Ask Us Anything #6: Going Beyond 10 Mortgages, Our Repair & Maintenance Assumptions, & Strategies for Paying All Cash

In this episode, Tom, Michael & Emil answer questions from our last webinar.  --- Transcript    Tom: Greetings, and welcome to the remote real estate investor. My name is Tom Schneider, and I'm joined by   Michael: Michael Albaum   Emil: And Emil Shour.   Tom: On today's episode, we are going to be addressing questions we recently received in a webinar. We got so many great questions within the webinar. So we decided, let's roll that right into the AMA, or an ask us anything? So today, we're gonna be going from the wonderful questions that we got. So here we go.   Theme Song   Tom: Before we get going into it, Emil and Michael, what is going on?   Emil: I have some exciting news. I got under contract for a three unit property last week. So nice. Yeah, it's been a while since got something under contract. And moving forward. We actually had actually, we had another three unit in contract right before it, but we needed to because there were like no marketing photos. So we had to have a signed contract to even look at it got in there. It was a total mess, tried to negotiate with the seller, and he wasn't willing to go lower. So we got out of that one quickly. But this one's looking much better. And we are, we got inspections coming up this week. So moving forward.   Tom: What a horrible like that seller making you get into contract before showing you anything What a waste of everybody's time is he like just trying to pull a fast one like that's.   Emil: I get it in that like, Okay, if you have, you know, multifamily, and there's tenants, they don't want people coming in just like disturbing tenants and being looky loos, but to not have any pictures or any type of like real information for the buyer. It's basically just like, submit an offer. And what's behind door number three, right? Like, that sucks. So   Tom: Well, congratulations, man. Awesome. That's great.   Emil: Thank you. Yeah, so inspections go and everything like that, but excited to hopefully be picking on my first small multifamily.   Michael: Right on man. Super cool. Yeah. So I just got off the phone. That's why I was a little bit late to this recording here. I just got off the phone with both the city and county out in Kentucky around a couple of properties. I never received my tax bill for I get a city bill and then a county bill. And I never received either of them. But I had for other properties in the area. So I was like, hmm, something's going on here. Let's see what's going on here. So I called the city and I was like, Hey, I never received my tax bill. And they go, Oh, that's because it was requested by this company that I never heard of. And I was like, well, that's weird. Why like so I just don't get one. They said no, it goes to their maybe your lender will pay your impound account or your escrow. You pay your property taxes.   I was like, that doesn't sound right. So I called my lender and I was like, hey, do you guys pay account for this property taxes? And they go, No. I said, huh. So I called this company. I was like, hey, what the hell guys like, You're the reason I didn't get a copy of my property taxes, like, What's the number? What's the parcel ID? And I told him, they said, and who's the lender? And I told him to go, that's not who we have on our end. I was like, wait, okay, so wait a minute, let me get this straight. So you input an error, the county and a parcel number, and now requested my property taxes for this property, which is why I never received them, meaning my property taxes are going to get paid late this year. And they go oh, well, I mean, maybe I can you send me something that says, We are this company and this is what we've requested? An they were like Oh, no, for privacy reasons we can't, you've got to be kidding me. So every word to the wise out there know what your property tax bills come out knowing they're due and keep an eye out for him because you can totally just get shafted by companies for no wrongdoing of your own. So I'm going to be having another strong follow up conversation with that company.   Tom: So a pro tip here related to dates is within your Google calendar or whatever. calendaring systems you use, create a new calendar, label it rental properties, and then add in any relevant date. So an example would be the lease end date. Perhaps you can put a reminder 90 days in advance, you can poke your property manager to say, Hey, what are you thinking about renewals, adding your taxes due dates, specifically, if you do not have those taxes impounded with your lender, if they are impounded, your lender is just going to manage it and pay them. Ooh, another date is you can actually appeal the tax value of your property. So if you want to try to lower your property taxes, there are deadlines based on the county on when you can submit an appeal to lower our taxes. Let's do an episode on that, guys. I've been meaning to research a little bit more and the best way to learn about is to talk about it and get into it. So anyways, protip adding a calendar, having your lease end date, taxes due date, and that good stuff.   Michael: Yep. super great point.   Emil: Michael. Doesn't the county usually have your address as like the address to send property taxes? So what even if someone else, like requested it? It's so weird that the city doesn't just like default, also sending it to the address on file or whatever?   Michael: Yes, yes, I am so frustrated. And so confused.   Emil: Makes no sense.   Michael: I have no idea why they just wouldn't send two records like oh one to the owner and one to this other random person that I've never spoken to before that has no like, no claim to this property, but we'll send it to them and not the owner.   Emil: Right? Like they've been confirmed like, Are you a member of this LLC or whatever, whoever's the owner?   Michael: No at all. No.   Emil: That's funny.   Michael: It seems a little too loosey goosey for me.   Emil: What city is this?   Michael: This is in Covington, Kentucky.   Emil: Shout out Covington. You guys are doing really well out there.   Michael: Just putting the entire city on blast.   Emil: I'm kidding. I'm kidding. Just, you know, sometimes local governments can be interesting.   Michael: Yeah. Yeah.   Tom: My update today is my closing date for refinancing on my personal house. So crazy rates. So I did this through loan depot, which I'd never heard of before, which, to be honest, sounds a little bit like interesting, you know, loan depot. But anyways, like 2.85%, like crazy low rates. So as it relates to real estate investing, finishing this refinance, then pulling out a HELOC to have that nice delta between the value of my house and the loan amount. And that will provide me some some buying power to get after it to build, build, build.   Michael: Did you have to buy down that rate, Tom, or that was that which is what they were offering?   Tom: No. And I'm glad you asked that question. I'm about to say they initially had some points. And I listened to the little Michael Albaum on my shoulder and a little Michael Albaum, my shoulder said, Hey, Tom, you should ask for them to not charge you that. Why not ask nothing to lose, ask? Right? Just as Michael Albaum would say. So I did that. And they took they took, like 2000 bucks off my closing costs, like 2,000 bucks off my closing.   Emil: What fee was that?     Tom: It was like a couple of points.   Emil: You just said can you not charge me points but give me the same rate? And they're like, sure.   Tom: Yeah, yeah, pretty much you know what I dangled in front of them. It's like hey, you know, I have this a bunch of rental properties that I may refinance to, you know, I perhaps we could do some stuff later, which I probably will I mean, if they're like having such crazy rates, and they're able to have a lot of leeway with regards to taking away these extra payments, so yeah, just ask for it. And you cannot get it. Don't ask for it. So yeah, it's got like a couple thousand bucks off my quote.   Michael: Good for you.   Tom: Thanks, Michael. on my shoulder and the real Michael,   Michael: No problem. I only charge at a 10% Commission. So when should I expect to see my check? I’m reasonable.   Tom: That's right, you know, yeah.   Michael: That's super exciting, man. Good for you.   Tom: Yes.   Emil: I want a HELOC so bad. I need our house to appreciate a little more.   Michael: Tom, where are you getting your HELOC through also through loan depot?   Tom: I'm planning to do it through 3rd Federal and they have you know, just crazy rates too. I think they're like two and a half we had an open and then we had to close it for the refi right so now we're gonna open it up again. And 3rd Federal, it's my wife's name is on the HELOC because they don't like people that own a bunch of they have a bunch of loans on their name. So just going through that this rigmarole right now. So as soon as this free five closed and will reopen a HELOC my wife's name and then onward and upward.   Michael: And what LTV will they give you on the he lock up to? Do you know?   Tom: Yeah, they'll give up to 80% Okay, but you know, we recently did some we added a bathroom, so I'm hoping we can get a good good jump and what they value the property at which would be pretty cool.   Michael: So did you have to get a new appraisal done for this refi?   Tom: No, they just like looked at their computer. And with refinances lenders are way more, less strict around sending an actual appraisal of the property. So if they just did a desktop appraisal and then came to the value, and again, no problem. And I assume it'll be similar for the HELOC the way that they do the appraisal. But on your question on percentage on what the HELOC went up to another lock provider that I was looking at is the it's like the San Francisco fire credit union, San Francisco for anyways, they go up to 90%. So their rates were a little bit higher, and I didn't necessarily need that extra pop of equity to take out. So I was okay with less of lower credit line and doing it through,   Michael: Because you're making 100,000 passive already.   Tom: Tom: There you go. Yep, there you go. There you go.   Michael: That's awesome. And so is the rate fixed as an introductory rate or is it it's floating fluctuating?   Tom: The refi is fixed 30. Man, it'd be so interesting to see what happens with rates, you know, in the next six months or four months, it sounds like they're gonna stay low. But with the HElOC it's going to move around based on what the rate is and…   Michael: The lightboard plus a spread or whatever,   Tom: I think it's reasonable to assume that it's going to stay pretty consistent, at least as the economy kind of chugs through the pandemic, that they're not going to be, you know, increasing that too much so but you never know, got to have good reserves. Gotta be mindful of your loan to value ratio and being able to service for that. But yeah, excited about it, though. So it's taken a little bit of time to get that done, but onward and upward. Alright guys, shall we get into the questions we got?   Michael: Totally   Tom: First question. We have, what is portfolio levered? And, and I think this question is really speaking to, you know, the concept of being levered and, Michael, do you want to speak to portfolio levered income?   Michael: Sure. So portfolio levered income. There's a bunch of different terms that get thrown around in the real estate space, I think to make the industry sound more complicated or sound fancier than it is. And I think most people are able to wrap their head around what portfolio income is just how much income is a specific portfolio generating, but the term levered in here kind of throws people for a loop. And what that really means is levered is just talking about the use of leverage, or debt, or a mortgage, all three of those words are synonymous. And so if someone has an 80% mortgage on their property, they put 20% down, they now have being detracted from the income, a mortgage to pay on a monthly even annual basis.   So the income they're gonna be generating on that property is going to be from $1 amount perspective, less than if they didn't have a mortgage. So portfolio leveraged income is just Hey, we have a portfolio, we have a single property, it has a mortgage on it, it has debt on it, how much income is that property, or that portfolio making? That's all portfolio leveraged income says. And so as again, as we scale properties from one to two, three to four to five, and now we have a portfolio, we're looking at the global portfolio, the summation of all properties together that all have mortgages and all of their incomes, how much revenue how much income? Are there? Is that throwing up?   Tom: Awesome. Another lending related question, as far as lending goes, is there a minimum you have to borrow to obtain a loan, don't you generally get a better rate, when you borrow more money, I can take a first stab at this one. So, many lenders will not loan below a certain dollar amount. And the reason for that is just the the amount of work isn't necessarily worth it, what I've seen is a common line in the sand with at least some of the larger lenders is if the size of the loan is below $70,000, or $65,000, it's not worth their time, I'm positive, there are private lenders that will do much smaller types of loans. But generally speaking, the larger lenders put that line in the sand around 60, or $70,000, of the size of the loan. So if you're buying a property for $90,000, just multiply point eight, that's the loan to value ratio that you're trying to get.   And on the question is don't you get generally get a better rate when borrowing more money, that's not necessarily true, you'll get a better rate, if you actually if your LTV if the amount your down payment is larger. So if I'm buying a house, and I'm paying 50% of it with my own as a down payment, and then 50% of the debt, you're going to get a better rate with that type of a down payment versus if you're only putting down 20%. In my experience, it's not necessarily the size of the loan, but the ratio of the amount of money that you're putting in relative to what the bank is putting in in the form of a loan.   Michael: Although I will say just to kind of pepper this in and piggyback off that in the commercial world, that can often be true. So commercial residential real estate is five units. And up as soon as you get above the million dollar threshold in terms of borrowing, you have a lot more power as a borrower, you also have access to other products that aren't available in the traditional world. Everyone's probably heard of Fannie Mae and Freddie Mac, as kind of the mortgage backed securities industry, they also lend on what's called Small balance loans. And those are anywhere between I think, 750, they can go as low as 750. But typically, they're a million up to 5 million, and you get to some amazing, amazing rates in that space. So definitely something to think about if you're going commercial. But as far as residential, I think I would agree with you, Tom, that the dollar amount doesn't really matter, you get into what's called jumbo loans above a certain threshold.   Tom: Good point, good point   Michael: And the rates can change a little bit there. So just kind of keep that in mind.   Emil: While you guys were chatting, I looked it up in the background. So jumbo loans, as of 2020, start at $510,400 for a single family home in most areas of the country. And they are the rates are usually a little bit higher. Once you get into jumbo, I experienced that on our on our personal residence when we did a refi. So the rate goes up a little bit. It's not like it's not drastic, but it does go up a little bit. And then I think when you go above a million it goes up again, is what I think I remember hearing or reading.   Tom: The upside down world of residential versus commercial lending. Just as a heads up, my computer's about to die and I don't have power here. So if I run out guys, continue to power through without me. Go on without me!   Emil: Okay, no worries, save yourselves.   Michael: The next question we have is can I refi a property and use those proceeds in a 1031 to pay off the mortgage of another property. So the good news is about refinancing a property is that that cash you get out of that process is actually tax free. And so you can absolutely use those proceeds to pay off another property, you can go buy another property, you can really do whatever you want with those proceeds, they're yours to use in cash. And so a 1031 isn't necessary when you do a refinance. Again, because That money is already tax free. So a temporary one wouldn't get you any benefit. Additionally, 1030 ones are typically reserved for selling a property and then buying a new property. And in the case of refinance, you're actually not selling any property, you're just tapping into some of the equity. So hopefully that answers that question. Emil do you want jump on the next one?   Emil: Alright, so next question, how do you finance so many, if you're only able to take out a max of 10, conventional Freddie, or Fannie Mae mortgages, so government back mortgages, Fannie, Freddie, you're allowed to take out 10 in your personal name. And that is where they cap out. I think if you're married, your spouse can take out an additional 10 in their name, that's one creative way people get around the 10 limits. But then once you're tapped out, you personally or you and your spouse, you basically have to move on to either private money, hard money, or commercial loans, like Michael was recently talking about.   So private money is private, it's friends and family, it's different investors, people who want to invest with you, you know, you can do interest only type loans, you can do something like what Michael Zuber on previous episodes has talked about, where he gives people some equity in some interest, you can just set it up however, you feel. Hard money is typically correct me if I'm wrong, it's not going to be long term, right? It's usually like 12 months, maybe up a little bit more, but it's not like long term debt that you can take out on a property.   Michael: I don't know if we can save that all hard money lenders won't lend long term. I think most people don't use it long term, because it's so expensive. Yeah, I mean, if I was a hard money lender, I would love to have someone use it long term, because that's one deal. I don't have to keep moving that money around. So I think most people use it for the short term. And in the interim, I don't know what every, you know, loan agreement actually says from every hard money lender that's gonna be lender specific.   Emil: In most situations, hard money is better for short term either fix and flip or different type of projects where you need a bridge loan for a short period of time. Otherwise, you'd probably just go to a commercial lender and get a loan that way where they are, instead of just evaluating you, like you do with your Freddie Fannie loans there, they are evaluating the asset as well as you personally. And in some cases, just the asset.   Michael: There are also private lenders above and beyond just friends and family. There are companies that do this that are backed by investors, so I was just chatting with one the other day, their rates are going to be higher than the Fannie Freddie type stuff. But there are much easier, more flexible lender, you don't have to jump through all the rigmarole typically for the qualification process. So it can be a really great way to go. And then I found just most people that I worked with that time you get to 10 properties or before you get 10 property, you could get properties eight or nine, you're going to be doing either a different kind of deal or structuring things a little bit differently. You could also look at wrapping multiple properties under a single note, depending on if you can work with a lender that'll do that under a single portfolio. And that'll technically be a commercial product. But that's a way to erase or get back whatever those Fannie Freddie mortgages you have outstanding.   Emil: And if you guys want a little bit more background and info, we did an episode on private lending, it was Episode 30, called how private money lenders can help you close more deals in less time. So if you guys want to learn more about private money, great episode to check out. One last thing I want to just make a quick clarification of here. So those 10, Fannie Freddie loans, those are only on single family, which most people when they hear single family just think of single family home, but it's actually one to four unit properties. So any of those properties are you can get a Fannie Freddie loan for, and that's what the up to 10, qualifies for.   Michael: Sweets. Another question we got is some properties that were sold for less than 20,000, a year ago are now available for 100,000 on Roofstock, this still makes sense to buy those properties. So that might have been part of a portfolio. And so if someone's buying a portfolio, and then chopping it up after the fact, on the purchase side, they'll likely get a better deal because it makes it easier for the buyer and seller to just do one transaction things are less expensive things move faster. And so if they were bought as a portfolio, and then we have work was done, and then now they're being sold as individual properties. Yeah, I can absolutely make sense.   So I'm often more concerned about how does the property perform today? What are the numbers look like today? What are the comps look like today, just because somebody got a great deal a year ago or a screaming deal a year ago or two years ago when they bought the property doesn't mean that I can't also get a great deal, even if I've got to pay more money for it. I've talked about this a number of different episodes. I bought a 5-plex from a guy who picked it up for just a song like four or five years prior. And so if we looked at what he paid for it versus what I paid for it, yeah, I paid way more for it than he did. But he got a great deal. He got screaming, yelling He bought it, I found a really good deal when I bought it. And so the numbers made sense. And I wasn't really going to compare myself to him. The previous buyers said, Does this make sense for me? And my goals? Yes, it does. Okay, great. I'm happy to pay what the asking price is or what the ultimate price was.   Emil: The other thing that might be happening there is let's say someone bought it for 20 K a year ago, they they may be also or flipper fixing flipper, right so they bought it and just absolutely terrible condition and then put in a bunch of capital expenditure to fix it up, right, maybe you own new floors, new paint, new appliances, new HVAC new roof. So they were they're making their money is on sale, where as you as a buy and hold investor, you're making it on the cash flow or equity and the total return over time, right. So they're playing a different game where it's just shorter term, and that's how they make their money is whatever they buy it for. And then they fix it up, and then that delta from sale price, so they put in the sweat equity, that could be another reason why they were able to buy it so low   Michael: Good points.   Emil: Alright, so this is a great question. What are some of the assumptions you're using for maintenance and repair expenses? Michael,   Michael: There's not gonna be any maintenance and repair.   Emil: Yeah, there is none. Right?   Michael: You’re Buying a turn key property.   Emil: So Michael, this is this is one that you kind of changed the way I looked at it. I used to, like most people, and most calculators take maintenance and repairs as a percentage of rent. When if you really think about it, fixing the toilet, fixing a broken refrigerator, whatever it is, they cost what they cost, they're not a percentage of the rent, right? Whether it's a two bed, one bath house, yes, you may have more expenses and maintenance in a bigger house than a smaller one. But still a lot of things that need to be repaired, they cost the same amount. So instead of using percentages, I have converted over to just a fixed amount per unit. So for single family, what I use for maintenance repairs is $75 a month is the flat amount. And that's probably pretty, I would say pretty conservative. I don't think a lot of people use that amount. But I like to when I'm evaluating properties really look at like my worst case, I don't want to paint a super rosy picture and say if everything goes right, this is what it's gonna look like. I'd rather say, okay, we're having not a great year. What is this thing perform that now?   Michael: I think I think you nailed it. No, I concur. 150%, I think using a percentage of the income, like you said is the wrong way to go about it. Because there are just minimum expenses associated with a property, whether it's a four to like you mentioned or to one, a fridge is a fridge, a roof is a roof. And of course, there's going to be differences in labor and material costs in different parts of the country. But you take a small house in a market and a small house in that same market to repair the roof is still going to be whatever, 50 bucks a square foot or what have you. And so there are just expenses associated with owning a physical property that independent of the rental amount needs to be paid for and accounted for.   So I'm the same I like 75 to 100 bucks a month depending on where the property is geographically located in harsher climates up that number. And for bigger properties up that number to be on towards the higher end of the spectrum have the hundred dollar range. But I think between for most single family home 75 200 bucks a month, I get you there, as long as things are in pretty good working order to begin with. If it's falling apart, well, yeah, that number is going to be higher, and it's going to be death by 1000 cuts. But if the property can sustain itself, great, not that doesn't need to be a problem.   Emil: And we're talking about just repairing maintenance, right? Like you have a separate line item for capex reserves.   Michael: Correct? Correct.   Emil: Yep, same. The difference is capex reserves. You'll hear us in different real estate investors talking about setting aside reserves for when you have these big things like the roof, like the water heater goes out, each vac needs to be replaced, right? If you're buying a completed turnkey property where a lot of these things were recently rehab, you may not need to put aside as much in reserves. But it's always good to just factor these things in because if you're planning on holding for the long run, they're going to need to be replaced in whatever, 15 years instead of two years.   Michael: At some point.   Emil: Yeah, exactly.   Michael: Alright, so moving on. So the next question is one that I love. So is it possible to make a full cash offer to get a discount over the asking price, and then refi afterwards to get leverage for the next deal. So I love this strategy. I tell it all the time. It's an amazing, amazing thing to do. If you're able to make all cash offers and all cash purchases, in a lot of these markets around the country, all cash carries a lot of weight. And so if you can make an all cash offer, you can often beat down the purchase price, which can often have positive implications for your property tax rates as well. And so if you can get the property for a discount, great, then you can go refi it and get 80% of your cash out and go on to the next deal.   Now a couple things to keep in mind is you definitely want to be well aware of what the lender that you're going to do the refi with is going to require both in terms of you personally as a borrower, what kind of documentation do they need any paycheck stubs, tax returns, all that kind of good stuff. And then how long do you have to own the property before you can do this refi The last thing that I would ask is how long you need to on the property before they will give you a new appraisal or are they going to give you the purchase price. So the differences. If you buy a property for, let's say it's worth 100 grand, you buy it for 80, you go through your cash out refinance, say six months is the lender going to give you 80% of the purchase price at 80 grand, or are they going to give you 80% of the appraised value, which is hopefully 100, maybe even north of 100.   Because the difference between the two is you might end up with all of your money back, if they're going to give you on based on the appraisal, because the property is worth 100, that you bought it for 80. So they're going to give you that full 80 grand back, which means you just bought that property for zero money out of pocket, or they're going to give you 80% of the purchase price of the ADK. Which would be what is it like 65 grand, I think, so you'd still leave some money in the deal. So people talk about BRRRR strategies all the time, which is buy rehab, rent, refinance repeats, in theory, there's a way where you can do that, without ever having to do the rehab part of the middle arc, you can get a good enough deal with an all cash purchase. So something to be thinking about. But again, it's really, really important to have the conversation on the front end, prior to purchasing the property about what the lending side looks like after the fact. And also, as you're running your numbers, make sure you you understand it with cash purchase, what are your dollars doing for you. And then also on the financed purchase. Okay, after you pull off, you have to put debt on this property, how does that property perform? Can it still sustain itself? And is it still cashflow? depending on what your goals are, that may or may not be important to you.   Emil: Solid. Great advice. Only thing I want to add here is I think it also depends on the environment you're in. I think a lot of times you'll think, Oh, just because I'm giving an all cash offer, for sure go out and get a discount, right. And let's say you're going for a turnkey property and you you go put an all cash way under asking I mean, you can you can always put out offers, there's no harm in putting on offers, right? We talked about it free, go for it. But a lot of times, you're not going to win those, right. And especially in an environment like this where interest rates are very low, it's very easy for people to get financing right now, it's a little bit tougher unless the property is almost in that state where a bank won't even finance on it, right? It needs to be major rehab or something like that. It's going to be even harder to win with a with an all cash offer just something I've seen personally in trying to go and throw out cash offers to get discounts. It's not saying not possible, but just also factor in the environment you're in, in terms of your expectations.   Michael: Totally. I was looking at a house hack a couple years ago in the Bay Area, California. And I was looking to make offers on properties. And I was getting laughed out of the room because I wasn't bringing 10% over asking and all cash. It's like all cash was the bare minimum just to even be considered. And then you've got to be above asking. So it's really important to kind of know your audience their demographic and also under try to understand if you can with the sellers motivation is if you're doing deals on RooFstock, that's a bit harder. But if you're doing deals off rootstock, go talk to your agents, hey, go find out why this person is selling. Oh, because they're in the middle of divorce. They need quick cash. Okay, well, all cash might play better than, oh, they just rehab the property. They're trying to sell it and get top dollar. Well, they might be waiting and holding out for the best offer and you're all cash offer might not be as strong as you might think it is. So understand the environment, understand and know your audience if you can.   Emil: Awesome. All right. Next question I want to take is, this is a good one I've been thinking about a lot lately. Is it common for renovations to be required when buying a property? And if so, how do you factor that into your model? I like this question a lot. Because I think a lot of us are trained to say I have to get a deal. Right a deal. I have to get it under a certain amount. So I can walk in with some equity. Obviously, that's what we all want. Obviously, that makes a lot of sense. Right? buy the property get it for a good price. Totally. Let's say you buy 100K purchase price. Yeah. And you're putting 20% down, right, right. So you put in 20 k Yeah, plus closing costs. We'll just make it 20 k for ease of example here. And then you walk in, you realize you have to put 20 grand in renovations to be able to rent it out, right? So you're 40 k out of pocket on this property, and you do your cash on cash, you look at your different returns and you're looking at your return it's going to be let's call it 7% because you had to put 40 k down, versus maybe there's another property that was 120 K, and it's turnkey.   And so you only have to put 24 k down and it's already at market rent. And so now because you had to come out of pocket so much less your return is typically not always you have to run the numbers, but your turn can be higher, because right now your denominator in the cash on cash formula, right is 24 k versus 40 K. So one important thing to really consider is yes, you may be getting a deal but your cash on cash return may not be as good because you have to factor in all these renovations into your cash out of pocket. That makes sense.   Michael: It makes total sense. I mean, not only cash out of pocket but also time and headache. So construction always is on time and always under budget right always. So the time there's holding costs associated with Doing renovations, there's physical time that it takes to do the turns to do the rehab, do the renovation, which all needs to be considered. And if you've got a single family property, you're probably not collecting rent for that time period. And so you could be negative cash flow for several months before you end up seeing anything. So again, we need to be kind of long term greedy here and look at the full picture about Hey, is this actually worth it doesn't actually make sense? And can I afford to float all of these expenses, if in your example, Emil, you know, you vote, buy the property for 20 grand, and you're going to put 20 into it, but all you have is 20 in reserves and the rehab is going to cost you the full 20, you might not be able to afford that rehab. Because all the while it's going to take two months, you're going to have property taxes, insurance costs, utility costs, mortgage costs, that all don't stop just because you're rehabbing a property. So again, just make sure you're getting the full, full, full picture, when determining what your actual cost is, then out of both on the time horizon and on the cost.   Emil: Yep. And again, this isn't to say, don't go buy homes that could potentially need renovation, there's a lot to be said there, it's just don't take it for face value that you got to buy something well under market value, quote unquote, but not realizing that you're gonna have to put way more cash out of pocket as well. So your return may not look as well look as good. So just make sure you compare those things and and look at them side by side.   Michael: Great point. Is right now good time to buy a rental considering today's uncertainties. This is a great question. So yeah, I think if the numbers do the talking for you, there's a lot less uncertainty in the equation, so to speak. So you know, I bought properties in high, hot markets, in cold markets and everything in between. And all the while the numbers have been the talking. And I mean, the numbers and the property, but also the numbers in the greater market. So you need to go get a handle on what's going on in that particular market that you're interested in investing in. And in that particular sub market, and talk to property managers talk to agents or contractors talk to as many people as you can, in that area to try to get as best a finger on the pulse as you can.   Because a lot of times what happens on national news isn't the same that's occurring at the local level. And so when we hear about mass unemployment and mass layoffs, and all this kind of thing, well, yes, that's happening at the national level, the local picture might look very different. And so getting a handle on what's going on at the micro level is hyper critical. So I remember we did a podcast and you know, with our, one of our property management partners out in Alabama, and they were saying that, oh, they're at 98% occupancy, and they've never been at 98%, occupancy, and physical and economic occupancy. So 90% occupancy, with brick with tenants that are paying.   So if that local market, things have seemed to be maybe even stronger, as a result of the last several months, or at least unchanged for the negative. So again, I think taking the global topic, the global picture, and kind of laser focusing in and zooming into the micro level and understanding, Okay, I understand what's going on nationally, but I really need to understand what's going on hyper locally. And that's how I'm going to make my decisions. Because again, in oh nine, we saw massive price drops and roller coasters on the coasts, the middle America was a lot more insulated. And so again, nationally, they were the The news was talking about all this crazy stuff, but we need to again, understand what's going on at the local level, to really get an understanding of how much uncertainty is there really.   Emil: Yep. The other thing I always like to point out here is that if you're like us, and you're planning on holding for a 20 to 30 year time horizon, right, even if let's say you buy something, and on paper, the value of it goes down. You gotta remember this is a is a rental property, right? So maybe your net worth in you know, your, your personal finance, tracker, personal capital, whatever you use to track your, your net worth, maybe that takes a hit. But you got to remember, you're not selling the I mean, you may have to who knows what's gonna happen, but that's just on paper, right? If it's a rental property, that thing's still making money every month. So I like to look at these things as I'm on a long time horizon, do I think real estate in 20-30 years is going to be more valuable than it is now are rents going to be higher than they are now?   I believe so. That is why I continue to invest through up and down. And one important caveat, I want to just, you know, say for myself, is I've never invested through a major recession. I started personally in 2017. So I've personally only seen a bull market but I like to listen to people who have been there and done that and one of the big things they always talk about is just make sure conservatively financing that's the big one, right like right now you can't even really go and get a five to 10% loan like they were doing in 06, 03-06 right. So like you have to be 20 25% down but You know, if you're feeling a little uncertain, maybe you maybe go 25 30% that'll help you weather storm so much better. Right? It gives you more of a cushion. So, yeah, besides what Michael mentioned those additional points I'd say there, and it's so hard to have a crystal ball and say what's going to happen, right? Like, I remember in 2018 people were calling 2018 going to be a crash. And then the headlines change to 2019 is going to be a crash. And then 2020 is going to be so every year those headlines are just there and it's really hard for people to predict them but they make for very click baity headlines. And I guess somebody at some point will get to say, see I told you I was right   Michael: I was right yeah.   Emil: They just keep moving the goalposts it's not to say it's not gonna happen always happens. They'll see that cycles but I don't know I plan on investing through the ups and downs.   Michael: Well, thanks so much for listening everybody. That was our show. I hope you enjoyed the AMA or the A ua please continue to send us questions that you have if you'd like to see answered on the podcast. Also, feel free to leave us a rating and review. We have a swag bag giveaway to a couple of folks that help us get to 100 reviews wherever they listen to your podcasts, Apple, Google or Spotify. So feel free to drop us a line there. Let us know how you liking the podcast. We'll catch you on the next one. Happy investing.   Emil: Happy investing