let's say in the last four, five, six, even 10 years money was so easy. Market was trending up so everybody thought this is great.

Occupancy is high. There was really no reason for property management to be in trouble. you know, in the rearview miror everybody could pay their rent correct stimulus checks. So now that's all starting to emerge.

And so you're starting to see the people that maybe were trying to just make money on the management fees or thought that they could do it. Um, and now that's all moving to Per Professional Management company. So we're starting to see that that's the first thing. So you find these syndicated projects a lot of times that might be 75 80% occupied.

They're not really managed that well. You know the market saves people well when it's going up correct, right? Rents are like you got it right. So so that's all emerging right now. So if you have that dialed in, you know that's again one less point of failure.

Yes, that's that's so amazing. That's interesting because it seems like right now, uh, I'm seeing deals that you'll have sellers. Yeah, look, we're 100% occupied and they're giving you rent rolls from like August or July right? And then all of a sudden it's like it's January Like, wait a minute, you're 20% vacant. What happened? Uh, and they can't get them rented anymore because the rents have fallen.

But as soon as you lower the rents on those units, all your other tenants are going to want a discount. So your cap Turns Upside down. So how do you? uh, is it just a matter of being really attuned with the rents? Or how are you preventing that risk? So that's that's actually the magic of property management in my opinion. So I started in that business uh, right out of college ni and that's all I've been doing, you know? and then in addition to that I started buying along the way.

So that is kind of my sweet spot. and so for me every Monday I'm looking at all the rent rolls I'm looking at all the exposure whether it's people that are moving out or people that H you know, um, let's say skipped out or whatever it might be or any vacancies or anything like that, even lease ups and you know every single week you need pressure. you know, no pressure, no flow like that. Okay, it's true.

and so because they all work for me I'm able to call up the phone and you know, re repic do little little uh, maybe some some deals to get people in. It's all about managing occupany and managing expenses. Yep, yep. uh and so do you find when you're looking at a new market? Uh, are you taking over the management yourself with your own employees or you taking or you just finding local management? What do you like to? I've done both so obviously have the experience you know we have.

you know, call it 300 people that work for us in Property Management Definitely one of our sweet spots and we have all the systems and all that. So this our 23rd year in business. however when we started buying in Oklahoma I went and found a third party manager. okay because we didn't have a presence.

I'm not trying to make a management fee sure I'm trying to produce the best results with local people for the investment right? So you know. So uh very You know when when we first came to Texas I ended up buying a management company. So I bought a 9,000 unit management company. So I I really what I wanted was the data and the employees.

Yeah, I wanted the employees Sure well and all the vendor connections they have. Yes, correct right? So that's what I was buying what' you pay for the man oh my God it was actually well it was awesome. Okay so I did a I did a um I did like 250 down, 250 Grand down which is not much that sounds great. already financed it and then uh what happened was was the the partnership that um and I was paying a monthly out of the cash flow that the properties uh were already generating and then about a year into it uh they wanted they wanted the rest and so I just negotiated a discount and I and I think all in I was less than a million bucks.

Oh wow, yeah for 9,000 units exactly of management and so I mean even if you're at a th000 bucks uh a door that's uh I mean that's a lot of money coming in. 10% of that for management or what do you usually see they 8 to 10% on management? Well, it's a little lower on the bigger projects, you know? Yeah, like four. let's say 4% But here's the thing. here's what I really wanted.

like I wanted to know what the operating expenses were and the rents were in certain markets. So so I stepped into that and so now I've got the data and now I'm making offers on properties in the area based on real data. and I'm not relying on the Brokers right? Yeah, Well, yeah, no kidding. Well, you're telling me you don't like performers.

I know. Oh, this is the worst. Okay, so so got it. So there there: Property Management Deals that become problematic then.

but you could probably buy a building that's mismanaged are when you look at a building that you think is mismanaged, Do you care if it's 30% vacant? or do you just count that into the price? take it off the price. So that's the only thing I look for I Want broken I mean broken. That's how you create value. So and once you start to get that reputation, then the lenders come to you and they're like we have this broken loan broken deal.

Can you fix it for us? Wow, So yes, that's what I want I want because that's uh, we bought one in San Antonio As an example, 680 units 50% vacant. Oh my. God So can you imagine negative cash flow right out of the gate? Bank own all that. So yes, you got to negotiate the loan down.

Yes, there it cost a several million dollars to turn it around. It took a couple years at the end of the day, you know we we generated an Uh somewhere in the over little over $20 million in value when it was stabilized. you know, because you fix, fix the project, solve the problem for the bank, and U and then you do your cash out Refi? Wow, that's amazing. That's great.

Uh, and so are you seeing more stress now coming up? I Think what you were saying is you are. Yeah, it's very interesting what's happening, so it's It's all based around maturities. So when I say maturities, a lot of people think the debt. but there's more than just debt maturity.

So if there's a reason for people to sell or they have to sell, then that's actually when they sell. So that might maybe it's maybe they ran out of money. That could be a reason. It could be that they're loans due, or it could be that their equities due.

So if you lend me money on on a two-year deal or three-year deal and you want it back, that's due. So all of those things kind of determine the exit. Let's say, the predetermined exit for the partnership. That's what you want.

So I Pressure I'm looking. Yes, You want time pressure on the seller? Yes and and so that's actually those that's starting to come due here. You know I think uh I think $1.5 trillion dollars in commercial debt is coming due by the end of 2024. A Lot of office.

I Hear though, office retail, industrial, multif family. Uh, depends. I I I have owned them? Okay, um, and I'm not afraid of them. Sure, but most of them are not.

uh, you can't refinance or you can't renovate them into. Apartments I mean nobody wants to live in an office building with no common area and you know, no bathrooms and you know, no lawn and no, no, no windows. And you know all the stuff that yeah, the times did this really great piece on it and they mentioned the older like 1920 stuff. You actually have more windows and more capability of converting.

but like the 60s like the old, like the FBI buildings where it's just a square and you have all this dead space in the middle, no windows. How are you going to do anything with that? So they're thinking like sometimes they try to core them out but then you're looking at it. It's bizarre. There's been a few people that have tried it and uh, so far I haven't seen a successful one.

Uh, there was a study that said that only 5% of all the office buildings in the US are even convertible. I Believe that. Yeah, so I think that's a pretty good number. And to your point, I think they're really tear Downs Yeah Bas they could be storage self storage I I Know a buddy that did those vertical Self Storage vertical self storage because you have elevators and everything.

Yeah, you need like freight elevators? Yeah, but change of use you know? I think that's uh. so yes, the asset. There's something. There has to be the right price.

Um, the bank has to Let It Go for the right price, right? And then there's the whole retrofit. Oh yeah, are you going to buy the dip on San Francisco the which one? San Francisco are you going to buy the dip on? San Francisco Uh, probably not. You know cuz uh I know you're from California but so I got to be careful here. but no, no, please say what? want don't hold back.

You know my tenants are going to want to walk on the street at night. Yeah, yeah, yeah, so that you know. so there's that. Okay, so so I mean there are parts of you know Texas and Florida where we don't want to walk like do a Craigslist deal at 9:00 at night either, right? So what's your rule of thumb? Because we know it's not just cap rate, but everybody who gets started in real estate's like I got to have the high cap.

So what's your rule of thumb to where you know it's a good area and now you're trying to get a great deal obviously in that good area. Well so first of all, I'm a long-term hold guy. so I don't really care about cap rate I mean I do I look at it, it's a it's a barometer I certainly if I'm trying to exit I don't of course. Um, you know it makes it makes something and if you're using managed money, uh, they for sure are dialed in on that.

But here's here's generally our rule of thumb. We want the houses the single family houses in our Market to be significantly more than what we would pay for the apartment. Ah, interesting. So so let's say we're paying $250 or $300,000 a unit in Dallas We would want the neighborhood I own stuff in Plano I own stuff in Carolton I own stuff in Richardson just just up the road here.

you know at the the the homes in the area are 400, 500, 600,000 And the most important thing thing number One schools. You know people move to neighborhoods be uh for for school systems you know that can't afford. you know private schools so that's a big deal. So if you can buy in those areas and what you want is you want a big gap between rent and mortgage and of course the FED just made that easier for us.

Oh yeah, no kidding, it's like impossible to buy now what? 7% or whatever 30 year? Yeah. Okay so Plano they're building a lot out there. Are you ever concerned about being deluded by the amount of Supply that can be built so easily? Absolutely yeah. You always have to be watching that.

But let you know, let's take a look at. depends on what you're buying. If you're buying Class A and trying to compete with new class A then you're going to have a bit of a dip. But you also got to look at the population growth, the employment growth for the area, and of course North Dallas Is you know, doing very well? obviously? Frisco Plano Carolton all those areas.

and there's big headquarters. You know, like State Farm opened up their big one of their big like a Disney or something? Maybe exctly right? Yeah, so there's so you have to look at all those factors and so but what I like to do is I want to be right underneath those. So I would buy 90s product that might be three4 $500 less per rent per month. and and I want to hover right in under there.

Okay, so a little below the median? Maybe Yes. I want to be underneath that brand new class. Okay, um, and and I want to, you know, you know, draft behind it. Okay, that's that's kind of what we like to do.

Affordable. call it sure. but nice. Uh, well located.

Nice. Okay, so so good location. Now how much do you like doing Renos I mean I know if you get a big enough discount, sure we'll do a renovation, but are you usually finding? It's better to find a you know, a multif family deal that you don't have to go in and renovate every unit. You just have to fix the management on.

like what? Which problem do you prefer? Solving management or renovation? Yeah well. I like both. Actually if I can get it I I I Management is easy for us. You you know it's A this is a people business.

Just like anything else you know. um it's like the restaurant. You know you go and you you know it's a people business. You know if there's somebody in there that you really like, you keep going back.

Same thing. so um I prefer some kind of a value ad whenever we buy something so you know we always want some kind of a story. So if I'm buying a '90s product, let's say and you know now we're in 2023. it could be a 30y old building.

Now think about that. like ' 90s is now 30 years old. So it's got 30-year-old dated uh, carpet, flooring, appliances. You know all that kind of stuff.

So yes, but for 8 or 10 grand yeah it's clean. Yeah exactly you're you're done. So so I don't mind that. Um you know the the the value ads are a great way to to grow your cash flow.

You're not going to get the cash out refi right now on that, but it's a great way to to grow your Bottom line: Why You probably get them rented quicker than to and get them moving? Uh, how how frequently are you finding uh, that your units at this sort of below median price are sitting vacant? Uh, or do you generally find they get rented pretty quickly? They do. They get rented very quickly. Yeah again, You know if you look at the new Supply that's being added that everybody's talking about? Let's say 500,000 units this year? Let's say all over the country, that's you know, those are two $3,000 units you know? Um I'm I'm talking about 1,500 1600, 1,700 1800 Renovated. So you know.

So as people get squeezed with inflation and all the things that are going on, you know they will. They will go to a really, uh, really well-located 30-year-old building that's completely freshened up. That's interesting. Yeah, so uh, what are your screening requirements for your tenants? So uh, pretty rigorous.

You know? Um, we do credit, criminal, and um, sex offender checks on everybody. Any score you're looking for? So what? we we try to dial into at least three times their you know their rent and of course income. And and then what we do is we take the decision- making completely out of the hands of our individual property managers. So what I mean sign it says it says yes, no or yes with extra deposit.

Those are the three options and um, and that's it and so you know. But it's all based on an algorithm and a metric that that each resident has to jump the. Hoops they have to jump through. Got it? So you might take a you know, like let's say a 620 but then they might have to put more of a deposit down so to speak.

Yeah so what happens is you know there's hard. Like most of the things for example, Bills Medical is a great one. Medical is a huge one right? Uh, some people are just down on their luck and they're great people. Yep, so you know those are in our my opinion those are great credit risks.

Okay there was there was somebody on on Tik Tok I have to ask you about it he said only rent to people with iPhones Interesting yeah that's an interesting strategy. yeah I don't know why I'm not listening to it I'm just I just wanted to see what your reaction was. Well I would I would call that person inexperienced? Yeah, yeah yeah yeah no. I think it's all like a clown show.

So but I'm like okay, uh okay interesting. So uh, what do you think about Grant Cardone So yeah I haven't met him. Okay so you know he's a good marketer. Yeah he's a great marketer.

Yeah I delivered him flowers he got they got yeah I know he's he's I think you know I look at um the stuff he's bought and um I think he bought him at the right time and he probably got a nice little market run I don't know what he's doing doing? Uh um now. yeah. but um, you know it looks to me like he's got a fairly decent organization. He's big online that's for sure.

Yeah. big personality. Okay, what about um, these debts coming due? How how are you finding them? Are you just looking for it's? your broker contacts? Are you looking for listings online and then asking the right questions? What are you looking? So right now most of the deals you're going to find aren't going to be through the the traditional brokerages? Um so what I'm looking for are distress construction stuff that's in the middle of being built uh with high debt. So right now construction debt is 89 even 10% so you know and I have uh, let's see six projects I have two under construction now, one in Lisa so you know those deals you required cash calls the the interest rates are significantly more than we started them two years ago.

So this is an arena that I understand. And so with the capital, you can go in and solve somebody's problem, solve the the developers problem, solve the bank's problem, and um, at the expense of the equity unfortunately. problem. Yeah, but you step in, you can step in finish the project.

Uh I Had a buddy I just had dinner with him last week. He had a a 17 million deal with a $12 million um construction loan and he bought it for six. Wow from the bank. Now 50% built? Yeah, so he had to finish it.

So it's 6 million plus. But the point is. Um, those are the deals that we're looking for. You know, solve somebody's problem.

Step into a project, take all that risk out. You know all that. Um, you know, political risk of zoning and getting jumping through the hoop are done. All that? Yeah, Yeah.

so so you just finish that up and and and solve some of these problems. So we're looking at those. We're also looking at deals that are finished and not haven't Uh, haven't leased up yet? Yes, so those are good. 20 30 Like oh we do so when they're barely occupied I Love it.

Yeah because because now everything Done Construction risk is gone. the the the the the developer sitting on these these high interest construction debt because they can't put permanent debt on until it's stabilized of stabilizes. Call it 92 93% So now I have that lease up Risk: I Get that. but that's what I do.

That's my business. So you underwrite what the market rents are in the yeah and discount. Yeah, you figure it out and then you fill them up. That's amazing.

Do you? Uh I mean you bought this man management company? Do you prefer having your own employees essentially or people under your company as the managers? or do you do you really ever go to third party I Know you did. Once in Oklahoma yeah we've done. I've bounced around on that issue. I Here's what: I like I Like one.

you can create a nice culture with property that you own that people work for. So I used to be in the fee management business. uh that's how I started and um the fee management business is hard you know I always tell people there's there's three things that happen in Fe Man the first one is you take over a building. Let's say you give me a building and um and I I don't improve it then I get fired.

If or let's say I take it over and it stays the same I get fired or I take it over and I improve the value and you're happy and you sell it and I get fired. So so all feed management is tough man like it just is tough. So so I like and then what happens is you you're always scrambling to try to find people to fill the projects. So with our company now you know we have people that have been with us 20 plus years right? Tenants Or workers or both workers and tenants.

But Mo you know, really? I'm uh we're trying to build a culture good of people and in Property Management it's tough and so you can have people with you. You can train them long term. they can. They can rise up and and and have succession through the company.

and there you know it's just a way better atmosphere. I Like that. I Like that a lot. Uh, what's the FED going to do? What's the what the? FED Yeah, well, they're going to lower rates this year I believe at least three to six times I don't know how many.

but but I do think that they're going to have to because it's we're heading into a political year. Also, there's a bunch of loone maturities that are coming due and people need relief, you know? And I'm talking about on the commercial on the commercial market. So now I don't I'm not hanging my hat on any of it though because I still believe rates today are decent. Oh wow.

56% My whole career was 56% What we just got through was was a gift, you know? Ah I see so you don't think we're going back I don't no, no. I think maybe we get down into the mid fours High fours. Um, but you think about it. you know.

obviously we're still what 3.4% inflations and then we've got, um, what are they going to do? They're either going to go neutral or a quarter point. Well, that's not going to do much. Okay, then maybe the next Fed meeting they'll do a quarter point, You you? So what are we really talking about? We're really talking about. Maybe a point.

Sure, year go from five to four. Big right? That's kind of my point. So so it's not going to move the needle enough. Um, especially on single family cuz the majority of those people that are sitting in that in that Deb like I think I think I read 65% are sitting underneath 4% loans.

Oh my gosh fix. Absolutely Okay so they're not going to move. Yeah, so they have to die. Basically, it'll help.

It'll help some things it's You know it'll be a political Hot Potato through the year. but as you know, low rates create oh, bubbles. inflation right? So huh? So would you say uh, the FED might be motivated to steer the election a certain way I don't know if they can I You know I'm not smart enough to how that works, but you know obviously it. uh, the rates are going to be fairly significant going into this uh, election year for sure.

That's true. Yeah there was somebody who was arguing and it was the first time I heard it was just yesterday. they said well because I I said hey like if the economy is doing well you know people sometimes don't want to change government regime because it could flip. but if the if everybody's miserable then they want the current president out.

So think like 2008 after lhan Brothers they wanted uh at that point Republicans out and went for the hope they could believe in Obama right? So there's this argument that if the econom is doing really well and let's say real estate didn't crash, people didn't get J you know, lose their jobs and inflation went away. Could Biden sort of be reelected on that basis and of course Vice Vera Trump And so uh, somebody yesterday from Arc invest argued that there's a chance the FED might have this bias of well could Trump mean less stable dollar or less stable politics therefore more risk to our mandates. So do we cut more before the election to try to keep Biden in. That was an argument they made.

Not what I agree with but I thought I wanted to see what you thought about that. Yeah, interesting. um well. I think the the systemic issue we have is homelessness and affordability I think everything's kind of pinned on that so you know Biden's come out with some stuff for that but it's slow to go and and you're you know and your your buddy Gavin oh my.

God You know he tried to roll out some of that affordable money and that was a disaster. There's article after article after article. so the government has proved that they can't really do housing. Yes, they need the private sector.

Okay, and so what I would hope and um, if you take a look at this, you know there's all kinds of stuff going on with the policy's. going to be a big deal this year because the politicians don't really understand how to help the renters and what really is needed is Supply Yeah, oddly build more well you think about because naturally High Supply low prices. period. Like like it gets overly complicated but it literally is a supply problem.

not in every area, but in most areas. If there were more options then affordability would come back. Rents would come down. all of that stuff.

but Nimi? Not in my backyard. There's all these things. all these zoning restrictions, all these things that make it harder for the project to be done, make it more expensive for the project to be done. So at the end of the day, whether people want to hear this or not, when when the government makes it more expensive to build, the developer builds, but then it just gets passed on to the tenant or the buyer.

Anyway, right at the end of the day, it all works that way. Ah, right. So I wonder uh I Don't know if you heard my this idea of sometimes in like a state like California because they make it so difficult to build what any real estate you buy over there is almost hedged. I Love it.

I Love I love what you said earlier, you know you're you're right. You always want to look for barriers to entry so you know years ago I bought in Portland Oregon now Oregon is a is a rent controlled State now but I bought in downtown Oregon The reason I bought in downtown Oregon is because it was really hard to build there and so whatever you bought went up in value. We did very well with that project so it's a great strategy. So how often do you sell your buildings in in the the fund The Entity that you work with or do you try to you said you just keep them.

Basically we try to yeah like I I I I like to take advantage of all the tax benefits course. so in when I was your age I was going and blowing I was buying stuff and building stuff and doing condos and condo conversions and all that kind of stuff. and at the end let's say the end of in my 30s when the dust settled I had nice stuff you know Jets and cars and great houses and and I had a lot of tax and I didn't own anything yeah I was like what I don't want to do this again So the next so I decided I went to some smarter people and they said long-term cash flow use the asset to you know do your cash out refi you use use use all the tax laws to your advantage and um and don't sell. and if you do sell do 1031 and and uh so that's been my strategy since probably my 40s and uh, you know that's how we bought uh, something like3 billion doll worth of assets at that point.

Yeah, that's really cool. Uh, if so, uh how does that? we just sort of how you fundraise. Well what we've done is in the you know, before the internet right? It was all friends and family and then you kind of country club stuff. really.

you know, go play golf or whatever. just you know as you would and have a business plan with you at all times. Now it's a little bit easier. um and uh, you know now we have a list of people, but in the in the early days it was it was difficult, it was hard.

um and of course with no track record and all that kind of stuff. But after a while as you start paying people back you start delivering on the promise and the plan. Then you know they're like okay, let's do that again and they start telling people and and now we have, um you know thousands of folks that when we put a business plan out, it's typically funded in a couple days. Wow, wow that's amazing.

Uh what about this? um well you mentioned it, you have a jet or had Jets and how is that changed your productivity Because some sometimes people look at that and say oh it's just you know a flashy thing is, has it been a tool for you Yeah H How how do you explain it to people? Well first of all, I I uh I don't think I've ever told anyone I told you because you have, we have the same uh brand. You know we don't have to talk about it if you don't want to. No, no, what what I mean is you're not going to see it on my social media or anything. is I use it like I use it to fly to Austin for the day Dallas for the day Houston for the day um to look at projects and you can come back same day and be with Acquisitions and you know so I use it for me.

it's a time machine and um, you know I use it for funds as well I flew it up to F1 you know to Vegas with some friends and stuff like that. but generally I'm using it. You know, to grow my business and um, that is kind of the point for me at least. Yeah, completely agree.

What? Um, so long term You think that interest rates could stay high longer? Does that mean you should wait to buy real estate? Or when are you trying to buy? No, it's a great question. I So if you look at the Historical averages, you know we're about right where they are. So so if they go down a point that's below the historical Aver Bonus, then it's just not what people are used to, right so so um, it's going to create a fair amount of distress and so what we really have going on. If you take a look at, let's just focus on on a supply problem.

So study after study. National Multi- Housing Council National Apartment Association National Home builders Uh, low-income housing Coalition All of those have anywhere from 4 million to 7 million as a number of a shortage of housing across the US So there's for sure shortage of housing because I Went through the 08 crash and during the O08 crash, the banks are taking back all this real estate. They weren't lending on new stuff. Why would they like you? You know, while you're you know, taking back all that stuff you're not lending to guys while they're building.

So so we went through like a 10year run of no or very little construction. So while the population goes like this, Supply was going like this. so that's actually what we're fighting right now. So so if you take a look at the amount of housing that was delivered, let's say from about 0708 till about 8 1718, it's hardly any.

Meanwhile economy is going like this. people are having kids, population growth, all that kind of stuff. So that's what's putting the that's what originally put all the pressure on this rents prices. Then of course everybody's like oh we're going to start building so they started building.

They're way behind so there are millions of units behind that. That's where we are today. Then when the FED started raising rates I think it was March of uh, 2022. Then all of a sudden the price.

that construction debt was going up. So developer what was once a deal said y we're going to wait because we can't afford it because we can't Finance it And then of course costs are going up at the same time. So so if you take a look the the products that's going to be delivered through this year and into about mid of 2025, it's going to be pretty robust. We're going to get some rent relief.

All that stuff's going to be great for renters, then it drops off a cliff. Oh about late 25 26 27 There's almost no construction deliveries so all you got to do is look at permits, you know. And so so right now we're going to go through maybe a year, year and a half of this Supply that started two years ago. Deals you could be getting from the developer.

You got it. So that's what you want to make deals on those and then we're going to have a massive affordability problem. Mark my words. at the end of 2025 26 27 you're going to see all kinds of legislation.

You know, no matter who in office, there's going to be a big problem because you have a lot of people that are going to be looking for housing and it's like anything like, you know, whatever there's when there's scarcity, prices go up. That's all this is. So you have demand, not enough Supply Wow and so the affordability issue you think is because of maybe the stress of like lower income individuals maybe bottom 30 40, 50% higher credit card debt and and like that for sure? Yeah, so what we really need is affordable housing? I See for sure. Yeah, the problem is we can't build it.

Yeah yeah, that sucks. Yeah I wish I could, but you know you guys do build some right. We build as cheaply as we can, but we're at the mercy of the lumber prices and the contractor you know. and the and the buildings uh are on the we're at the mercy of the land cost.

We're at the mercy of what the cities allow us for, impact fees and all those kinds of things. All that gets rolled in to the price. Aha interesting. So right now, uh, what do you tell people who are looking to buy their own home let's say, or a small you know, duplex or something just to get started.

How does somebody start in today's economy? that's you know where rates are 7% Yeah well. I like some of the traditional methods you know I like house hacking I r rooms I love that I I do you can buy I Just actually talked to a guy at the gym last week. He bought a $175,000 duplex, lived in one side, rented the other, paid for the whole thing thing. those deals are still out there.

And also, you know, while we haven't had crazy population growth cuz it's definitely been lower than normal, what's been interesting is all the migration moving around. like immigration coming in. or well, that that too. That's you mean like Co migration within? Yeah, so that's been interesting because people are moving out of San Francisco Let's say, but they're nearly not moving to another state.

A lot of them, some are, but they're moving to the suburbs. That's happening in Seattle Happening in Portland Happening in. You know, a lot of these towns and it's creating bubbles in these small little you know, call it submarkets. And those bubbles are massive opportunities.

Because for example, I have a home in C Lane Idaho Ah, so you, that is one of them. Yeah, I was there. Yeah. so Corane Idaho I I've been there 15 years, I've watched it.

You know it's just one thing. a lot of people moving there, not enough housing price goes like that. So those little those are massive opportunities because what we have there now. Just as that, because I know that one so well.

You have a situation where people can't find a place to rent that work in the service business. So you solve that problem. you know? So so those are the kinds of things. I Think there's a tremendous amount of opportunity.

even though all the stuff is going on globally, you know, and and nationally there's massive opportunities. uh, with real estate and plus we still have all the tax benefits and all the things like that. and and we're heading to a renter Nation You know if you really, if you really look at it, yeah, cuz affordability. If I I believe people are supposed to rent and then buy a home.

okay, that's kind of the progression. and if they don't want to, that's obviously their choice. and I just think that's kind of the natural progression. And do you think that you know if today maybe what 63 is 64% of people own their own homes.

Do you think that'll flip in the future where maybe it's 60% of people are renting as supposed to owning I think it's going to go down and for the first time ever under 60% Wow yeah. so if you remember under the Bush Administration he was like everybody needs own a home and I went up up to about 68 69% then Obama kind of you know he took the heat. but really, um, it was Bush that kind of rolled out all these polic policies and then um, um, you know that's when it kind of started going backwards 08 you know, 0708 and and then everybody moved from single family to Ral during that period of time. So I was in the rental game during that time.

So you know, while while we took a hit on our multif family prices, people were moving out of single family into multif family. They're they're really, they don't work together. They're actually opposite. Oh my gosh, Because if the single family Market is not doing well, if you can't afford it, you rent Makes sense.

Makes complete sense. Yeah, Oh yeah. and so and I Like your idea of you want to have that almost wedge between what you're renting for compared to what a single family would cost. So that way you're something to fall back on because I mean certainly like if you're a two-bedroom one bath apartment and somebody could get a house for what rent you're asking because you built that class, a luxury or whatever.

Well, somebody probably get to go for the House Eh, that's ESS what you're saying. Yeah, So we just we sold the property this year in Tulsa Oklahoma I owned it like 12 or 13 years. It's like 300 units I renovated it twice and we owned it a long period of time. The rents in the area were somewhere right around $2,000 You know for at at our project the single family houses in the area were about, you know, 2500.

Oh wow, Close. Yeah. so we're like H. All right.

So we exited and then moved that money to um San Antonio So what are your favorite markets now? So I Like where everybody's moving so where is that? That's Texas Florida North Carolina's Tennessee that has been played Arizona No gosh, no. Well obviously it's getting a lot of press and people are there. Don't get me wrong, but if you look at Texas last year a couple there's a couple things I like to follow. The first one is driver's licensees turned in.

second one is Postal Service people do the change of address. Third one's U-Haul one way, another one is United Van Lines Okay so those are four for your for your listeners. Yeah but you know if somebody read what the last one one way the the United Van Lines Van Lines By the way, these are all onlinein Yeah that's so interesting. So go online.

They have these. They have these lists like if a family moves from Seattle to Phoenix one way it it's just a data point. So you start to look at all this stuff and you kind of see where people are going. It's pretty cool and so from there you just make really good decisions.

It's all to California I Know my gosh, it's coming out of there. So California is obviously at the bottom of the list of people moving out. but they have net migration in and net migration out and they have all 50 states and we can't get U-Hauls for some reason. Yeah I wonder why? Yeah, No kidding, they all come out of they tagged yeah yeah yeah.

exact. That's funny. Oh my gosh. So uh okay.

so Florida Florida Texas um how about Airbnb Is that a bubble? Yeah Well so there's Well there's a couple things. Uh, it's not a bubble like if you look at Airbnb year-over-year there's more people using it. Okay, the issue is twice as amount of people doing it right. So you have you have the owners doubled.

Um and so so that's what you have. You have a lot lot more choices and so it's interesting to see. By the way, those are great opportunities too. Well the ones who were upside down because yeah, yeah, because I I you know I was like you can't have a single point of failure.

You can't have your only solution being you know, 70% occupied in Airbnb it has to be able to rent to, you know, for the normal rent. so that's that should be where you start. and then the Airbnb is just gravy and then you can always pull back. Yep, well a lot of people didn't do that.

So so so that would be another opportunity for somebody to go in because we're seeing it all like I live in Scottsdale and and there's all these million dooll plus homes that were these guys bought. renovate them Beautiful great locations, furnished them and you know you. You know how you can always tell on the MLS or the Zillow. Um, they have bunk beds.

Oh yeah, there you go there. you go up the bun this look for a picture with bug beds. So those are great opportunities to to snipe and and and grab Because you know they're they're they're You know they've lost a lot of money on them And the markets. The markets come down.

but their their proforma rent says everything's fine. Yeah I know I know exactly. So Okay so what do you think about uh, Airbnbs now trying to push more apartment building owners to allow their tenants to sublease on Airbnb What do you think about that? Yeah, I've done this for a long time. Yeah, like years ago.

I had 200 units of furniture and we were doing. we were doing two or three or four in all our projects. Um and we you know back back then. um it wasn't as sophisticated and dialed in as Airbnb is.

but we always have corporate units. always always always always have corporate units because there are people that are visiting their their friends or family there and they want to use it. Uh we use them for models and so so I've been in the space a long long long time and um the the. The big thing is is it can be very disruptive.

You know when you have people moving in and moving out in generally. um if you have long-term tenants let's say um so I have no problem doing it like in a dedicated area dedicated building. You can set up a whole thing and run it that way. but it's It's a very different business than set and forget.

Yeah, no yeah, you know like like these are these are needy people that you know they things happen while they're here and they expect really good service just like they would a hotel. I'm not saying not to do it. What I'm saying though is it's a very different business than you know, just regular Property Management Yeah, exactly. So that's interesting to sort of carve out like oh yeah, if you have sort of multiple different buildings Building C that'll be there.

Absolutely, you could do that and do it very well probably and then just test it. And you always have corporate rentals, where are you advertising these? So we typically, uh, we typically do that right on our websites and it's it's usually internal. so um and then uh, there are certain things that go on in Arizona every year like spring Training. um we were doing deals with the Giants with the Cleveland Indians not with the the players, but with the coaches and the media and that kind of stuff.

So um, we did stuff with the um, the U Some of the artists like The Lion King would come and and you're we're talking about 15 20 units. uh, furnished. so there's a there's a there's an underground of groups that are always coming to markets wherever they are that uh, even like when they're opening like a Target store, you know there's a team that comes ahead and they're hiring people you know. and maybe it's just five or six or seven people.

So there's those kinds of things are going on everywhere. They're there for three months or couple, right? So there's a whole network of that and uh, we're dialed into all that Nice. Okay, and then what's what's the sort of exit with the SP Like how how does how does your company structure work I Guess yeah. so the the the way we've done it is.

um I'm a long-term hold guy so you know, as I said, I I I wasn't that in my 30s and now I have been. Um, what we've been doing is we're upgrading our whole portfolio. So stuff that you know what when I was in my 40s I was buying stuff that was built in the 80s and now that's 50 years old? You know, you know. So we're just rolling that forward into.

you know, some of this newer Class A stuff. So really, it's just taking old assets, not really paying tax on them, rolling them forward into newer products that make sense. Financially easy, so just just momentum. Got it? Got it? So it's not even so much anymore.

Uh, new funding that you you're trying to look for or whatever it's it's just taking what you have, the cash flow from that, throwing that into to Opportunities along with sales. Yeah, yeah, so it's just now. it's just taking Equity properties and and and trying to, uh, legally avoid tax as much as you can and and and upgrading the projects in different areas different markets tell me about. YouTube Oh gosh, it's been I started during the pandemic I didn't know what I was doing I still don't think I do I'm having fun with it.

be honest I I Love educating um I never thought I would do it I never thought I would have the time. So it's been fun and uh, so would you say uh, your favorite is sort of uh, talking about uh, what the market might do or like, what? what kind of content do you prefer doing well I think what people what I found is what's resonating with the people that have been watching. Are you know what Am I doing? What am I looking at? um obviously I've been in this business for 40 years and and I've been in lots of different businesses. um, you know different Cycles but and I don't know everything, but there's a little bit of wisdom that goes on when you've bought and sold all that stuff and you've grown companies and and I've sold a few companies.

um, all of that and of course EO YPO I me all those as well and so you bring all that knowledge into into some of these and all I'm trying to do is um, help people not lose money? um and and shortcut the learning process so that they can achieve their financial goals quicker. That's awesome. What about uh, folks who uh, like Subject Two: Subject Two Real Estate deals. What's your take on that? Yeah, yeah.

so I don't know a ton about it I've never done them, but um I know it's a it's a legal process right? Yeah I I It seems like I I Always hear people who are getting started in real estate want to do subject two, but but then the people who are always doing real estate don't So there's some kind of Disconnect between the hope of of taking over like somebody's existing debt and then you know paying them. uh, you know a second loan as an example. Yeah. I I Think it revolves around I think most people think they need money to buy real estate and I think that's actually the problem because you don't like, you do not need money.

You mean like 5% down on a house you're buying Or do you mean like go to people if you're doing something personally and you're going to move into it. Clearly you you have to have a savings, but if you're doing it for investment, you don't need it. Like there's more people with money than there are deals. So once you start to find the deal, my my experience has been in fact right after this interview I Got a got a best and final call on a project that we're working on and you know you know once if we get it we'll put it out to our group and they'll decide if they want to be in or not.

And so the you know. We're constantly trying to vet deals and so my experience has been that if you can find something that makes sense financially, it doesn't Even the business plan is a formality. You're basically just like putting it together. You already know the deal in your head.

It's like back of the napkin stuff. Yeah, of course it should be, you know. And so um, the the funding is never a problem if the deal is good. correct? Yeah, how? What's your favorite way to negotiate? I Mean you said you have best and final call.

Is this you emailing a counter offer in? Do you ever like to meet the sellers? Call them How? what? What's your preferred well? relationships? everything. obviously. So obviously if you know the sellers or you know the Brokers or that's big their track your track record and what you've done is Big At this point you know we have a five-page in uh, buyer questionnaire that we have to fill out so the seller often times might even know who we are. You know we're talking about 4050 offers down to three and then a best and final round and then so You always come in with a little less, then you have some dry powder at the end.

So we'll come up on price probably today on on the deal that we're looking out. but we might not. we might not get it. So when we whenever we make an offer there's a a a price that we, um want to buy it for and then there's a Max So we always know what that is internally and we come in somewhere in the low end obviously.

And then once we hit that Max we we We say no, done yeah, yeah and we just move to the next one. So it's uh, it's not emotional, it's all math-based If, um, if it doesn't make money for the investor, don't buy it. We pass. Yeah, absolutely.

what do you do? Uh, when you're when you buy a deal that you, well it doesn't sound like you like to buy stabilized deals. but let's say maybe you found a stabilized deal that you liked and then you go through escrow and they kind of let the management go while you were in Esro, which happens. You know it's 60 days sometimes to close these deals. Come on in.

Um, what what do you do? Are you going back to that seller? How are you beating them up? Yeah, so well usually that's in the contract right? Um so you know if they do something that's um you know like I'll just give you an example. I I I was in the I'm trying to buy a media company right now with a bunch of billboards and digital um and uh, during due diligence we found a bunch of stuff. You know I don't want to throw the guy under the bus but at the end of the day day not a very sophisticated seller. you know, over 20 year old, uh, owner? um grew it from, you know from from the bootstraps and um, you know we went back to him and he had done a bunch of stuff while we were in escrow.

Yep, and um, you know you got to paper it up, not necessarily lawyer it up, just paper it up and then have that conversation with them and uh, he either budges or he doesn't and he didn't So I'm like okay, we're out and we killed it. Yeah well I mean as you should I feel like sometimes there's this this weird balance between like you you want, you want to have that great reputation but then if somebody else screws you like you can't let yourself get screwed e like I don't know how how do you balance that? Oh yeah, yeah, I'm really crystal clear on this, you know. I I Look at it. First of all, you have to have the right lawyer and you make sure you got to have all that stuff in there and and over time you figure out what some of those things are.

You know what to look for I've seen a lot of things you know with Sellers and Brokers and and projects and stuff and we found stuff A Lot of times we find stuff um that the seller doesn't even know. Yeah and and it's true, like a lot of sellers are using third party managers and they might not even know so and maybe the broker doesn't know, but you know you always wonder but it doesn't really matter to me. So at the end of the day we just always call it so like you know, like there could be Plumbing issues there could be asbest there could be led at paint. Love all those things.

Yeah, all those but those are all things a lot of times they don't know yes so you you need to flush that out all in due diligence and and you know with time you kind of figure that out. but you got to be careful because you're you're stepping in I Always say don't don't catch a falling knife, yeah, you know I'm kid, you can't step into somebody else's stuff because you're going to have these issues when you buy it. No kidding. Yeah.

and so you really really have to be tight with that and it's going to be money or time or both and you just don't want to be in that position. So I'm fine with saying no, you know, And and um, you know we've done it a few times. we don't. We try not to get anything in escrow and then do it.

I mean like most of that stuff's done before we're in escrow like right now. On our call this afternoon, you know we'll be asking all those hard questions and we'll be boxing the seller in the broker in. and then if, um, if we find something different then we just refer back of course of course. um, what's your last question? Sort of the um, biggest advice you'd have to folks watching.

Well, I think you're going to see a massive wealth transfer here in the next five years, you know, and there's no question in my mind, you know we have a huge supply problem. I Don't think real estate's going to get any cheaper. So um, you know it's the most stable way. Uh, if you want to build passive income for the long term I think it's it's by far Bitcoin Yeah, Yes, exactly.

I think it's I think Real Estate's by far the best thing. You get. all the tax advantages you get, all the tax. uh, cash flow.

Um, and um, it's not that hard. Yeah, that's it isn't I I Really believe it. It's not that hard I believe you. I think I think anybody can do it.

It It does. It takes effort. but it's not hard effort, right? I Like that. Okay, that's really good.

How can people find you? Uh Ken Maroy official and you know I'm on YouTube Ken Mary.com on the internet. Yeah! Awesome! Thank you so much. This is amazing. We'll link that all down below.

Thank you so much appreciate it! Budd Good to seeing you! Yep, even though I'm a licensed financial adviser, licensed real estate broker, and becoming a stock broker, this video is neither personalized Financial nor real estate advice for you. It is not tax, legal, or otherwise personalized advice tailored to you. This video provides generalized perspective information and commentary. Any thirdparty content I show should not be deemed endorsed by me.

This video is not and shall never be deemed reasonably sufficient information for the purposes of evaluating a security or investment decision. Any links or promoted products or either paid affiliations or products or Services we may benefit from I Also personally operate an actively managed ETF and hold long positions in various Securities mentioned including potential short positions. However, I have no relationship to any issuers nor am I presently acting as a market maker.