And the NAR could have could have avoided this, in my opinion by being more flexible and being more open to those negotiations but the 3% on the seller side that's there's less of an issue with it that this is more about the NAR role and two operating conditions requiring the sellers agents to share if a buyer's agent was involved and so the buyer's agents are going to now need to be more informed that are educated and change the way that they present their permission request to either the buyer or the seller.
Definitely, yep. Okay, well, thank you, Matt, and anything else that you wanted to add? Just a reminder, Matt is our affiliate attorney he covers all 50 states. He's been an attorney for over 20 years. In real estate also licensed in the UK, I believe as well, right?
I am. So I have no more to add on that. But
any mention of any number is just an example. Yeah, I was gonna say any any mention of any number of commission is just an example and for training and example purposes, we're not trying to fix any sort of numbers.
Correct? Correct. But you know, I haven't heard much from you guys. But truly, if you got a legal question, please reach out and just give me a call. That's part of part of being in the group and my my participation in it. So please reach out if you have any questions. Thank you. One last
thing before before we move on just any timing, guesstimates. Something that's big has to take a long time to shake out. And so it's good to be able to bring it up and discuss it make sure that it's known. But how long until people have to start saying you know, if you're not a part of one of the larger groups, kW REMAX or anybody else who was named or is yet to be named, you know how much longer do you have to start thinking about that?
Well, the deal is this case, it is the big shining example of what not to do and what we all what what my practice is involved in is trying to keep people out of trouble. I'll get you out of trouble. Once you're in it, but I prefer to get people to keep people out of trouble in the first place. And so my advice, read the case, or call me and don't do what these guys have already gotten in trouble for doing or if you don't, if you don't take that advice then your number could be next in six months, a year, two years, something like that. So I would be very careful from this point forward about how you operate. I don't think that's in the future. I think that's right now.
Gotcha. By May tomorrow morning, I'm attending a webinar on car attorneys. All California and brokers are by a while due to challenges. It's a it's a virtual thing. There's one going on right now and there's a need to bid borrow from the car attorneys about what's going on here. In regard to that, I have a FAQ that they sent out for the last one I have done, and I'll be happy to put it in the chat. I'm looking forward to it.
And Matt, could you put your email address in the chat bar for everyone? In case anybody has any questions or knows anybody that needs any legal direction?
Don't do that right now. Thank you.
And with that being said, we're going to move on to our guest speaker today Matt Mandel and I'm gonna have having moderate with with Matt. Matt Mandel. Just to tell you Kevin has a big financial background and so I thought he would be a great person to moderate and talk to you during this chat. And I'm gonna let Kevin sort of introduce himself to you and then talk about your bio. I know it's a great bio. So I'd like him to do that and talk about your background so that the members understand who you are, what you do, and we appreciate your time very much thank
you so much. I really appreciate you guys inviting me in. Thank you. Go Go ahead, Kevin. So yours. Well,
you know, thank you, for me and from the rest of the group as well. And we're excited to have Matt because, you know, Kelly was nice enough to say I have a financial background but if you compare my LinkedIn profile to match then I'd be dwarfed immensely. You know, he brings a lot of experience 35 years, at least in the real estate world and investments. And, you know, his background starts out with REO property specialists right to how I met most of the folks in this group. And so man, I started out at Wells Fargo and worked in REO default for at least 10 years a little bit longer, and then moved into more of a risk management and now I'm back in default with Key Bank and so you know, looking over your, your areas of expertise in the background experience, starting out with the reo, and ending up now with non performing loans, the acquisition space, you know, it's intriguing to the group here because we have a lot of brokers and realtors here who, you know, this is the elite real estate network. So the reason why I joined is because you have a lot of like minded folks, lots of experience. They're able to problem solve, and I think that's really one of the signature signature pieces of the group. Everybody's looking to be able to share their expertise. help everybody else grow. And when we're either meeting clients or talking with new clients, the discussion really starts out with how can we help you what problems can we solve? You know, we have a lot of boots on the ground and all those years of experience. So hopefully, there's nothing that the group hasn't seen. But if you get a hold of somebody like Milt, and you say, hey, Milt, I got a question about this. You know, if milk doesn't know well, then we got 30 Couple other folks on the call or on our email chain that we can reach out to to say, Hey, I haven't run into this yet than anybody else. And so Matt, having you on here looking for a little bit more of that background, but then also would love to hear you kick off, share what you're seeing out there today. And, you know, then have some specific questions, but want to share a little bit about the group as well. You know, with the focus on real estate, the opportunities that are presenting themselves as we finish out this year go into next year. Just have you touch a little bit about that. But if you could fill us in a little bit more about your background and share with us. Just your thoughts. certainly appreciated. Sure.
Thank you so much. Pleasure to meet everybody. So I've been doing real estate investments for as you said Kevin for 35 years and I have a background in mergers and acquisitions, investment banking, asset management, and I own about a half a billion dollars of real estate throughout the US with my partners. And as of recently so we've been buying non performing loans and Oreos for 20 years probably. Actually, I started buying him in 94. So it's amazing as time goes by, but I'm sure everybody here is probably aware of the Signature Bank loans that the central bank was taken over in. And first, fidelity was a federal fraud the other names of the banks but in any event, our group was one of a handful that was approved to bid on the Signature Bank portfolio of non performing and performing assets. And so we today actually, we submit we've been up for the last week, like non non stops, like cramming for finals, getting our bid completed and approved in in with the FDIC and we submitted our bid today on $600 million of commercial loans. Most of them are performing some are not performing almost all of them in New York. And so what I wanted to do today was just briefly, touch, really briefly touch on kind of how we got here today. You guys probably talked about that quite a bit in your previous meetings. I want to spend a lot of time on it. And then what we all can do moving forward over the next year in two years to figure out how we all survive and succeed and make money and and anytime you guys have questions just feel free to interrupt me it's fine. I'm gonna rather have this as a kind of a q&a and participation than just me being a talking head because it's better for me to be able to answer questions as we go along. So feel free to to ask as you participate. So as I said
Northern California and he explained that how is your Buy Box changed from last year to this year based upon the the landscape the financing landscape? So
the you know, right now the the financial indicators are kind of in flux and trying to figure out where people's people's expectation are the investors expectation of return is fluctuating wildly, you know, a year ago, people were saying if I can get a 10% internal rate of return, I'm happy and now yesterday I was on a call with some of my investors and they said we'd really like something in the range of 25% internal rate of return, which I haven't seen. It's not something that's really out there at the moment. You know, it's it's funny thing we're investors, no matter where the market is, investors are there's always that gap between, you know, investor expectation or buyer expectation seller expectation, and that's what our job is to spread them to make that happen. So, you know, we are are trying to figure out how to price things. So on this on this portfolio that we bid on today, we bid it at, effectively a 15% internal rate of return on the existing as kind of the floor with an upside based on projections of somewhere in the mid 20s. And so, that's kind of what we we hope it's obviously you know, and again, I may go off subject and and kind of digress a little bit. So if I start doing that you guys can pull me back in if I get too far off of it too far afield. But, you know, the thing that we want to be cognizant of which I think that a lot of times people forget is that when you're looking at things like internal rate of return or cap rates there they are, of course, a a measure of the you know, how your, your investments performing, but right it really is, is really it's a measurement of risk, right. So, the question is at what, how much risk are you? Are you taking over and what is your anticipated return for that risk, what you're really doing is buying risk and buying a risk profile. And people tend to, to forget that you have to balance risk in order to be able to compare investments. And oftentimes people say, Oh, it's, you know, this is a 10 cap and I can get a 12 cap. It's like okay, well, not really because I mean, yeah, maybe you can get that but is you know, is it equal equalizing risk in you know, I'm sure Matt will say that. One of the kind of the concepts behind real estate laws that real estate each piece of real estate is unique. No two pieces of real estate are are identical, which is one of the reasons why people can sue for specific performance instead of damages. So in that tell me if I'm sued by misstating something, yeah,
that's exactly right. So,
so, being able to to equalize risk. means that you have to take really an apple and an orange and compare them and figure out how to make them both into a pair, right. It's it's something that that comes together as a pair. So when you're talking and this is one of the takeaways I would start with, to give you guys is that whenever you're talking with either you're looking at an investment or you're talking with your clients, and they say, Oh, we want to get a certain return. So the first, the first measure of return is would be kind of what government bonds be paying, right? What's your risk list? Effectively riskless return, and that's going to be your threat, your baseline threshold, and then how much more risk are you buying when you're investing in whatever it is, you know, whether it be commodities or real estate or whatever, what have you. And so when you're talking to your clients, and they say, oh, we need to get a, you know, a minimum of a 12% IRR, you know, an eight cap or whatever the number is, the next question out of your mouth should be, what is your risk tolerance and how do you measure that? Let's get an understanding of what it is that you are looking at so that we understand how to equalize risk. Once you do that, then you can start balancing some of the objections that you're getting of, well, you know what, this isn't as good of a deal because the cap rate isn't as good or the IRR isn't as good. And that's just not the case. It's not as simple as just comparing the two more questions so far. Paul, did I answer your question? Yes, sir. Yep. Thank you. Okay. So, you know, the question, first question is kind of like, how do we get here? And then where are we going? And then what do we do about it? Those are the three things that we want to address. So I'm going to share my screen for just a second if I may, and give you guys a peek at something that's even once they're gonna move this over different screen and this over. I think I have screen sharing capabilities here. Let's see.
I think Oh, admin may have to make you host Hang on a second. We should
talk. You guys can see me. Okay. So sorry, this is not a word documents and I forgot to put on a PowerPoint basically, this is just from 2008 to 2023. And this is your delinquency rate and special servicing rate. And you know, so here we have we have 2008, we see our risk, you know, the liquids starting to go up. And then 2012 That came down and then they kept going down, kept going down, and then we had COVID and they shot back up. And then and then we had the PPP loans come in, and they started coming back down. And now we're over here effectively. So this was the, the, each one of these you can see is a crisis point in our economy. And you can see our delinquency rates come up and come down. So, you know, it doesn't take a rocket scientist to figure out where we're going from here, which is we're going to see these delinquencies go up and up and up and up. And I can send this to you if you guys want a screenshot of it. But if you look at each of these events, where you see that the default rates going up, or delinquency rates going up and you know, here, here and here, it's because there was some catastrophic event that happened that caused that now, this where we are here today is you know, we had the PPP loans coming in we, the government put a whole bunch of money, and then and so everybody started paying those things down. And then what do you think happened right about here? where it started, come back up. And he gets us so what happened here was people started burning through all the PPP money, right? So at this point, they got their money, they started making their payments, payments, payments, and then all sudden they like oh, we're sitting around and money, we're going to start defaulting and it's going like this. Now, if this if we were to look at a similar graph of credit card debt, you'd see you'd see a very similar almost identical graph. And right now credit card debt is over a trillion dollars and the challenge that we have is that where we're going to I'll take this off now is that we have access to another $2 trillion of debt now. You know, what, what's going to happen is that people you know, people are now at the point where inflation Oh, is that my screen that is doing that. Can you guys see me here? No.
Yep, I can see him at okay,
sorry. So what's happening with the credit card debt as people are now at a point where they're they burn through 90% of their savings or more, I mean, that says August they burn through 90% of their savings, and they're starting to live on credit. And they still have another 2 billion $2 trillion of credit that they can access and thereby doing things like buying groceries and, and living day to day on their on their credit. And at the, you know, in the near future. Once they burn through all their credit, what do you think they're going to do? They're not going to have the capital to be able to pay it off. They're going to walk away from it and who's going to end up having to foot that bill. That's going to be us and us. as taxpayers are gonna end up subsidizing all those costs. And so, the reason we got here, just to cut it short, is that the, you know, the federal government was was incredibly reckless in printing massive amounts of money. That was you know, had no backing it was it was just effectively causing massive amounts of inflation. You can't print that much money, put it in circulation without having something, some goods and services to support it. So now we printed all this money, and at some point we got to pay the piper, and that's why inflation now is skyrocketing, and why interest rates are going up. And then of course, we all know that how the cycle goes. So you know, our interest rates go up, and then our our mortgage rates go up and then housing affordability goes way down. And people say, Well, I can't I can't, you know, sellers are saying, well, I can't replace my 4% mortgage so I'm not moving anywhere. I'm not selling inventory goes down and and the market basically ceases to function. In economics, the the the health of a market is correlated to the velocity of capital. So how much capital is trading hands is indirectly correlated to how much you know people are are psychologically feeling rich or not rich. If people are starting to hold on to hold on for dear life and not spend money and they're they're buying things on credit and they're they're worried all sudden the economy comes to a screeching halt and everything tanks and that's kind of where we are now and that's why we're seeing our default rates skyrocket. So that leads us to the banking crisis, which I want to I want to touch on so we have we're all on the same page, and then we'll get into what we do about it. Our banking system is a is a flawed system because it's based on a fractional lending model. And if you guys have already covered this in your meetings, I don't need to go over it. Because I don't know what you guys have talked about before but the way the fractional lending model work Stop me if you've heard this, I don't need to explain it. But the fractional lending model works that the the banks will borrow money from their depositors. And so these deposits go in as kind of short term deposits and then they're they're taking, like 90% of that money and lending it out on these long term loans. Right. So the the bank is effectively holding long term assets, those loans or making long term loans while funding those short term liabilities. As deposits. And so, if I come to you and I say look, I'm gonna borrow, you know, I'm gonna lend you $100,000 You say Great, thanks, I'm gonna you know, I'm gonna pay you 1% I turn around, then, then you turn around lend it out at 5% You you're making money, but then if you lend out the money and I come to you and say, I need that money back, and you go, sorry, I lent it out. I don't know what to tell you. That's called maturity mismatch. So comes where these, these borrowers come in, I'm sorry, the depositors come in. And they say, well, we need my well, I need my money back. And the lender goes well, I let the socks on for 30 years, and I don't know what to tell you and that's what creates a run on the banks. People get nervous and all sudden, there's a depositor says he can't get his money, he starts talking to his friends and people get nervous. And then the depositors all say, well, we all want our money back. And that's really what happened with signature is that it was a it was a capital call. It wasn't that they were they made really bad loans. Their loans are fine because I've gone through all of them. It's that they they got stuck in a you know, a capital call that they couldn't meet. So the fractional lending model is kind of a broken model. I mean, it's the best model we have to date, but it's it sort of creates issues. And the other part of that fractional model, which is lending model, which is interesting is that these banks, they can only lend a portion of whatever they have on deposit. So if they have, let's say, you know, call it a billion dollars on deposit, and they've lent out $900 million, and then they they have their depositors put that money, hold that money back in their accounts with that same bank. Then the bank goes oh, we can lend on that money. too. Right. So they start building this pyramid scheme, where they have multiple loans that are, you know, that that are building on each other and every time someone takes money out, and redeposits in their bank, they then reload on that reload on that reload on that reload. So it becomes a house of cards and as soon as it gets to a tipping point where a couple of people have said not a couple of people but a certain percentage of the of the borrower say hey, we need our money back and the bank goes, oh, sorry. And we don't we don't have it. We don't have the liquidity. The bank fails and it creates a run on on the on the bank. Now, the question that leads us to this question of like, why are banks why can banks do this? Like how do they balance their sheets that in a way that the feds allowed them to, to operate like this? Well, the Feds understand the theory of loss of capital and that's the that's what makes the most money makes the world go around. So the, the, the these Sorry, I lost my train of thought. Let me just go back to the wasn't gonna say about the fractional lending. You second.
We're talking about the maturity mismatch in the capital call. Yeah.
I just had a train of thought I wanted to share with you guys which was the Oh, mark the market sorry. Okay. So so under GAAP accounting, the only banks we can't do this, if we did this, we go we'd be thrown in jail. So this is an interesting kind of factoid. That so the banks get to, to look at their books and say, Okay, I made a loan to you, Kevin for, you know, for a million dollars and, and it's going to be due in 30 years, and over that time period, I'm going to make $5 million of capital on that loan. And so I'm going to book that, that income now to show what are my books as if that's, that's an asset that I hold worth 5 million even that alone is a million, because they're, they're counting their future income stream based on that loan today. Now, the thing that happens is they say okay, so and then they take these these these financial statements, and they go back to the to their lenders and they say, loan us more money so we can learn more money, and they build these credit facilities spin up, and they go great. Okay, here's, you know, we're gonna give you a bunch more money. Well, you know, that creates a real issue, because if that doesn't account for a borrower defaulting, or a borrower paying off their loan early, and all sudden if a borrower pays that loan that loan early, then that income stream disappears and then all of a sudden you start seeing the fragility of these balance sheets in these five statements. They have nothing underneath they're not real. So if you were to look at the true solvency of 90% of the banks, today, 90% of them would be considered effectively bankrupt. It would be insolvent and that's a true statistic, which is mind boggling. So this whole concept is of the way that that the banks are allowed to, to it's called mark to market so they can they they're not required on they're not required to use the Market to Market methodology saying that they have to actually value that asset of what is worth today. They can pick pick some arbitrary number, literally pick some number and say, you know, we're gonna get an income stream of $5 million. So we're going to book this at $5 million, and that's going to be part of our of our assets. And we're offsetting that against liabilities that are fraction that's super, super healthy. It's not the way in reality it works but and the banking system, that's the way it works. So I find that fascinating. I think it's a it's a crazy methodology. And now I understand when I learned that years ago, I was like, oh my god, this is insane and you No wonder we have a banking, potential banking crisis. So so the Feds printed a bunch of money and created massive amounts inflation and interest rates went up, people started burning through all the money, and then we have, you know, a, a crisis and then and now we have people that are a bunch of loans that are coming up due that are going to start terming out at three 4% interest rates that are now going to have to qualify for interest rates of you know, say seven or 8%. And that's what's going to be that's what we're heading into now. Which is our crisis that you're seeing that that those defaults skyrocket. And so, the, you know, the next question is, what should we expect? And then how do we, how do we deal with that? So, I would expect that we'll see a value decline of an additional 30 to 40% over the next probably, this is talking specifically, I'm addressing kind of commercial but this also applies to residential because it flows together. Because you're just by default, if you look at the financial indicators, by the way, in this group, how many people do commercial versus residential? Commercial?
Put it in the chat if you do commercial, I know that I'd probably say about 25% of our group, maybe
we'll talk on the resi side because that's more pertinent probably then, but we can apply it to both. So we can we can expect that. You know, the, the financial ended indicators are going to miss a line. I'll touch back on commercials for a second for talking about cap rates, or grocer multipliers or your your rates of return. Those all are have to meet the gap. So right now, if, if you're, let's say that your your cost of debt or your interest rates on your loans are at, you know, 7% and you're only earning like a 5% return on your investment then that's called negative arbitrage. You're losing money. If you always want whenever you make an investment, you always want your cost of debt to be lower than your return on investment. So you get to make the spread. You get to leverage that, that that that difference and that's how you make money in real estate. You leverage the spread by borrowing money at a lower rate and earning money at a higher rate and you get to arbitrage that too. And you make a bunch of money. Alright. The challenge that we had the reason we got one of the reasons we got into where we are today is because people were buying on the greater fool theory. They were buying on speculation not on financial set, you know, fundamentals. They weren't looking at things saying, you know, I can make money. You know, on the on the fundamentals of this makes sense that we're saying someone dumber than me is going to step in and buy this thing and pay more for it just because, you know, inflation in value is going up and I'm going to, you know, I'm just going to get in line, get my ticket, cash it out. Make some money, keep doing that, well, eventually, that that's gonna fail because it's not supported by sound fundamentals. So, and the reason that that people were able to do that is because the cost of funds was so low, because they're trying to stimulate the economy that you know, people looking at interest rates said, I'm looking at these loans in the summer called, we call it whack the weighted average cost of capital, which is the balance weighted average cost of capital is how a group of loans what's the average interest rate on those right what's the cost on those? So our whack on on these this portfolio that we bid on which was 6.6 120 some odd million was three point 3.89% Which is crazy low right, considering the current cost of capital is double that. So we're looking at these loans go you know, thinking okay, well when these term out these same properties are going to have to qualify for a mortgage, it's twice as high. And if they can't qualify, then either the borrower has to come in to pay that loan down to come to the bank with cash and say, here's money to pay the loan down so that I can qualify because the bank is going to require the property, you know, only has a certain depth threshold or, you know, a it's called deep debt service coverage service ratio. And, or, the bank's gonna have to delay and pray and say, we're going to kick this down the road, we're going to just extend because we don't have to deal with this or they're gonna have to foreclose, right. So they either give the borrower an extension, the borrower comes with cash, or they foreclose is there kind of your tree loss made options? And so the banks at this point are going okay, what do we do about this? This is really going to screw up our books because we're gonna have to go back and face the auditors at some point and say, Look, we kind of cooked our books that's not really what's happening and we don't want the banks to you know, the auditors call us insolvent. Now, for a while there used to be there was built rules which lenders are required to follow, which are basically the after the SNL crisis, they they created the Belk rules. That said, you have to keep certain amount of reserves on hand for for each non performing asset. So, what you're going to start noticing now is that a lot of these banks are getting tricky and they're saying okay, as long as we don't call this loan, even though it's not performing, we don't call it non performing. We're not We're not You're mocking is a non performing loan and we're not required to put it in special assets and then hold reserves, which is money, we can't loan out that we can make money. On so they are they are you're marking it as a on a watch list but not as special assets which is going to ultimately come up back and get put them in trouble. But by not acknowledging on paper that they're in trouble. They don't have to hold these reserves and they and then they're their shareholders, which are their depositors and people on their stock don't really don't get wind of it. So, the these lenders are now trying to figure out what to do with these and that's where we all come in and learn how to help them from, from the bankers perspective, anytime you're looking at the value of a company and this is kind of m&a, mergers and acquisitions one on one is the value of a company has a direct correlation. Of the free cash flow to shareholders. So how much spending money can you it's the same thing as if you're looking at you can apply that to investment property or, you know, a rental house. It's how much free how much spending money do you pocket money to get? What do you get to use for this? And if you start depleting that, and so it's getting less and less that that the value of that of that asset to you or to the shareholders goes down, so the stock prices go down. So the number one kind of almost fiduciary obligation of the board of directors and the bankers, the the officers of the bank is to protect shareholder value and to make sure that the shareholders are are not losing stock value. And if if the cash flow starts getting depleted, then obviously the stock value goes down. And so this is this, this is what they're trying to figure out how to not have happened. If they start, if they start acknowledging that all these loans are not performing, then they have to put a bunch more money reserves which they can't lend out so they can't make money on that. But they still have to pay the depositors on that. And so then also in the valley, that the cash flow goes down, and the value in the stock value goes down. So that's that's the the theory behind it. Hope I'm not providing getting too far afield here, but I'm trying to get to the reason why we're getting where we are. So the next question is how do we find the assets that are in trouble? And how do we work with the lenders to get them to want to work with us? And theirs? Has as have you guys worked on like, has anybody shown you guys like, you know, how to track the foreclosures? I assume that someone's already gone through that and you guys know how to do that. Right? You notice look at the notes, the default set of trustee sales, talk, you know, track the asset managers go back to the banks, right and, and look at those things. Okay, so, definitely
sorry, Matt. We've got seven. We'll know how to do that. But we got several members that are doing that constantly. So they have some great tools to
do that. Okay, so you guys know how to do that. So that's the that's, you know, that methodology is great. And that's what's going to generate a bunch of money for all of us that are doing that. That's where the next market is, is helping people to you know, effectively, how we get paid how Matt gets paid. How Kevin gets paid, is that we solve we solve problems, right? And that's how people that's effectively the the, the theory of life is, you get paid to solve problems, and you know, and the better the better. You are at that the more money you get paid. So the problem is that we have to solve now if we think about it as how do we solve the problems for the lenders or help them figure out the problems so that we can get paid a bunch of money in in and do that now? One methodology is we track the the Notice of Defaults and notice of trustee sales, and then we go in and contact them and, you know, get try to get the listing. That's clearly a a good methodology, and I made millions upon millions of dollars doing that in the last downturn. The banks, obviously hire services and I have you guys talked about how to work with the services and the software and all that, as someone touched on that. This is on the revenue side. So there's a bunch of servers like Mr. Cooper and a bunch of other ones out there. They all have their own proprietary software. You sign up with them, your contact their asset manager party, sign up with them, you go through their training, and then you do their opinion values, and then they assign your listings. And you go through the whole process of doing that and you should be I would anticipate that if you're actively working on finding all the services and applying getting trained on all the software and contacting them. You should be going out and visiting the asset managers in person if you can, that are in Utah, Colorado, Florida, you know, wherever they are, and develop a relationship with them. You should be getting somewhere between 102 100 listings a month from them, per person when this market picks up, which is quite a lot, which means you have to ramp up and make sure that you're you have a team behind you. If you're not using AI you have to start using AI if you are not using AI you will be you'll be like put aside pretty quickly. Yes, I
have a question for you. So pretty much everybody on this call today has had that kind of volume back in the oh eight Yeah. How do you see that translating again in this market, even without talking politics, you know, from what I see foreclosures they go in different directions. Now we got private equity firms buying up MPLS in bulk. We I go to the Court steps the first Tuesday of every month for Texas for Super Tuesday. It gets to the musty it's bought on the Court steps I'm not even seeing it getting to the Court steps I know defaults down right now but when it comes back, do you really think it will not be a political hotcake and it will get to Oreo again,
it's it has to get flushed at some point so it will get there the question is in what form and how's it going to be handled? So, right now, you know, one of the main arguments not when you were following this, this case, the ner case, one of the main arguments was that the buyer's broker is a little bit obsolete now because the technology effectively AI has replaced them. Right. Right. I think it's a new argument because people can hire whoever they want for whatever purpose they want. They're up for it. No have to use that but that's not here nor there. So you know, that's a very, very good indicator, that's a wake up call for everybody to say okay, so technology is now replacing the the broker now, if we go back, and I'm gonna, Kelly I'm gonna answer your question in a second here but follow me just for a second if we go back to look at you know, when I back in in the 80s when I started in real estate, you know, we got paid because we controlled information. We were able to control the MLS, we were able to control values and comps and contracts and and now that information is readily available and there's no longer a commodity, right the commodity of information is not something that that we can control any longer. So we have to figure out a different way to provide value. And part of that is by expertise and by understanding how to, like I say solve problems the problem previously was we're solving was the consumer didn't have access to the information. Well, that was solved long ago and that's no longer a commodity and and we didn't adjust our pricing in relation to the value that we were bringing in. That's why people that's why this lawsuit came out. People were saying look this is not the value any longer. So so how do we create value is really the question now and the value isn't in the being able to provide, you know, quote unquote valuations or even even things like, like filling out contracts, and, you know, most of that stuff is kind of, you know, cover your ass documentation that is just not not pertinent to the details of the transaction specifically. It's now it's about how to counsel the owners of the property on on affection effectively. We're not financial advisors, obviously. But that's really what we have to figure out how to provide value and is how do we get them to understand what they're there without, you know, take putting on the hat of being an attorney, understanding what the the cost benefit analysis liabilities risks and and how to to take the capital that that's coming out of this and deploy it in a way that that lets them make more money and yes,
sorry, what would you say it's fair to say? During the last REO wave, the value of the broker came in effect with GSEs more so where they were trying to keep the directive of Fannie Mae might be to keep values up in the market neighborhood. So we have to do a market analysis based on how to bring it up to fair market value to stop calling in the neighborhoods would you say it would depend on the level of REO as to whether or not the broker is is an important factor? Because So, one of our sorry, one of our members had said that we might be bypassed and go through auction. But the big benefit to having the broker is when you want to keep values up in the market, and you have to repair and bring in that factor to it.
Yeah. So that's certainly the case that the challenge is that that now can be handled through an algorithm can tell you much more effectively. What was going to add value then, then kind of a human can they can do it faster, more efficiently, quicker. The only thing that that that the algorithm can't really do is literally go and look specifically put eyes on it and say this is specifically what you have to do in this one case, but that's going to happen to that's going to be done pretty shortly with effectively drone technology or something that's going to walk gonna spin through the house, you know, like a like a Roomba and take pictures and look at everything that's wrong and tell you that what needs to be done and what doesn't need to be done. So the the question where we've kind of become are, our job description is becoming more and more obsolete and harder and harder to fit into value proposition because things were getting replaced. And one of the things that I talked, touched on briefly earlier was, you know, that everybody has to start using AI. Now, the interesting thing about AI is that when it initially came out, people talked about AI being the it was going to kill all the blue collar jobs and it was going to make everybody you know, genius as well. Really the opposite happened is the the white collar jobs are getting the serped and the blue collar jobs are getting more valuable, which is fascinating. It's the first time in since kind of the Industrial Revolution this has happened because we you know, all of a sudden, we can have an AI do a lot of what you know we all sitting here get paid to do. But you know, if we have to go and change your toilet is not going to do that for you. Right. So those prices are going to start keep those values are going to start going up. Now, personally, you know, as much as I like wrenching on cars and building things. I don't want to have to do that to earn money. I want to you know, earn money in different ways. So on and you brought up a point second, I was going to touch on your saying oh for the bulk right. So on like these these things, the bulk things that that were that we're looking at, you know, where we're seeing the most value is from the from our brokerage partners are people that know other investors and funds and things like that, that say we're interested in taking pieces of portfolios that you buy and arranging bulk, you know, small Bulk Sales small ones, they don't have to be huge, the bigger the better but doesn't matter and because there's a lot of there's a ton a ton of money sitting out there right now on the side like a ton of money and getting involved with the with the people that whether it be a hedge fund or sovereign fund a you know, something like you know, a CalPERS which is huge or a high net worth individual family offices, individual, individual investors that have capital that want to
regional banks, credit unions, sort of smaller,
so they're not buyers as much as sellers. Right. And yes, they're, they're through this. This is the tip of the of the banking crisis we're seeing. It's gonna get way, way, way, way worse than it is now. We're gonna see a massive, massive amount of bank failures coming up. And, and in terms of sheer volume, I mean, so far, you know, just the sheer volume of signature and first republic and what's the other one, silicone, and now, citizens says is pretty small. Those, those have just the volume of number of assets that were taken over by the FDIC from those are, are greater than something like 50% of all the bank failures from the last, the last cycle which is crazy, right? It's insane. Anyways, so, I, what's gonna happen is you're gonna see a lot of these small regional banks and community banks are gonna get are going to either consolidate, they're gonna come together, or they're gonna get bought out or they're going to fail and then get bought out and so we're gonna see a really rough road coming up for them which is going to prevent present opportunity for us. And so, so we can go in getting to the kind of nuts and bolts of how do we go back and how do we help them make money is is or survive is we go in and we say, okay, let's, let's analyze your current portfolio from a real, honest perspective. And look at where you're at, you're going to have issues on which assets and then offload the ones that are going to be seriously troubled assets, redeploy that capital at new rates spread of higher, higher levels, because they're holding loans at low levels. And getting the bankers understand that they need to sell off some of these loans. Yeah, they're gonna take a loss, but they're taking a loss on a on a three or 4% loan, and they're redeploying that capital at seven or 8%. And it's gonna allow them to survive and not get underwritten. Now, a lot of times the bankers held the position of like, well, we know better we know what we're doing, you know, don't tell us how to do our jobs until they get hammered. And then they start coming to you saying we need some help. You want to try and get to them now. Before they are before they're, you know, once the regular step in their list, absolute control. Soon as the Raiders walk in the doors, they no longer have any power whatsoever. They hand the keys over walk up into the done. Yep.
Now I see a question going back to AI. What would you say? The real Agents Brokers in this meeting? What if you were in their position? What API would should we definitely be using right now? What should we be doing?
Okay, so there's, you know, check GPT there's Claude there's, there's a bunch of of there's about almost 9000 new API. You know, programs out there, Jack GPT. Just came OUT out with Jack GPT s which is allows you to build your own mini kind of bots to do things. So, you know, here's the problem with AI at the moment is it's like when apps first came out on phones, everybody's producing it, right? It went from zero to 100 immediately. Now I started using AI the third day that it came out in back in September as a kind of a beta tester. And then I've been using I use it every single day. And lots of the tools are super terrible and laugh and there's a few of them that are really good. Obviously the ones that make art and things like that are great. The if you're using something like Chuck E T, you want to use the professional version. It's 20 bucks a month, which I think is technically free and you want to use their data analysis utility which allows you to upload things like you can upload PDFs or Excel spreadsheets or Word documents or what have you and have an analyze it now right now. It's okay. It's not great, but every day it gets better and better and better. And Claude, for for just basic tasking and and you know, having to write emails or or do something like the auto blog or what have you. That is Claude is actually better than Chuck GPT and but they're gonna continue to get better and better and there are, you know, new ones coming out. All the time. So there's something also called Gen. I think it's called Gen AI, je n. Or Hey, Jen, it's called Hey, Jen. And that allows Hey, Jen allows you to create your own avatar that is identical to you it's almost seamless. It's it was sitting side by side, you would notice about a you know, a 5% kind of lag ratio or something that would be like, ah, something's not exactly right there. But the cool thing is that between Canva and, and Jen, Hey, Jen, and Chuck GPT you can combine those together so that it's doing it could do like you could say to Chechi Beatty, I want you to to come up with you know, 100 you know, social media posts or you know, video blogs and then you then you give me a script. You take that script, you plug it into your Hey, Jen, it'll create your app. Somebody looks exactly like you sounds exactly like you is almost indistinguishable, and we'll make the the video the content for you. And then you post it right and you use Canva as well. And then there's something called so name of that. It's a I'll send it to you guys. I can't remember what it's called. But it's a it's a thing that basically it says Like if we wanted to talk about, you know, what are people asking the most questions on you know, right now, in a certain area, it'll tell you, it'll list their questions, right, the top questions that are being asked by the general population, and it's basically pinging Google and it's saying, you know, these are the top questions that everybody wants to know and this how many people are asking so you direct content, specifically, your video content? Through that through chat TBT you say? This is the questions that I have you download into champion to GPT. So give me the answer this, make sure that you double check it so it's not inaccurate. Take that feed it into your agent. It prints the video you take that and feed it into your social media and all sudden you have 100 posts going out boom, boom, boom, boom, boom. All right. Now, I say this a little bit. You know, embarrassingly enough, I don't use social media, because it's not something that for me is an important aspect of my business model. But it's, you know, 100% the future of of how to get yourself out there and become quote, unquote, the expert on whatever it is you're doing. So did I answer your question?
Yes. You know, you did, and I think there are several of our members that are doing they have the avatar, they're using Canva and they're creating content and sending it out there and I know that's a streamlined way to do it. Okay. Definitely.
I apologize if that was repetitive for you guys. Then I did no,
no, no, because we haven't gone over it in detail. And I think this is all irrelevant stuff. But if I'm fascinated to hear you talk about how you're so certain that there's a bubble coming and I just wondering how is it going to play out because when we go back to the s&p crisis, then the you know, the default crisis, the banking crisis, they were also different and the factors driving them was so different. And this time, it's very unique to so it's hard to know for sure how it's gonna play out.
Yeah. So, you know, by default the in order for us to, to go from, you know, where interest rates are now, and where the financial indicators on investment properties is, the business investment properties have to come down in price by, you know, 30 or 40%. And same thing with affordability of housing. You know, housing people just can't afford to live in houses. That you know, at the end, the funny thing is that interest rates today are really where they kind of 6% is kind of like the gold standard where it should be. Now we're going to know that I personally believe that we're gonna see interest rates go up into the double digits. That's my opinion. I think that it's a pipe dream people people that think that you know, in a year or two, we're gonna be back in our three or 4%, you know, interest rates, I think that it'll be 15 years before we get there. And I think that if you if you look at the economics of it, it's there's no way to get there. Just there's no possible way you know, if you if you want to talk about really real doom and gloom, which is what I'm concerned about is I'm really more concerned about the failure of the US economy on a wide scale basis. And that you know, civil unrest and things like that, but that's kind of a topic for
a different and I think it's great listening to you and hearing because you're kind of at 30,000 feet, right and way more boots on the ground. So it's great to hear your perspective. I'm in the Dallas Fort Worth market and I can tell you, I think we're in what's called a lock in here and it's probably the same intercept several other markets whereas like you said, we got the seller sitting on 3% mortgages, they're not selling so inventory is down, which I think is a blessing in some disguise because it's keeping values up to some degree for now. But on the buyer side, affordability, affordability is down so we have this lock in and the market is just not moving. So that's where I'm at right now have interest rates are the only driving factor to that do you think
Well, I mean, obviously supply and demand right? But interest rates are what control the ability for people to access supply and in in what creates demand. The you know, you're gonna see a bunch of seller carry backs, you're gonna see a bunch of of wraps you know, people that I don't know if you guys have people that are newer to this, you know, haven't been in this industry longer than the, the, you know, if they got any industry restricts or low, they'll never have really seen a rap you know where where the seller is basically, you know, the buyer is not, it's not a formal assumption. And the, the, the buyer goes in and says, like, I'm just going to take over the payments, or I'm going to pay the seller and the seller is going to pay the bank directly. There's obviously inherent risk, and there's, you know, in that that loan can be called, it's not legal to do that under banking regs, but people do it all. That's what people do all the time. And that's what the way that in, you know, when I was doing business and interest rates are in double digits. That's the way a lot of these deals got done because there were loans that were their legacy loans in the you know, 6% interest rates are at 12 or 14%. And this the seller said, Look, all I'll wrap the loan and the buyer just takes over the payments. And that's what that's what is what you can create a lot of value there for your clients by getting them to agree to, you know, to wrap the loan or even take a take, carry the the loan at a slight loss in order to offset future losses. Just to get it off their books. There's you know, you have to get really creative these days. So, but getting back to, you know, the so there's there's a couple schools of thought is how do you how do we make money one is making money on a one off, you know, one at a time, one at a time either dealing with private individuals and then you have your one offs every time we sell a property. That's the reason that I that's one of the challenges with our business model is if we're good at what we do, we're out of a job as soon as they're successful, right? Because we sell the property and then we're like, we gotta go back to work and find another one. Keep building so we're trying to juggle, oh, we're generating more leads to get more business and we're closing that and then we you know, so we're doing this, the great thing about dealing with the asset management companies, although there are serious pain in the ass because the asset managers or, you know, usually don't know what they're doing and are, you know, undereducated and over empowered, and they treat you like crap. But that's why I say develop a personal relationship with them to not treat you poorly. But the great thing is, it's just, you know, as you're building that relationship with them, they're getting, there's no emotional attachment, their job is to move product. And so it's just like over and over and over and over now. So there's that level of the asset. There's the the private sellers, then there's the asset management, and then there's the fund managers, right. So that's, those guys can direct the asset managers on Look, you're going to use this person, I don't care what you say, this is what you're using, you know, kind of discussion. And that's, you know, the the guys that are that are in charge of the funds and, and doing these deals if you start bringing them deals or bringing them putting people together and you say to them, Look, I'm gonna bring this deal but you're gonna give me every, every property in my area that comes up as as part of the deal. You're there. They'll say done, they don't care. They're happy to do that. Right. So that's above the level of the asset manager where now you're, you're you're, you're operating like a CEO of a company, not as you know, an agent and that's where you want to be. So you're controlling, and then you start putting people with money together and you start getting paid on those transactions at
the same fund managers get involved in the asset management level to that degree. So I wanted
to follow up on to that just to tie in to what Kelly was saying. I asked him a little bit different way. But, you know, how is it that you're seeing people get on that radar and get to those folks, you know, do you have a couple of examples two or three different agents or brokers where you said, you know, what they did was this and it was genius, because now they're well connected and getting more business.
Yeah, so what is Ben? There's one of the so it's kind of a, a hard question to answer exactly specifically, but I'll do my best. There's lots of of kind of symposiums and, you know, in groups out there that are for Note buyers and for funds and, and going to those is great. But when you go there position, don't position yourself as like I'm a broker and you know, I'm trying to get deals, it's you want to kind of position yourself from the perspective of, of I put people with money together and we create, you know, opportunities to generate capital. So if you have you know, a bunch of properties or you have a bunch of money, let's all introduce to some people then we'll just do business together. In return. I want you to feed my real estate company. And they they're typically very happy to do that. They're they're all they care about is deal flow. That's what makes the world go round. So in answer to your question is you go to symposiums you contact all the, the, you know, family offices, and there's you can get lists of these folks. And funds. You know, the their sovereign funds, there's there's investment funds, there's high net worth individuals, there's family offices, there's, you know, any of those groups and attorneys are great because attorneys are oftentimes doing especially like m&a attorneys that are doing these kinds of contract mergers, they they know people that have that are that are in this world now. Like so. Build on the mail spoke with you guys right? Yep. Okay, so Bill is my partner on. He's my business partner at person capital. So he and I are the work. We are the ones that we've been together on the FDIC portfolio for signature. And so, Bill on allied you guys know, Bill Weinstein, if anybody knows bill, no, he's one of our other partners. And we have, you know, a few others now. Bill by Mel is probably the best networker I've ever met in my life. That guy is amazing. He's like, nonstop, you know, and we're, you know, I talked to him, I don't know, 1015 times a day. We're going back and forth and working together and he's like, just non stop, non stop non stop and flying all over the literally all over the world. You know, he's in London and he's in Dallas, and he's, you know, we're going to Dubai in December. It's like, and he's just networking, networking, meeting people meeting people and, and, and figuring out how to get people together and bring money and things like that. And so he makes a ton of money doing that, right. And so that's not my I'm not great. At networking. I'm but I, I'm good at working with people that are good at what they do in their individual disciplines. And so I would say that getting you know, networking with with people that are high energy, you know, the light love to go out and do that and, and schmooze and meet people is key and keep building your, your sphere of influence and, and everybody it's such a small community. Once people know each other, then they really start to you know, to work together and, and it just like a small group, like this group here, all of us, you know, like, you know, the other person you know, Darrell is amazing, right? Darryl is just like, such a good he's, everybody loves him. You know, there's like, if you can understand him. Yeah, yeah. And you're, he's great at networking, and he'll open every door for you that he has he'll, he's happy to introduce you and he knows a ton of people. But definitely getting in with a few decision makers that and they'll introduce him more and you build your network, right? I don't know if I answered the question. Exactly. Kevin did.
You did and what we're doing as a group is we're having more presence at NBA, Ironman, that kind of thing. And we have a booth at NBA where, you know, we're going to cover that every year and we're Ironman. So I guess those are the stomping grounds right.
Yeah. But so the key is, is we have to figure out how to provide value that's not the same as everybody else. What is it that sets you aside, you know, head and shoulders above everybody else? What value do you bring to them that they can't live without? And that's the key to this because if you're just you know, a broker, I'll do a let me do an opinion. Value for you. Or, you know, let me sell it's like, Okay, next, right.
But it's something about relationships, right?
It's about it's about bringing capital or bringing the deal, and, you know, making sure and then the other thing I want to warn you guys about is a couple there's two to two warnings to hit specifically. One is if someone is a bullshitter, or they're or they're, you know, not real, do not just distance yourself with them as much as you can because that is really like, there's so many people out there that are not real. And it gets, you know, those of us who are real, we, we tend to be like, oh god like this again. And you just you really want to be cognizant of that. That was the first point. And then the second point was I forgot what it was, but I'll come back to in a second. I know, by the way, we're over time. I just want to make sure that I have more time. So it's up to you guys.
Any other questions? Kevin?
I open it up to the group. I am sure that there's a another question or two out there. And he raised his hand. Go ahead, Paul.
Yeah, thanks. Good. Hey, Matt. So you said the back a little while ago about accessing the $2 trillion in debt additional debt. So is that home equity debt or credit
card debt? That's strictly credit card debt. Now, there's also a there's if you want to expand your horizons a little bit, there's more than so we're talking about real estate as a very you know, so you have residential real estate this niche then you have commercial is this niche right and you have other niches but right now we're talking about on MPLS non performing loans, we're talking about the debt side of it, and there's debt, there's there's residential, residential and MPLS. There's President there's commercial MPLS, MPLS, non performing loans, then there's obviously performing loans and those are sold at right now at a discount because if someone's buying a loan that has a 3%, you know, three and a percent interest rate, they've got to bite it enough of a discount that it bridges the the return, so that it it creates a an in your return on investment that's commensurate with whatever today's market is for that risk. But that's not all there is. There's also credit card debt, auto debt, consumer debt, light, you know, there's all kinds of different, you know, debt pools effectively, you're just at that level where you're dealing with NpLS or, you know, on commercial, residential or what have you. You're just dealing with what I call paper. It doesn't matter if it's based on a, you know, you know, if it's securitized with real estate or been securitized with nothing, which is just credit card debt, or it's securitized by, you know, auto debt or student loan debt or whatever it is, people are just looking at these investment vehicles to purchase to provide some type of return of an investment and the, the, the the learning curve on those. Isn't that dramatic? It takes a little time, but you could figure it out. I mean, literally AI could teach you most of it, and then you can, you know, talk to a few more people about how to how those things are packaged and sold. And so, you know, basically selling you know, that type of of paper can be lucrative now, you got to be careful, as I'm sure Matt will tell you I don't know if he's still on here and I believe, yeah. But, you know, you want to be careful that you're not running, you know, up against any type of, you know, financial regulations that require some type of a serious license that you might not hold, but you can, you can basically broker paper, and it's not super difficult to learn. The great thing about broker and paper is that, you know, it's super easy to value because you're looking at someone's credit score and what they owe, and then the payment history and then you know what the value is, it doesn't it's not reliant upon what's the condition of the house. Thanks,
man. Amen. So another question, what tools do you use on a regular basis?
I am a so I use Excel extensively. And Excel, if you're, if you are in dealing with financial analysis, I don't know that there's a better tool but you have to learn it pretty well. And most people say Oh, I'm really good at Excel and they suck. Honestly. I mean, they just don't, they really are not good. At Excel. Excel is an amazing, amazing program. If you can learn how to use a few even a few of the formulas, you know, like you know, indexing and match and search and VLOOKUP and X lookup and and a couple formulas. The great thing by the way, if you guys want to really gain the system, here's a huge takeaway is Chachi Beatty is really, really good at writing XML code for you or you know, formulas. And it also writes what's called VBA, which is there. It can run in Python. Or check to write any language you want C++, Python, you know, SQL doesn't matter. And Excel is really good at it. VBA and Python, which are both I don't know how to I don't I don't write either of those. But my you know, my job should be to writes it for me and I plug it in, and then I run it and test it. And it usually doesn't work the first couple of times because Jack GPT hasn't quite figured out everything so you just keep going back and forth thing that didn't work tried again. That didn't work tried again, that didn't work that worked. Right and it can I wrote some incredibly elegant performance that people were like, I've had people like, you know, so on this one that we just did this, I had hedge funds, they're multi multi multi billion dollar hedge funds with these analysts, and they were like, Oh my God, how did you do that? I got on then. These guys are like, seriously good at this. And I was like, you know, I didn't tell him but it was like to catch up to this fine or, you know, I just architected it. It's amazing. You can do so much with it. It's it's frustrating as hell for a little while because it gives you a lot of kind of crap and then you have to filter through it and then you but it's getting better better.
It's not always right. That's John. Oh,
yeah, it as they call it. It's really nice. Yeah, no, I'm
sorry, I was just gonna say you got to remember that AI was developed by humans and humans. aren't always right. Yeah. So yeah, of course.
You know, AI can you know, when people can be nefarious with the AI, gala Wikipedia, they can put anything they want. You can say one plus one is three. You say, hey, what's one plus one is a two and you know, it's three. They're gone. Sorry. You're right. It's always going to agree with you. So it's just an algorithm of how many times is it getting that same input to verify
in many cases, what publications do you read or review often?
You know, The Economist Wall Street Journal, the you know, I read this on the CCM I read a lot of CCI and so if you guys are interested in commercial, C, you should do a see what you can do to get your CCIE and it's got great tools. There's, there's a guy named Peter Assange. I don't know if you are know him. It's Dr. Peter Assange. I think. He is a classical economist that he's a PhD in econ in economics, who will give you the doom and gloom worst case scenario on everything, but he also cuts through all the BS. He's really good. I can actually share my screen and show you what it looks like. Seriously, look them up if you want. Let's see if I can pull them up here. Give me one second. Peter.
Is it ZEIH? En
No, no, it's a I think it starts with an O Peter. Yeah, I think so. Let me held his this should know I watch this stuff all the time. If that
if you if you find it, send it to me and I'll send it out to the group Yeah,
I guess I have it here on them. It's my dick. We're getting
to quarter past one we don't want Oh, yeah, sorry. Yes.
They met one last question. So when you're analyzing banks, their balance sheets and you're looking for those assets that have not been earmarked as non performing, although there are watch assets do are those can you identify those watch assets or is that just an internal of each bank?
So you can what you can do is sorry, sorry. Peter. Sorry, it's Peters St. Onge St. O N G. Thank you. Okay. So, so one thing you can do is you can look at the bank's financials, right, they have to predict they have to publish their plans, but if they're publicly traded, they have to publish their financials, and you can start looking at here's what you do, get their financial Stromata check. GPT say, tell me where they're, you know, give me an idea of how they're performing, what their assets are bad assets are like, and tell me if you think that you asked you to chat up TJ, tell me if you think that they're gonna start having more more issues or things like that, and it'll give you some kind of good talking points that you can go back to back and say, looks like I looked at your financials. This is what I saw. You know, this is you guys are going to be in trouble. Let's look at your portfolio and see, you know, what's performing what's not performing now. That's one way to do it, which is high level. The another way to do it is when you go through the, you know, all of the you pull up the Notice of Defaults, notice trustee sales. The next thing is you do a search on that banks, specific assets that are in default, not just the one that isn't default. So it'd be like, Okay, I see, you know, Citibank has, you know, this asset in my area that's in default, and then you do a query on what else do they have, and it shows everything that's in default, everything that's in notice dresses scale, everything's gone reo, and when you call up and you talk them and not just things in your area, right? You say, Okay, you're in Dallas. Well, there's, you know, you know, someone that's in Florida, you know, someone's in New York and so on. And so, you, you get your list of people that you would recommend in front of you and you say hey, you call up the you know, the asset manager and you say, I see you have this and this and this like talk to you about those are some people that may be interested or I may be interested or I can help you with evaluation, whatever your approach is. And by the way, I also saw you have this property in New York and by the way, let me introduce you to this person who is a great who knows everything in that area, and you know, they're great go to person to get your, your needs met there. Right. And they look at you and they're like, wow, you know, everybody. I mean Darrell is great at that. They will look at you and be like I'll call it call him call this person call that person. That's
where I hope that, you know, we appreciate you spending time on this call for us and us picking your brains but we're here to help you as boots on the ground anywhere we can as well. And Bill you know, is is often talking to us, but we want you to to know that we will anyway we can help you guys.
My last question is from the canary in the coal mine. Is there anything except for unemployment that would be important that you would look at to give you a market indicator?
Well, it's for a market indicator for what market? That's a broad question.
To be able to see the market shifting and we're talking about the consumer market with regards to unemployment. You're talking
about the real estate market shifting or the guest. So I think that we're looking at, you know, unemployment, we're looking at the use of credit, right, the how much consumer credit is being being accessed, the amount of debt, inflation rates, interest rates, all these things are going to point to where, if the markets getting if the economy is getting healthier or less healthy and the underlying real estate market which is affected both a draw it's both a leading and lagging indicator effectively is going to adversely be affected or positively affected. The the so obviously, every market is just psychology, right? The only thing that really drives it is psychology. But the question is what drives psychology? And how how much people you know, how much money do people feel like they have? And then what is the it's a it's a little more complicated, because, like, is the current administration doing what they need to do in order to control things? The short answer to that is no. But you know, and are we going to be in a world of hurt coming up? The short answer is yes. And how is that going to create defaults? And the answer is yes. 100% Yeah, so
my big question is, you know, nobody has a crystal ball, but when, when, alright,
the one thing I've been blessed with, and I don't know why this is, but since 86, I've never missed a mark or never, not even. I mean, I've called and not only that, like in 2012. I was, I was talking at one of the conventions it was in front of, I don't know, 2000 people or something. And I was one of the keynote speakers and I said, Look, this market is going to come crashing down in late 2018, early 2019. I think I didn't see what's COVID Of course, right had it not been for COVID We would have actually started doing that about that. You know, markets are cyclical, the the one thing that I should touch on or something that's important is that the thing that's changed between our marketing you know, when I first started and then with the advent of technology is that the the advent of technology, the velocity of information, moves much faster. So Marcus is to do this right now they do this, but they do this coming, right? They it's it's smarter, smaller. pieces, but he's still running that cycle
line information faster, but still on the same trajectory, right. Yep. Right. So
where people are, and that was one of the reasons why our value is real estate brokers has been has been depleted because we can't control that information, like we used to be able to, which is information control as a huge commodity. But the, you know, in terms of the specific answer to when is it going it's happening now? It's you're going to see it increased dramatically over the next. I think we're going to be in a down cycle for about five years before we see a bottom and then stagnation for a little bit and then coming back up. And and then we have to account for if you're looking at at the true value of dollars today we not only have to catch up to where we are where we were, but we also have to compensate for inflationary costs. So if we're looking at true inflation of look closer to 8% not what they're reporting, you know, seven or 8%. And we if we have, you know, five years without it, we've lost 35% of the value of our dollar which we have to So we'd have to beat 135% of today's values to get $1 for dollar value ation of how much can that dollar buy in terms of our goods and services to equalize where we are so we're not gonna be back to where we are today for probably seven years, but we're gonna have a bunch of, of, you know, foreclosures and terrible, some real strife coming up in the next couple of years. And it's, it's, as all of these loans start terming out there. There they have to figure out what to do with them and that's going to create a waterfall of of default scenarios. Thank you, Matt.
Thank you so much for your insight and your time. Anyone got any other questions before we end the call? I do Grace Barzini How are you guys?
Hey, um, as an individual, I mean, we've all known like 1819 We knew this was coming and I felt the same way as you it just took so much longer because of COVID. But looking at it from a more personal perspective and and with clients as well. Where would you recommend if you have cash that you should should have it now? Are we protected at the banks? Are we No,
no, you're not. I need personally and I can't give you financial advice. I can't tell you where to put your money. I can tell you why. What I do. Bitcoin and gold to me are good stores of value for the moment and then also pick cherry picking opportunities that in real estate even if it's going down there's always deals to be had. There's always things you can you can make money on and especially as you know, like individuals. It we make our money on the buy, but we don't you know, we don't ever we should never buy something less we understand what our exit strategy. So our exit strategy is, is you know, is key, knowing when we're gonna get out of it. And so if you can buy something now, understanding when you want to get out of a grace, so that you're saying, Okay, this is how I can generate enough cash flow. I don't care that it's going to come down a bit. You're certainly going to maybe lose a little bit of equity, but as long as my cash flow is there, you can buy cash flow, and then, you know, protect your equity through your cash flow. I think there's going to be lots of opportunity in two to three years to buy things. Very cheap. I'm not currently buying very little, you know, real estate at the moment, mostly buying NpLS because I'm looking at being able to buy them, turn them, make the spread, keep doing that keep building my portfolio and then ultimately on the on the assets that I'm allowed to keep that I can foreclose on. I'll keep those on the FDIC portfolio. We're not allowed to keep any of those. Those have to be sold off to a third party. But those are and we're buying. We're buying, you know, both single family and commercial NpLS and we're looking at Oreos and and if there's a desperate enough seller, there's an opportunity to make money on it. But in answer your question, the short answer is for me I personally am investing in Bitcoin gold, and send MPLS that's my life. I don't know enough about stocks to really, really dabble in that. Some people do very well with them. I don't know anything about stocks really helped me out.
Do you have a question? Yes.
Matthew, thank you for your time today Darrell had shared personally with me so many great things about you. And I think that you certainly have fulfilled in my mind of what he had shared. I do want to ask, are there more things that you would like to share or feel that there would be benefit sharing with us? And if so, would you be willing to speak with us again?
For sure. I'd be happy to come back and I'm like, I can you know, ramble on ad nauseam. I can. I can go on and on about, you know, theory and applicable theory and Applied Economics and investment strategies and share deal flow with you and all those things. And I'm even happy to if you guys want to go through and teach you guys how if you want to learn how to analyze commercial, and underwrite commercial deals, I can do that or you know we can work on whatever you guys want. We can do AI together, look at some tools, we can look at waste, you know, things whatever you think will create value. I'm happy to help.
Thank you, man. So kind of you and personally I think the next call that I'm going to set up if you will join is AI and I'll be fascinated to know how you can you know, implement, show us what you implement. And we have some people in the group that are doing AI stuff as well, that would you know, it would make a good call. So we'd appreciate that. That'd be great. Yeah,
yeah, for sure. And again, I'm not by any means the best AI professional user. There's, I can't keep up with it all because it's so it's coming at me so quickly, but I try to stay. You know, I try to learn as much as I can and implement what I can. I
think it's moving faster than then they really predicted it would right
Absolutely. Yeah. It's it's truly amazing what you know, humans can do when they start collectively working on it together. Yeah,
and I read it scary. You know that tacky btw and all the AIS they're not always accurate because it's built by a human. But there was one incident I think it was on Chapter UTP where this gave advice on books to read on a subject to the person that was asking the questions and when they looked up the books, they didn't exist. Yeah, it
hallucinates. It can eliminate a lot. It's you can ask it to so I'll touch briefly on AI it's it's entirely based upon what they call prompt engineering, which is the instructions that you give it to say that has to follow and it changes prompt engineering is not something that is a static discipline it as, as the AI evolves, the prompts that you give it must evolve with it or they will no longer be relevant to the outcomes that you're expecting and having being able to tell it you know, that double check your your statistics show me the best thing to do is say, show me your resources. Show me where you're getting this information, so I can fact check it because otherwise it's gonna make things up.
The craft here isn't how you use it, not what it gives you.
Yeah, it has the ability to give you almost anything. It is really unbelievably mind blowing. And that you know, so in Chachi P is what they call gated spelt, it doesn't give you doesn't have unfettered access to like the dark web and things like that. There are systems out there that will do that. That will give you anything you want unfiltered, you know and, and the there's a there's a ethics discussion that pause, you know, in that is if you're if you are accessing Chachi btw and it is gated, it's filtered. whose agenda is it filtering, someone has to have given it the rules by which is filtering and do those rules align with your rules. If they don't, then it's not going to help you because you're gonna get you're gonna get very biased information. It's like our news outlets provide us very limited scope. So there's and it's it's it's antithetical to the politicians and the government's desires to have us have access to things they don't want us to see. So they're trying to throttle it as much as they can and keep it at you know, limited, so we have limited access. So, every time we start getting, you know, more unfettered access, they try to put a limit. I mean, you look at you know, clearly China will not allow this to exist or Vietnam or any of the, you know, these some of the or shortcut countries and we only see what we're allowed to see. So, you know, you can definitely go down that rabbit hole for are
some very good points because I think that the government are always going to try to be a few steps. Ahead of the information that we receive. Yeah,
yeah. There's, you know, they're the people that there's, you know, the politicians were the constituents and then above the politicians with people that are they have an agenda. Yeah, yeah. I mean, like you know, the, the most powerful people in the world are like the guy that that is the CEO of Blackrock or Blackstone or huge, like George Soros. Yeah. But anyways, I digress. So, back to our, to our world is is figuring out the, the model, our actual model of real estate brokerage is a very quickly dying model. We have to reinvent ourselves to be able to create value otherwise we're going to be shut out of luck pretty soon.
