So. Alisa So we just went through five rate increases.
We probably have two more coming right?
One in November, one in December.
By the time this airs, it'll be before the November meeting.
Well, I don't know about you, but we're having a heck of a time.
We're seeing cap rates go up.
We're seeing sellers expectations finally get adjusted.
You know, we're seeing massive up to 20% discounts on stuff
that we saw just three or four months ago in the multifamily space.
What are you guys seeing?
Yeah.
So seeing whether you can the cap the market has really deconstruct it
and maybe what you don't see in Texas, what you see in Phenix is because
base prices high in Phenix, relatively higher than Texas.
The higher I see.
And so, you know, you kind of see not only the interest rate going up,
but the amount of the lending available for a particular market may be restricted,
which makes interest rate maybe even higher and that select the market.
So we also invest in Texas, but not like
like you, you know, we have only a few properties over there.
We have followed, you know, San Antonio, for example,
when we invest in that, the market isn't as restricted.
And like Arizona for the same lender, you kind of have fewer options, right?
Because they would say the lender will say, hey,
we reach out to the Phenix or, you know, we didn't want to pull the trigger.
There is opportunity.
There's always the in to our question.
Right.
So it also creates some opportunities for some bargain buying
or maybe see a little bit of that in that market, if that that makes sense.
If that that is something, as you always talked about, can
is some sort of fixed element in there
that, you know, you're kind of debt expenses is fixed.
And, you know, for example, you can put it
in the agency loan that has a step down that basically allow you to have lower
prepayment penalty or creating two layers of it.
Both are fixed rate when a little bit higher on the secondary loan
and the first first loans and lower to create that blended rate.
But it's fixed.
So these are maybe some ways to kind of find some great deals
and inorder to find fixed rate deals, the property has to cashflow very well.
So in order to do that, we're seeing maybe some more
finished products, that being exchanged than that because amid
the multifamily value space, we buy old properties.
So in that area, you know, in Phenix, there's a lot of projects
has already been turned that so buying these units and thinking
about more of a yield play specifically if the math kind of makes sense.
So we certainly see a lot like so much
fewer projects that make sense that hit our table
and you have to kind of really dig a little bit deeper over there.
So where the market's kind of going, I do agree with you.
I think there's probably maybe two more rate rise of interest that's coming up.
And then we don't really know what happens after that.
We had a property, I think I shared with you that we were in escrow on.
Yeah. And the property was a nice value add.
It was a property
that, that needed a lot of work that was really well located
and it actually was a bit of a pride of ownership.
But the owner decided,
you know, to just keep it the way it was for a long period of time.
But there's significant upside.
Well, while we were in escrow,
our our debt costs went up because the federal you know, the Fed met.
And, you know, we're raising their federal funds rates.
And so our cash flow went from,
you know, 3 million to 2 million on that one asset.
So, you know, it was 3 million, which was about a 7% cash on cash.
And then it went to 2 billion just because the debt one up.
So it's the exact same property, but and I was like, man, like
and the seller asked, would you, you know, would you consider,
you know, just make us another offer at a lower price?
Yeah.
And I was like, you know, we we don't know where debt costs are going to go.
And I'm afraid that if I do that and we close or, you know, and then I'm
now stuck with something that potentially a floater that could go even higher.
Yeah.
And so we passed on the deal and just kind of waiting
for these debt markets to flush out.
What do you see? Do you see this?
You know, a lot of syndicators, I think, are kind of running blind to this issue.
I mean, they're starting to see it as the statements are are rolling
into their office and some of this cash flow goes to negative.
Yeah. Where do you see all this playing out?
Yeah.
So I think that's going to probably create, again, some buying opportunities.
And I think, unfortunately, some folks are going to lose some projects
if if that's the case over here.
You know, I keep up myself at night sometimes thinking about these.
Now, what we have been doing is to try to mitigate a little bit.
And thanks to you and the collectives, you know,
we kind of talk about this like beginning of last year.
So part of the clock.
So the last year we have some recaps on our recaps as these insurance
that you purchased to cap the raise so you insurance will pay you back the delta.
So we have put some 25 basis point, which is 0.25%.
The CAP recap in the beginning of last year
when it's really, really cheap to do so
and these are paying off really well now and they're fantastic.
But you know, towards the end
the year, we don't cap as much because the insurance has gone up.
We've on our numbers. It doesn't make a lot of sense.
So these we put a lot of reserves on them.
I think reserves can help you.
So for the syndicators out there of people who is invested into syndication,
you should ask the syndicator,
how much reserve are you raising in addition to this,
to cushion this rising of interest if you're going to take a bridge loan?
But we've seen bridge loans are going seven, seven and a half, eight.
You know, like at that point, you're like, hey, look at some different
creative financing.
And I think for people who invest in these projects, check,
you know, ask what is your reserve?
Do you have interest rate cap and also how we mitigating
this using fixed rate that is there ways to kind of mitigate in that?
So for folks who are not looking at that, if you have very, very little reserve,
but then the investor may be expecting a cash call,
which is, you know, they will ask for more cash.
But usually investor
don't put in extra money if it's not doing well, unfortunately.
And so we may be seeing some project kind of falling out.
You hit a ceiling in corporate and I think a lot of people do that.
What happened to you specifically and what made you go,
you know what, I've had enough of this. Yeah.
So I didn't quit cold turkey.
I kind of slowly plan my exit.
But there is a few pivotal moment
and, you know, kind of to share personally.
It's like there's a certain bend, I suppose, to become a senior.
And it took me forever.
When I compare with people who I started with,
I was like, okay, we all a salary to this level.
But that senior band that it just could not get right
because it basically was told to me, You got to play more politics
in order to get there.
But that wasn't really my passion.
I really had a passion for like creativity
and building, come up with a great solution to resolve issues.
But politics is not.
It's more like procedural.
So for me, it's a combination of that.
And my daughter was bored that you like.
What's the point at some point?
And also our passive income on the site with single family.
You know, single family actually don't make a lot of passive income
from a cash flow perspective, especially if you're in a coastal market.
I'm in Seattle, so it's a very much appreciated market.
So you don't see a lot of cash flow, but there is pretty big equity
gain during that period of time because we bought a right in the right market
and that kind of just dwarfed the income.
But for me it's also like
something has to be exclusively paying for you to switch it
because you feel comfortable, you're comfortable.
This is all, you know, I think. Is that a no?
That is really scary.
And to a lot of people, it's feeding into my head.
Growing up as getting a job, being stable is looked upon on and also, if,
you know, there's so many stories that they share with you,
like so-and-so went and did a business, went bankrupt, right?
So that that so it was like it was like, ooh, I'm not sure.
And my parents are very conservative of being Asian.
They're very conservative. They are. You sure?
You sure are you going to quit your, like, a really good job, right?
So it's the golden handcuffs.
Really? Yeah.
How did you get your friends and family? And you're.
I've met your husband, by the way. He's awesome.
But how did you get, like, all of them on board?
Because I know.
Because it's almost like as my as my buddy says, it's like right now
you're in the bay. Yeah.
And now you're out at in the ocean, you know.
And that's a nice analogy, you know, because in the bay it's very safe.
But now you go out into the ocean and everybody perceives
it is extremely risky, except for probably now they're going, oh, okay.
Yeah, I supported you all along. Right, right.
But in the meantime, don't you feel that resistance and guilt and questioning
and all that stuff and it like it chips away at your mindset, right?
Yeah, definitely.
So first of all, I do not share that with my parents until I was successful.
So I think that was really good
because I didn't you know, I
kind of set it up in a slow way where I didn't just like quit in day one.
And I think that that's actually probably a better way for people
who want to kind of ease into it versus quit.
They zero because now you have the stress of making money, etc..
So I kind of slowly increase the portfolio and also we stay invested is awesome
because
even though you are actively participating and there is still passive income,
so relatively instead of taking another job, it's
relatively quite low hours on your first couple project.
And also part of what my husband does is I actually include him.
He was really handy, so he renovated last measure before you renovate
a first two units and we realized that we don't work very well together
and that, you know,
you kind of see the economy kind of works.
And I kind of try to show him the numbers, even though he's
not very interested in that.
But we kind of essentially create a team.
He is coming from the builders background,
so it is a little bit resistant because he's seeing his dad lost a lot.
His dad was a developer, lost it all
and then never came back because he's never that never tried again.
You know, one key to entrepreneurship is like
you just take your failure and get up and redo it again.
Some people never get up.
So that was kind of how I get them signed up and was my parents literally.
I didn't tell them what I was doing until I was a certain size of a
all the other guy.
Hey, I'm going to make the jump and funny story over there too.
My dad retired the same year I retired.
Technically retire.
Retirement for me as entrepreneurs is just the minute that you quit the jobs
you don't want to work out.
But for him as to retirement. So we quit.
We retired the same year
and he actually the first two years, he's like, Are you sure?
Are you sure?
Are you sure? But hey, it's already done that like, you know.
Yeah, so, but later on, see
the success is that, oh, I always thought you had the entrepreneur spirit.
That's also the way to say it.
You guys, you and your dad retired the same year?
Yes. Yes. And that's awesome. Yeah.
I think about.
Yeah, there's a 30 year difference between age.