Podcast Episode 65 Transcript

Episode 65: Raising The Cap: How To Raise Capital To Invest In Multifamily Properties

When someone says portfolio loan, what they mean is that the bank themselves will actually hold that loan in house. And why that's relevant and important is because they will take typically, when normal home loan is done, the bank will take that loan, package it up, sell it off, and then charge a servicing fee to whoever the new buyer of that loan is. And that's how the banks generate their money. They can take a small profit now live to fight another day and then retain servicing fees and then companies that they sell those to, they'll package them up into what are called RMBS as a residential mortgage backed securities. And that's how we got the 2008 financial crisis.

Welcome everyone to the podcast. We're joined today by Blake Selby. Blake is based out of Iowa. He's the owner of Selby rentals.Com, and he is a real estate investor, a private lender and is scaling across five or six States already at this point. So as always, we think there's going to be a good bit of value here in this episode. And I've got a ton of questions. So first off, let's welcome them to the show. Blake, how are you doing? Thanks so much for the opportunity. I'm doing well. How about yourself? I'm great, man. No complaints. At least none that you want to hear or the audience. Right? Exactly. You're one of the kind of serial entrepreneurs it appears, right that so often end up on the show. And you're doing a good bit of private lending and real estate investing. But before we jump into today, I'm curious, are you born and raised out in Iowa? Born and raised in Northern Michigan, actually, which isn't too far from where I live now. So most people from Michigan don't even know how far away Iowa is. But the Eastern Iowa portion that I live in Davenport, Iowa, which is the Quad cities, is actually only about 7 hours away from where I grew up in Northern Michigan. So just happens to be the part of Iowa, I mean, isn't too far away. But I grew up Northern Michigan, graduated from Michigan State and then moved out here immediately after. And then when you moved out, from what I understand, you didn't go right into real estate. You only at some point, right? Yes. Immediately did the gym thing. My degree was in kinesiology. So exercise science and I had done back then I did personal training and different things throughout College and even parts of high school. And I had done some competitions and different things for weightlifting and things. So, yeah, it was a good thing for me to do. The gym taught me the fundamentals of business, and then I was able to parlay a lot of that into the real estate sphere. So did you keep the gym or did you sell out or what did you do there? Yeah, I sold the gym, and that was sort of the catalyst for me to really get serious in real estate. I got some good money on the gym sale, and that allowed me to parlay into a strip center. And then from there, I used that to move into a lot of other properties as well. Okay. So how does someone take the leap from fitness and gym to real estate? Were there any influences, as you were younger, were you around real estate or how did that happen? Yeah. My grandfather was the head of real estate buyer for Ford Motor Company. All of it. And so he obviously I heard growing up as a kid, I listened to a lot of the conversations, and so listening to him, that was a huge influence. And it's something I guess you were interested in. And just as that opportunity presented itself, you made the shift. Yeah, I saw it as how can I do something to where I can set myself up to have residual income without having to work more hours or should be showing up all the time. And I didn't love the idea of stocks as a singular investment because of the fluctuation of the market when I was in College. That was right when 2008 had happened. And so I saw the stress that my family went through. My father had a business that really got stressed by the 2008 recession. And so I said, oh, boy, I don't know if I want to trust all my money that I make to saving in stocks and things. So I said, Well, why don't I try something that's a little more grounded, something that can't go to zero, like real estate or if it does go to zero, we've got bigger problems. The connection between Realtors and agents and passive income, believe it or not, is not made as often as it should be. So my guess is what you were trying to do is eliminate trading time for money. Right. So if you're in the gym business and you're there and we experience this on the consulting side, it doesn't matter how good you are at it. You're limited by time, right? As much time as you can lend to that particular endeavor is what you can be compensated exactly, even when you excel at it. And we've done a really good job in the consulting world. And you're able to get paid more and more over time. You're still bound by the amount of hours that you can allocate to any particular project and stop me at any point if I'm off base. But I would imagine you saw this as a chance to say, you know what? I can replace 6% of that income that I was pulling from the gym by buying a shopping center or a strip center. And you had your formula, and you figured, okay, X amount has to go down. I want a cash on cash return on that ultimately. But I wanted to have access to every month we call it mailbox money, right? The money is there. Don't get me wrong, folks. Owning a retail strip center is not as easy as Blake and I are in such a glib manner. Like, yeah, we'll trade time for real estate. It's a science, and there's a lot of different things you can do to win between the lines in all of these different type ologies, but it's a great way to assure yourself or reasonably assure yourself X amount of dollars a month, right from your tenants. And you saw that as a way to replace some of the income from the gym. Was that the blueprint for you? Absolutely. I saw the passive income as a necessity for me if I was ever going to get ahead and I wanted it to be something that was scalable, something that I could scale up. The problem with a lot of local banks and things when somebody gets started is that they doing methods such as the Burr method and other popular methods. The local banks. On paper, those methods, like Burr and all these other methods work. But some people think that you can just sort of form a human Centipede of houses and just keep burring the same amount of money through 100 houses. And while in the olden days, you used to be able to do that, most local banks will have a cap on how often you can do that. They're going to have limits on how far you can go with that. So it's not as though you can just buy a house, refi it use that money to buy the next one refinance, keep making money the whole way through. And then all of a sudden, I have 100 houses that have bank money. That's not how it works nowadays. And I know this because we aggregated, like, 40 different banks in my area. In my area, we have 400,000 people in the greater area. So it's not a small area. And we went ahead and aggregated like, 40 of these banks, and we pretty much picked their brains on what are they doing? Portfolio loans. Are they selling to Fanny and Freddie? What's the limits? What are the thresholds? And what we found is that some of those methods are very limiting. And I was very fortunate to have an individual who did portfolio loans early on in my career. He was actually a member of my gym. He loaned me a million dollars out the gate, and that was huge. So that gave me the explosive money that I needed to move forward. But if you're just going one at a time, that's a very linear growth mode, whereas I wanted something exponential, how can I scale this and get huge? So once we sort of maxed out what we could do with the banks, we leaned on the seller financing portion to acquire more and more and more packages and units, which I then I'm sure we'll get to this, but I parlayed into about a 320 plus unit portfolio that I own, and then I sold off 200 of them, paid off the remaining 100. And however many I still have and then also had seven figures to loan out. So that's private lending. How that kind of came about for me, right. So we covered a lot of ground. What Lake is referencing, folks is the Burr method. It's buy rehab finance, rent refinance, right? Is it rents refinance? We'll just add more Rs. It'll be really cool on paper as he's referencing. It is a great model, right? You get in, you acquire the property, you fix it up, you rent it, it stabilizes your refinance, you pull your cash out, plus you move on to the next project. But what they don't necessarily tell you on all these go become a millionaire programs is you are amassing debt, right? Unless you're doing solid financing institutions, no matter how good your credit is, no matter how good, how much money you have in the bank, you hit a point where they go. You have 20 mortgages, right? You're no longer meet our criteria. And it doesn't matter what your balance sheet looks like at that point. They're just not going to lend anymore. So, Blake, you have referenced earlier portfolio loans. Would you expand on that for the audience just to let them know what you're referencing? Typically, when someone says portfolio loan, what they mean is that the bank themselves will actually hold that loan in house. And why that's relevant and important is because they will take typically, when normal home loan is done, the bank will take that loan, package it up, sell it off, and then charge a servicing fee to whoever the new buyer of that loan is. And that's how the banks generate their money. They can take a small profit now live to fight another day and then retain servicing fees and then companies that they sell those two, they'll package them up into what are called RMBS as a residential mortgage backed securities. And that's how we got the 2008 financial crisis. I way oversimplified that process. So what you want to find, you want to avoid where they just sell it off because their requirements are going to be a lot more stringent and less flexible for you as an investor. Portfolio lenders, they'll allow you to do things like skip appraisals. I just did a series of loans up until this point, up until literally this week, I had no loans. And so now I got an offer that I just couldn't refuse because the interest rate is stupid. It's down in the three s with no appraisals. I'm like, come on now. So they're going to do basically a BPO, which is their opinion of value without charging me anything for it, which is great. And so you can do things that are way more flexible like that. I don't have to disturb the tenants. They don't have to go into the properties, so they're going to give me a quick half a mile, just doing BPO type format. And then I can have my money in the threes, and I'm going to use that to leverage it out and do some other stuff. And then I'll Boomerang it back and pay it off at a later date. But I've already got seven figures in cash, and so I'm going to use that additional money to loan out. I like to keep seven figures in cash because it gives me a huge amount of purchasing power whenever I need to run in and grab a big pack of houses and just jet in and jet out. So people don't quite get this as they should. And I guess they're not in the business. But when you're going to a bank and you're going through all of the crazy things that you need to go through to secure a mortgage, many, many times, those are not necessarily the bank's requirements. These are the requirements of the folks who buy the paper behind the banks. Right. So what may seem like a trivial thing as you're going through the mortgage process, you think you can color a little bit outside the lines and they sell these things in big packages, and you literally can't color outside the lines. That's the whole point of purchasing portfolios. And then as a homeowner or a property owner, you get these notices, your mortgage has been sold, your mortgage has been transferred, right? That's them packaging and selling, packaging and selling packaging and selling. So what Blake is talking about here is when they keep it in house, and they don't have that additional layer of many layers of requirements that they have to meet to sell it on the secondary market. It's typically a nice, easy process. It's internal underwriting requirements. They can color outside the lines a bit. Right. And it makes it just infinitely easier to do. So the next natural question, Blake, is, how do you find someone that's willing to do portfolio loans, right? Yeah. So when we aggregated all of those banks, we basically looked up every bank in our area figured out when I say we my staff and I and we figured out, okay, which of these banks are doing, you can just call and ask. And if the girl that answers the phone or whatever the teller doesn't know, then they'll get you to someone else who might know, but just keep asking, hey, do you guys do in house or portfolio loans, and they'll tell you if they do or don't and what they offer. So most of the bankers know what that means. There's no substitute for hard work right? There probably is. But every time I try to substitute the hard work portion, it seems to get a lesser result, no doubt, no doubt. So you're now lending in six States? Yes. Think we're up to more than that now, but there's at least six. We got Wisconsin, Iowa, Illinois, Michigan, Indiana, Florida. We're doing Missouri. Well, that's seven right there. And then I've got other ones, too. I think we're doing one in Ohio. We got two loans there, and then we're working on one in Arkansas. Yeah, we're pushing ten. Could you give us a sample or an idea of what type of appetite you guys are looking for when you lend? What does the deal look like? So for me, especially in this economic cycle that we're in for your listeners who maybe aren't familiar with economic cycles every so often we have a rise in the economy and a dip. That's just how it goes. That's how it's always gone. It's not to say that it always will. But that's how it's gone for the last 100 years. So I look for patterns. So you look, 1987, we had a big crash. Then it went up, and then the dot com bubble boom, another crash, 2001 September 11. Okay, now went up, went up, went up. 20, 07, 20, 08 crash. Now it's gone up again. Some people say Pandemic was a crash. That's a blip. That was just a blip. That wasn't a crash. So we were due prepandemic. We were due for a massive market correction by all metrics, Warren Buffett index and all these other metrics. I'm not just talking about stocks, but just the market in general. The market we're in right now mirrors pre 2008. It mirrors 2007, not because of the residential mortgage backed securities, but every other type of investment. We have more investors leveraging margin in the stock market. Right now, we have about ten times the margin leverage that we had in 2007, which is very scary. You've got people who predicted the 2008 crash, like Dr. Michael Burry predicting that we're going to have a 95% stock market crash. I don't believe that. I think that's way out there. But with that being said, you got inflation fears. You've got all this instability. We've now marked the 50th anniversary of us being off of the gold standard. President Nixon and 50 years ago pulled us off the gold standard officially for our Fiat currency, which we have our US dollars. So with all of those things going into the soup, I think that we're at least due for a correction here soon because it's just been so long since we had the last one and the PNG ratios and everything else is just crazy right now. So with that being said, when I do loans now, I'm typically loaning at half the value of the asset or less. And the reason is because I don't want to be underwater when the next crash comes, because everyone in 2007 that was in my shoes, they were lending up higher and higher and higher just because they couldn't get loans otherwise. And I find that for the right customer, what I'm offering is just perfect. So I'm a little bit of a niche but I want to be safe in the event that we have some kind of an economic correction. I'm not a doomsday. I don't believe that we're going to have an apocalyptic event that we all need to be getting crossbows and rice and beans for. Right. But at the same token, I'm looking at this going, Holy Moly. I'm watching people buy some of the dumbest stuff I've ever seen at higher prices than I've ever seen and going, wow, this looks a lot like 2007. And in 2008, we had a 30% market correction. That's possible again. I mean, we're way past 2007 levels now. Yeah. I don't think it's possible. I think it's guaranteed. Yeah, it has to be. It has to be. Who knows when it'll be? It might be in five years. I don't know, but I certainly don't want to be caught with my pants down when that happens. Look, I applaud you, first of all, for being discharged. Sure. We talked to a lot of people in the business, and very few folks are willing to go down the rabbit hole. And I'm glad that you are, because this is what I believe people need to hear. Of course, enough cheerleader stuff going on out there. There are realities to these markets, and we're a bit of a student of the markets ourselves, and we agree that we're at a point we're back in 2006 because I'm on the deal making side. At least I was then you see things a few cycles before they report, right. Because the real estate cycle takes so long. Right. We're seeing some of those cracks, and we've been seeing some of those cracks for almost a year now, the pandemic, you have to weigh and measure what exactly happened there. And we dismiss some of the things from the pandemic. But at the end of the day, this is going to do what it does, and it's going to correct. And that's not to scare people normal. You have more opportunity if you're prepared in a challenging market than you ever do in a market like we're in now. That's why I'm considering taking out some loans, which I normally don't do. I have no loans right now, but that's why I'm considering I just got approval on about a half a million in loans that I'm going to take out a stupid low interest rate on properties that are paid off anyways. But I'm going to use that just to beef up my cash. Even more go from low seven figures to higher just to be able to have that much on the sidelines ready to execute Warren Buffett. What does he have? I might be misquoting here, but 150,000,000,000 cash sitting around now on the sidelines or something. That guy is not an idiot. I mean, he's 91. He's still running one of the largest capital firms on the planet. Obviously, I think he knows something about investing at this point. So we did this back in 2007 is when we started to see it. Seven is when we had that moment where it was like, okay, let's tie up some loose ends and let's pull back. And of course, we advised clients to do that. Some did. Some didn't. One point of caution. I want to share with the audience because I got caught in this in 2008, I had done what I thought was right. I was very conservative. I didn't have mortgages in many places. So I went and I applied for lines of credit, right? Because I knew that when it hit the fan, cash would be King. And there'd be a lot of opportunities there. I took out several lines of credit, zero balance across them. And when the crash was in, when everyone kind of accepted that this actually was what was happening, the banks shut the lines of credit off. So this is a point of advice out there to people. If you've been conservative and you're responsible with debt and you have the discipline to leverage those lines of credit, now is the time to do it. In my estimation, take the money out, take the money out, and then keep all your accounts. If you really are doomsday. Like, what we do is all my money, like seven figures that I have in cash. I separate it between every FDIC insured account. So there's limits per bank you have about quarter million is FDIC insured. Fdic is. I can't remember the acronym Federal Whatever Depository Insurance Commission. That's probably not even close. But anyways, it's this agency that insures your money. So in fact, in the event that your specific bank defaults, like many of them did in 2008, you're not just out the money, right? Because you've got. So if you were to keep a million dollars in FDIC insured account, you would lose 750 potentially. So we spread them out among nine different banks that we spread a quarter million, quarter million, quarter million out. And so that cash is all we always any time it goes over 250. In a significant way, we'll move that money into another bank. And so that way we have FDIC insurance on all the cash that's sitting there. I know that's super paranoid, but I just try to assume the worst because 2007, everyone thought nothing would happen, and then 2008 comes and everyone was just blood in the streets. So I want to be ready. And I don't want any of my cash where they can get their grubby hands on it. When things go south, it's not paranoid. And by any measure, it's being a realist and being smart and pragmatic. Right again, folks don't quite understand that. That's a reality. If a bank closes and you've got significant cash in a bank, you may have a real tough time recapturing that money. So splitting up and keeping it under the FDIC regulations for each individual lender is just good sense. Pull that money out of those lines of credit, because I do think we're headed for correction. I'm completely aligned with you there. It's tough to quantify. What will it be this time, right? It won't be the same thing. It's not going to be the same thing. That's for sure. Cms, which are different than RMS. Rms is what took us down in 2008, that's residential mortgage backed securities. But CMBS is commercial mortgage backed securities, and they're doing the same shenanigans they did with the RMBS. But now they're doing it in the CMS. And we saw that in a big study that came out about two months ago where they reported that most of I'm sorry, there was too many of the underlying assets were not meeting the criteria, just like what happened to Residential. So they're more likely to default. And this is on the big commercial. Now, we just saw the stocks take a monster dive Intraday today because of the retail sales reports that came out that were kind of underwhelming while we did have the lower inflation reports that came out the other day. Thank goodness. Right. They were lower than expected. But all that's going to do is it's going to delay the Fed increasing rates. And so there's probably not going to be a rate hike. And so the Fed has out of options. If we have a downturn, the interest rates are so low right now, you can't go any lower. And therein lies the question. Right. So as you had said in 2008, these were subprime mortgages on residential properties. People are buying real estate now, they're not buying real estate. They're buying payments, right. Because of the low interest rates they're going into these tertiary markets. They're underwriting deals based on very limited historical records on rental payments. Right. Prices have appreciated because of the lack of supply at just rates that don't make any kind of sense. And all of these mortgages are tied to a short period of time before those rates start to adjust. Right. So people get into it and they take a three year or a five year, and they feel well, in three or five years, it'll be worth 20% more. Man, that's not what's happening here. And they're buying in these markets where there's no sound fundamentals behind some of these acquisitions. And I think we're headed for a real correction on that side of things. Well, you saw what just happened to Bill Ackman, bill Ackman purchasing Square Capital, one of the bigger investors, His SPAC, that just came out with this special. I don't remember what the spec stands for, but it's basically this giant. His was a $4 billion capital raising program to bolster up a company and get ready for an investment he was trying to merge. I think a couple of different companies and the government just put a Cabos on the stack. But all these stupid investors just throwing money at anything right now, even if it doesn't make any sense, even if there's no. Like you said, there's no underlying fundamentals. It's just silly. Yeah. So it'll be interesting. The stimulus, the second package, if you will, doesn't hit the ground. And by the ground, I mean, 50% of that money has already hit many of the city's Treasurer accounts, but it hasn't been deployed. It doesn't start getting deployed until first quarter of next year. And they were very smart in how they laid this out. And the last deployment, if memory serves me, doesn't happen until 2025, that period of time when they're straddling midterms, they're straddling a presidential election. This cash will continue to flow into the market. I'm real curious. The impact the stimulus is going to have. And what happens now when rates go up as a nation? Can we afford the debt, right? No, we can't. So if we can't afford the debt, the rates stay low. What happens? We're in uncharted waters here. Uncharted is a great word, because there's really two outcomes. Either one, the debt becomes when stuff hits the fan. The debt either gets foreclosed on defaulted and those rippling ramifications happen there. Companies shutter, things happen, people lose their savings or more money is printed. And I think what we're seeing with the modern monetary theory, the MMT, or the new money printing that's going on right now with their Fiat currency, which is again, hasn't been backed by anything for the last 50 years other than consumer confidence. And we'll see how long that stays in place. If you look at those two options, it seems like this administration, even the previous one. I hate to say it, but they even went toward the money printing machine. And I do worry, because if you look at the Weimar Republic or however you say, Weimar Republic in Germany, and they were having, like, 3000% inflation going on, which is just unsustainable. If you look at Zimbabwe and what happened there or Venezuela, even modern day Venezuela. And look at what the Venezuelan Bolivar is. Their dollar over there in Venezuela. Go look and see how much the Bolivar is worth trying to buy something with a Boulevard. Good luck. You know what I mean? There's some kind of a video I watched of a gentleman going through Caracas, Venezuela, and he is going up to a hot dog vendor and saying, how much is it to buy a hot dog in Boulevards? And he said the hot dog vendor said basically about a few weeks worth of normal workers wages. We'll buy you one hot dog. So that gives you an idea of the inflation problem they have over there. Now it turns out that the inflation numbers weren't as bad as we were thinking. That just got released a couple of days ago. That report. And so the markets did stabilize out. But then as soon as that good report comes in, we just get this terrible jobless report and spending for retail sales. That report came in pretty terrible Intraday. Today we had about half a 50 point dip on the Dow, which was pretty. I'm sorry, half a percent dip on the Dow, which is pretty significant Intraday. I think that's paired off some of the losses there. But you look at all this stuff and it is very worrying. So it's like, what do you do? Do you go just invest in a bunch of gold bars like Palantir, the big IPO company that just bought what, $50 billion worth of gold bars or something? I mean, to me, buying gold isn't going to help you because Gold's even overpriced right now, everything's overpriced. So you buy gold, you're still going to lose out. So I think hard assets, the day where they come in and repossess the average American. I guess property is the day that the whole thing is over anyways. Right. So I think by holding real estate and real estate backed assets, I think that's a smart way. I think the US dollar has probably seen its best days for a while. So holding a bunch of cash like I do can be a little scary, but I have to have it for purchasing power, because sometimes even if inflation is 20%, I can make more than 20% of my cash. I can still beat inflation more than the average person can. So the rentals that you're amassing are more on the residential side or commercial side residential. So I'm doing single families. I want things that most of my rentals are single. I have a couple of apartment buildings again, my future plans and even current trajectory has been that I'm not adding any more rentals, but I am loaning. So I want my cash tied up in property. But I don't want to be an owner of the property. And so I just found that that's a much better for me to provide ancillary services and do private lending and then have a bunch of paid off properties or close to paid off. Now, if I'm going to get this new small loan package. But the way I've seen it, a single family is so easy to basically do dispositions on because everybody and their brother. If you look on your Facebook list of friends, right. How many people would be interested in at some point in their life buying a single family house? Most right. Probably most have thought, oh, yeah. It'd be nice to own a house. How many people have you thought would want to buy a Duplex or an apartment building? Way smaller number. Right. So I mean, if you look at who you can unload those things to. So for me, it's been single family, but there is tons of money in apartments. There's tons of money in commercial real estate. You have to know exactly what you're doing and have some kind of a competitive advantage. But someone such as yourself, you probably could smoke the average investor on apartments or multifamily. Right. Because you're better at it than most people, right. For us, the issue has become you're right. You need a competitive advantage. You need a disruptor. We're using our experience and our knowledge. But we're also developing technology and some app stuff that has now grown into a full blown technology company because we believe that there's some safe space there. Oh, yeah. But for us, legislative threats have become a massive I mean, it wasn't even on the SWOT analysis 20 years ago, didn't even appear. Now legislative threats is top it's. Number one. The issue with and the reason I think you saw divest and some of these huge funds start to follow the decentralization pattern. And buying the single family homes in the secondary markets was because they wanted to get out of all of the regulations. So many of the benefits from a tax perspective and from the ability to take things and destabilize them that used to exist don't exist anymore. And as the society becomes more and more litigious, there's less and less incentive. Let's face it, that's what it's about, right? Is the risk and reward. Is it worth the risk for us to take down and continue to take down apartment buildings? Is it worth the risk to continue to take down commercial assets? And there's ways to hedge? And there's ways to be smart about it. But you really have to be concerned legislatively about what's happening around you. You can't operate in a vacuum anymore. Okay. This world has given us access to everything at our fingertips. Right. And I remain shocked how few people are taking advantage of that. Blake, you're one of the very few people who I've spoken to that has this level of understanding. Thank you. What's happening around you. So I applaud you with what you're doing. Are you concerned about legislative threats where you're based out of now? Oh, yeah. I mean, you look at Illinois, for example, even the properties where we do ancillary services, like just kind of managing or whatever any of the other properties that are in Illinois, we've got several hundred, 300, 400 properties that my staff looks after for friends of ours and the Eviction moratorium. While the federal moratorium is gone, the Governor Pritzker has legislated a state Eviction moratorium. Still, it's there. We're just now being able to start processing Evictions. And some of these folks haven't paid rent since 2019, which is bananas. And now we're pushing 2022 here. So these are big problems in sea areas with C class, even some of the higher ones. So we're going in and keeping abreast on that and making sure that all the grant monies are applied for for everybody that we're working with. But with that being said, the grant money didn't even come close. It probably didn't even scratch half of the rent it was owed. And then all the ensuing loss during the time. So I was great because I pivoted out. I pivoted out of all this stuff right when Covet hit. So that was right around the time when I sold 200 of my 320 units and paid off the rest of them. And the ones that I paid off were all pretty turnkey. And most people were paying rent. So for me, I didn't really get hit hard. But the folks that did were the ones that were super leveraged in C class areas in blue States, States like Illinois, where the Eviction moratoriums basically said, anyone who doesn't feel like paying rent from 2019 into 2019 to now, you're good to go. And so that's tough on a mom and pop landlord. So that's one area of legislation that I'm worried about that's kind of on a state level. But some of the other areas of legislation that I'm worried about is these groups that are advocating for ending private property rights. Now this is down the road down the pike. But there's kind of this attitude, this general unrest that I'm feeling in the United States right now and across the world where people have nots are starting to look at the haves and going, hey, wait a second. Why don't we own the important properties? Why do they own the properties? They're looking at the fat cat landlords and the property owners. And what they don't realize is how much expense and how many jobs we provide and the expense ratios. We're getting hit on all angles. We're getting hit from the tenants not paying. We're getting hit from the local municipalities doing code violations, and then we're getting hit from taxes and we're getting hit from the banks. So we're getting squeezed out as landlords. So yeah, legislatively. Absolutely. I do worry there's tons of other legislative things I worry about, too. What about you? What are some of the things that you worry about? Legislatively? Yeah. We talked about this a while ago, and unfortunately, we're seeing it come to bear. But good cause eviction. Albany Commons City Council passed good cause Eviction, which essentially says that if you don't follow certain criteria in your lease and you get to the end of the term and you don't renew or you don't get people out. And we do this all the time. People in the business. When you have good tenants, you don't raise the rent, right? You work with your tenants and you do what you can for everybody and what they've basically put in there is good cause Eviction, you'll have to go to court. Even if they don't have a lease, you can't get your tenants out, period. You can't get them out. So I know that isn't registering for a minute because it sounds completely insane. So about a tenant in and they've been there for five years and the lease lapsed, and I just want to get them out to sell the home or to renovate the home or to move into the home can't get your tenants out anymore. You have to have a good cause and go to court. If a tenant complains about a repair, the city can now send their contractor and good luck with that. Bill and do renovations. And bill you back as the owner. And of course, that contractor is going to cost three times as much as what you could have got it done for or more. We have coming up for debate in City Council Friday. There are proposing commercial rent control in New York City. Well, and the problem is they don't understand it. Or maybe they do, and they don't care. But the landlord can only get squeezed on so many areas before it's just not profitable anymore. And if you want to see a true economic collapse, make it not profitable to rent. And you will see a rent crisis like you have never seen before, because no one will want to be landlords. Everyone will just either Airbnb their units or they'll just sell to homeowners or sell on contract. Right. And that's it. That's all they're going to do. They're not going to want to rent, and they're certainly not going to want to rent to C class individuals who they think are at high risk. And so what's going to happen is there's going to be this massive housing crisis? And then I predict that many years in the future, hopefully this doesn't happen soon and across the US, but the government will step in and they'll say, well, capitalism didn't work for rentals. So the government needs to step in. And anyone who owns more than five houses, the government is going to seize the property. I mean, this is way down the road because they're not going to be able to get away with this anytime soon. But I see the writing on the wall. I see where this is headed. It's super scary scary for my business, too, because not so much from the lending. I mean, yeah, from the lending standpoint, too. But I'm into it for solo on each property that by the time if it starts hitting me, that means the whole country is underwater, right? Yeah. I'm sorry to interrupt you there. 50%. Ltv. I circled it, right. Like when you said 50%, I said right away. Okay. He knows exactly where the score is here because we're putting together a fund for defaulted notes. I think that's where there's going to be a lot of opportunity in the coming years. So we're putting the framework together now. But when you're leveraged at 50%, like you said, if we get to that threshold, it doesn't matter. Literally. It sincerely doesn't matter. It doesn't matter. Yeah. Once you get to that threshold, even if you had gold, you are going to be screwed. You know what I mean? People don't realize they're like, oh, yeah, but I'm just going to buy gold bars. Yeah, but look at what the price of gold is right now. That price is going to fall too. You think the average person on the street. What are they going to pay you for with a gold? I mean, deflated currency. You're not going to want that currency anyways at that point. So it's like, what are you going to trade a gold bar for food if we get that dire, if things get that dire and it's cannibalism and all kinds of craziness, believe me, this is way out there. I don't think that's going to happen. But if it did get to that level, gold is not going to save you. And you lose money buying and selling gold all the time. Every time you buy a piece of gold bar, you lose money. Every time you sell a gold bar, you lose money. Assuming just from the transaction costs, it's like real estate. You're going to pay a realtor you're going to pay. But in gold, you're paying the person who gets all the smelting and all the different things. I wish I knew more about that process. I don't I'm probably butchering it. But I've looked at all the hedges and all the possible alternatives. And I don't think stocks will save you. People say, oh, well, if you're worried about that, just invest in good companies and stocks. Yeah, but just like landlords, these good companies are getting pushed in, like you said, legislatively on all angles. I mean, they own buildings too. They have workers and they got to deal with unions and they got to deal with this other stuff. So again, if you make things unprofitable, it will crash because people will just not participate anymore. So if people say, oh, rents too high, let's do a rent control, and then half the landlords just fire sale the properties and disappear or don't sell the properties. Just let them go. Let them get dilapidated. That can cause a major issue, because now is the city going to come in and fix those properties? They can't afford to. They think they can. But if they don't get paid back, I mean, just the amount of money that you would spend. I remember on we had, like, 320 units. I was spending like 100,000 minimum per month on maintenance. You know what I mean? $100,000 a month on maintenance. Government doesn't have that kind of money. They can't print enough money to cover all that maintenance. There's no way that's on 300 units, you imagine 300,000. 3 million units. I mean, they don't have the money to do it, especially if they're not collecting rent. And if they're paying for the people's rent too, that's why we have private property, because landlords are willing to sacrifice things that a government worker may not be willing to do. It's a sin because so much of the legislation is well intended. But they make examples out of the bad actors. And then the people like us that stay on the right side of right. We immediately pull back. Right. We just don't want to get caught in the fray. So we pull back. And when you start losing us, it becomes problematic. And anyone who is an advocate for government owning properties, just go take a look at any one of the government owned housing complexes in New York City, and you'll get a real quick dose of the difference between the private sector and government run buildings. And I'm not saying landlords are perfect because there's enough bad ones. That all a bad name. But there is a balance. There is a right way to do things, and there is a way to keep things moving the way they should, and they organically naturally should go through their process without, like you said, forcing. If you're going to create rent control for commercial or for any asset class, for that matter, are you going to cap municipal charges, right? Water and sewer in New York have gone up 5% a year for the last ten years in a row. That's a 50% increase you can't keep up. They wonder why rent is going up, cost of labor, your new charges, violations and ticketing. It's tough. I predict that what could happen is we could have this perfect storm where if the scales in certain States, I think it'll start at the state level first, because in Iowa, it's still very profitable to be a landlord. But in Illinois, which I'm right on the border of both. And I own stuff in both to do ancillary services for tons of properties in both. In those areas. In Illinois, it's almost not profitable. It's almost not profitable. It still is. And this is for guys who have bank loans, right? If you've got loans against the properties, you want to see some real chaos, make it not profitable with no bank loans on the properties, then you're going to see when it's a negative cap rate when you start seeing negative cap rates on. Again, I don't think this Stuff's going to happen in the near future, but unfortunately, this is like the spirit of America and the way that progressive nature. The things are moving people. They don't care how it gets done. They just say, hey, my rent is too high. I don't care how it gets lowered. Let's just put a rent cap and they say, hey, my landlord didn't fix my stuff, but they don't see that. We're given the parameters we have. We're doing the best we can, right? Yeah. It's going to be an interesting few years. But again, I believe that there will be unprecedented resident opportunity between the lines and those that are disciplined and delayed gratification some of their core principles. And they put themselves in the right spot. They'll find opportunity. They always seem to. So you scaled pretty quick. You've got quite an operation going on here. Any books that were of any tips you can offer to the audience? Yeah, I'll give you a few books. Some of these are more generic books. But let me start with one that's really specific. One is called My Life in 1000 Houses by Mitch Steven. That's a really good book. I love that book. Actually, I've listened to a few podcasts and other people talk about that book too. It's just this very grassroots shoestring budget kind of book on how to just kind of find the bargain properties and do really well with that kind of thing for scaling, for acquiring units, letting people know you're in the space, sourcing buyers for your stuff. It's a really good book. I enjoyed that one. A lot more of a general book, though. Like The Richest Man in Babylon was a good book just for kind of overall mindset and philosophy. That was a good one right now. I'm reading a book by Carly Fiorina, who was a Republican candidate for President and talking about her struggles with being a CEO of HP and moving up through her ranks at at and T. So like, I read a very eclectic range of books. Anything that just helps me understand how the world works a little more, even if it's not directly real estate. Like the book Shoe Dog by Phil Knight, the founder of Nike. That was a great book. I loved that book. Just it talks about being a CEO and all the problems they have to deal with, the things they have to overcome. And there's always little Nuggets you could pull out of those books and take back to your own business without a doubt. I appreciate you sharing that with us. Of course. What's the best way for folks to get a hold of the company? Yes. So on my hat here. Shelby Rentals dot com is my website. That's got all my contact info. Youtube channel. We've got like little fun videos we put out for just free stuff. We don't charge anything for education and you can submit loan deals if you want to get our financing or funding. We have a little deal submission thing on there. So we kind of have it all in one spot, which is nice. Perfect. Well, I really appreciate your insights today. You listened up because Blake hit on some real Nuggets here today, some really valuable information. Yes, we went deep, didn't we? We got pretty deep on this one. Now you're a definite call back after guy. I have a lot of things I'd love to run past you. So we'll be now. That sounds fun. Alright, man. Thanks for the time. Thank you so much for the opportunity. Take care, Blake. You too. Now, as always, everybody out there, please stay safe.