The Good Stewards Real Estate Podcast

Recession Resistant: How Stewardship Properties Pivoted During The Crisis

Episode Summary

As the US has entered the longest economic expansion in history, a market correction is bound to take place in the near future. The one thing that will insulate you better than anything else in a recession is having a healthy cash flow. ​

Episode Notes

As the US has entered the longest economic expansion in history, a market correction is bound to take place in the near future. Stewardship Properties shifted the business during this period and also entered the Kansas City market.

The one thing that will insulate you better than anything else in a recession is having a healthy cash flow. The people that got hurt had bare land that wasn't returning anything or commercial properties that were empty.

Show Notes:

The market is pointing signs to a future recession:

1:20: We are currently in the longest expansion in American history. We just I think in July we set the record and now we are kind of uncharted territory. The fed just dropped interest rates.

4:50: the yield curve flipped and was inverted about a month ago to August to 2019. what this means is that the return on the yield on short-term bonds is higher than the yield on long-term bonds, which means people don't really trust the economy in the long term.I think it was December of 2005 that it went at the yield curve inverted and then the recession began.

10:20: I do not think this will be a real estate crash like 2008. That I think will probably be yeah, it'll be the bond market, student loans, the car market a combination of things maybe the stock market but real estate will be pulled down with it.

Restrategizing in the middle of a recession:

13:05: we had to stop our buy-and-hold strategy and we moved into more of a flipping strategy and even that was difficult because as that recession gained so much traction, buyers had a hard time finding loans because lenders got so frozen up.

15:50: Since Stewardship Properties wanted to get back out of a flipping strategy into a more buy and hold, the midwest and southeast markets had stronger cashflow than it would on the coasts. And so we (Andrew & his brother Philip) just decided to you know, pack up and start a branch out here.

Finance Strategy in the middle of a recession:

18:30: Our price point on a house in Kansas City was fifteen or twenty thousand dollars, you know, those are a lot of houses that we still own that didn't need, you know, they needed some work, but we were still renting them for 600, 700, 800 dollars a month. The numbers worked on a from a cash flow perspective and we could afford to leave the private financing on them for the long term because the cash flow worked.

22:19: When asked about lending in Kansas City, all of our private lenders said No at first and then they all came back. Don't be a pest but kind of a pest when you know the numbers are so strong. We’re loaning say 225,000 in Oregon and they could loan 55,000 in Kansas City and yet get that kind of rental return, they felt much more comfortable

BOOKS MENTIONED:

25:29: Jay Scott’s, Recession-Proof Real Estate Investing and The Book On Estimating Rehab Costs

Other notes:

25:49: Don’t stop just because we’re currently in the peak and could see a recession in the near future, just make buying with an equity margin a priority.

27:35: With a direct-to-seller strategy, you can pivot with the market and adjust your target actual retail value (ARV) percentage you’d be willing to purchase the property.

30:00: Use “Dollar-Cost Averaging”, buy wisely today based off the data you have today, don't speculate, don't Fudge arvs, don't underestimate how much repairs you have.

Connect with the Good Stewards:

Episode Transcription

Andrew: During the down the down cycle. It was very tough for us to do anything but flip and that was challenging as well. But you know, what comes after that is the best, best period for Real Estate Investors there is and that is the trough and up.

[00:00:16] Intro: Welcome to the Good Steward podcast. The only podcast dedicated to seasoned Real Estate Investors who want to maximize the cash flow potential in their business. We are Buy and Hold investors with a thousand plus properties in markets across the U.S. who bring an insider's view into the nitty-gritty details of real estate investing.

[00:00:38] If you are looking to develop the mindset teams and systems that can dramatically build your real estate business and net worth? You're in the right place.

[00:00:50] Ryan: Welcome to this episode of the good stewards podcast. I'm Ryan dossey.

[00:00:54] Amanda: I'm Amanda Perkins.

[00:00:55] Bill: I'm Bill Syrios.

[00:00:57] Andrew: I'm Andrew Syrios, welcome ladies and gentlemen to the good stewards podcast. We're here to discuss the current economic situation as a whole where the market's going and what to do in a down Market or Market is trending down as a real estate investor.

[00:01:12] For more please follow us at thegoodstewards.com plenty of content subscribe to our podcast as well. But today we want to discuss the ins and outs of basically our economic situation and what's in store. We don't have a crystal ball, but we have certain reasons to think certain things are going to be happening. And I mean eventually we will be right. We are currently in the longest expansion in American history. We just I think in July we set the record and now we are kind of an uncharted territory.

[00:01:46] Now, this hasn't been a crazy expansion has been rather slow expansion. It's mostly been sort of 1-3% growth per year but has been but you know all good things or at least, maybe this one isn't good, all decent or relatively mediocre things will eventually come to an end.

[00:02:04]Ryan: You can only kick the can down the road so far.

[00:02:06] Andrew: Yeah. Yes. And I mean as as we're taught we are recording this in September of 2019. You know, the FED just dropped interest rates. There are places in this where interest rates are going below zero that which doesn't seem to make any sense. I'm not sure why you want to just stuff it in your mattress at that point that was supposed to be sort of a bad joke. Now it actually might make sense for if you're I don't see what the point of investing in a negative 1%, negative 2% interest rate is but if you want to lend at negative 2% interest, please reach out to us.

[00:02:41] Ryan: Yeah, we're here

[00:02:42] Andrew: absolutely

[00:02:44] Bill: people in Europe are already experiencing negative interest. So in other words when they take their money to the bank, they actually have to pay for the privilege of having it in the bank that hasn't come to the United States yet, but that is

[00:02:56] Andrew: I mean, given the returns on your average CD, you know 0.4% or 0.3%, you know, it's

[00:03:03] Ryan: it's close.

[00:03:03] Andrew: Isn't much. I mean if you take inflation into account, it is a negative. I mean inflation even now is probably two to three percent. That is your you are making a negative return by holding on to your cash. So all the more reason to invest it but invest it carefully, especially as we're moving towards an economy that probably will be going to recession within the next 18 months probably. Of course there again with economic predictions, you know that you cannot you have to be very very careful. I remember seeing this. It was actually it was interested in Christopher Nolan was giving an interview about his movie Interstellar and they're talking about how physicists could be like know exactly where an atom would be in any given time. Whereas at the exact same time. Economist's can't even figure out like. Do you know what the stock market will be tomorrow? So

[00:03:52] Amanda: Well one of the things though too is it's sort of happening while you're living in it and it's not happening in every single market and so like, living through it the last time, it was hard to know when it was happening to you. You were hearing about you know, things happening everywhere. And so it was it was, until you were faced with it. You know, we were more on the tail end of it I feel like than some people were so. That's what it felt like to me.

[00:04:19] Andrew: Absolutely, but it's I think the big key here is don't don't take anything. We're going to say here as gospel or anything like that. There is no such thing as a sure thing with regards to predictions, you know, Wall Street, you know stock speculators are paid a fortune to get, get it better than average 10% of the time, you know, so in any even that is debatable whether they can do that. They're not just flipping it die flipping a coin or rolling a dice or something like that, but we have moved into a situation the yield curve flipped and was inverted about a month ago to August to 2019.

[00:04:58] And what this means is that the return on the yield on short-term bonds is higher than the yield on long-term bonds, which means people don't really trust the economy in the long term. They want their money back quickly and when this happens generally speaking the economy will go into recession within one to two years or thereabout back to the previous one. I think it was December of 2005 that it went at the yield curve inverted and then the recession began. You know late 2007 and then really got going in 2008. Unemployment is still great at this the time of this recording is it 3.7% The stock market is near all-time highs. Although it's been flat for about three months kind of up and down housing prices continue to go up. They have over the last, since about April according to Zillow sale data since about April of this year. It's been more or less flat but it hasn't gone down and prices generally oscillate a little bit like to go a little bit up in the summer and a little bit down in the winter. So it's kind of like this, you know, it's like that's how they'll go when they're going up because people generally buy homes in the summer months and they generally don't sell in the winter months, especially in places like Kansas City where we're at where it's absolutely freezing cold. And the last thing you ever want to do is move.

[00:06:24] I mean that's this is

[00:06:25] Ryan: or live there. I mean,

[00:06:27] Andrew: I'm not sure Indianapolis is that different? Well, I guess you're in San Diego now, that's improvement. I was just looking at our MLS data, Kansas City is pretty similar. It's been flat since nearly since around it around May around April of this year. But other than that, it's been growing steadily since the trough around 2009/2010.

[00:06:50] Some other indicators consumer confidence is down a bit. It's down from its high in in early 2018 from a 100.91, I don't even remember how that I don't know how they calculate this but it's down to a 100.08. So it's gone down a bit. Nothing crazy. Auto Sales are down a bit. So and and you know, again the FED just cut interest rates and so we're looking I think at this time if I, you know gazing into my crystal ball or my little magic 8 ball or whatever, I would say the economy will probably be flat for the rest for the next 12 months and then probably start to go into a recession. I don't think I'll be a crash like last time but you never know now, of course this comes with a lot of grains of salt, but that is. It's especially given how long of an expansion we've had the record all time.

[00:07:41] I don't think it's likely that we're going to continue this expansion for too much longer. I guess. I'll open it up if anyone has anything else to add to that.

[00:07:49] Ryan: I think is just uncharted territory. You know, it's kind of hard what to expect when we're at a record. You know, I imagine kind of my my thought on it from people I've been talking to I kind of agree with your sentiment that I don't think it's really going to be a real estate crash. I think it's going to be more of a slow down. I'd be more worried about subprime Auto Lending, student loans that kind of stuff right now than I really am on the housing side, but I do think it also makes me glad that I'm in the market I'm in. I was out to dinner last night with some guys that invests used to invest heavily in Phoenix back in 2007 and that market the bottom fell out of it. Prices dropped by over 70% and they still say that in their mind the markets foundation is ice and ice always melts

[00:08:43] Andrew: Weird thing to say for Phoenix

[00:08:45] Bill: Where  they have PTSD

[00:08:46] Ryan: Where it's so hot

[00:08:48] Andrew: Phoenix is a rollercoaster, skyrocketed before the crash just fell like a rock and then it skyrocketed again afterwards.

[00:08:54] Ryan: Yeah it's all based off of I mean supply and demand and there's a lot of land so they can keep building. It's just I forget the data they were talking about but something like 10,000 new homes are currently being built. So, you know, I think it's. For those of us that are in markets that have industry and a lot going on particularly in the midwest.

[00:09:14] I'm a little bit, I wouldn't say I'm optimistic, but I'm not as freaked out as if say I was doing you know luxury flips in Los Angeles right now.

[00:09:26] Andrew: I'd add two points that I the first one is you've may have heard that there's a major under supply of housing or there were still have a backlog since development and construction pretty much ended during the crash.

[00:09:37] There's still a backlog. This is extremely like there's still still housing shortages. This is extremely Market dependent in Manhattan in San Francisco and you know places like that. Yes, there's an app there's a massive housing shortage. But at the same time this is not true. I'd say in many other Urban markets, especially more rural suburban areas.

[00:09:59] I wouldn't say there's a housing oversupply, but there is. I want to say this is Major shortage that will save the real estate market. I'd also say that it doesn't completely matter because if people are priced out they're priced out no matter what where things are at. So you can if they can't afford a house to buy it for that price that they can afford to rent it.

[00:10:20] Then it's just the market will come down and I agree with Ryan completely. I do not think this will be a real estate crash like 2008. That I think will probably be yeah, it'll be the bond market, student loans, the car market a combination of things maybe the stock market but real estate will be pulled down with it.

[00:10:40] Like in the Great Depression. That was a stock market crash, but real estate was pulled down with it. So which means it won't be hit real estate as hard as it did in 2000, even if it crashes big but it will hit it nonetheless.

[00:10:52] Bill: Just to look at a couple more macro features before we dive into the real estate market. There's a presidential election on the horizon which makes a big difference. I'm sure the present Administration will do everything in their power to not go into recession before that election happens. I have heard .

[00:11:13] Andrew: And I mean there's only so much they can do that.

[00:11:15] Bill: Yeah, absolutely all

[00:11:16] Andrew: over the last election the last crash happened. During election

[00:11:20] Bill: The Trump Administration can beat on the FED continually till they have no more words to say to try to lower interest rates. It's just another factor. I think another outlier here is the fact we have trillion dollar deficits every year now in Good Times, which is unheard of in u.s. economy and deficits don't matter until they do and we just don't know when they will matter, they haven't yet. But how in the world can we continue to rack up that kind of a negative balance sheet on the national, in the national debt to to think that that's not going to matter someday?

[00:12:04] Ryan: Not a business I'd want to own.

[00:12:07] Bill: The only thing keeping in the United States in such a good situation. Everybody else is so much worse off. That's that's really the bottom line. And we also can print dollars, where other countries can't print their currency than the same way because the global economy trades in dollars. So we have a lot of things on our side, but that that's just outliers. It's things we just can't control and don't know where we're going go or happens.

[00:12:32] Andrew: You say how thankful you are for the petrodollar, does sort of ties to Saudi Arabia. So it's not the greatest thing in the world.

[00:12:40] Amanda: so Bill and Andrew last time going into it for you eyes open like we know we're in a recession. We're changing our business model, we're doing, I mean a lot of our expansion happened, you know in the come back from the recession, so it wasn't.

[00:12:58] Bill: Well you remember mad at you were with us when we started flipping properties, and and I think it was almost unconscious, but we realized that every month the value of properties worth less than the month before so we had to stop our buy-and-hold strategy and we moved into more of a flipping strategy and even that was difficult because as that recession gained so much traction, buyers had a hard time finding loans because lenders got so frozen up.

[00:13:29] Amanda: Well, and then I remember I feel like it was around April 2010 the first time buyer Home Credit which was like an $8,000 tax credit was taken away and that really just I mean it really took the wind out of all the sales that were left blowing. I mean it was, it was rough.

[00:13:49] Andrew: We were also we're doing a lot of short sales back then and it happened the exact same time that the bank the bank's at one point we're just giving them away. And short sales when the bank, a person's behind in their mortgage, but the but they haven't been foreclosed on and in the bank allows them to sell the property for less than the principle of their mortgage. We were doing a lot of those at one point. The bank is basically just giving them away and then they just said no, we're will take a small discount, nothing more. At the same time that the tax credit amount of just mentioned was taken away in a pretty much shut that that's one of the reasons I'm out in the Midwest actually.

[00:14:26] Bill: Can you be more specific about that Andrew while you're in the midwest that

[00:14:30] Andrew: Well, yeah. I mean, we wanted to get back into buy-and-hold flipping was very challenging. I mean, it's always, it's hard to do anything in a market that's going straight down. I mean, it's there's no buy-and-hold. You need a massive discount because you got to make up for the fact that the property is going to be worth less next month in all likelihood. And flipping there aren't very many buyers. It's easy to buy a property but it's hard to resell it. So it's that is the most challenging investment market is a market that's going straight down but what follows that is the. Is the happiest Market ever for Real Estate Investors of one? I'm quite nostalgic for and that is the trough and up.

[00:15:14] And so we wanted to get back into buy-and-hold and Oregon is a bit of an expensive Market. It's certainly a market you can buy and hold in but it's not ideal to it's better for flipping. We were tired of flipping even flipping in the good times before the before they took away our short sales. And and so we took a trip out with a friend to the Midwest a lot of our extended family. I mean your parents are out here a lot of aunts and uncles and it's just the prices were less the rents were a little bit less but not, you know, the Gap was much smaller between the two and it just seemed to make a lot of sense.

[00:15:50] It cash flows a lot better in Midwest and the southeast and places like that than it does on the coasts. And so we just decided to you know, pack up and start a branch out here. My brother Philip joined us a little while after that and we were just started buying holding ever since. And at that at that time we could just pretty much just go out on these property tours and look at 15 different, you know houses almost all of them were all REO's which is a bank-owned House/properties they've taken back after foreclosure. We'd make offers on 13 of them or so and get 2 and we just do that every month and go from there. I mean it's financing was challenging. It's very hard to find any bank that would lend to us, but the properties are just now being sold for very cheap nowadays. It's much easier to find financing but you have to dig a lot harder to find the properties. Really probably have to do direct marketing like mailing text message things like that stuff. We've covered another podcasts, but that is really. I mean that's really kind of where the market. This kind of the tracks the trends of the market, you know during the down the down cycle, it was very tough for us to do anything but flip and that was challenging as well. But that you know, what comes after that is the best best period for Real Estate Investors there is not as the trough.

[00:17:02] And up and so in many ways we personally would like I don't want to crash and it's not a good thing to wish for a recession, but it would be helpful for our business. Be a lot easier to find properties to buy and they cash flow a lot better. We do we do flip some we are flipping more now because we're going into a rougher environment market-wise, at least we think we are and we're at the peak and it's going to take advantage of those High by sale prices, but buy-and-hold is where we really, that's where we butter our that's that's our bread and butter. And so that's what we wanna get back to

[00:17:36] Amanda: We did kind of when we did make that pivot into the Midwest and stopped the flipping. Because I mean especially with our model in Oregon was to try to acquire our houses via short sale in order to flip them. Well a short sale can take six months to close and by the time you purchase the property, you maybe don't even want to at that point because of the values gone down even further and so, you know, we were just chasing that over and over. But we had built up was private lender network and we had you know, we knew bank and you know commercial type lending was going to be hard to come by but we have this private lender network built up that it made sense. Like, okay. Well, maybe we can figure out I mean, I don't know if we were that strategic about it, but it happened that way maybe we can figure out a you know, a different way to make this work for us.

[00:18:27] And you know, we first were in Kansas City, our price point on a house was fifteen or twenty thousand dollars, you know, those are a lot of houses that we still own that didn't need, you know, they needed some work, but we were still renting them for 600, 700, 800 dollars a month. The numbers worked on a from a cash flow perspective and we could afford to leave the private financing on them for the long term because the cash flow worked. It made sense. And so I'd love to say like, oh we were so eyes wide open like this was the strategy but it was sort of I mean, I think we knew what we were doing, but it worked out better for us than we thought it would. Is that fair to say?

[00:19:08] Andrew: I think we should rent con the past and just say that this is all strategically planned.

[00:19:13] Bill: But that keyword that you said there Amanda was cash flow and I think for any investors now looking into the future as we are too. The one thing that will insulate you better than anything else is having healthy cash flow and you know, so the people that got hurt obviously had bare land that wasn't returning anything or commercial properties that were empty or you know, they were flipping and had a lot of inventory on their hands. Those are the folks who got hurt the worst. We just happen to be cash flow investors. And again, it wasn't a huge strategy on our part. To well, it's it was well, it was a strategy in the sense to make sure we were good in a recession. But what it did do is it allowed us to ride through the recession because as long as there wasn't a tremendous recession in rents a cash flow investor is all about rents can the property be rented at a reasonable rate.

[00:20:11] And yes, maybe the rents also drop a little bit during a recession that's possible. But sometimes they don't sometimes they rise because people are abandoning their houses and they have to live somewhere. So, you know, I think being a cash flow rich investor and having that as your mindset.

[00:20:31] We did de-leverage during the recession. I remember selling places. I probably didn't want to sell well in retrospect. I didn't want to sell. And looking in any way I could to de-leverage but on the other side of that was just keeping the cash flow up and making sure our property management systems were in great shape and filling our units with good people that you know, could you know had reasonable job prospects and so forth. So in a total recession would people are losing their jobs. Yes even rents become an issue, but.

[00:21:12] Amanda: We were also fortunate in that during the last recession. A lot of people left trades went back to school that sort of thing and you know college enrollment was up and a lot of our Oregon portfolio is right around the University of Oregon campus and, that didn't we didn't feel a rent decrease during that period. In fact, it got a little bit tighter and then everyone came in started building because that was one place that people could still build and make it work and so still building but we didn't feel that as much in our Market but that's not to say that other people wouldn't have felt it in other markets. We just didn't.

[00:21:56] Andrew: I'd make a quick note, a little digression, just every single one of our private lenders when we asked them if they were interested in lending in Kansas City that we had, that were lending in Oregon, every single one of them said no and then every single one of them changed their mind shortly thereafter, so it's good. So we I think we got every single one of them to lend to us in Kansas City that we have.

[00:22:17] Amanda: I can't think of one that said no.

[00:22:19] Andrew: But they all said No at first and then they all came back so, you know, don't, don't be a pest but kind of be a pest, you know, no doesn't mean no forever. So, you know. Take the known and maybe ask him again in a month or so.

[00:22:32] Bill: Well, everybody saw the numbers when they were loaning 225,000 in Oregon and they could loan 55,000 in Kansas City or Dallas or one of our Midwest markets and and yet get the kind of rental return that they saw us getting they felt much more comfortable of loaning money in the midwest. By the way, we usually borrow money between seven and nine percent. Say 8 to 9% is more normal. But if you look at an amortized loan of five percent over 20 years, even though I prefer that loan because you're paying down the principal. The loan cost, the mortgage cost is about what an interest only nine percent loan is so if necessary you can you can ride a long time on a private lender loan at somewhere around nine percent interest only.

[00:23:28] Amanda: and our lenders are happy to let it happen

[00:23:33] Bill: yeah, we rode one for 10 years right on an eight-plex and boy was our lender tickled pink that we never pulled the trigger refinance that thing.

[00:23:41] Ryan: Well, I think it makes a lot of sense too if they have confidence in you if your private lenders have confidence in you that relationships built when there's blood in the water, they're not looking for another fish. You know, it's kind of like okay. My money is here. I'm getting paid. I'm good. That's not to say I mean, I'm sure you guys can speak to a little bit more, but I'd be curious if you guys had any people that just wanted more liquidity on hand that pulled back or did you find that most of them wanted to keep getting the cash flow?

[00:24:11] Amanda: The only, the only people that were concerned with liquidity and you know, we were in a different era of our business management at this point were Banks. And Banks got to a point where I mean at one point a bank sat down with a straight face and told us that if we parked our money and I want to say it was like eight hundred thousand or a million dollars in the bank and earned nothing on it, basically they would feel comfortable loaning that same amount back to us at a percentage rate. I mean it was just like 

[00:24:43] Ryan: That's a good deal.

[00:24:46] Bill: Why would anybody ever do that? But apparently people do

[00:24:49] Andrew: want to pay us interest

[00:24:50] Ryan: you want a secured credit card.

[00:24:52] Amanda: Their own version, yes!

[00:24:54] It was like maybe we look dumber than we are but

[00:24:59] Ryan: I mean, I appreciate them having the honesty though, like, you know, worst sales pitch ever, but you know,

[00:25:07] Andrew: I think I think probably we should bring this back to sort of recession or Peak Market investing and just kind of give some whatever tips we have for some for investors out there who want to be carefully who want to invest in real estate but realized that this Market is probably teetering on the brink of some sort of recession within the next one to two years.

[00:25:29] And I mean, I would start by first of all, I mean, I haven't read this book, but I very very a big fan of the author Jay Scott's book recession-proof real estate investing. Is a book I intend to read so I recommend just based on the author has some very good books is book on estimating real estate rehab cost is is I think a must read for Real Estate Investors.

[00:25:49] So I'd recommend that to start with and I mean it my position is just sort of don't stop but you need to do everything a bit more carefully. You need to maybe if you're aiming for you know. The one of the great things about the BRRRR model buy rehab, rent, refinance, repeat. Is that you're looking for a 25% Equity margin to begin with and that gives you a cushion in case the market goes down. And even if you don't have enough Capital as it goes down 10%, you have enough Capital to refinance all of your money out and put a little bit in. You can still sell the property and make yourself whole so I think you just need to be extra careful with your criteria, maybe even make it a little bit more conservative instead of aiming for for you know, if you're aiming for 80% aim for 75%-70%. You just be a little more careful in that but also more especially really go through your due diligence, you know. Make that, you should be making it a priority regardless, but really really emphasize that because you don't this is not the time you want to get caught with a big, a big Capital expense you weren't expecting and then the economy go into recession to as a double whammy.

[00:26:53] If you buy right? You should be okay at least get your may be made whole or very close but it's one of those things you want to be. He's just more more diligent at every step of the of the way.

[00:27:06] Ryan: Yeah, I think it's somebody who's in kind of the direct to seller side if I'm a turnkey buy-and-hold guy. I'd probably not be buying turnkeys right now. Right? I'm not looking for deals with all the life sucked out of them. You know, you want steak. You're not beef jerky. 

[00:27:23] Andrew: Probably not a great time for Passive Real Estate Investors, you know getting into syndications and things like that.

[00:27:28] Ryan: Yes, syndications is another good thought. I think the other the other thing is like if you're going Direct to seller you can pivot with the market. So right now we're historically offering 75% of aRV - repairs - what we hope to make. So if I've got a hundred thousand dollar house that needs 25k. I'm at 75,000 - that 25k - either my holding costs to BRRRR that out or if I'm flipping it the profit I want to shoot for. The economy starts to go down and I'm probably not going to stay at 75. I'm going to go to 70 or 65. I remember when I first started in real estate investing and I'm the youngest one here when it comes to experience in the market. I haven't been through a recession. But I started right at the end of it and I remember we were at 60 65 percent of arv was where we were starting with our offers.

[00:28:22] Now you go to a seller right now and offer them, you know, 40 cents on the dollar they'll kindly tell you where to go stick it but I think it's really just about pivoting you know now is not a time I'd be buying for appreciation. Now is not a time where I'd be okay with the 1% Rule. I want 1.25 or 1.5 If you can get it, right?

[00:28:46] Bill: What's that rule Ryan?

[00:28:48] Ryan: Rent to cost ratio. So a lot of people kind of recommend like a one percent. So if I've got a hundred thousand dollar house while 1% of that in gross rent amount so thousand bucks. In my experience, that doesn't cash flow super. Well even at the 1% rule.

[00:29:05] Andrew: I would I would critique that rule in general, but we'll save that for another podcast.

[00:29:10] Ryan: Yeah, I mean it needs to die a terrible death. There's a lot more that goes into it than that. But at a minimum we're looking for a 1.25 is kind of what we shoot for. So and obviously if you're in a market like a Southern California or a phoenix or a market where that's a lot harder to do.

[00:29:28] You may just pivot. I've got a lot of friends that went through the crash that we're fix and flippers that turned into wholesalers, I've got wholesalers. I know that went the like short sale route or went more of the realtor route. So I think it's just being aware of what's going on around you and if you have you know projects that you have concerns about things are your may be trying to push the arv on them. Now's maybe a time to get your cash out and not you know, hold out for top dollar

[00:29:59] Bill: You know, if we step back and look at the long-term. If you see yourself as a long-term real estate investor, I'd encourage you to do what is called dollar cost averaging at least mentally. So in the stock market dollar cost averaging is were a stock investor puts in say five thousand dollars a quarter. Maybe he's putting into a he or she's put into an index fund and so they don't even care. Well, they care, but they can't control where the markets going because they believe in the long-term US economy. So they're going to keep putting $5,000 in whether it's high, whether it's medium, whether it's low in real estate investment.

[00:30:39] I think there's something similar that you could think of over a 20-year period and that is I can't anticipate where the markets going to go. I really can't. This a real quick thing, I have a friend who's a financial advisor who who advised all his clients because of the uncertainty of the market to take all their money out when Trump won the presidency every bit of it.

[00:31:00] They went all to cash and they missed a 40% upside. So you just can't you know anticipate where the market is going to go? Right? And that's true the real estate market so dollar cost averaging means that I buy wisely today. I buy wisely fight, you know, three months from now I by wisely six months from now not thinking I know exactly where things are going to go.

[00:31:24] But if I buy wisely the nice thing about the real estate market compared to the stock market is that I'm starting to pay down principle if I have a mortgage. I'm starting to, you know, increase my Equity position if I'm improving the property over time. I'm raising rents and so forth. So I look back over now I've been into it over 30 years and say boy, I'm sure glad I bought those properties 30 years ago because those things among them have paid way down and their mortgage payments or I've refinanced got tax-free cash back to to expand the operation excetera. So if you have a long-term view, I think dollar cost averaging saying I can't anticipate the direction the market but what I'm going to do is by wisely today and by wisely again tomorrow and then the next day as well.

[00:32:17] Ryan: I think that's a great closing point of just like if you get anything from this episode, buy wisely today based off the data you have today, don't speculate, don't Fudge arvs, don't underestimate how much repairs you have. If you're buying good deals now, that makes sense now, it's just you have to constantly be re-evaluating what makes sense but I think. I mean, I think that's the pinnacle of this episode of buy wisely today buy wisely five years from now.

[00:32:50] Andrew: Remember that sage wisdom. And also, please join us at thegoodstewards.com. We have plenty of content there. We have free ebooks, and in addition to that, please subscribe to our podcast. Thank you again for joining us and have a great day.