Ranch Investor Podcast

Colter and Matt

Episode 12 | The Future of Real Estate Investment: The Next Big Trend

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How does real estate investing shape your life beyond financial gain? Explore this intriguing idea with Matt Fore in a must-listen episode of the Ranch Investor Podcast.

Matt shares his journey from corporate life to real estate mastery, emphasizing ‘Return on Intentionality’ in investing. His insights on aligning property investments with personal values offer a unique perspective on financial success and life fulfillment.

Dive into current trends and strategies in the real estate market, tailored for both new and seasoned investors. Join us for an enlightening conversation that redefines the power of property investment.

Speaker 1: 0:00
Welcome to the Ranch Investor Podcast. I am Colter DeVries, your three-year host. I’m an accredited land consultant with the Realtor Land Institute and an accredited farm manager with ASFMRA American Society of Farm Managers and Rural Appraisers.

Speaker 2: 0:18
The Ranch Investor Podcast is the most downloaded and informative industry-specific content that intrigues while entertains.

Speaker 1: 0:27
Before we get started, as usual, I’d love to hear your feedback, so if you have a recommended guest or a subject, please let me know. Well, Matt, for Next Level Income. Thanks for joining us on the Ranch Investor Podcast. Before we get started, Matt, I’m going to do an introduction. You spent 15 years in various sales and leadership roles at some of the largest technology companies in the world. I’d like to hear more about that as we get going. You have been an active real estate investor, which is part of the reason why I brought you on the Ranch Investor Podcast. You also have your own, and that is ice cream with investors. On a personal note, you love endurance, cycling, investing and a passion for living an intentional life. Matt, let’s get started with your introduction. What is an intentional life? That’s interesting. I think we can go with that.

Speaker 3: 1:26
Yeah. So I came up with this concept a couple of years ago, where whenever you’re on social media today, you see all this like how many doors people have assets under management, all these sorts of things and when we’re talking about finance, we typically talk about ROI return on investment. But what I have been focused on for the past couple of years is this idea that we should change what ROI means to return on intentionality, and I think none of this stuff matters in real estate and having so many doors and how much property you have and all those sorts of things, unless you’re using that to be intentional in other areas of your life. So we can go into a little bit about backstory and why I’m big on that, but I just believe this idea that every day you should wake up without a purpose. Every day, you should try to be intentional with those you care about and the hobbies that you have, and so I’m really trying to be on a mission right now changing what ROI means from return on investment to return on intentionality.

Speaker 1: 2:26
Let’s hear this backstory. How did you come to return on intentionality, living an intentional life? That’s interesting.

Speaker 3: 2:33
Sure, so you mentioned I’d spent 15 years in sales and sales leadership at some of the largest technology companies in the world. My real estate journey began back in 2016, when I was supposed to receive a life changing commission check, and I grew up in a really rural town in East Tennessee which I’m sure you and some of your listeners can relate to, and so I never really cared about big houses, cars, watches, boats, things like that. So I was looking for different ways that I was going to invest this commission check, and I looked at everything from crypto to bonds to annuities. And then I had a buddy at the time that said, hey, you should look at this real estate thing. It produces cash flow, it appreciates, it gives you some tax benefits. And then I got a call the week of Christmas that year from my VP who said, matt, we’re not going to give you that commission check, we’re only going to give you two cents on the dollar from the money you earn. And when I asked him like, hey, how did we come up with this number? What happened? He said, well, how much money have you made this year? And when I told him, he said, well, isn’t that enough? And so it was that point that I realized I, if I wanted to achieve the financial goals I had in my life and pursue the hobbies that I had and the people that I cared about, that I was going to have to find a different way. Right after that, though, I found out that my dad was going to have to have triple bypass surgery, and I lost my sister, and so it kind of all culminated in this moment of why are we even doing all of this if we can’t be intentional with those that we care about? So that’s kind of how it, how this idea started and is morphed from there.

Speaker 1: 4:05
Would you say that intentional investing? I like to say one of the aspects of a good investment is it produces income, so it has. So it has an annual yield, it appreciates in value, it has the tax benefits as you mentioned, and it you have appreciation of the investment. So that’s personal appreciation, whether that’s use of a second vacation home or art or collector coins not that collector coins produce an annual yield. But you could try to check all those boxes, wouldn’t that be a perfect investment?

Speaker 3: 4:44
Absolutely. I mean, as I’ve kind of grown my financial knowledge and standing and things like that, people are always asking me hey, is this a good investment? Should I invest in this thing? And I always take them back to well, what’s a good investment to you? Do you understand the investment? And, ultimately, I know what my criteria is, but that doesn’t mean it should be your criteria. So I’ll use an example of active real estate. If you’re a surgeon or a doctor, or you have a bunch of kids or hobbies on the side, do you really want to change gears from your day to day job and take on a whole new set of problems? With active investing? Yes, it may meet certain criteria of producing X amount of cash flow or appreciation and those sorts of things, but are you being intentional in other areas of your life because you’re taking on another job? So that’s kind of how I’ve shifted my investment to. I’ve got my criteria but ultimately, while investing in this thing, help me be more intentional in the areas of life that I want to be intentional in.

Speaker 1: 5:44
To arrive at what your criteria is? Do you ever do a mission, vision and values board and say here’s the plan. We’re going to try to stick to this as best as possible and use this as our guiding light.

Speaker 3: 5:59
Kind of we’re going into the new year here as we’re recording this, and that’s one of the things that our family has set down and started determining where do we want to be as a family, what do we really value and how do we be more intentional in pursuing those values. But ultimately, what I’m looking for is the exact same thing you mentioned in your analysis of a good investment. I want something that cash flows. I want it to appreciate natively above the rate of inflation, which means that naturally it’s going to appreciate above the rate of inflation. And then I want to see native tax benefits and no matter where you go in the world, usually there’s a tax benefit around producing energy, producing food and housing a population. So that’s kind of how I’ve made my criteria of what I look for in an investment.

Speaker 1: 6:49
Well, it sounds like you think and consider holistically. That’s right. Holism would be a personal value of yours.

Speaker 3: 6:59
That’s right. That’s right, like I personally don’t want to take on active real estate projects unless I can meet a certain extra hurdle on my return, because I know the complications that come around that.

Speaker 1: 7:13
That’s and that’s how I am with residential real estate. And you always consider the trailer parks and whether it’s just the slabs or the actual as Dave Ramsey calls them, tin can ATM machines. If you’re buying a trailer park, yeah, the annual yield looks great, the depreciation looks great. A lot about this. You can leverage the heck out of those. A lot about a trailer park looks awesome, but holistically, I don’t think I want the headache that has always steered me away that I just I don’t have the time. I don’t want to develop the learning curve. It’s going to come with some, some more understanding and if I, if I do a residential or a trailer park, I’ll probably consider a property manager just to relieve myself of that, because that sticks closer to my values of focusing on what drives me, what my passions are and what I’m good at.

Speaker 3: 8:15
Yeah, so you’re matching mobile home parks. We we actually have 1000 mobile home parks in our portfolio today are lots, I would say, and, depending on when this airs, we have 1000 more under contract going into 2024. But make no mistake about it, it was a learning lesson around dealing with some of the headaches that come with mobile home parks versus a brand new, a class, multimillion dollar apartment building and getting different clientele and tenants. They each have their struggles and it’s one of those things I think being a good investor is knowing what you’re good at and staying in that zone of competency, and we had to go learn how we could apply our zone of competency to that level. But ever since then, you’re right, they are little ATM machines that print cash.

Speaker 1: 9:01
So one of the challenges we run into selling rural real estate and say it’s say it’s vacant land on the outskirts of a of a metropolitan area that’s basically held for appreciation very low if any, probably no annual yield in that situation. But then when you get into farmland you can probably get an annual yield of two to 3% gross. That’s your cap rate and then it goes down from there as you get into Montana. The recreation hunting properties that you’d envision as a trophy ranch, the annual yield and depending on the size, like the smaller ones are going to have, probably have less. Granted, there’s been some mega $200 million type sales out there that have a cap rate of a half a percent but it can get as low as a quarter of a percent and that’s that’s just taking out the bare minimum property taxes and insurance. And now you’re at 25, 25 basis point cap rate. So one thing that we we fight with is a lot of commercial investors say, man, buying a trophy ranch is the dumbest investment out there. That is not an investment, that’s a toy. You’re buying the hobby, you’re buying playtime and there are tax benefits, there’s significant tax benefits. But but I also come back to there’s so many aspects that are not priced into the market, that you cannot concessionize or monetize, and that’s as you can relate to with your two kids, quality time with family experiences, exclusive experiences, property rights, and and how do you value those? Or is it? Should we be more strictly? Look, I need to go for the 18 cap. This is, this is the reasonable, sensible, pragmatic thing. Show me the 18 caps.

Speaker 3: 10:59
Yeah, I would say it depends on the person and what their investing goals are right. So most investors that I talked to are trying to reach a certain cash flow number so that they don’t have to worry about getting fired from their job, taking relocation, reorganizations inside their company and all those sorts of things. And then some investors out there, the Ted Turner’s of the world, the Bill Gates of the world they have so much cash that they can go park it and land and say it’s okay that this doesn’t yield and cash flow because it gives me some sort of other tangible benefit, whether it’s hunting, whether it’s a second vacation home, whether it’s being able to go take your kids somewhere and things like that. So I would. I would say it really depends on the type of investor and what their personal goals are. I know for me personally, going back to kind of my zone a genius I wouldn’t know how to take a 200 acre, 200 million acre, 200,000 acre property and make it into something that’s more valuable because that’s not really in my skill set. But definitely if somebody has that skill set out there, there’s value to be made in any sort of real estate.

Speaker 1: 12:08
Well, and I would consider that farm and ranch is more of core real estate. It’s it’s priced adequately in the market every time. It’s it’s kind of like your lower Manhattan that there is a lot of demand. It’s core real estate, it’s. It’s stable. You know that there’s liquidity, there’s going to be buyers, not a lot of volatility or variance. But you mentioned cash flow is a good place to start and that I would. I would agree, for all of us average Americans who are not Bill Gates and Ted Turner, the cash flow benchmark, the metric Is, is kind of what we build our lives around. How can I get to passive income so I can do more of the things I want in your case, cycling. So how do you get enough passive income to become a cyclist more over the United States? Go to more areas and that’s where I think you might have got into next level income. Is that next level income is? Is that a consulting firm? Yeah, next level income is a commercial real estate private equity firm.

Speaker 3: 13:15
So my partner, chris, and I we basically what that means is we help individual investors investing commercial properties to receive cash flow, appreciation and tax benefits Without actually having to act actively manage the tenants, the termites, the toilets and all sorts of things like that. So our asset classes range from apartment complexes and mobile home parks to car washes and we have a debt fund. So a lot of the things that we work with our investors around is helping them understand that they can be involved in the space passively. They don’t have to actively go put their name on the deed, find the properties, get bank loans, managed tenants, all those sorts of things. But also, what is your end goal? What are you trying to achieve? And remember that the tax system in America it’s not. It’s not based on how much money you make, it’s based on how you make it. So if we can come to a number of how much are your expenses, we can back math that into. Here’s how much you need to be investing in different types of asset classes to get to your quote. Unquote financial freedom number.

Speaker 1: 14:19
That’s financial freedom by 32 is that kind of how you started this dream?

Speaker 3: 14:23
Yes, now I want to put an asterisk on it Financial freedom by 32 didn’t mean that I was buying first class Tickets to air. To buy it meant that I basically had enough money coming in for my passive investments to put a roof over my head and put food on my table indefinitely. So what I found when I achieved that at the age of 32 was the intentionality piece. I could go be more intentional with the people I cared about. I didn’t have to get up from dinner to accept a phone call from my boss who was yelling at me on Christmas Eve or New Year’s Eve or something like that. I could start saying no to the things that didn’t give me energy in life and start saying yes to the things that gave me energy.

Speaker 1: 15:10
Well, that’s that is probably for a lot of people developing a muscle, reworking a muscle, because when you get this life or life changing commission, it would be very tempting to spend it on a trip to Dubai and live the live the big life. That’s sexy. You can put that on Instagram, get a bunch of likes and some hearts, you know, and that gets you street cred, but then I don’t think putting a mobile home park on Instagram gets as much sexy shares. So it takes this you have to work this new discipline, this new muscle Of intentionality, and how the heck do people do that?

Speaker 3: 15:52
Yeah, I think it goes back to again understanding what your passions are. So it all comes back to a why. If I, if you, won the lottery tomorrow, one of these one billion dollar mega jackpots or whatever, what would you spend your time doing? And I would beg to say that a lot of people that listen to your show or podcast about real estate would not just go sit on a beach and sit my ties all day. Maybe they would for a day, maybe they would for a month, but after that they would get bored and restless and want to be more productive to society. So what are those activities? What? What gives you energy? What trains your energy? In a perfect week, in a perfect month, what would your life look like? And once you have a pretty clear picture on that, that’s when you can go back and say, ok, well, how do I get there? Regardless of whether you’re obsessed with money, like money, think money is the root of all evil, regardless of your feelings towards money, you need it to survive in society. So we all have this money obligation that we have to go solve. So either you’re going to go learn about it and figure out how you can solve that problem, or you’re going to allow somebody else to tell you how to solve it, which means, basically, they’re going to get rich off your ignorance. So I, when I was early on in my career, I said this is something that one I do care about, but I’m interested in solving. And then, once I solved it, I was able to be more active in the areas of life that gave me energy.

Speaker 1: 17:16
Well, you bring up a good point about the listeners of Ice Cream with Investors, your podcast and the people I talk to. The listeners of Ranch Investor is, I would say they’re already in this mind frame. Their personalities, the character that they have developed is one that they probably aren’t looking to build their Instagram followers for the next TikTok dance and get all the hearts and likes what you have in Ice Cream with Investors. This is a form of peer support. It’s people listening to other people of like interest, saying, boy, I like what that guy, Matt Four, had to say about discipline and wholism and intentionality. I’ve been longing for that and I talked to my wife about it. I go to work and there’s not the same, there’s not always the same type of philosophy at work for my coworkers, my peers in person. I need to go to these podcasts where there’s like-minded people with the same values and visions. I guess this is an opportunity for me to thank my listeners for an awesome year, the third year Ranch Investor podcast and you, when I get to bring you on. This is my form of peer support and accountability and new, fresh ideas. I just want to thank everyone for a great 2023 and thank you as well, Matt.

Speaker 3: 18:56
Yeah, no, I appreciate that. When you were mentioning peer support, I believe that the people you hang out with ultimately decide your future. As someone with two kids, it’s amazing to see the influence that their friends have on them. We were having this conversation over the week. It’s crazy how, when my dad grew up in rural West Virginia and in a town of 400 people, you had to be all in all to get stuff done, because this was the late 40s, early 50s in a rural part of the country. If you couldn’t do it yourself, chances are you didn’t know someone that could go do it, so you had to figure it out. Well, the new world is really around. We’re connecting in different time zones right now. Across the internet, I get to see your face, you get to see my face, which I’m sorry about that, but we get this opportunity to connect with like-minded individuals to help us grow. My real estate journey really took off when I started consuming more content and surrounding myself with those people in my ears, when I would go on my runs and my rides and things like that, but also by reaching out to those folks, and what you’ll find in this space is that everybody wants to help each other. I mean, we’re talking in a multi-trillion dollar industry. There’s enough for all of us to eat. Everybody wants to help each other, so reaching out, making those connections, adding value to other people, is ultimately going to help you. You yourself scale as well as us.

Speaker 1: 20:23
Yeah, and my personal story is roughly 10 years ago when I left banking and I thought I’d become the world’s greatest rancher which that was naive at 26. That was also during a huge cycle bubble in the livestock values that forever changed my life for the better. But at that time it was just audio books. I would pick up Malcolm Gladwell and that was my form of reaching outside of my immediate tangible peer group and you’d get all the audio books and you just have it siloed. It would just stay with you and you didn’t have I didn’t have a lot of people to bounce that off of. And fortunately then came the podcast and at that same time my wife and I we’re in our late twenties, mid late twenties and you start seeing things in your long time friend group, from what I can remember, where I just didn’t want to play that game. It just didn’t feel comfortable. Like buying the biggest house you could with a first time homeowners loan, 5% down type of a deal, paying mortgage insurance, and then and then go leveraging a new car, a new pickup in our case in Montana like a 65 at that time $65,000 pickup and then and then, because you got the cash flow, your paycheck is every other week. Well, let’s go leverage a boat in the summertime and maybe a snowmobile in the wintertime, and all of that even before I know my listeners give me. They give me shit cause I’ve mentioned this a lot. But even before I lost my ass in the cattle market, matt, I was still uncomfortable with that amount of leverage and it just felt like slavery. Like I had that conversation when I was going down with my bankers. The ranching wasn’t working out and they said well, coulter, you can dig yourself out of this hole. We know you can. It’s just gonna take 30 years. Do you want to do that?

Speaker 3: 22:44
No, I don’t. I would say the biggest shift happened to me when I lost that commission check was this idea that somebody else was gonna control my life as long as I was working with inside of big fortune 500 companies. Somebody else was gonna control how much money I made, what I did, all those sorts of things. And one thing I’m pretty passionate about is we live in a modest home today. We could absolutely go live in something bigger, but every time you make that sort of a purchase a snowmobile, a new pickup truck, a new house you are adding years on to your working life. You are adding time that you only get finite number of time Losing. My sister taught me you only get a finite number of time and you never know when that’s going to end. Why do you want to spend more time doing the things that you don’t give you the energy that you want not being intentional in life because you wanted the bigger house, the nicer car, the bigger snowmobile and things like that?

Speaker 1: 23:39
Well, in my personal experience I can say that developing the freedom. So then immediately we kind of we didn’t do the Dave Ramsey program, but I listened to enough of Dave Ramsey on the AM radio and I have a finance background that I was like, all right, the writing’s on the wall, I get what the message is here. We immediately went into paying down mortgage, paying down paying off the cars, paying no credit cards. You know the whole three month savings emergency fund and that felt good. I know that it gets brought up on different channels and people who are of the same like mine, but it just feels really good personally when you’re debt free for the personal debt. Now, I do agree that you should leverage income producing assets to a certain point for that leveraged cash flow, but it just feels good to have that discipline. It’s like at the end of every workout. You know those endorphins. You can’t buy those.

Speaker 3: 24:46
That’s right. That’s right. I mean, look, dave Ramsey gets a lot of heat from finance people. I was actually listening to him last night as I was falling asleep and one of the things he was talking about is the idea that debt introduces risk. I thought it was like it’s a fair point. I think it was a less harsher tone than he’s given in the past. But he is correct that anytime you add debt, you’re introducing risk. But ultimately, what you decide to do in your own personal economy is a mix of math and emotion, and there’s always going to be a math answer to the equation and there’s always going to be an emotional side of the equation. What you should do is a mix of both and I can’t tell you what your mix of both is. But you shouldn’t do all emotion and you definitely shouldn’t do all math. You should find your right blend of both and pursue a path forward.

Speaker 1: 25:40
Well, how did you come to launching a private equity fund with a thousand mobile home lots? I mean there’s a certain amount of lots of risk in that, and how do you balance that? And I mean, just tell me about how difficult it was too, how many years it took. And I mean you’re a pretty young guy, so to have potentially 2000 mobile home lots and a private equity fund at your age is a significant accomplishment.

Speaker 3: 26:11
Yeah, I would say the answer to that question is a lot of partnerships and a lot of meeting the right people. So we at our firm come with a level of competency in certain areas of the real estate transaction and the real estate life cycle and then we understand where we don’t have expertise or where we don’t have a team built out and where we’re gonna lean on other partners to go help us do some of those things. For example, I have no idea when I walk into a mobile home how much work needs to be done and how much it’s gonna cost. You could tell me it’s gonna cost $2,000. You could tell me it’s gonna cost $10,000. And with a little bit of experience I could tell you which number is closer, but I’m not really sure, down to the penny, how much that’s going to cost. So I’m gonna have to leverage our other partners in this equation, whether they be construction managers or things like that, to help us understand what this is going to actually take. And I think that goes back to the conversation we were having earlier around. When my dad grew up in rural West Virginia, he had to know everything and be everything, because there was nobody else In today’s world I could get on chat, gpt, I can get on Reddit, I can get on the internet and find other ways to come up with an answer here than having to know everything myself. So I think when I started understanding these are the things I’m really good at and can help add value, and these are the things that I don’t care to go learn because it sucks my energy and I can go find people that can add value there. And two and one plus one now all of a sudden equals three. Then that’s when I started to scale and really see a lot of success.

Speaker 1: 27:51
BecauseŚ≠© today and I’m in a state where we control the cabinets and we set up the machines to be home and home. I jumping back to China. I see many people who assume cube and cube which is 20 feet long. No-transcript I’m concerned about and think about I’m concerned Mm. Ok, she doesn’t even need that chat, gpt or something, and but yeah, we, we, we are fortunate that we have so much information available to us Probably makes pursuing those dreams a little more within reach, I would say because because information used to be hard to get, now it’s cheap. And now I would argue that most dreams are closer.

Speaker 3: 28:46
I would argue the same. I would say the difficulty now in today’s environment is that can does not mean should, and what I mean by that is because I can go do this, because I can go learn. This does not mean I should go learn this and do this and kind of circling back to the whole return on intentionality piece. I know that for me I don’t get energy out of swinging hammers and putting in the manual side of the labor. I know I can go do it. I know I can go learn it, but that’s not where I want to spend my time because it’s going to ultimately drain more energy than give me energy. So I would encourage everybody to understand that you could go achieve anything you want today. You can go do anything you want. It does not mean that you should go achieve everything you want and should go do everything today. Find the parts of your world that give you energy, that you care about, that you have a zone of competency. Get really good at those and find the best people around you to supplement the things that drain your energy or don’t give you. Don’t add the value that you want to add.

Speaker 1: 29:56
Well, in in can versus should. In your experience, did you have to test things at a small level like let’s take the mobile home park 20, let’s say it’s a $20 million fund? Did you have to start with two of your own personal mobile homes and say you know, I’m going to test this out at a smaller level, build a track record, prove the, prove, the thesis, prove my, my management skills, and just to see if I can’t? Well, you know, I have a pretty good idea that I can, but to see if I should, do I test this at a small level before I jump into a $20 million fund.

Speaker 3: 30:37
Yeah, I mean, I started all all this on a single family background. So my first investment was a single family turnkey rental that was right around the street from where I lived. I bought that because, one, I just lost that commission check due to no power of my own. So me putting down a 40,000 down down payment for that was one the cost of an MBA, so if I failed at this at least I would get some education from it. And two, it got me going in the right direction. So I knew from that turnkey rental that I could analyze deals, that I could find deals. Now my next deal was a flip. So I bought a property holds on the wholesale market. I used hard money lending. I understood that process. I started down the process of trying to fix some things in that property when I learned very quickly that that’s not what I enjoy doing. So I knew at that point that, hey, if I want to go do this, I got to find a good partner. And I found a good partner and a construction manager who could go do a lot of the things that we needed to do. So we started doing some flips, we did some burrs, we did some things like that and then, ultimately, I ran out of cash. I had to go find properties that were valued not based off of my income but based off of the asset itself, and that got me into commercial real estate. So I invested with some partners, passively at first, kind of looking over their shoulders, understanding what they were doing. And then I got involved on the active side and started putting together deals, putting together the financing, raising capital and things like that. Yes, I started on a very small scale, but by the time we got to the mobile home parks I knew that I was never going to be the one that was going to go in there and swing hammers and collect rent and manage the property where we’re going to. We were going to go find somebody that could do some of that work and we were going to add value somewhere else in the scale and the in the life cycle.

Speaker 1: 32:28
Well, you brought up hard money lending and I think it’s time for map for his forecast. It seems like and I want to hear your crystal ball that with the way where rates are today fed fund rates, your risk, free, opportunity, cost of capital and you’re, you’re borrowing power and given where cap rates are in commercial same with farm and ranch, there they are suppressed, compressed and do not appear to be increasing at any point. What I just I don’t know what it’s going to take for cap rates to improve and farm and ranch it’s going to take. I don’t know. I don’t want to speculate there, but I want you to speculate. What are what are we going to see with commercial, with these cap rates? We hear about huge vacancy rates. We hear about refinance balloons, bubbles coming up and then the financialization of these hard assets. Do they just become paper money? Do you? Do you do more hard money loans and and turn a real property into mortgage paper instead? What? What is going to happen over the next two or three years? Map?

Speaker 3: 33:43
Sure, so, since this is on the internet and, if I’m wrong, it can be easily erased and never brought up again. I’ll give you my forecast, but ultimately, look, no one knows, right? If I knew the answer to that, then I would be living on a private island somewhere and I don’t know if I would be embracing the cold here in Nashville today. But I mean, I have a couple of thesis that we are watching right now. The first thing is I do think rates go down next year, and it’s as simple as it’s an election year and no one wants to see a 2008 happen again. Regardless of what side of the aisle you’re on, you do not want to see another 2008. Second is, it feels like inflation has been moderated, and I don’t know if it’ll get down to a 2% level, but it will get down to a three ish, three and a half ish, and that will give the Fed enough data that they want to lower their fed funds rates, which ultimately will drag down property rates. However, when that happens, rates prices on all real estate will go back up, and so it doesn’t solve this problem of affordability, and right now that is starting to become more of a political issue than anything, and that has nothing really to do, I think, with the economic environment. It has to do with the regulatory environment more than anything. So you go into these big cities like San Francisco and California where everybody says they need affordable housing, everybody’s on board, and then you want to build something affordable next to a billionaire’s house and they say wait a minute, no, we’re not on board, go put that somewhere else. So that doesn’t solve the affordable housing thing issues. So if I’m an investor right now, there’s two things we’re watching. One we believe people will be moving down the affordable stack over the next couple of years, because, as interest rates decline, as property prices appreciate back again, we believe that people of housing will become more affordable and people will be moving down the stack. That’s why we are very bullish on the mobile home park space is because if that thesis plays out, then mobile home parks are affordable housing for a lot of folks out there. That allows them to not only live affordably, but also own a piece of property affordably, which is hard to find these days. Not only that, but it’s it’s shrinking in supply, so if more demand is increasing, supply is decreasing. It’s great economic position to be in. The second thing I think will happen, though, is that probably around 2025, 2026, 2027. So not this next year, not really the next 24 months, I think inflation will go back up, and the reason being is because you are on shoring all of your manufacturing that you’ve offshored for a number of years and, just put simply, when you took a $7 job and moved it to a $2 job and you’re going to bring it back to a $15 job, inflation is going to go up because people are going to cost of goods are going to go up and people will demand more, etc. Which will cause another height. So, if you are going to buy real estate, the next three years probably present your best opportunity and then the back half of the 2020s early 2030s, look a little bit shaky. So that’s kind of our underlying thesis and that’s kind of what we’re looking at right now. To your point around paper assets and being the bank, essentially we’re always going to own real estate, but we also do have a debt fund where we lend out to fix and we’re on a short term basis on that money, so we’re able to receive high cash flow no tax benefits, no appreciation, but high cash flow on short term basis, so that my money is always cycling back on us and allows us to be nimble where we need to be nimble. So I know that’s probably a long wind to dancer, but that’s what we’re looking for.

Speaker 1: 37:40
That’s certainly what we’re looking for with with the loans. Do you adjust your required equity position based on? What do you? What do you base the equity position on? Because that seems, given the thermometer of the economy, maybe today is, if people are ultra worried about a correction in real estate values, you’re going to increase that equity position, right? So where are you guys at today and what’s the range?

Speaker 3: 38:12
Yeah. So, first off, even in a hard money loan fund, our LTV across the portfolio is right around 65%. So we don’t have 120% LTVs, 100% LTVs and things like that. However, what comprises that is a lot of tiers. So if you wanted a 100% loan to value to the ARV, then we’re going to charge you 16 points, 17 points, whatever that is, and if you wanted a lower LTV, then we would charge 12 points, 11 points, something like that. So we do have a mix of loans to value, depending on what tier we’re in, and we also charge higher depending on what LTV you want and things like that. So it varies. The ultimate answer is yes, though we do want to keep it within that 65 to 70% range, so that we’re leaving us room, if a borrower defaults, to go back and take over the property, add the value and flip it at a still a profit.

Speaker 1: 39:17
Well, matt, this has been drinking through a fire hose listening to you appreciate it. Do you have in our last five minutes? Do you have a couple plugs? We plug next level income. That is, your private equity group. You’ve got the. For those that enjoyed what they heard of Matt, we have always got the next level income show ice cream with investors to learn a little bit more about commercial.

Speaker 3: 39:42
Yeah, it’s bringing on everybody from the real estate industry. So when I first got into this business, I thought that you could only be the fix and flippers you see on HDTV. What I’ve learned is there’s so much more to it. So we have people that have talked about fix flipping land. We’ve had people that talk about flipping apartments. We have people that talk about flipping parking lots. We’ve had people talking about being the debt. So really, the goal is to bring on different people from the real estate industry to talk about their specific niche and what they’re doing and ultimately, listeners can say, hey, I know that this aligns more with the intentionality piece and things that I feel like I would be good at, and I can just be a broker of those connections. So go check us out. Ice cream with investors on all of your major podcast apps. Would love to have you like and subscribe and be a listener.

Speaker 1: 40:31
And on that for next level income. Thank you for coming on the ranch investor podcast. It’s been a been a rewarding 45 minutes.

Speaker 3: 40:40
You got it. Thanks for having me.

Speaker 1: 40:42
We at Ranch Investor are very interested in hearing your thoughts, your opinion, your wants, desires, hopes and dreams. Everything on ranch syndications, ranch investment, ranch real estate syndications and DPP’s direct participation programs. Please reach out.

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