The Good Stewards Real Estate Podcast

Why We've Sold A Couple Properties Recently

Episode Summary

Cash is king, always. Your buy and hold business needs liquid cash for opportunity as well as a rainy day, like the current COVID-influenced market now. Never get your business in the position of being forced to sell, we’ve been there and think preplanning and forecasting the needs of your business is a much better position to be in.

Episode Notes

Why We’ve Sold In Indianapolis:

2:50: We bought a vinyl village era property a year and half a go that never was an issue renting out, but we felt that it would be good to elevate our cash position given the time of  uncertainty.

4:56: Our net profit was $42,000-45,000 which can cover a lot of residents who decide to stop paying rent.

6:12: This is a great example of solid preplanning. I’ve been a motivated seller before and that’s a bad place to be.

9:00: If you’re plan is to manage a large portfolio, your time counts for something. You can only manage so much and your growth is going to be limited if you hold on to it.

Why We’ve Sold in Springfield, OR:

11:19: We got a bit better than vinyl village property under contract last week. Bottom line, it’s hard to cashflow in the west coast. We think this is a good flip candidate at a purchase price of $200,000 and reno budget of $20,000. 

13:45: The good news for the Eugene area is that the university of oregon is planning to reopen for the fall semester, though is expecting about 15% less students.

The 38-Unit Development Property in Portland:

17:00: We bought a piece of land 2 years ago and planned a 38-unit development. But we’ve done everything wrong on this project. It’s hard to figure out how to manage a property when the city requires a certain number of units dedicated to affordable housing.

19:57: We didn’t do our due diligence on this one as we might end up with millions of our own locked into this deal. But we’re pivoting this project to be affordable housing and if it still doesn’t work out, we’ll sell it.

21:49: sometimes you sell a property to pull in liquidity. Sometimes you may have to sell one to stop the bleeding.

23:50: Buy and hold is multi-faceted with segments of business dedicated to acquisitions, overseeing rehab, property management, and then lending. It takes a very rare and special person to be good at all those areas, most aren’t and it takes years to master.

$2k Profit Flip in Kansas City:

29:00: Making smaller mistakes is always better, and even the larger mistakes we’ve still been able to keep.

30:22: We blew through the reno budget because of dry rot issues. We had originally planned to BRRRR this property, but we just had too much cash in the project at that point to make it a good buy and hold. So we listed it.

32:24: We didn't have to sell that property, but we were kind of trying to hold ourselves to a different standard.

33:32: When you get a bigger portfolio, keeping your cash reserves strong and your liquidity strong so you can stomach a rainy day and jump at opportunities. BRRRR is all about an accumulation of decisions for your business.

Connect with the Good Stewards:

Episode Transcription

Amanda: (00:00) At one point we were trying to be realistic, really realistic that okay, we're just going to have to cut our losses and it's going to be several hundred thousand dollars lost and okay, we're going to have to rip that band aid off and deal with it. That might still be the case. I don't think it's going to be the case, but we hope it's not the case. But sometimes something that you go in with thinking it's going to go a certain way, you have to be flexible to make changes.

INTRO: (00:31) Welcome to The Good Stewards podcast, the only podcast dedicated to seasoned real estate investors who want to maximize the cashflow potential in their business. We are “buy and hold” investors with a thousand plus properties and markets across the U.S. who bring an insider's view into the nitty gritty details of real estate investing. If you're looking to develop the mindset teams and systems that can dramatically build your real estate business and network, you're in the right place.

Ryan: (01:03) Welcome to this episode of The Good Stewards podcast. I'm Ryan Dossey.

Amanda: (01:07) I’m Amanda Perkins.

Bill: (01:09) I'm Bill Syrios.

Andrew: (01:10) And I'm Andrew Syrios.

Bill: (01:11) Great to have you join us today. We've got a really interesting topic, but before we get into it, please subscribe. Go to the goodstewards.com. Send us your comments. Get the word out. We'd appreciate it. We're going to talk about “When do you sell a property?” And the question is maybe, that hangs over everything is, how has this Covid-19 going to affect this issue? And I look forward to the day that we're not going to mention Covid-19 in our podcast, but that day is not today. As a matter of fact, yesterday I was in Indianapolis traveling with Andrew and another one of our partners and we were coming back and of course, the plane was just virtually empty on both going there from Kansas City and coming back. But what was interesting is that we actually ate in a restaurant and I didn't think about it until about halfway through.

(02:09) And I thought, oh, this is so unusual. We're in an airport restaurant. It wasn't a regular restaurant, but the fact was we were sitting down with other people fairly close. There's a waitress who didn't have a mask on and she was touching a lot of things and we were touching a lot of things. It was a little bit creepy for me.

Ryan: (02:26) Inaudible

Bill: (02:27) To be honest with you. It's kind of like, okay, which one of these things is going to give me Covid or am I going to somehow come into contact with it? I just kind of had to shut my mind off of those things because I think we've all become pretty darn germaphobic. I was never germaphobic before. But all of a sudden, now I am. Obviously, we're creating new habits in our culture and those habits are going to play out over time. We're just going to have to see where they go. But we're real estate guys and gals and we want to talk about how that affects us. So, here's our topic. When do you decide to sell a property?

Ryan: (03:03) So, I've got one particular property in mind recently that we decided to sell. It was actually a pretty good rental for us with no problem renting it out. We had pretty solid equity margins in it, but with kind of some of the uncertainty going on in the marketplace and us not knowing what rent collection would look like, we decided that it probably made sense for us to have a little bit more cash on hand. So, the property was a fairly nice, vinyl village. I think he was built like 2003 or 2004, four bedrooms, two and a half bath attached, two car garage, kind of in like a satellite neighborhood off of Indianapolis. Now we did get the benefit of some appreciation, which doesn't happen very quickly in Indianapolis normally.

(03:53) When we bought the property about a year and a half ago, I think we thought it was worth $140,000. This is in the midst of Covid like two or three weeks ago was when we listed this thing. We ran comps and they came in actually quite a bit higher than we thought they would. They came in at about $160,000. These were like nicer granite, homeowner, like had been upgraded from builder grade materials, whereas ours was all original. So, we decided let's kind of test our luck and throw it out at $160,000 and see what happens. And within 72 hours, we had multiple offers. We sold to 20% or 25% down conventional buyer for $5,000 over asking. It didn't appraise, which didn't surprise me. So, we had to reduce it to $162,000. And I want to say, Amanda, we're all in for about a 104? Is that correct?

Amanda: (04:49) That sounds about right. It might be 110 but it's in that neighborhood.

Ryan: (04:56) I know the net to us was like 42-45 somewhere in there. So, I mean, obviously the benefits to that, right? That covers a lot of tenants that decide not to pay rent for a month. So, I think it really is kind of a matter of “Are you in this business for the long haul?” And I think when you're in this business for the long haul, there are times that you have to take a couple steps backwards in order to move forwards. And that could be you blew a rehab budget and the property comp BRRR, you had a substantial repair come up that you weren't expecting.

(05:36) And I don't know, I think it's wise as you're going through business to realize that sometimes everything isn't going to go according to plan. And that may mean pivoting and selling a property that initially you hadn't planned on selling. And this is a property that obviously we would have loved to have kept, but it was one of our vacants that came up. We did a turn on it and decided, let's just kind of throw it out there and see what happens. We were not motivated sellers by any means on this deal. It was really kind of, if somebody buys it from us at a great price, we'll sell it.

Bill: (06:12) And that's actually a really good place to be because I have been a motivated seller before and it's been a number of years now, but boy, that's a bad place to be when you have to sell something. So, far better to do some pre-planning and not get yourself in a situation where you are illiquid to the point where it's do or die. So, I think this is solid pre-planning to think about.

Amanda: (06:37) Just to be completely transparent about it, to build a long-term “buy and hold” company, it's very hard to hold every single thing and try to build your rental management company and try to cover all of your overhead as you're making that happen. And so, I don't think it's realistic to think I'm going to hold every single thing I buy and wait until I get enough doors down to cover that overhead and all of that. If you're just one person and you are the overhead and all of that, you might be able to make it work a little bit better.

(07:13) But the way that we've run our business model, you don't just build your whole company and you have $0 into it. So along the way, if you want to be building a company, you're really going to have to think about “What's my short-term plan? How do I cover my overhead? How do I cover the extra costs of just doing business that property cashflow doesn't cover?” Because, especially if you run the numbers on single family houses, there are some markets that they cashflow better than others. And it depends on where you're in, but it really is about, you need a really large, strong portfolio to build enough cashflow for you to be looking towards a future and having that property management company that you want to run. And so, you have to think about how you're going to get there. And in this case, like in Indianapolis, we needed to sell that in order to cover our overhead, pay for our property management, all that sort of stuff. And that's just part of business. And yeah, it would be great to keep every single property, especially when you're looking at it like I could [08:17 Inaudible] out this, it would be a great thing for me to hold. But it's probably not realistic unless you're starting with a big giant pot of money in your bank account that you're full on, ready to like leave in your business for the next 25 to 50 years.

Ryan: (08:32) If you're new to this business and think that “buy and hold” investing is easy and cash flow just pours in like mailbox money, you should go back and relisten to what Amanda just said because it's pretty much you now know who's behind the curtain. That's Oz, right? It's not this fairy tale. Like, well, my freedom number says that I just need five rentals and then everything's like… No. That may work if you're going to buy 10 units and self-manage them and self-maintain them and if that's what you want, that's totally fine. If you're looking at a larger portfolio where you're bringing in things like staff, it's not that simple. So, I'd highly, highly recommend replaying that as much as it's going to hurt to hear. But I think it's better to know what's reality.

Andrew: A lot of it depends on whether you manage yourself or hire out management or build a management company. If you manage yourself, it is possible, but also your time is worth something. Your growth is one limited. You can only manage so many and it's going to take more time to get there. If you're not managing, and it is sort of this almost the myth of cash flow, like one, you're not going to cash flow that much. And if you're making a hundred dollars a month off each unit, you need a lot of units to live off of. But there's another con, if you're familiar with accounting, kind of the way to say it, you're making a hundred dollars a month is kind of the way to think of like your gross income, the costs of the property itself are the costs of goods sold, but that doesn't include the operating expenses, the fixed expenses, that you also have to pay for and above.

(10:14) So you have like, okay, the property takes this much to run and it makes this profit. Okay, well this product makes this profit when you sell it, when you take all the goods and work that goes into it. But then we have our operating costs and our fixed expenses and all the rest of that. And if you have a management company or build your own, those costs are not going to be paid for by “buy and hold” rentals very quickly. And so, or if you're buying passively, it's just going to take a long time to replace that. Cashflow is great, but it's mostly to make sure that you're not building a giant Ponzi scheme. It takes a while to get there. The way you build wealth and “buy and hold” real estate is to build up your equity and that takes time.

Bill: (10:53) Right now we're debating and you should never do this, but you should always go into a property purchase knowing how you're going to exit. And I think we've decided to hold this property. It's property in Springfield, Oregon. It's on 59th Street. We bought it. Did we close it on Monday, Amanda? Like two days ago.

Amanda: (11:14) No, last week.

Ryan: (11:17) Was that the SEO one or is it a different one?

Bill: (11:19) It's a different one. That's a different one. And it's really great, it was built in 2002. It's a little bit better than vinyl village. It's a little bit nicer subdivision. It's kind of at the top in terms of being like, we will barely cash flow. We hope to basically break even with PITI and some maintenance and management expenses thrown in there. So, it's hard to cash flow in the West Coast basically. So, we bought it for $200,000 and are trying to limit our budget because we're going to keep it as a “buy and hold”. So, Amanda's put down the law that we can't go over $20,000 and then she gave me a contingency factor of 10%. So that's $22,000.

Amanda: (12:05) Did I give the 10%?

Bill: (12:07) Yes, you did. You gave me the 10%.

Amanda: (12:11) I have to roll back the recording to make sure that happens.

Bill: (12:13) [Inaudible] I will buy off witnesses anyway. So again, we're looking at the future as all of you are who are listening to this and thinking about, okay, what direction is this going and how much liquidity do I need? So yeah, we could flip this property and I think we have a nice payday on it, but also keeping it as kind of our model, business model. We're “buy and hold” investors. So, what do you do? And we've kind of decided to keep this one, but also if we felt like we really needed to push up our liquidity position, we could turn around and sell it or we could choose other assets to sell. And I think we just got to be ready to do that because, when we look at our business in particular and every business is different, but we have a very niche model in Eugene, which has a lot of student rental properties.

(13:07) And the good news is that there was an article just a couple of days ago that came out that said the University of Oregon is actually opening its doors in the fall.

Amanda: (13:14) No, they are planning to open their doors in the fall. We are still under home order so we are hoping that comes.

Bill: (13:22) So I mean that would be the kiss of death for us if they didn't because although we have a lot of things pre rented for the fall, can you imagine the conversations we'd be having with parents and students who pre-leased things and then the fall semester doesn't start or the fall quarter doesn't start? Those would be difficult.

Ryan: (13:41) Sucks to suck.

Bill: (13:45) And then the other aspect of it though in the same article that said, yeah, but we are expecting 15% less students coming this fall then last fall. So, we're not only trying to up our marketing game, we're also realizing we might have some serious vacancy. We never faced serious vacancy at all, but we may have some this year. So how are we going to make that up and how are we going to get from this year to the next fall?

Amanda: (14:11) Well, especially considering our prime like months of leasing, which I think they're going to be extended this year. And luckily, we did really well in January and February until we got a ground to a halt in March. But it's hard, with this amount of pre-leasing we do, that means that we are showing our occupied properties. We haven't been able to show occupied properties ongoing on eight weeks now. So, it's hard to rent property sight unseen. The good news is our big stuff got rented and a lot of the smaller stuff, if it doesn't go to students, there's some of it that would be difficult to go like market. Especially just because I don't think like somebody who is working downtown wants to live one block off the University of Oregon with no parking. Those are going to be tough sell. But it is easier to rent studios and one bedroom and two bedrooms to market residents rather than have to aim for that college. But if that doesn't happen, which I'm confident school is going to start because as an entire nation, we can't remain in lockdown forever, I mean the economy is just crumbling.

Bill: (15:32) The real question is what are people going to feel comfortable with? And I was interested in my own feelings yesterday when I was in that Minneapolis airport sitting in a restaurant and it was kind of like, I'm way more vigilant right now than I normally would ever be. And the question is, when are people going to feel comfortable going back to restaurants, theaters? When are they going to be comfortable going to a college football game or an NFL game? And if college football doesn't start up, maybe it'll start late and they'll do a truncated kind of schedule. But how about if it doesn't start up? That's a multibillion-dollar industry that is tied to the University. It has all kinds of ramifications of unemployment, spiraling out of control.

Amanda: (16:20) I usually try to not let my head go down the rabbit hole as far as yours has.

Bill: (16:27) All that means liquidity is a good thing at this point because we don't know what the future holds. We just know it's going to be uncertain. We know it's an uncertain future.

Amanda: (16:37) Well, regarding, making a choice to sell a property that maybe that wasn't your intention. I can talk about a deal that it's kind of a sensitive deal in our company because we made a lot of wrong decisions with regards to this. And part of it was just all of the things going on every day and running a business with multiple facets and different locations and all that sort of stuff. So, a couple of years ago almost, it's been almost two years ago, we bought a piece of property in Portland. And our idea was for the first time we were going to develop it, we were going to scrape the land, it was about a half-acre parcel and we were going to put 38 units on it and we felt, there were some zoning changes happening in Portland.

(17:30) And one of the things that was changing also was that, because they were trying to promote low income housing, they were going to start putting some stipulations on certain percentages of your apartment complex, needing to be affordable housing. And so, actually it's affected a lot of development in Portland just because it's hard to figure out how to run a property when you have to dedicate a certain percentage to affordable housing and have a market property. Especially if you're thinking about being in a downtown area and you need those higher rents to cover things. So, we've never done this sort of thing before. We had some direction from some people, but I wouldn't, if I had some of the choices that we made to do over, we definitely would.

(18:25) But we bought the property, we paid to get it developed and we got a year down the road and realized this isn't going to work that great if we have to leave as much money on the table as we would. And in this case, it would probably be 2 to 3 million of our own money we would leave on the table and it wouldn't turn a great profit. And a lot of that just has to do with the high cost of property taxes that get assessed on a new property versus an older property. There's just a lot of factors.

Bill: (18:58) Also we found that we realized that the build cost in Portland was substantially more than what we're used to in Eugene.

Amanda: (19:07) We didn't do our due diligence. We really messed up. So last summer we were like, oh, my gosh. We had some things running up against us. We needed to complete our permit process and pull the trigger on that or else we would've got kicked out on some zoning issues that we got in. And so, we decided to sell it. It didn't work out. We didn't get it sold. And there are a couple of things that happened there. I don't know how much detail I would go into in this call, but I would say like most of the things that you could do wrong on a deal we did wrong on this deal starting with lack of due diligence and lack of really going in with our eyes open. We are pivoting this deal.

(19:57) It is a sensitive subject in our company because we hold ourselves to a certain standard where we are trying to make decisions for each company that fall in line with what the other… Like just to not be unfair to the other companies because while we are multiple entities, we're all part of the same hole in a way. And so, we're pivoting it and turning it into an affordable housing situation that we hope will work out. We have a lot of green lights. I've had a lot of meetings with the housing authority. Affordable housing is a really strong way to go. So, we're hoping it turns out, but I mean, we're not out of the woods yet. We're hoping that we can turn lemons into lemonade, but our worst-case scenario would be we have to dump the property and we lose many hundreds of thousands of dollars.

(20:53) So, we're hoping we can make this pivot work. But I think to go into that, sometimes what you go in with your intention of what's going to happen, things change along the way and what you thought was going to work out maybe didn't. Circumstances change. You have to be really flexible and then also realistic. Like at one point we were trying to be realistic, really realistic that like, okay, we're just going to have to cut our losses and it's going to be several hundred thousand dollars lost and okay, we're going to have to rip that band aid off and deal with it. That might still be the case. I don't think it's going to be the case, but we hope it's not the case. But sometimes something that you go in with thinking it's going to go a certain way, you have to be flexible to make changes.

Ryan: (21:49) So, sometimes you sell a property to pull in liquidity. Sometimes you may have to sell one to stop the bleeding, which is a way less sexy topic. And Amanda, I seriously appreciate you sharing that because I know this has been a sensitive deal. But I think it's important for our listeners just to realize like Stewardship has been at this for 30 years and it's still not perfect. On a recent episode, I think it was, Bill or Amanda mentioned, it took them 15 years to get property management down. I'm the newest one here and I'll be the first one to tell you, I feel like I know nothing when it comes to “buy and old” real estate. I know how to find deals and that's my strong suit. But I think it's just important for people to realize that every “buy and hold” investor I know that's got any sort of portfolio of any sort of size, you sit down and start to have an honest conversation and they're like, oh my gosh, you've done that too? You've found yourself upside down on a deal. So, I think as a podcast, I love ethically that we're getting into that of like, hey, it's not all always roses.

Amanda: (23:00) No. And sometimes there's so much emotional baggage that you tie to a deal that you do have so much money in and it is a real sick feeling when you're sitting there thinking, okay, how am I going to make this bleeding stop? Do I just take my lumps and move on? Do I throw more good money after bad? Like those are all… There's a lot of emotion that just plays into running a business.

Ryan: (23:24) Plus the time too.

Amanda: (23:25) Absolutely.

Bill: (23:25) Well, in Portland we were kind of, none of us wanted to deal with this. We have another partner involved as well. His name is Jim. And I think all of us just wanted this to go away, but there was no going away. But one thing I would think is as you who are listening to us, the “buy and hold” is really multifaceted. You have to have four things down. And what I have seen is that every company I've been involved with, there's probably only one really strong base. And so, I think of it as a baseball diamond. The first home base is lending. It is finding the money. First base is acquisition, second base is overseeing rehab and doing a really good job with rehab. Third base is property management. You really have to have every single base working. That's also the BRRRR method in other terms. But I've seen in every company I've been involved with, including my own, when I started one of those bases in particular was not functioning very well or it seems like it would go off the rails. So, you might have a really strong acquisition arm, but then you're really not overseeing contracting very well and your property management's falling down kind of thing. So, “buy and hold” real estate investing is doing all four of those bases very well. And that takes time, energy and focus and maybe bringing in expertise that you just don't have.

Amanda: (24:49) Well, right. And if you're one person trying to cover all four of those bases, those are very different bases. To be a really good contractor minded and know what's covering rehab but also to have your accounting piece? Those are two things that might not be that complimentary or to have this really strong marketing for acquisitions to get that piece down. That's probably not the same piece that runs a really strong property management company. So, I think it takes a very special individual that can make it work for themselves. But I do think that also means your portfolio growth is limited. But that's also okay. I know a lot of very successful people that they acquired 10 or 20 rentals over their working life and that's their retirement and that works great for them. They've realized a lot of appreciation. They've paid down a lot of principal, but they grew very slowly and that works. That could be a really strong wealth building model for somebody who's just looking to acquire one a year, one every other year. Even two every five years. If you have to save it up to get, maybe you're not trying to do exactly the BRRRR method. People have different strategies and what works for some, doesn't work for all.

Bill: (26:12) Yeah. So, we have partners also that I think bring a strength to the partnership on one base to the other. For instance, our group that's in Emporia, Kansas. Kyle and Jessica. Kyle really brings the second base to BRRRR. He is an incredible contractor. He worked for a number of years at a nuclear power plant as an electrician. And so, all our electrical work is very, very, inexpensive. He runs a tight ship, a great crew. And his sister, Jessica is our property manager there and she does great. But we're not really, really great at acquisition in that partnership. It’s a weak leg for us. So, they're trying to do what they can to strengthen that one. But you'll probably come in with one really strong set of skills and that's not a bad way to come in. Go ahead and focus on that, but look to shore up the others, whether it's a partner getting expertise, training, whatever it takes to think about. Now, Andrew you might want to talk too because you brought in a brother that kind of helped you out in Kansas City.


 

Andrew: (27:26) Well I don't know if I brought in the brother, but he came.

[27:30 Inaudible - Cut]

Andrew: (27:46) Yeah, I mean Phil definitely had a very good mind for property management and kind of dug into that and created pretty good systems. And sort of this, we're going to offer a good product and we're going to give you something good at a reasonable price and we expect a lot from you as well. We're not going to take any grief and you're going to fit into the system and we're going to create our rules for exceptions and we're not going to make them outside of that. Really building the system has taken us as many years to… I wouldn't say perfect, but get substantially better at a point where our property management here in KC is running as good as it's ever ran. And to the point where I think I could leave and not come back for a year and everything would be fine with the property management at least. And so, I took over more of the acquisition, the rehab and the financing aspect of it and he's moved more towards that as well of late because we've been able to hire out. But yeah, different people have different skill sets.

Ryan: (28:52) So everybody else has shared their whoopsie or their pivot. What's one you guys have done, Andrew?

Andrew: (28:59) Well, we've had a couple. I mean one recently we had with regards to selling was a property. It was a lot smaller than the one you're talking about. Making smaller mistakes is better, although we've made some big ones in the past for sure. But most of those we've kept actually, but one of the small ones, we just sold us a house that we bought for next to nothing. And it was one of those things where there are often two big things that cloud. Even once you've learned to add contingencies and check all these things on rehab budgets, two big things that cloud it and screw up your budgets. And one is the size of the property. If you buy very big properties, sometimes you don't go up kind of percentage wise with the size of it. And the second one is really, really big rehabs. There's often just once you start digging into it, it just goes and goes and goes. And so, this was a 720 square foot house. Just a [29:53 Inaudible] North of Reverend, Kansas City. Bought it for $27,000. It is worth about, I think we sold it, we ended up selling it for like $93,000. But I had budgeted something like $35,000 for the repairs. They added a lot of dry rod issues, all the windows replaced, all the flooring, needed a new kitchen, needed a new bathtub and stuff like that, some flooring repairs. It needed a lot of work, but it's also a tiny house.

(30:22) But once we got into it, it just kind of kept expanding and expanding and expanding. By the time we were done with it, we were all into it. Our rehab was well over $50,000 and we had an equity margin of probably less than 10%. And so, at that point we were a little tighter on cash. We wanted to open up the liquidity, stop just buying and holding no matter what. We wanted to aim to BRRRR out or get close or throw it back on the market and get rid of it and get our cash back. And so, we ended up selling that one. I think we made a very sizable profit of like $2,000. Not exactly a well-done flip. But that's something that if you're low on cash and you're trying to BRRRR one of the ways out, one of your contingencies is to sell.

(31:12) And so one reason, again, kind of an offshoot, I would recommend against trying to BRRRR really cheap properties, those $30,000, those kinds of ones. There are several reasons. One, you usually rehab out your equity. Two, it's hard. Often the operating expenses are more than the operating income.

Ryan: (31:33) You're replacing the dishwasher and all your equity is gone.

Andrew: (31:35) Roof costs are the same on a $30,000 house or a $300,000 house at least per square foot. They're good residents in those areas, but it's harder to find them and it's more likely you're going to have issues. And so, but the other thing is it's harder to sell them. They're less liquid and only people really interested in them are investors. And so, when you have a property that's kind of in that working class to lower middle class, which is kind of our favorite area, if you need to sell it, there are homeowners who want to buy in those areas. And so not as much as in higher end areas, but there's plenty. Areas I like the most are areas where it's probably 50-50 homeowners and investors, those areas. I think that because then you can flip it if you need to, but it's also a very good hole and its cash flows. Not as well as a little bit lower than that but it's liquid enough if you get rid of it.

Amanda: (32:24) Well, and I just want to add a caveat. We didn't have to sell that property, but we were kind of trying to hold ourselves to a different standard to try something out a little bit just because in our previous model it was just like, we hold everything because it has worked out for us. Especially, we're in this for the real long game. Eight years ago, there were tons of times where we went over rehab and those properties are worth twice as much or three times as much as when we bought them. And so, we had time and appreciation on our side. But we're trying to do better as a business and really practice what we preach and hold ourselves to the standard of we're going to try to meet these things and sometimes we are going to make exceptions that make sense because we're in it for the long term. But we're in a different position than some people. We do have that flexibility to do that. But like I said, in Kansas City, we didn't have to sell that property. We just felt like, let's really try to do exactly what we're saying that we're doing. And that just wasn't a property we were that excited about anyway.

Andrew: (33:32) And when you get a bigger portfolio, keeping your cash reserves strong and your liquidity strong so you can stomach a rainy day and jump at opportunities and stuff like that involves making decisions you don't have to make. Selling properties you don't have to or refinancing when you don't have to or not buying something when you could to keep those cash reserves strong because it's the accumulation. As you BRRRR, it's the accumulation of decisions. It's not individual ones. So, you got to keep that in mind and think of a systemic business the whole entire business way.

Amanda: (34:07) Right. And that's what that decision was about. It was about the whole greater portfolio in Kansas City. And yeah, just because we could doesn't mean we should or we will in this case.

Bill: (34:19) Which kind of leads to an interesting decision or opportunity that you've come across Andrew and that's the purchase of 26 houses or those are not all houses, but most of them are. And the person who's selling them, he and his wife have come to the conclusion that they're really tired of living hand to mouth with their equity position, which they have lots of equity but they have very little cash at the end of the day. And they're kind of wanting to make a lifestyle change where they really free up their cash to do other things, which is not something we would probably choose to do because we're a long-term “buy and hold” investors. And I know that they have second thoughts about it, but we're kind of on the other side of things looking for opportunities and to buy 26 pretty nice properties at fairly good areas that are going to be thin as far as cash flow.

(35:12) But we're kind of stepping into this saying, okay, it's an opportunity for us, it's an opportunity for them too to free up cash where they've been so tight for so many years and just kind of fighting the BRRRR method. They're a little bit saying, okay, we're tired enough of this that we want to move on. So, people are at different places and I'm sure the folks who are listening to us that are different places you have to evaluate where you're at. But in this present environment, obviously with the uncertainty, having a strong cash position is the thing you want to do as much as you possibly can. Because again, as Andrew mentioned, there's money needed for a rainy day and there's money needed for opportunities and you want to have some for both.

Ryan: (35:59) Don't be too proud to pivot and admit that you went over budget or you were wrong or you didn't do great due diligence.

Bill: (36:07) Yeah. So, on that wonderful positive note, I think we'll encourage you all to check us out again and leave your comments, questions. We'd love to address subjects that you're interested in at thegoodstewards.com. And we have a free eBook for you to pick up. Please do so and we'll definitely see you next week.