Podcast Episode 87 Transcript

Episode 87: Former Olympian Now Real Estate Investor with Sunitha Rao

So we're super excited for today's guest. We're joined by Sunitha Rao. She's the founder of Griffix Property Group and has an amazing story, amazing background, and is transitioning. And we'll get to this, folks as we do a little later in the show. She's transitioning into the pursuit of financial freedom in a manner that has given me fits over the years, which is long distance investing. But Suni, thank you so much for joining us today. Thanks for taking the time and sharing with us. Thanks for having me. I'm really excited to speak with you. Yeah. So we wanted to have you on the show for a number of reasons, but certainly your path of how you landed, where you did, and specifically why. I think finding your why and financial literacy and financial freedom are things that elude many of us, even those of us that have gotten to a point of awareness where we know we want to find it and we're seeking it, but it eludes us for one reason or another. If you could give us some of the background, starting back six years old, tennis, becoming a pro, just missing being a top 100 player in the world. Amazing story. I think it would provide some great context for the audience to understand your journey. So if you could spend a few minutes on that background, I think it'd be super productive. Absolutely. I'd love to. Thank you. So, yeah, my background is a little bit different from many. I spent ten years playing tennis professionally. I turned pro at the age of 14, retired at the age of 23, and my life up through the age of 23 was solely dedicated to my sport. It was incredibly just eye opening. I got to travel the world.

I got to play on, like, sold out stages. There are so many stages that many would never be able to have, which is I'm incredibly grateful for. But by the same token, it was equally as hard. The lows were just as low as the highs were high. And one of the many things that I took away from the sport was my fear of being broke again. So playing a professional sport, it sounds really glamorous. You're traveling every week, et cetera. People think you're just making bookus of money, buckets of cash. You're going to retire in Monaco. And that was definitely my plan. It didn't work out quite as I had anticipated because the one thing that I failed to and those around me failed to kind of anticipate was how expensive it would be. So if you think about how you save each year to go on vacation, maybe for like a weekend or a week with your family, how expensive that is, how much of a bite that takes out of your budget? Think about what it costs to live that life 30 weeks a year, 40 weeks a year, because that's how many treatments a week a year that we are traveling each week at a different destination. So that is a hotel room, eating out of a meal, etc. The money doesn't stay in your pocket unless you are at the very, very top of your sport.

And I was very close, but I didn't quite get there. Before we move past that, I just want to talk about it because that really jumped out at me as I was doing my homework. Being the top 100 or I think it was 103 or 108 at your highest point. And that was in 2008. You would think being in the top 100 of anything in the world, never mind something as well known and competitive as tennis. I, too thought that there would have been this glamorous lifestyle that was connected to that. Is it because of restrictions within the industry itself, or is it solely unless you're in that top 10th of a percent, the tournament money doesn't flow the way you would anticipate or endorsements? Yes, it's both. So when you look at the earnings of the top athletes, prize money is just a drop in the bucket. The majority of that lifestyle is actually funded by endorsements. Those are for those who sell significant tickets. So they have a lot of visibility. People know about them. And also the way that the air quotations business model of the sport, there is a lot of money being poured into a certain group of players, but you have to be at the very top. So, like, you can be even just inside the top 100 still barely be breaking even. However, if you're maybe top 50, then you're starting to I haven't looked at that. I'm just glad I haven't looked at the prize money in ten years. I retired in 2009, so things might have changed a little bit, but there's still this very diverse kind. There's almost like a Gulf in between the haves and the have nots. And even the have nots are the best at what they do.

I mean, if I was at 108 in the world in real estate, can you even imagine how much money I'd be making? Or just even if I decided to play a team sport that was more loop in terms of Brandon Joshua had more TV time and exposure, my life would have been very different. However, with it being an individual sport, one that is less marketable. It's less able to sell as initial ads. But on TV, that sort of thing, all of that makes a pretty big difference in how much money the players walk home with. That was remarkable to me. And I guess it's perception versus reality. As is often the case, until you've walked a mile in someone's shoes, you really don't understand what's happening on the other side. So you raised your career literally to levels that most can only dream about. Suni, was tennis something special to you at the earliest of ages? How did you follow this path? And I would assume there had to be exceedingly high level of passion, the commitment I can't even begin to fathom. Yes. So something that it was a decision that was made for me. I'm not going to lie decision that was made for me. My father wanted a professional athlete because he wanted to be one and couldn't. And that's not an uncommon story. I was kind of putting the sport.

Thankfully, I had an aptitude for it, and I was able to pursue it. It was more like a need and an obsession versus a love, because to this day, I don't miss it. But at the time, I couldn't envision life without it. It sounds a little bit like competitive relationship. I say that lightly, but I don't make light of those situations just for full disclosure, because I grew up in a violent home. So that's kind of also why I can say that at the time it was very difficult. But once you break out for me, once I broke out of it, it was a much easier and better life. And yeah, the kind of commitment that requires is really unfathomable. It's like being on a diet every day of your life, from the time you're child and everything, literally everything you do, every decision you make revolves around how to better perform everything you put in your mouth, what time you go to sleep, what time you wake up. Everything needs to be around energy optimization. Like what in every aspect because the competition is so thick. If you're not optimizing every aspect of it, you can't even be at the top of your sport. I would assume that being raised under challenging circumstances must have played a defining role in driving life after tennis. Right, 100%, yeah. And that's a really good question. That's eventually what led me to one of my wives for pursuing financial independence. One of the things that I learned at a very early age, far too early, is that economic independence can make all the difference in the world.

My mother was a high school dropout. She wasn't able to really kind of economically provide for herself or her children, my brother and I. So that was the means in which that my father that's a lever that my father used the most, and he knew it. So once I left the sport, there was a time, obviously, when I was in the sport and I didn't have any money, as I was alluding to earlier. But once I left, I was like, all right, now it's time to make something of myself. At the time, through tennis, I rationalize it. It was my dream. That's what I've worked for since I was four years old, like chasing tennis balls until it's dark and I'm cramping and I'm about to throw up. But after a certain time, it's time to stand on your own. 2ft And I would never mistakenly fall into another situation like that, where I was dependent on someone else. And in the long run, that's also what led me to real estate. So after I finished my tennis career, I was like, okay, what's a success looks like. Success looks like having a stable income. Success looks like having a job. It was so very different from the life that I knew, the life of the corporations and the boardrooms and winning through your thoughts and your intellect, that seems very different than kind of like the more brownie lifestyle I know. So I went to College, a six year dropout. So I had to go back to my community College, take remedial high school classes, eventually find my way into a private institution up in Boston for my undergrad, got an awesome job at a Fortune 500 company. And I was in the leadership development program, which meant an accelerated management training program. And I thought things were going really well at first, so had that stable income. Life was good. But then I had this knowledge brought to me where I realized I was told that I was being paid the least of my entire cohort, despite doing things at a very high visibility that no one else was doing. And my rotation manager at the time had said, we know you're good at things, but we don't know what you're good at. And here I was in my late 20s.

I was an Olympic athlete. I had supported myself traveling the world for years on end. No help done so successfully, even if not fully monetarily by the time I retire. And I realized I was relying on this one person's opinion of me to basically control my life. So many of our choices that we make are based on our economic resources. That is one of the largest constraints we have. Economics and time. Right? And so much of my life, by being dependent on this one resource, was being decided by them. And I realized I was not okay with that. So that's when I started looking into other options to optimize my financial standing so that someone else's opinion, any single person, could not drive the economic choices I could make, the options that I had. So you transition into what certainly must have felt like a successful career, right? You're paying your bills, you're able to achieve what at that time probably very much felt like financial freedom, but it becomes the old trading time for money, and you had a finite ceiling that you didn't have control over that you pretty quickly recognize and push through. So I'm really interested in considering the tennis background, the fierce competitive nature which is perfectly suited for real estate and what you're doing now. But was there any real estate influence at all?

Like we go from tennis to corporate America real estate? Just that? No, there wasn't. One of my favorite professors in undergrad said that. And this is pre real estate said that my resume was the most random things he'd ever seen. And I was like, it's not random. Like there's a selection of options that I'm using and sometimes it doesn't always look like what we think it will look like. But when you find yourself in a situation, you have to keep an open mind and survey what all the options are in front of you. And sometimes the best one is not what you had envisioned and what you set your path for prior. So no, there wasn't a real estate background. My father was a business owner, but certainly didn't own apartment buildings or even homes they rent out anything like that. I came across real estate through just doing research and I found a Bigger Pocket podcast and I realized what was possible. At the time I was living in Boston, rent was exorbitantly expensive, like it was going to be taking up. If I want to live in a decent place that was in a good area, it was going to be taking up most of my paycheck, you know, so I didn't live in very nice areas and I was just hoping that I could find a way to breathe easier and still have a decent home and not be strapped after paying for rent or my mortgage. And yeah, after I found bigger pockets, my initial thought was, oh, okay, let me get a Duplex here in Boston and someone else can help me pay for my mortgage and then maybe I'll actually be able to make some financial strides. That being said, I started looking at prices of houses in Boston and realized I'd be saving until I was 72, probably to buy a single home exaggeration. But it was through that realization that I started to look into other options. And that was when I found long distance investing. And even though I couldn't live in the house, it wasn't going to offset my housing expenses.

I could make more money, have that come in, and then grow my financial position in a different way. Honestly, to a much larger extent than just having someone help me with my mortgage. So Bigger Pocket seems to be one of those reoccurring reference points that guest after guest at one point or another was impacted by the show. What other resources? And then we'll jump into the fun stuff. What other resources can you point to? Any books or anything in particular that helped you make this transition into really what was a completely unfamiliar world for you at that point. Yeah. Honestly, BiggerPockets was the biggest one. I mean, I read Rich Dad, Poor dad. Also, like everybody else, I'd read from Tony Robbins, so I'd fully become aware of the power of real estate. But it was through Bigger Pockets that I built the network. That's where I got the books. That's where I listen to the podcast, got all the information. So, honestly, Bigger Pockets was the biggest source for anything and everything I learned. Yeah. So there are common threads that I have found in those of us that have pursued this industry and are now either transitioning or have transitioned successfully to the equity side. Fierce competitive nature, lifelong learner. These are all common themes for us.

And as we transition, I can't advocate enough for the audience to continue to explore, continue to read, continue to learn, to seek out information. You referenced Rich Dad, Poor dad. We have a book club here, and that was one of the books we read maybe five or six months ago. Just so profound. It's such a peculiar book. Its concepts are wildly simplistic, yet they are so profound. And until you take the time to really analyze where you are and what trading time for money means and what financial literacy really means, that's when you can start your journey, if you will, it befuddles me that financial literacy is not an absolute requirement in curriculum in this country. How we are not teaching any of these things to the kids. It's just completely absent from any curriculum I've seen anywhere. Yeah, I agree 100%. Not going to school after 7th grade didn't really stop my success. Other than checking off tick box, checking off boxes and opening doors in terms of what is a normal education, going to a normal College, not being very good at algebra, not knowing any geometry hasn't exactly stopped me. What I see stopping people is not understanding how that works or how to use it to their advantage. Not understanding how money works, not understanding what those with wealth understand about how to use it. That's what impacts people lives more than Earth science. Well, no, I will not use Earth science as an example.

Maybe we can edit head out. I don't know. But you know what I'm trying to say. Points well taken. The curriculum is jam packed with things that we're just not going to use in life for most of us and the discipline and all the things they tell us aside, there absolutely is room for financial literacy. I think that it can have a profound impact on so many people's lives. We're working with a local high school, and we started a book club there, and we're giving a $10,000 grant out at the end of the program to give one of these kids an opportunity to go find a deal and buy property and we're hoping that it catches on. And who knows? We'll see where it goes from there. Suddenly you're now, at that point, you've recognized, okay, this was a good gig, but no one's putting any more ceilings on what I can do. You certainly understand your value, your talent. You're picking up bits of information as you go along from podcasts and books, as we all do. Let's talk about. And this is such a relevant part of the show and why I was so excited to have you on, because a lot of people are where you were at this moment we're describing right now. They are living in cities that are wildly priced. They're finding inflation is far outpacing their earning potential, and they're looking for that freedom. Most experts say it takes 60 to 65 days to break a habit, and it takes another 60 to 65 days to replace that with another habit. And we've broken our habits. We've broken our patterns of getting up and going to work every day with Coronavirus, so many things have changed that the world is really at a pivotal place. So I was excited to have you today again, because a lot of folks are right at that moment that you are at that we're going to talk through now. So you're picking up this information which is available to everyone that listens to the show. What happens next? How do you source your first deal?

What does that look like? Well, I think first you have to get over the I don't know if you operate. I'll try to hold my son. But yeah, I think the first thing is getting over your own fear and figuring out what you need. There's a quote, Stephen Covey begin with the end in mind. I think the first thing, honestly, is to take personal inventory and figure out what do you want your life to look like and then reverse engineer how to get there. So for me, I was working my butt off in corporate America. I was working in corporate finance. Corporate finance on the coast is not an easy career path. It's highly demanding nights, weekends, you name it. Before, like earnings releases, etc. Your life is your job, right. And so I didn't want yet another path of that. My life had been my job for decades, from the time before I was 14 years old, you know, so I was angling for an easier path in the long term, even if that meant more work in the short term. So for me, what that meant was spending more time educating myself. And part of that was because I didn't have money to invest for a couple of years. I was making my way through grad school while still working full time. But yeah, just taking the time to learn so that I knew everything I could. And then that would also allow me to minimize the risk or attempt to minimize the risk that I'd be taking by putting my money in these investment choices. Right. So, like learning where the ups and downs could be and what do I need to know to ask the right questions, to try to make sure XYZ doesn't happen? Because I'm like not going to lie to you, and any investor will tell you that there's always things that happen where you spend way more than you realize and you have to do it.

Otherwise you don't have an investment. Right. So a roof goes out, a contractor runs out on you, and you have to pay again twice to fix whatever was broken or whatever you were doing. You literally don't have a choice. So really, making sure I educated myself was number one. Number two was building my network and making sure I had an idea at least of what I was talking about and could back that up before I started reaching out to people so I wouldn't waste their time. And I could try to figure out how to add value to them because our main currency is what we can do for others. So if we can help others, then there is a greater chance that you can do so in authentically, genuine, good manner. People will be more inclined to help you return. Right. And so then that also helps me reduce my risk of failing. Because you have different people, you have a group mind, you can reach out to different contacts, et cetera, et cetera. So the first two steps really educating and building that network. Both of those were the safety nets under me as I went out into this brand new arena by myself. So education network. Okay, you're starting to now dip your toe. And I would assume before long you've jumped in the pool. And now, one thing about this industry and podcasting, I found it is an unbelievably wonderful community of people that are looking to help. The people I have met on this journey have been so amazing.

And I know I certainly have reached out and helped a number of folks. They've, in turn reached out and helped me a number of times. There are a lot of people out there that want to there's a very communal feel to real estate. There are the Sharks, of course, and we're all Sharks in our own right. But there is definitely a communal feel to it. So you're establishing the network, you think you've got a good base. What does the first deal look like? So for me, the first deal was different from what I was seeing when I was starting. A lot of people were chasing like the C class assets, looking for what they thought would be the higher projected returns. At the time, those were duplexes for $70,000. That could get you 650 right. Each side, you're close to 2% working class or slightly lower economically than working class. And that wasn't what I wanted. So my first deal was actually in one of the more affluent communities. I invested in Indianapolis, and it was a duplex that a lot of people were kind of overlooking because it was in the outskirts of the city. It didn't have an Indianapolis address, but the school systems were some of the best in the area, if not arguably the best low crime. And I figured those are the statistics that would lead me to a better investment in the long term. At the time, I wasn't looking to constantly be trading, selling one, buying another, selling what I had. I want to get something that would be a good long term asset, would be like easier to hold. I would just keep updating it, polishing it, improving the revenue stream. But I wouldn't just be like, hey, I'll give you this. Give me that. I wanted an easier life. So that investment theory actually has worked out really well for me because as I've seen, other friends and other investors kind of get tired of the and especially during cobed, when people who maybe don't think or are unable to plan for the future economically in the same way, they struggle a little bit more when it comes to paying their rents, et cetera.

Whereas when you are in a place where people are planning for the long term because they want their kids to be in the top school districts, they want their kids to be in good neighborhoods, they're thinking more into the future that I have seen extends to also their living situation. They're able to pay rent, they communicate when if something goes wrong and they're able to plan for that, and that helps you, as the landlord, also plan for that and be able to make your payments. And it's less stressed that investment theory has worked out really well for me once I ended up moving to Indianapolis two years ago, and I started to foray into some of the lower class assets to give it a try. I'm going back. I sold it a year later. I was already done, and I'm going back into what initially worked for me. So when you made this acquisition or just outside of Indianapolis, where are you living? Boston. Boston. So when vetting a market, right, not just on this transaction, because I'm sure from what I understand, your eight or nine transactions in at this point, your model is evolving. You're learning, you're adapting. What are some of the metrics that you look at when contemplating investing in a market that you're not able to reach out, touch and feel, if you will, on a regular basis, for sure. So I think at the end of the day, what it comes down to is, are there going to be quality tenants that are going to be able to pay for housing? Are they going to be able to afford quality housing? How can they afford it through their jobs? So what do the jobs look like in that area. Like, are there a lot of different companies or is there just one? Are there a lot of different sectors or is there just one? Is it just the car industry? Is there just one large employer? What happens if something happens to the car industry? I don't think I need to go farther than that example.

Right. Or like, if one employer shuts down, how are people going to afford it? Right. So if you can have several different sectors, several different large employers in that area, giving people jobs, allowing them to have a way to pay for housing, that's one, then what does the future look like? Right. So real estate is not a get rich quick strategy. You have to hold it for years and keep working and keep toeing the line and doing what you need to do. So does that mean when you look at job protections, are they supposed to increase or decrease in that area? Are more people moving there are people leaving because you want more people there that's a larger supply for tenant pool comes on supply and demand. Right. So job growth, that also means unemployment figures are sometimes easier to find. What are unemployment figures like? Are they better than what you can find in the rest of the country, or are they worse? Because let's pick a number out of the hat. 6% maybe that sounds low to you, but what is the national average if everywhere else is what unemployment is, that means there are less people in your area who are able to pay for housing. I don't think you'd want that. Right. You want a place that has lower unemployment figures.

So it's kind of things like that, like what fits in, which other factors fit in with people being able to afford housing. Those are the factors that you need to be looking at. And something that not nearly enough investors do take the time to look at. Is these metrics on more of a macro level? Right. I reference it as buying payments. I'm seeing people time and time again. They're falling in love with today's interest rate. They're not locking them in long term and they're buying a payment. They're not diligencing these things that Suni's referencing. And folks, it's not if the big company shutters its doors. It's not if there's a dynamic change in who may be or what may be the major driver of employment in that particular area. These things do happen, will happen. They are going to continue to happen. These are metrics you must be looking at when investing outside of Homebase, if you will. There are so many factors that you can study to make sure that you're on firm ground, not just in today's world. What we're living in today for real estate is an anomaly. This is not going to last. It never does. It's a cycle, folks. So important that you do the proper diligence. Is there a ratio or is it more location specific? Is it 30% of the average income attributed to rent? Is there any one formula that you look at in particular, or is it really site specific? It's very site specific for me. When I look at an area, I try to see where people are living, what kind of jobs they have, what they're doing and that sort of thing, instead of just looking at it in terms of income to rent, because income to rent can be a large swath, whereas when you're investing, it's hyper local in some areas, it can change block to block.

Right. So that's more of what I would look at. And how are you managing the management of these assets? Absent scale. Right. It's a lot easier if you have five buildings and they're 200 units apiece and you can afford one and a half full time supers and a management company. How do you manage that? For a couple of years? I did use a management company. They would take a percentage of groceries and just take care of everything. After a while, I realized that was less beneficial to me because after a certain amount of time and this was also a benefit of investing long distance, I could afford more units. The flip side adds more units can be more problems in terms of repairs, but having to cycle through those repairs, I also cycled through contractors and found like a good team that I built up. And so that took away a lot of my headaches in terms and my why behind hiring the property managers. They have the resources, but now I did too. So after a while, I took over the property management of my own places, and eventually it would be nice to hire that back out again. But right now, especially since I invest in mostly, like, I think higher economic class areas, it works out for me. It's not as hard as it would be as if my portfolio was in a lower economic class where people couldn't afford the rent, et cetera. I feel like I talked to everyone I talked to is similar to me. I can have those conversations. So how many units, how many deals have you successfully closed at this point?

I think it's eleven deals. So that includes, like, all my purchases, one sale and then a mobile home Park I signed a contract to last year. Congrats. So eleven deals. And how many units does that translate to? Nine. Yeah. Are they all in indoor around the Indianapolis area? Yeah. Okay. Yeah. So as you're acquiring these deals, so many questions, where are you finding the deals first and foremost? A variety of places. Some are off market, some are the MLS. My last acquisition was off the MLS. It's just about recognizing it early and being able to put in a strong and competitive offer in this market. So that can mean cash. That can be a quick close. Yeah. You just have to be willing to be aggressive with it. Okay, so as you're sourcing these deals, of course there are. Which metrics are most important to you? Is it your cash on cash return or is it a cap rate analysis? What are the goals? When Suni looks at the deal, what is she looking for? So the first decision point in my final is price to rent ratio. So I won't look at anything that's like less than maybe like 1.3% price to rent. And then everything I need these days has to be durable because I'm growing this on a single discretionary income. So that doesn't really happen quickly. I don't have 100K cash sitting around ever. I don't have the kind of cash to be able to do this. So I take on debt partners and then I need to be able to exit them by refinancing. So I need to be able to refinance pull out a significant amount of cash. So I need to make sure that even at the time of purchase, I am purchasing it under market. And then the after repair value is much higher than what the total purchase price and repair costs were. Those are two of my big things.

And then obviously low crime. I don't need to be in like the highest school districts anymore. Also, those are so competitive now that getting a cash return on that is insanely difficult. So I'm okay in a lower class area, but it has to be gentrifying, like it has to be improving rapidly. So I'll buy something if there's like flips all around. But that neighborhood, that block is still a little difficult because I know in two years or something it will be a very different story. So the audience is following. Can you explain in your own words what is price to rent ratio? What does that mean? Right. Sorry about that. I should have defined those right when I said that. So price to rent is looking at your monthly rent versus the purchase price. A lot of people talk about the 1% rule. So that means if you buy a house and you're all in for $100,000, you want it to rent for $1,000 a month. So if I'm all in for $100,000, I want it to rent for at least 1300 a month. And then if I'm all in for 100, like when you say Bird, that means buy. That's an acronym. It stands for Buy, Rehab, Rent, Refine and Repeat. So buying cash, rehab it so that you force the appreciation on it and it is now worth more than the cash put into it. You rent it out and then you go to the bank and say, hey, can I get a loan on this? Because there's no loan on it right now. And if you run your numbers correctly, you can take a loan out for, let's say you put $100. I'm not going to do math. Please don't make me do math in my head. I need Excel. That was best. My years of corporate financial, I can't actually do anything in my head. So if you spend 100K all in and let's say the bank will let you take out 100K, give you a loan for 100K. If it's actually appraised for 150, you want to make sure it appraises for 150, and then you can get back all the money you put in and then have a cash flowing rental with your cash not in it at all, which is the ideal scenario for some. There's all kinds of arguments, like sometimes that will cause people to take on too much debt. So that's something to be aware of. But yeah, as long as you know what numbers work for you in your overall portfolio, that's something that I look forward to be so that I can keep growing. Because if I leave my money in an asset, I'm not going to be able to buy another one for a long time, which is why four years later, I'm at like nine doors. I'm growing very slowly, but compared to many.

But that's okay with me. Yeah. So if you're methodical in your approach, folks, what Suni is describing is there's no guesswork. I can assure you she's clearly measured and prepared. So when you're acquiring an asset, you want to make sure that there is the upside required from if the strike price is $100,000 and you know you're going to put 30 or $40,000 in, you need to make sure that there are comps at $200,000, for example, for a refurbished, stabilized asset. At the end of the day, simple to go out and verify. I'm sure Suni is also taking a look at the local lending institutions. If they're doing refi cash outs, what are the rates look like?

Are they doing 70% leverage? 80% leverage, 90% leverage. What does that refi cash out look like against the initial acquisition debt carrying costs and all the other factors that get rolled up into this? And at the end of the day, when you have pulled that additional cash out and you're stabilized, what's the Delta between your principal interest, taxes and insurance and the number that they're actually paying you in writing? So you're actually able to take that money back, pay your investors back on the acquisition and on the construction. Many times you're able to put a nice chunk of change in your pocket. You own the asset and you get to keep the spread between, say, $700 a month payment and a $1200 a month rental. Am I on the right track here? Perfect. So as you're going through this process, are you finding that it's becoming more challenging as you get up to five 6810 doors? We have heard before, and I experienced this at one point in my career. Even if you've got great credit and you've got a great balance sheet, there does come a point where the banks start to say we are not comfortable lending anymore. Income ratio. Yes, there it is. Yeah. So also, not going into the math behind this, there is a formula that I cannot repeat to you on demand. So your bank looks at how much money you're bringing in and how much money you have you're holding in terms of debt. That doesn't necessarily mean you're not making money. But a lot of times I think they look at your tax returns.

Right. And so with depreciation and write off sometimes, I mean, you look like you could be living in poverty. It looks like you're not making any money, even though you're getting the income from the rent, et cetera. So that's when it can get harder to find someone who will lend to you. And that's why this business is all about the relationships you make, the friends that you have in the different areas, and genuine friends who will help make things happen for you, like a good lender who knows that you are good for it, you're successful, you're not going to make risky financial decisions, and they'll find a way to help underwrite that loan. So, yeah, it definitely does get more difficult. But there's also ways around it, right? Like you can pay some loans off, you can do other things to increase your income, et cetera. A good CPA also comes in very handy when it comes to these things, without a doubt. Are you seeing any changes in the market now? Are you seeing any signs of the banks tightening up restrictions, or is it business as usual still? What are you seeing out there? Well, I think things have changed a couple of times with Covet, et cetera. I think last year at one point, Fanny Freddy lowered the amount of investor loans that they would provide, which really was kind of like a punch to the mouth because that just hits your mom and pop landlords. That hits the ordinary people like me trying to just get a leg up in life because, you know, the Wall Street institutions are not using Fanny Freddy to fund their deal. So it's just like how on Earth? But anyway, back to the point that has since been like my last corporate job. I no longer work in corporate finance. I work for a personal finance podcast now, but my last job was in corporate mortgage data. So like the next three years, mortgage rates are supposed to increase slightly, almost every quarter.

So I think that's going to make things definitely very interesting in terms of investing, making sure we get the returns. And for those who flip, there's just this dichotomy between low supply because building stopped for so long and now building costs are so high and money, even though it's getting more expensive, is still historically pretty cheap. So, like trying to make sure if you're buying and holding, making sure like the fixed rate, you're using that to work in your favor, because it's not in your favor long term to get an adjustable rate unless you're going to pay it off. Just knowing there are a lot of things in play. I don't think anyone really knows exactly what's coming, but I think there's enough that it's going to stay competitive for a little while. Yeah. So certainly no one has a Crystal ball, but we have not been bashful about making predictions over the years here. And we recently started ringing the alarm Bell maybe about six months ago when everyone's been talking about interest rates raising for ten years. But we haven't seen that or felt it. But we do think that we're there now, and we do think that I think you're spot on about over the next couple of years seeing three to four increases in rates over the next few years.

And some of the deals that we've seen that folks are underwriting and acting on, they're not as crazy as it sounds. They're opting to take an extra quarter of a point or three eight of a point discount in today's rate in exchange for only being fixed for two or three years, which to us feels like suicide. I mean, there's especially like the multi family sector now because that's gotten so competitive if you are underwriting five caps or four caps and so like a four cap for your audience would be the return on the investment without leverage taken into account. So if your return is to make this very simple, if your return on a seven unit is 4%, but you have a mortgage rate that's going to increase in two years to above five or six if you're paying 6%, but only making 4%, that seems crazy. I've never seen a pro forma right. That didn't work. And that's part of the trick is making sure that you're able to navigate those waters. So the Griffix Property Group, let's just spend a minute or two on services that you're offering. Yeah. So still ordinary person just trying to build her just trying to build her portfolio, her little Empire to have an easier life. I think the biggest thing that I'm really passionate about is helping people invest, making sure that there are other people who can help influence their financial future through investing. So I do some consulting and work with especially like new investors or investors looking to learn about long distance investing. I do some of that, but other than that, that's basically the extent of my services. I also talk to people a little bit about short term rentals because I also dabbled there and I'm growing my short term rental portfolio.

So that's pretty much it in terms of what I offer with a full time job and a rental portfolio, I'm not exactly one of the gurus that you'll see, but that doesn't mean I don't know what I'm saying. No, certainly. And there's a lot to be gleaned from real world practical knowledge and being able to learn from what you're implementing. Now, Suni, give us just a minute or two before I let you go on, where does the journey for you and what is financial independence, financial freedom, look like? Do you have your site set on 1000 unit portfolio or do you have your site set on? Absolutely not, yeah, so extremely ambitious person here, obviously, like caveat. That being said, again, my goal is to live a better life. To me, that doesn't look like working all the time, so at one point in time, I would love to grow faster. Now I'm actually selling off any units that aren't like prime, performing optimally and then using that to convert my current units into pulling them into optimal positions, and only then will I start to grow. So if I can have six or seven paid off houses, bring in my income figure, like my net income goal, I am good with that. There's no need for me personally to be owning a ton of apartment buildings and stuff, I just want enough to have a good life and do what I love to do, which is some real estate, but then travel, go on vacation, do the funding, no, without question. And we lose sight of that.

Even in the pursuit of financial freedom, so many folks we've seen over the years lose sight of what that really means, and you had said something in the beginning, look at the end right before you begin, and I think that that's so important and something that is really easy to lose focus of. A lot of people are lured into real estate now under the auspice of passive investing. I want to scream that from the rooftop, thank you. Not passive, there's a difference between passive and residual, it is residual, it is great. As a residual investment, you have people pay down your debt, where else can you buy a stock and have someone else pay at 10% of the stock price and then have someone else pay down the stock and give you spending money you can't, right, so it's residual, it's awesome, but it's not easy, and it's not passive. Without a doubt, this is a great show.

I really appreciated the chat, Suni, what's the best way for folks to find you? Probably through my website, GriffixPropertyGroup.com, Griffix Property Group, also probably through my Instagram, which is S-U-N-I-R-A-O that's Suni Rao, perfect Sunitha Rao, as always, please stay safe, and, Suni, thanks so much for the time, thanks for having me, be well.