00:00
sequence of events in which i lost
00:01
everything and ended up 26 million
00:03
dollars in debt
00:04
uh so that ended up ended my
00:06
multi-family career uh but i rebuilt
00:08
myself through
00:09
um american homeowner preservation ahp
00:12
which started out as a non-profit to
00:14
help families at risk of foreclosure
00:15
stay in their homes
00:16
we started this in 2007-8 i used my
00:19
experience
00:20
from when i had when i was overwhelmed
00:24
with debt and i was able to use that
00:26
experience
00:28
with families across the america
00:30
millions of families who are now
00:31
um struggling with unaffordable debt and
00:34
i was able to use that experience to
00:36
devise strategies that were helpful to
00:38
them
00:38
uh we started out as a nonprofit but we
00:41
um
00:41
eventually
00:45
became a for-profit and started buying
00:47
the mortgages and that’s where we really
00:49
had uh the most success both in terms of
00:51
company profitability but
00:53
also in terms of achieving our social
00:56
mission we could buy these loans at big
00:58
discounts from banks
01:00
and hedge funds and uh in polls and then
01:03
we would um
01:04
share some of those discounts with the
01:06
families um and we were able to achieve
01:09
some
01:09
uh and have been some great results over
01:11
the last decade we’ve purchased more
01:12
than
01:13
10 000 distressed mortgages
01:16
across the country and we’ve also
01:18
morphed into
01:19
a couple of other businesses we still
01:21
buy mortgages but we’re also a national
01:23
servicer
01:24
hp servicing we service across the
01:26
country
01:27
um both for loans owned by ahp and loans
01:31
owned by third parties
01:32
and we recently started our last year
01:34
started a
01:35
another platform called pre-reo where we
01:38
are able to um
01:40
serve as a platform for hedge funds and
01:42
eventually banks
01:43
who want to sell their distressed
01:45
mortgages to
01:46
uh local investors who can simply buy
01:48
them one by you know one offs one by one
01:51
and many times we’re selling to you know
01:53
a real estate investor especially in
01:55
today’s market where there’s so few
01:57
reos uh many a times it’s attractive to
02:00
buy a pre reo which is the distressed
02:03
mortgages
02:04
a distressed mortgage earlier in the
02:06
cycle and
02:08
um and typically at a much greater
02:10
discount than what they could buy an
02:11
reo4
02:12
so that’s what we’ve been up to uh and i
02:15
think
02:16
you know with with uh with what we
02:18
anticipate
02:19
to be a significant you know market
02:22
disruption you know in the next six to
02:24
12
02:24
to 24 months you know everything we do
02:26
today is kind of geared up for that
02:29
okay very good uh thanks for for that
02:32
introduction
02:34
a lot of our listeners still are in the
02:37
commercial
02:38
field right a lot of them are
02:40
multi-family investors but also in
02:42
retail offices and so on
02:44
but i think it’s very valuable to hear
02:49
from from your end on the single family
02:51
side how
02:53
things are going uh right because
02:55
obviously
02:56
multi-family particularly in the b and c
02:59
class base where a lot of
03:01
private investors are investing in
03:04
it’s not in a back it’s not operating in
03:07
a vacuum right
03:08
whatever happens in the single family
03:10
world has a direct impact on multifamily
03:13
too particularly b and c
03:15
class properties and that’s only the
03:17
case when it comes to
03:19
to rent increases obviously with single
03:22
family homes as we know now
03:24
with kobe 19
03:27
having that massive impact with
03:30
with property values uh jumping
03:34
uh anywhere from 10 to
03:37
20 30 sometimes even more in certain
03:40
markets
03:41
and that makes affordability obviously a
03:44
big issue
03:46
which pushes more people into into the
03:49
renting
03:50
rental market which certainly short term
03:53
has an impact
03:54
a positive impact on the multifamily
03:56
space
03:57
particularly in the b and c class space
04:00
but i wanted to get a sense from you
04:04
how you see that uh what is happening in
04:07
in the single family world what has
04:09
happened over the last
04:11
uh over the last years since call with
04:13
19 hit
04:15
and how also
04:18
from an investor perspective what the
04:20
impact was for people that invested in
04:22
directly in single family homes as well
04:25
as investing
04:26
in notes that obviously you’re also
04:28
offering
04:29
investors a platform to invest in in
04:32
these notes
04:33
yeah i appreciate you sharing that
04:34
downtown we we’re powered by
04:36
crowdfunding so
04:37
actually investors can come to our site
04:39
ahpservicing.com
04:41
and invest in a fund that invests in
04:43
distressed mortgages and we’ve done
04:45
we’ve been crowdfunding since 2013
04:47
we’ve done this is our sixth fund uh we
04:50
did five
04:51
we did four 506 c funds which are funds
04:55
which you can crowdfund you can
04:56
generally solicit
04:58
but you can only take money from
04:59
accredited investors so that was the
05:01
first
05:01
four funds in 2016 we did our first
05:04
regulation a plus offering which allows
05:06
us to generally solicit
05:08
but also accept investments from
05:09
accredited and non-accredited investors
05:12
and that was a big um
05:13
um turning point for us in terms of um
05:18
accessibility to just almost anyone can
05:20
invest and
05:22
one of the things we did was we lowered
05:23
our minimum investment which was
05:24
previously ten thousand dollars we
05:26
lowered it to a hundred dollars
05:27
and so for a hundred dollars anyone can
05:30
invest online they could do it in a few
05:32
minutes
05:32
and that was a um it was part of
05:35
marketing
05:36
because it it was wow they you can
05:38
invest for only a hundred dollars
05:39
but also i think it gave a really low
05:42
entry point a really easy entry point
05:44
for investors to
05:45
to participate and we literally had one
05:47
investor who put in a hundred dollars
05:49
and like three or four months later they
05:51
put in a million dollars i think the
05:52
first time it was just okay let me see
05:54
how this thing works and it worked and
05:55
so they put in a million
05:56
so there is a um uh i mean
06:00
people say crowdfunding how much money
06:02
can you raise we’ve raised almost 100
06:03
million dollars
06:04
online through crowdfunding so it’s been
06:06
been um
06:07
been really helpful now um
06:11
but we own tens of millions of dollars
06:13
in loans uh when covet hit
06:15
and i’ll tell you i was very concerned
06:17
both you know loans and
06:19
some reos and i was thinking oh this is
06:22
going to be really bad for our book you
06:24
know we’re going to
06:25
um there’s going to be some um value
06:28
adjustments and
06:29
and i was thinking it was me value
06:30
adjustments going down
06:33
what’s happened as you alluded to has
06:35
been the complete opposite
06:37
uh we started seeing it last summer
06:39
where we had our first one
06:40
we had we’ve actually foreclosed on a
06:42
home and i’ll just give it an example in
06:44
akron ohio
06:46
and at that time we had an agent go out
06:49
there
06:50
and i believe they think that hey if you
06:52
do a little bit of work we can probably
06:53
get the sold for
06:54
80 to 90 000 and uh but because of covid
06:58
we were not able to get the deed
07:00
until july and so now we were able to
07:03
get the need we could finally put the
07:04
property on the market
07:05
and uh and this is the sheriff because
07:07
the sheriff’s office they closed and so
07:09
we couldn’t even get the deed from the
07:10
sheriff for all
07:11
all this for months but now we put it on
07:14
the market we
07:15
and we send the agent out there say hey
07:16
you know let’s get it listed you know
07:18
what do you think you can sell for he
07:19
said
07:20
probably 120. so it went almost a 25
07:23
increase in in just a several months and
07:26
we put it on the market at 120 and again
07:28
this is last summer
07:30
uh multiple offers and we had one offer
07:33
which i think was 128 so 8
07:35
000 over asking and they said hey
07:38
there was some kind of clause in there
07:39
that if there’s any other offers
07:41
you know we’ll match them up to an
07:42
additional five thousand dollars uh so
07:44
that’s that’s the
07:45
the buyer we went with and uh that has
07:48
only escalated i mean everyone hears the
07:50
stories now we had one in
07:52
i mean it wasn’t ours i wish it was one
07:53
in california that sold for
07:55
a million dollars over asking price and
07:57
you hear these stories
07:58
uh that just across the country uh
08:02
like you said 10 20 30 appreciation
08:05
in in many times less than a year and uh
08:08
that has been great for our book so all
08:10
these assets that i was concerned about
08:12
in kova
08:13
it’s almost now great some of them were
08:15
were not resolved
08:16
uh before colgan because now we’re you
08:18
know to the extent they’re getting
08:19
resolved whether it’s
08:20
you know um whether it’s an reo being
08:23
sold or we get a deed and loot from a
08:25
family and we’re selling that property
08:26
or we are doing a modification of a home
08:29
of a of a loan and now selling that that
08:32
loan back into the market after it’s
08:34
performed for six or 12 months
08:36
in all cases the prices today are
08:38
significantly better than covid
08:40
and that’s been very very good for for
08:43
for um for ahp for our funds as well as
08:47
um i think just a lot of investors
08:49
anyone who was sitting on
08:50
on on assets when covet hit and was able
08:53
to make it through those first two
08:54
months i think by and large are doing
08:56
pretty well today
08:57
uh but that all said i get concerned
09:00
that you know with all this wild
09:01
appreciation
09:02
it’s we’ve seen this before i mean i’ve
09:05
seen it a few times and i’ve been in
09:07
real estate since 1990
09:09
and i you know usually these these wild
09:11
up
09:12
um you know there’s a site uh
09:16
this is all cyclical and at some point
09:17
you know goes up up up up up and the
09:19
more it goes up
09:20
you know the the the the greater the
09:22
fallen i really think there’s going to
09:23
be
09:24
um some correction coming up and i think
09:25
that will
09:27
as always you know the the distress
09:29
typically creates the the biggest
09:30
opportunities um
09:32
for investors whether it’s multi-family
09:33
or whether it’s notes or whether it’s um
09:36
it’s single families and i think that’s
09:37
uh that’s coming and with
09:40
it was obviously the end of the upcycle
09:41
when covet hit and i thought that was
09:43
going to be the trigger for it to go
09:44
down now it’s gone up
09:45
but it’s it’s there’s going to be
09:47
another side of this
09:49
yeah it’s really crazy right
09:52
also on the multi-family side we we
09:55
already thought that in
09:57
1819 that we really are hitting the
10:00
plateau right and it
10:03
was really entered into 2020 with uh
10:06
with the expectation that it really
10:08
cools
10:09
calls off they’re not and calling 198
10:12
everyone was scared
10:14
in march of of uh 2020
10:17
a lot of lenders accident particularly
10:19
on the bridge side cmbs side
10:22
and then things improved very quickly
10:25
obviously the
10:26
the forbearances that the agencies were
10:29
granting and
10:30
other lenders uh eviction
10:34
uh restrictions and all that blood
10:36
combined with
10:37
with stimulus uh money that was
10:40
aggressively pushed out it just
10:42
helped to uh to alleviate that
10:46
that situation in the multi-family world
10:48
we
10:49
obviously hospitality and retail was a
10:52
very different story and
10:53
still struggling hopefully comes just
10:57
out
10:57
out of the out from from the bottom now
11:01
so i think what you’re
11:05
telling us here is very similar also the
11:07
multi-family side where
11:09
uh you mentioned for for your portfolio
11:12
for
11:12
for investors and i think also all the
11:15
various lenders
11:17
it was really uh very helpful with with
11:21
all these appreciations right you
11:22
mentioned there is not much of
11:24
of reo anywhere on on books
11:28
which is not really a surprise right
11:30
when you have all these appreciations
11:32
so if someone is in a in a house that
11:36
they cannot afford
11:38
in a typical market you have to
11:40
foreclose
11:41
right because they they cannot sell and
11:44
they cannot service that debt so it
11:45
needs to be foreclosed but now
11:48
instead of having to foreclose the the
11:51
owner just sells that property for
11:53
and very often even makes a profit and i
11:56
think we see the same thing really on
11:58
the multi-family side we have seen a lot
12:01
of
12:01
properties that have been mismanaged
12:06
the sponsors and operators are not do
12:08
really have not done a great job
12:11
but because the appreciation in rents
12:14
and then noi
12:15
and the contraction in cap rates they
12:18
were still able to sell these properties
12:20
at the profit for for their investors
12:23
right
12:24
so i think we have a very similar
12:26
situation on the multifamily side as you
12:28
see
12:28
on the single family side and it’s only
12:32
a concern of what is going to happen
12:36
going forward why because we have
12:38
extremely low cap rates why can cap
12:41
rates go lower we have inflation uh
12:44
pressure which will have an impact on
12:47
uh on the longer uh end of the year
12:50
curve which then has
12:52
an impact on borrowing cost which that
12:54
has an
12:55
impact also on the cap rates right at
12:57
some point
12:58
you cannot contract cap rates when your
13:00
10-year treasury moves up
13:03
so there is only a similar concern on
13:06
on the multi-family side the question is
13:08
when is it
13:09
when is it going to turn right
13:13
right now similar to what you see on the
13:16
single family side
13:17
at interest in multi-family by investors
13:21
is just
13:22
through the roof right everyone wants to
13:24
invest in multi-family
13:26
so there is such a high demand which uh
13:29
pushes
13:30
again cap rates even lower
13:33
and uh you have more and more people
13:35
that that are
13:36
investing in multi-family so do you see
13:39
the same thing
13:40
uh on the single family side with with
13:43
investors still
13:45
rushing into single-family homes too
13:48
investors and home buyers i mean
13:50
everybody’s caught uh you know is very
13:52
enthusiastic the low interest rates make
13:54
it
13:54
affordable i mean we we have an
13:56
origination army hp mortgage direct and
13:58
we
13:58
uh we are seeing situations where we
14:01
just did one
14:02
recently where the the
14:06
tenant purchased the home where she was
14:08
renting
14:09
from the landlord and her rental rate
14:11
was eleven hundred dollars uh
14:13
and her all-in payment principal
14:16
interest um
14:17
taxes insurance and mortgage insurance
14:19
was 455
14:20
so she cut her payment um her housing
14:23
costs by more than half
14:25
and that was just dramatic so when
14:27
people see those types of numbers hey
14:29
it’s cheaper to buy
14:30
than to rent uh we are
14:34
it makes financial sense to do so now
14:36
the unfortunate part is the reason
14:37
they’re buying
14:38
their their payments is so cheap is
14:39
because the rates are so cheap they’re
14:41
still
14:42
it makes them less sensitive to the fact
14:44
that hey this price is kind
14:45
is historically high what you’re paying
14:48
for the for the home
14:49
but if they can afford it it makes sense
14:51
and these are typically buying
14:52
fine today at fixed rates so um it’ll
14:54
keep their their housing costs low
14:56
but that is put you know look it’s
14:58
continuing to push these up and uh
15:00
it is a little bit um concerning now um
15:06
well concerning and also you know
15:07
there’s going to be an opportunity but
15:08
it also
15:09
what happens and what i anticipate
15:11
happen is today
15:12
like you said if a property owner gets
15:15
into
15:16
trouble they can oftentimes sell and
15:18
walk away with some money in their
15:19
pocket so
15:20
they’re happy but lenders today if a
15:23
homeowner isn’t willing to sell
15:25
some homeowners uh if they have um if
15:28
their income was disrupted by covet
15:30
then they are there’s foreclosure
15:32
moratoriums put in place for them
15:33
which is uh was the right thing to do
15:36
but then
15:36
there’s certainly some people in there
15:38
who weren’t impacted by covet but are
15:40
not paying their mortgage because
15:42
they can do it uh i think there will be
15:44
a um
15:46
once all these foreclosure moratoriums
15:48
left you know we’ll we’ll see which
15:50
families can uh get under some
15:52
longer-term modification or something to
15:54
stay in their home and which ones
15:56
aren’t and end up having to sell um
15:59
i mean having to get foreclosed upon now
16:01
that will create some more re inventory
16:03
once that supply increases
16:04
it’s got a it’s got its um
16:08
kind of temper this appreciation and
16:10
maybe even trigger
16:11
uh trigger downturn in all likelihood
16:13
and what happens you know all these
16:14
people that bought the homes kind of
16:16
today
16:16
at what maybe the the height of the
16:18
market you know fast forward a year or
16:20
two and now
16:22
property values are dropping and they
16:24
may be able to make their payments they
16:25
may be making their payments but all of
16:27
a sudden
16:28
they owe 20 or 30 percent more you know
16:30
the house is worth
16:32
you know they bought it for 200 and now
16:33
it’s only worth um
16:35
140 or 150 and um they owe 190 they may
16:39
be saying hey
16:40
you know just like people did in 2008 9
16:43
10 11 12 where they were saying
16:44
why should we pay on a house that we owe
16:47
you know
16:49
20 percent uh more than it’s worth uh
16:51
and then you
16:52
then people that even can pay default
16:54
and that kind of
16:55
adds to the inventory adds to the
16:57
foreclosures and uh
16:58
you know kind of helps fuel the downturn
17:01
so there is going to be a turning point
17:02
to this
17:03
uh no one knows exactly when but once it
17:05
happens
17:06
uh the since we’ve we’ve appreciated so
17:09
high
17:10
there is high likelihood that it will be
17:12
a severe um
17:14
severe downtown yeah yeah uh
17:18
uh it’s it’s only if uh when we when we
17:21
look at
17:21
the borrowing calls today right it’s
17:24
it’s really a question of where where we
17:27
are going to be
17:28
in a in a year from now right i
17:30
personally feel that the 10-year
17:31
treasury
17:33
will be above the the two percent mark
17:35
in the
17:36
in the near future early in the year uh
17:39
i predicted it will hit the 150 when we
17:42
were at 1
17:43
110 and the month played we were already
17:46
at 150
17:48
now it has we were at 170 plus for a
17:51
brief period now we are down at
17:53
around 160 mark but i think the pressure
17:57
inflationary pressure is just very
17:59
very strong there right and that is only
18:02
also the fear on the multifamily as well
18:05
as single family side once these
18:06
borrowing costs move
18:08
up uh you investors just cannot pay
18:12
these uh these uh these entities that
18:16
services
18:17
uh once these rates move up so they have
18:20
to
18:20
offer less for for these investment
18:23
properties right so
18:24
obviously one one side is our actual
18:26
homeowners
18:28
uh that that may or may still be able to
18:31
afford it but at some point
18:33
it limits them and then they have to
18:35
offer less for for a new home
18:37
and then you have all the investors that
18:39
obviously run the numbers and once the
18:41
numbers do not make sense they cannot
18:43
pay
18:44
would have been willing to pay before so
18:48
one question have there on the single
18:50
family side i think
18:52
fha has come out with some new rules
18:55
when it comes to investment
18:57
property single family investment
18:59
properties
19:01
uh where i think the rates have
19:03
increased their
19:04
qualifications have also been tightened
19:06
so have you seen
19:07
already there a little bit of a more
19:11
more difficulty for investors to get
19:14
reasonable financing
19:15
terms on investment properties actually
19:19
i’ve not seen that yet
19:20
uh even if fha you know fha tending the
19:24
requirements there’s plenty there’s so
19:25
much capital sloshing around
19:27
in the economy right now there’s plenty
19:29
of lenders out there who are offering
19:31
options uh for investors so i think the
19:33
capital still
19:34
if an investor wants to buy a property
19:37
uh they can usually find the capital
19:39
um maybe not fha to your point but
19:41
they’ll find it um
19:42
there’s plenty of resources yeah there’s
19:44
plenty of sources
19:46
so that’s maybe a prudent move on fha’s
19:48
part i mean anticipating what we’ve
19:50
discussed is
19:51
hey we need to i mean investors going to
19:53
have the same issue and maybe even more
19:54
so
19:55
when uh they have a single family and
19:57
they um
19:58
you know property value drops so they
20:00
owe you know
20:02
you know 180 190 on a home that’s now
20:04
worth 150 and dropping
20:06
that will be a that’s a reckoning
20:08
they’re going to say hey and then it
20:09
goes vacant
20:10
or something like that are they going to
20:12
walk away from this are they going to
20:13
what are they going to do do a short
20:14
sale
20:15
what are the what are the solutions to
20:16
that um and with a business owner
20:19
it’s or an investment property owner
20:20
it’s typically you know they’re
20:22
making decisions based on the numbers
20:24
homeowners are often you know
20:26
uh also makes making decisions based on
20:29
emotion
20:29
you know i want to stay in the home my
20:31
kids are there and stuff like that which
20:32
is understandable
20:33
um but investors it’s it’s going to be
20:35
the numbers and it’s tough to justify
20:37
you know when you’re severely underwater
20:38
we saw it last time a lot of people just
20:40
walked away
20:40
multi-family too it just doesn’t make
20:42
sense and uh
20:45
from business perspective um so we’ll
20:48
see how it uh see how this one fares
20:49
it’ll be
20:50
you know interesting to have this
20:51
conversation in um
20:53
you know in a year and two years and and
20:55
kind of tie back to what we’re talking
20:56
about today and and
20:58
peop i mean my expectation we’re gonna
21:01
have this
21:01
we could have the same conversation
21:02
somewhere between a year and two years
21:04
and we’re going to be looking back at
21:06
this date april 15 uh
21:08
2021 and we’re going to say what was
21:11
everyone thinking
21:12
uh they’re paying prices that are just
21:15
ridiculously high
21:16
um and it just didn’t make sense so
21:19
people but people forget
21:20
i mean we’ve had this environment before
21:22
2008
21:24
and every time it gets like this people
21:27
say well this time is different because
21:29
dot dot dot whatever the reason and it’s
21:30
never different there’s always a cycle
21:32
there’s always a downturn
21:33
um that that that follows um you know
21:36
the significant
21:37
um upturn yeah uh certainly a very good
21:40
point
21:41
right as as we have seen on the single
21:43
family side in 2006 2007
21:47
uh everyone was investing right
21:50
obviously money was
21:52
readily available and that that helped
21:55
so now uh forward to today money is
21:58
readily available
21:59
as you mentioned try to uh to finance
22:02
some of these acquisitions
22:04
particularly on the investment side
22:06
right
22:08
and so we also see that
22:12
on the multi-family side i would say
22:14
there are very good operators like that
22:17
that are doing it as a true business
22:19
they have a an
22:20
understanding of the risks and no
22:23
operations well
22:24
but we certainly see plenty of people
22:26
that are
22:27
entering into multifamily uh that have
22:30
been
22:31
uh in a in a very good spot because the
22:34
market helped them
22:36
uh rescue them in previous deals that
22:38
have done over the last
22:40
five to seven years they really have
22:43
won and made good money for themselves
22:47
and then investors
22:48
not because of their operational
22:49
performance but because the market was
22:52
essentially helping them and i think
22:55
that brought
22:56
more more investors into the marketplace
22:58
with with the view
22:59
oh multifamily is easy
23:03
right you you make money here that’s
23:05
that’s all the returns that you can
23:06
generate and i think
23:08
what we see is a lot of operators that
23:11
that are not really that should not be a
23:14
multifamily at
23:15
all and we’ve ice
23:18
i predict that we will see some
23:20
opportunities there because these
23:22
operators will not
23:23
will not be able to perform once the
23:26
market turns
23:27
right once once rent again
23:30
not just flatten but potentially go down
23:33
but also
23:34
operating cost goes up right even if
23:36
rents stay the same
23:38
inflationary pressure is also on the
23:40
expense side and
23:41
a lot of them will not be able to
23:43
operate that
23:44
at the profit that they predicted
23:48
and you just need some cap rates uh
23:50
going up and then suddenly to realize as
23:53
you
23:53
as you mentioned or now i don’t really
23:56
have any value
23:58
in that property so what i do now i
24:01
think it’s not worthwhile to
24:03
to spend our time here because i’ve as a
24:06
gp as a general partner sponsor i spend
24:09
all my time here and i likely will not
24:12
see any money anymore
24:14
still and that’s when typically the
24:17
the tight turns uh so i completely agree
24:20
with you what we have seen
24:22
back in in 2000 uh
24:26
five six and seven with that frenzy
24:29
we really have a very similar frenzy
24:31
today
24:32
right it’s uh uh and it’s um
24:37
it doesn’t mean that one should not
24:38
invest right if it’s if it’s smart
24:41
investing but there’s only
24:43
a lot of players that are just trumping
24:46
him
24:47
and hope for the best and we see a lot
24:49
of operators
24:51
and sponsors that haven’t bought a
24:53
property for more than a year
24:55
that are very experienced so you always
24:58
have to wonder why is it that the ones
25:00
that are really doing
25:02
their due diligence they are vertically
25:04
integrated they know what they are doing
25:06
why are they not buying by newcomers or
25:09
just
25:10
gobbling up one property after another
25:13
it’s true you made a comment earlier
25:15
which i think is very accurate that um
25:17
even today because of the appreciation
25:19
about a weaker operator can look like a
25:21
big success story
25:23
um but remember i think there’s another
25:25
part of that which is
25:27
uh in a in a downturn in a bad market
25:30
even a strong operator
25:31
can look bad uh so i think it goes both
25:34
ways so right now everybody looks good
25:36
anybody you know was holding assets when
25:38
and was able to make it through um
25:40
covet real estate assets are generally
25:41
doing very very well
25:43
and i think um but now you know you hold
25:45
too long
25:46
i hate to say it but this is you know
25:48
these are almost like
25:49
these market frenzies make real estate
25:51
seem like a pyramid scheme
25:52
you know everybody makes money except
25:54
the last guy to buy the last person to
25:56
buy
25:57
um and they are the ones that the market
26:00
turns
26:00
they’re holding the property and and all
26:02
those gains are given back
26:04
and the primary collapses so uh we’re
26:07
i mean for anyone out there buying i
26:09
really have to say
26:11
um and and i think antonio made a good
26:14
point you know
26:14
a lot of experienced buyers are on the
26:16
sidelines right now or they’re probably
26:17
sellers that they they have
26:19
have stuff to sell uh because we we’ve
26:21
got to be right near the top of that
26:22
pyramid
26:23
yeah certainly it’s only very close and
26:26
the question
26:26
is how much upside is still there other
26:30
than just a speculative
26:32
element to it right yeah so
26:35
uh will be very interesting to see
26:38
what’s uh what’s
26:39
uh happening over the next uh year or
26:42
two
26:42
so we certainly should follow up in a
26:44
year or two from now and see
26:46
how how things have evolved and who
26:48
knows maybe
26:50
we we are still in that frenzy so
26:52
somehow it’s
26:54
uh it’s it stretches out more and more
26:57
right because of additional stimulus
27:00
money
27:01
and or forbearances that are being
27:04
further pushed out who knows
27:06
right but as you said at some point it
27:09
needs
27:10
the mar it needs to adjust right
27:14
because there is only so much that that
27:16
one can stretch and
27:18
uh as we have seen with the stock market
27:20
they can go on
27:21
for quite some time uh there it’s the
27:25
same frenzy right when
27:27
everyone and and their friend
27:30
is investing in in stop anything else
27:34
that’s exactly that was on the tip of my
27:36
tongue when you said it yeah yeah
27:38
that’s uh it’s not based on like the
27:41
the underlying stock it’s all
27:42
speculation at that point that’s right
27:45
short term people make a lot of money
27:46
and that’s uh and you know
27:48
good for them but somebody somebody
27:50
bought it at that top price and didn’t
27:52
do so well
27:53
so yeah that’s right so uh hopefully
27:57
uh uh no one who is listening will be
28:00
at the top of the of the mountain on the
28:04
buying side why because it’s only
28:06
and if someone is then hopefully they
28:08
have enough
28:10
equity in the property and a lot of cash
28:12
reserves that they can
28:14
run it through two to three years of uh
28:17
of a tough situation right and i think
28:20
that is
28:21
when we look back to 2008 9 and 10
28:25
uh even the ones that uh
28:29
uh had a cash flowing property if they
28:32
had to refinance
28:33
right at that point they still lost the
28:36
property
28:37
right because the value as you mentioned
28:39
right once the value drops to
28:41
you mentioned the single family property
28:43
of 200 000 now 150
28:46
if you have to refinance right at that
28:48
point
28:49
even though it was cash flowing in the
28:51
with your previous mortgage to service
28:53
that that
28:54
no one is willing to refinance it for
28:57
the previous loan
28:58
so you need to bring equity to the table
29:00
and if you don’t have that
29:02
well you you essentially have to walk
29:05
away
29:06
and the same thing happened also on the
29:08
multi-family side
29:10
where someone uh if someone was caught
29:13
right there to refinance
29:15
uh during that tough period where values
29:19
dropped by
29:20
around 20 right at the on the
29:23
multi-family side
29:24
doing a relatively short period but it
29:27
doesn’t matter whether it just drops
29:30
by 20 uh for one year and then recovers
29:34
after that
29:35
if you have to refinance right at that
29:37
point it doesn’t matter
29:39
yeah exactly a lender doesn’t say well
29:41
let’s wait
29:42
for uh for another year and see where
29:45
the values are
29:46
right so i think the
29:49
the message there probably is only on
29:52
the multi-families i make sure that you
29:54
don’t
29:54
that you always have a cushion of two to
29:57
three years
29:58
so that you are not forced to refinance
30:01
and i do not know how it is on the
30:03
single family side where you have a
30:05
similar situation where
30:07
some investors are more into short-term
30:10
loans where
30:11
the risk obviously is much higher if you
30:14
are forced to find another
30:16
loan if the market turns right
30:20
yeah that’s it’s the same thing i mean
30:21
any anybody especially on a for
30:23
investors who are taking out
30:25
fix and flip or bridge type financing
30:27
for a year or two hoping to add value
30:29
and then resell
30:30
um you know they get caught midway then
30:33
uh
30:34
when the market turns that’s you know it
30:36
is impossible very difficult to
30:37
refinance they have to bring cash in the
30:39
market values dropped
30:40
that’s why every time these things the
30:42
market turns there’s always some
30:45
you know big construction in this in the
30:47
um
30:48
you know in big buildings that are half
30:51
done and they’re left half done because
30:52
everyone walks away
30:54
and the lender gets to figure out what
30:55
to do with it
30:57
absolutely right and uh we already have
31:00
seen it right have
31:01
some friends that are in the fix and
31:04
flip
31:06
world and there was already a phase in
31:09
2019 when when it happened where
31:13
particularly in high value markets in
31:15
along the coast
31:16
in california where they were caught
31:19
with
31:20
with buying a property too high thought
31:23
that they can
31:24
rehab it and sell it and then some
31:26
realized uh
31:27
there is not as much demand as it was
31:30
just a few months earlier
31:32
and they’ve as you know right once you
31:35
have these million plus dollar
31:36
properties the carrying costs with hard
31:38
money loans or just
31:40
through the roofs and a lot of them they
31:45
already back then
31:46
had to sell at the loss just to get out
31:49
of it
31:50
and that was just a slight dip before a
31:52
brief period of time and the markets
31:54
kind of cooled down uh so i i would say
31:57
that’s kind of a
31:59
just a sign once the market really turns
32:02
then things
32:03
start unraveling very quickly
32:07
so yeah it could be weeks or months i
32:09
mean it’s not very long
32:11
yeah you and you don’t be caught i mean
32:14
uh
32:15
right now we’re trying to sell
32:16
everything we can and and uh
32:18
and i think that’s uh
32:21
you know do that because it does you’re
32:22
right it happens very fast and no one’s
32:24
saying
32:25
you know hey it happened it’s just so
32:27
many people start hey
32:29
start hearing hey stuff isn’t selling
32:31
there’s more supply on the market or
32:33
or or whatever the the components
32:35
interest rates rise
32:36
and and we start seeing and then there’s
32:38
something like cova it didn’t happen
32:40
this time but usually there’s like one
32:41
event
32:42
which you know then the news is all
32:43
talking about hey the market’s crashing
32:45
and
32:46
and um so that’s going to happen
32:49
i mean i it just happens it happens
32:52
every
32:54
1990 you know 2000 um
32:58
2008 uh there’s there’s there’s multiple
33:00
times this has happened over
33:02
over the over our lifetimes and it will
33:05
continue to happen yeah we should never
33:07
be surprised but they always seem to be
33:08
yeah definitely uh so obviously
33:12
there there will be plenty of
33:14
opportunity there right
33:16
uh i think it’s now it’s more important
33:18
than ever to invest smart
33:20
right so that you have that cushion in
33:23
whatever you’re investing that
33:25
uh either you’re on the beneficial end
33:28
if
33:29
if if things go go sideways or go down
33:32
or you have enough of a cushion that you
33:34
can ride out the storm right
33:36
i think these are the the two strategies
33:38
and i think you
33:40
it’s only with your programs for
33:43
investors you
33:44
you’re offering some alternatives there
33:46
before we
33:47
uh end i was just wondering
33:50
since we have a lot of in investors and
33:53
sponsors
33:54
that are also doing five or six speeds
33:56
five or six c’s
33:58
some of them are also considering the
34:00
larger ones the reggaes
34:02
sure so maybe you just can give kind of
34:05
a
34:06
a picture of how easy it was for you to
34:09
transition from a 506c to a reggae
34:13
offering obviously it’s costlier it’s
34:15
more time
34:17
consuming but how was your experience
34:19
there
34:20
to start out uh moving over from the
34:22
506c
34:23
side yeah so 506 cs are very i mean
34:27
in in relative regulation 8 plus are
34:30
very easy they can you can set them up
34:32
you don’t have to wait for the sec to
34:34
review everything you can just
34:35
if you comply with the guidelines you
34:37
can get a site up um
34:39
and an offering up pretty fairly
34:40
promptly regulation a plus
34:42
you need to put together the offering
34:43
statement package and submit it to the
34:45
sec and then
34:46
we we went back and forth several times
34:48
i think our first one took
34:50
um seven eight months uh to get it uh
34:55
qualified by the sec so we could finally
34:57
start raising capital
34:58
um and the second one took almost about
35:00
the same amount of time we’re working on
35:01
a third one
35:02
now that we’ve already submitted to the
35:03
sec a couple months ago
35:05
and um so it is a back and forth process
35:08
it costs a lot more money uh in legal
35:10
fees i mean i think the 506 c
35:13
i forget the numbers but it’s in the ten
35:15
thousand dollar ish range
35:17
whereas the regulation a plus is closer
35:19
to the seventy five thousand dollar
35:21
range
35:21
uh to get it up but regulation a plus i
35:24
mean the huge advantage
35:25
is that you’re you can accept money from
35:27
non-accredited investors which still
35:29
most not accredited investors have
35:31
limited investment options
35:32
uh so once that there’s a viable reggae
35:35
offering up there’s definitely interest
35:36
uh but certainly what we found i mean
35:38
both of our last two funds have had more
35:40
than a thousand investors each
35:42
and uh that has um
35:45
that’s it makes it i mean when we had a
35:48
506 c
35:48
we we’d be you know kind of marketing
35:50
the the fund i’m ever talking about it
35:52
on on a local radio show
35:54
and they uh and we had an investor walk
35:56
into our office with a hundred thousand
35:58
dollar check
35:59
and hey i want to invest i heard about
36:01
it sounds great
36:02
and but then we discovered he was not
36:05
accredited and we couldn’t take the
36:06
check we had to
36:07
sorry we can’t take it uh and that was
36:09
uh so those are
36:10
there’s definitely you’re gonna the
36:12
marketing that you do for
36:14
506 c will hit non-accredited investors
36:17
will attract non-accredited investors
36:18
and you’re gonna you have to turn them
36:20
away
36:20
for whereas regulation a plus there’s
36:22
limits on how much they can invest
36:24
but still they can invest and that i
36:26
think is uh
36:28
makes your offering much more scalable
36:30
so you know anything we do in the future
36:31
is
36:32
is regulation a plus um you know our
36:34
goal is to take
36:35
the next step uh to actually do a public
36:37
offering you know listed on the exchange
36:39
that’s fast forward a few more years but
36:41
that’s where we want to eventually get
36:43
uh but that’s our transition our we
36:46
first started out with uh
36:47
just a traditional in 2011 uh
36:50
traditional
36:50
um hedge fund where we had to print out
36:54
our i forgot what they were called our
36:55
prospectus we had
36:56
we didn’t number them when when we
36:57
handed them out uh and that was um
37:00
you know very we couldn’t market we
37:02
couldn’t if i talked to someone in the
37:03
media i couldn’t tell them what what we
37:05
paid and
37:06
our investors but that all changed with
37:08
crowdfunding in 2013 i think there’s a
37:10
it’s a lot of opportunity i’d encourage
37:11
investors to um
37:14
to uh go the crowdfunding route
37:16
definitely
37:17
yeah very good so that the actual uh
37:20
crowdfunding side do do you have your
37:23
own platform or do you have use
37:25
a third-party platform that manages it
37:27
all for you because that obviously is a
37:29
challenge
37:30
when you have investors that come in
37:32
with a hundred dollars a thousand
37:34
dollars
37:36
that’s the 506 c managing investors is
37:39
like of a
37:40
walk in the park in comparison
37:44
yeah so here’s uh my perspective um
37:46
which is probably a
37:47
outlier but i think it’s served us well
37:49
over the long term
37:50
when you go to a third party platform
37:52
and they handle all the back end for you
37:54
very attractive but the um
37:56
the downside to that is they own those
37:59
investor relationships when someone goes
38:01
to really t-mobile or apacheland or
38:03
you know any of the other sites that
38:06
they’re
38:06
they’re going there and that’s they
38:08
identify hey i’ve invested this
38:09
opportunity on realty mogul and even
38:11
though it was
38:11
you know your your um your fund or your
38:14
apartment complex that they’re offering
38:16
and so when you do it on your own and
38:19
you build up a brand as
38:21
you know xyz you know apartment um
38:25
investment fund and you and you build up
38:27
that brand
38:28
over time you know you’re developing a
38:30
an email list and
38:32
and uh and and a group of investors who
38:36
identify with xyz apartment investing
38:39
fund and i think that’s a huge value so
38:41
if you’re looking to do this
38:42
long term raise money uh then uh we
38:46
we did it that route and uh it was
38:48
slower going at the beginning because we
38:49
couldn’t plug into
38:51
you know one of the big uh platforms uh
38:53
existing network of investors
38:55
so we had to build up our own investor
38:57
network so i’d be on pod i mean a
38:58
podcast like today
38:59
i’d be on radio shows i’d be on blogs uh
39:02
speaking at conferences but all of it
39:04
was to kind of build um
39:06
our investor bait build awareness of ahp
39:09
and as a result build our our investor
39:11
base and we
39:12
kind of control own those relationships
39:15
we put up webinars
39:16
in which we do periodically pretty
39:18
frequently and give investors updates
39:20
uh and that’s our audience so i think
39:22
that’s um
39:23
huge value if you’re looking at this
39:25
long term i think that’s a and do
39:27
multiple raises
39:28
i think there’s a lot of value in doing
39:30
it on your own and there are plenty of
39:31
plug-in
39:32
uh services that you can use kind of for
39:35
your back-end so
39:36
even though they’re going to in our case
39:38
an ahp site or hp servicing today
39:41
then and investing on the back end we’re
39:43
oftentimes delivering
39:45
uh different technology solutions or
39:47
different service providers
39:48
uh to process those funds uh but that is
39:52
i mean it’s like amazon i wrote a book
39:54
called burn zones about you know all the
39:57
building up that portfolio 4 000 units
40:00
and then losing it all
40:01
and i sell it um directly through my own
40:05
site and i sell through amazon and the
40:06
majority of the sales go through amazon
40:08
and the problem with amazon is they know
40:10
that
40:12
they own that customer relationship i
40:13
just get royalties and i don’t know who
40:15
bought it
40:16
i’d love to have those uh those book
40:17
buyers in my um
40:19
database so i can you know build
40:21
relationships with them so
40:23
same thing uh a lot of value if you’re
40:25
doing this long term i definitely
40:27
encourage you to
40:28
have your own portal and um and build up
40:31
your own um
40:32
investor following yeah excellent point
40:34
right
40:35
on on your client right and all your
40:38
customers rather than
40:40
someone else that’s a really excellent
40:43
recommendation
40:45
uh one more question on the on the reg a
40:47
plus
40:48
side from in terms of of reporting and
40:51
auditing from the sec
40:53
side have you had some some issues there
40:57
or
40:57
no issues yeah no no issues it’s just
41:00
it’s an additional layer of work is what
41:02
it is i mean not in a bad way we have to
41:04
have audited financials so you have to
41:05
get your financials audited each year
41:07
and then you need to
41:08
file you know the audits you need to
41:10
file other filings with the sec on a
41:12
regular basis
41:13
uh and you know it but it’s fairly easy
41:16
to map out like they’re due on such and
41:18
such a date
41:19
and um and you need to get them done and
41:22
that
41:22
is um so
41:25
yes there’s more requirements but i
41:27
don’t think it’s um
41:29
i don’t think they’re extraordinary and
41:31
they’re predictable um
41:32
so you so it’s manageable if you’re
41:35
doing this at scale for long term i
41:36
think i think it makes sense i mean our
41:38
goal is to use our experience
41:40
having audited financials you know
41:41
public you know reporting through edgar
41:43
through the sec site
41:44
uh you know as we keep growing into
41:47
larger and larger funds and eventually
41:49
hopefully getting listed on exchange
41:50
that’s all good experience
41:51
um because we’re going to need to do
41:53
that on on an increasingly um
41:56
um robust level sure yeah and uh
41:59
obviously having all the financials also
42:01
helps the the confidence by
42:03
investors right absolutely so they can
42:07
can trust it obviously there are always
42:09
cases that the auditors miss something
42:11
but it’s definitely
42:14
an additional layer of protection there
42:16
is no doubt about that
42:18
so jorge thanks again for adding uh
42:22
so much value to our listeners today
42:25
uh how how can they reach you obviously
42:29
you have different investment platforms
42:31
uh from a hp
42:34
as well as pre-reo so
42:38
why don’t you give us your contact
42:40
details so that the list sir
42:42
reach you yeah absolutely you can go
42:44
learn about our
42:45
um hp servicing our crowdfunding
42:47
opportunity you can go to
42:49
ahpservicing.com
42:50
if you’re looking to buy a distressed
42:52
mortgage or learn more we also sell reos
42:54
you can go to prereo.com and uh
42:57
you know on there there’s plenty of
42:58
contact information if you want to reach
43:00
me or anyone on our team
43:02
um so i encourage and welcome um any
43:05
inquiries feedback uh
43:06
thoughts uh please reach out we’d love
43:08
to talk all right
43:10
great thanks again for coming on and
43:12
sharing
43:13
all your knowledge with us i appreciate
43:15
that anton
43:16
thanks for having me on yeah thank you
43:18
all right talk to you later bye