Podcast Episode 97 Transcript

Episode 97: How To Only Own The Benefits Of Large Apartments With Kent Ritter

Are you ready to bring your real estate game to the next level? My name is James Prendamano. I'm the CEO and founder of PreReal. And over the past 25 years, I've closed over a billion dollars in transactional real estate. Each week, I'm meeting with outstanding investment investors, highperforming individuals and visionaries operating in the real estate space. These are the people that are actually out there in the real estate game right now. Getting It Done this podcast aims at bringing anyone's game to the next level. This is The Prereal Podcast. Welcome, everyone, to The Prereal Podcast.

We're joined today by Kent Ritter. So Kent is the founder of Hudson Investing multifamily private equity firm. Has had a tremendous amount of success. An amazing story. We're going to talk about the why and how he got to that kind of moment where he really decided it was time to make a change and some of the unbelievable projects Kent worked on and some opportunities that are out in the market today. Kent, thank you so much for joining us. Yeah, James, thanks for having me on the show. Excited to be here. Yeah, absolute pleasure. Anytime we can get you're young, but you've got a heck of a resume and kind of a grizzled vet that understands how to do these. Do you look that bad? No, you look outstanding. I got to tell you, a bit jealous, but your resume is outstanding. And there's a lot of folks out there today in the market that are syndicators, but there's a lot to be wary of. Right. So anytime we can have a pro on, we're really excited. Before we get into the deal points and the work that you're doing over at Hudson Investing, can you talk a little bit about your background? I always find it fascinating. There's this kind of common threads that I find that a serial entrepreneurs all share. So before your real estate days, let's go back to when Kent was a young lad and talk a little bit about how you ended up in the management company and then we'll take it from there. Yeah, sure. So I went to College at IU, Indiana boy, grew up here, right? Iu basketball and all those good things kind of was preordained that that's where I'd go to College. So went to IU studied business, studied finance and e Con specifically. And then when I was coming out of school, it seemed like everybody was going into either investment banking or management consulting. And so I decided that I didn't want to work the 120 hours a week. So I decided to go into management consulting. And honestly, I thought that it would be a good opportunity because I had always wanted to be an entrepreneur. I always knew I wanted to own my own business. I didn't at that point know exactly what that business would be. But I saw manager consulting is a great way to just see a lot of different businesses and kind of understand how businesses work. And that was exactly what the experience I got. I was a manager consultant for twelve years and I flew all around the country every week to different clients and saw hundreds of different businesses and help them solve some really difficult problems. And so it really was that it was getting to see a lot of different ways and how businesses work and how they operate and what works and what doesn't and just get a really just kind of a crash course and how to solve problems because that's all we ever did. Nobody called us when things were going well. So I think just a great foundation for what I'm doing now, which is we were running large scale multi million dollar projects and it translates really well into what we do from a real estate perspective. Yeah. At our core, we're all problem solvers. Right. I think that background. And I've always been a bit fascinated with management consultants. I do a bit of business consulting myself so I can parachute in and out of different businesses with really almost no experience in the business itself. But as problem solvers, there's things that are kind of in our DNA that we see on the chess board that others may not. And as it translates into real estate, that and I think tenacity are probably my two biggest attributes that have helped me to have some success in the investing side of things. You mentioned that you always wanted to be an entrepreneur. Was family, mum and dad. What was the influences there? Yeah, that's a good question. No, my family was not. My mom was a schoolteacher. My dad worked really worked for the state, didn't make a great salary. And he passed away when I was in 8th grade, so pretty early. So really a lot of my life that I remember at least being in high school was living off kind of a single teacher's salary. So we didn't really have a ton. Didn't want but didn't have a ton. And no, there's nowhere I can look where I could say, yeah, there's an entrepreneur I really wanted to follow. I think I just always recognized that I wanted more. I always wanted more. I felt like as I looked and kind of studied and it was always the people that own businesses that kind of had what I wanted, I guess, or they seem to be more successful. Right. And so I thought that was a great path. I've always just been a leader and I've always wanted to be a leader. I've never wanted to follow others. And so I think that all kind of plays into just being an entrepreneur and owning your own business. But no, I didn't really have a path to fall. It was always kind of the opposite. I knew, like what I didn't want. Right. I knew I had to do something different to get what I wanted, and so I think that was part of it at the very beginning. So mom is out crushing it. Single income family, as you noted. You're seeing what you want, and I think that certainly is as much of a motivator as anything else, looking kind of across the aisle and aspiring to reach for that. You mentioned that you've always been a leader, and I think in our own way in real estate, as we lead these types of deals, we're all leaders in one way or another. But at what age did you really start to even understand leadership? It's something that I've always been interested in. Right. Even I remember being, like, little with my friends and wanting to be the one in charge, for lack of a better word. Right. Or captain the teams, different things. I mean, always wanting to be kind of in that position. It's always something that kind of fascinated me. Like, even when I would watch movies and just seeing those people, whether it's like my dad was really into, like, military movies and so looking at generals and different things, I kind of started studying that stuff and just understanding those folks. It just always fascinated me how you can influence people to essentially do what you want to do, but not in a negative way. More like inspiring. Right. More inspiring people on how you do that. And I think that always just kind of fascinated me. It still does and the psychology of it all. And so I recognized at an early age that's really what I wanted. And I think that just kind of developed over time into where I'm at today. I think at times, though, while I was interested in it, I was scared. Maybe scared is the right word to kind of take that position and where I've really had to grow my own personal growth over the past. It's probably been 15 years now since really consciously being in the business world and focusing on that. It's really becoming comfortable stepping into that spotlight and being able to take that role and just being the one that wants the ball when there's 2 seconds left on the clock. Right. That kind of thing. And so I've really kind of matured into that. But I think even when my younger years, when I was interested, I think it was still kind of scary to kind of be that person that everybody's looking at. I got naturally a pretty introverted person, not a big fan of the spotlight, just in my own personal life. And so I think that all kind of plays into it, too. And I've really had to evolve into somebody that's comfortable in the spotlight and comfortable being the one that's going to get it done when it's on the line. Yeah. So interesting that you're an introvert kind of outside of what I call my element. I'm the same way. I've always had a very difficult time being in the spotlight. I didn't want to be in the spotlight, but when I was in my game, when I was in what I knew, it's just the switch flips and you lead. And I came to learn pretty late in life, to be honest, Kent, that leadership meant so much more than just the actions you take in that moment. We started a book club here a couple of years ago. We ran through a bunch of the Maxwell books on leadership, and it really helped to round out what being a leader means because it is so much more than just taking the reins in those moments. And I didn't realize what a profound impact can we have on people throughout our lives when you're in that position? Yeah, absolutely. And I think that's what's so cool about it now is realizing the impact that you can have on people's lives and actually seeing the value that you can create. And I think that's one of the things to me now, being a business owner, is I just feel like as a business owner, you're kind of creating the most value that you can. Right. You're able to impact the most people, whether it's our residents or investors or just the people that have worked for me now or have in the past. I think it's just awesome seeing them grow and develop and being able to just even pay salaries. Right. And create jobs. I think that it's really amazing to me, the impact that you could have as an entrepreneur. It is. And it's incredibly rewarding watching the team come up around you. I've got some team members that have been with me over 20 years now. And watching them come into their own, get married, have kids, buy their first home, buy investment properties, and watching that growth, it really is an incredibly rewarding experience to see the team succeed around you. Yeah, it's a lot of fun. Yeah. You're essentially playing a pivotal role in a management company. The business grows to 95 employees, $30 million a year in revenue. You're rocking and rolling, Kent. So what was the trigger for you at that point to say, no, this isn't for me? Well, it really was. You say it's a line in Godfather. You got an offer you couldn't refuse. Right. It was kind of what happened to us. It was we're doing our thing. We're building our consulting firm. The technology that we had really focused on had really taken off at that time. We're kind of riding that wave, tremendous growth. And then we started getting I think we got one, and then we got two unsolicited offers to buy the business. And that really got us thinking about. We started having those discussions as partners, like, should we sell? Do we want to sell? Do we want to do this for another five years? Where do we want to be? And I think as we all sat around the table, we realized that it had been a pretty hard grind for five or six years. And we got a multiple even on the initial offers that we never really thought we'd be able to achieve. And then we thought, well, yeah, maybe we should look into this a little more. We went out and we hired an investment bank and we ended up going to market with the business and shopping it around. Yeah. But it was ultimately just getting those offers that put it on our radar to say, wow, you get a good offer sometimes you shouldn't look the gift to us in the mouth, right? No, without a doubt. So your success really is what leads to this transition. So now the company is sold.

Yeah, right. That's a good question. Well, I mean, really, real estate started to be a very personal thing in there. I had this extra capital and I didn't want to throw all my eggs into one basket in the stock market. I needed to diversify. And so that's what led me to looking for alternatives, because all I had ever done prior to that was invest in the stock market. And so led me to alternatives, led me to just start researching different things. Real estate really fit a lot of things I was looking for being non correlated with the stock market, which allowed me to diversify, producing some cash flow. I wasn't sure what I wanted to do next. I wasn't sure if I wanted to jump into another business, just some passive cash flow appreciation, tax savings, all that good stuff, right. All the reasons we do it. And really, I started out just by finding somebody that was close to me, a family friend who was doing some real estate, investing himself and saying, okay, hey, what's this all about? And so I really started out doing what he was doing, which was buying notes and really being the debt and building out a note portfolio. And that was cool. I did four or five of those before. One of those about a year later, a house got paid off. And you're on the statement, the closing statement, because you're getting your loan paid back. And I'm like, wow, this guy just doubled his money. This house doubled in value in one year. And that's cool. I'm getting my money paid back. That's all well and good. But this guy doubled his money. I need to start buying assets instead of holding the debt. And so that really turned me on to starting to do some fix and flip, starting to do some single family rentals, build out a single family Duplex portfolio with a couple of buddies from College. We ended up with about eleven units. We're doing three or four flips a year, and that was fine, too. But that's hard work. I don't know if you guys have flipping is a full time job. None of it was scalable enough, right? We were making good money, but it wasn't scalable enough for me. That was what I was trying to bring to really that group. One of my friends had been flipping houses for 15 years since we graduated College, and he was doing three or four years self funding. And I was like, hey, let me pump some capital into this. Let's scale it. And we just hit it was harder than we thought to scale. So I was like, okay, well, that was all well and good. And at that time, I was really learning about apartments, though. I was learning about apartments and multifamily and really getting engrossed in that and really met a couple of mentors that have my eyes open, like, wow, this is how you scale. This is how you go buy 100 units at one time. And that just made all the sense in the world to me because that was one of the big things that I learned. Being a management consultant was as a business, you've got to be growing, and there's safety in scale. And so the bigger you can get oftentimes if you do things right, there's safety in that size. And so that's what I saw. We got a scale. We got a scale. And so that's what really brought me to apartments. And then I learned about syndications, and then I started investing with other people. And instead of doing the work myself, I started investing with others and said, well, I'm getting not as good as flipping a house, but it's a hell of a lot less work to just send somebody $100,000 and have them give you 15%, 20% back, right? Yeah. And so I did that until really the end of 2019. So it was about a three and a half, almost four year period where I was just doing kind of figuring my way and learning about syndications and investing with other people. And until 2019, when I had been through, I've listed all the podcasts, read all the books, been through the courses, found a couple of great mentors who could help me avoid some pretty large potholes. And I launched Hudson Investing because I felt comfortable enough to actually bring other people's money on, because up to that point, I'd only invested in my own capital. I didn't want to ever lose anybody else's money. So I wanted to be really sure I knew what the hell I was doing. So in 2019, we launched that at the end, I think it was October 2019. We acquired our first property. It's a two property portfolio with a couple of partners down in Atlanta. It's 250 units, and that was the first syndication. And that was the first time I raised capital from others and really ran the deal. And then from there, now you kind of fast forward, and we're on our 11th acquisition right now tremendous. So I love that you went through a number of different iterations because I think it's very hard to understand all of the different elements that you just described. And for those of you listening, that's a hell of a wide berth there from no issue. I don't know if they were performing or defaulted to the border strategy, which again, I laugh when I see what I call the TikTok investors that make it look so easy. Right? Yeah, it's not that easy. It's not that easy when your contractors don't show up, you're sitting there. Yes. The only way to scale because I went through a similar path. Right. Is you have to start a construction company, and now you're in a whole other universe of things that are not really relevant to our core things that we want to be working on. Right. That's not my skill set. Right. Whenever I walk a property, I always bring a GC I know with me bring the maintenance guy from the property management company use because I know that's my blind spot. I can do handy stuff, but I'm not a construction person by any means, and I don't have that knowledge. Yeah. Exactly. Right. For me to go out and think I could start a construction company would not be my highest and best use or digging into my skill set. Yeah. So you really quickly bring organization and scale to this process of identifying and acquiring multifamily. So were any of those properties along the way outside of the multifamily class, or has that been the sweet spot for you straight through? Well, Besides the initial single families and duplexes that we were doing, everything else that we've done up to this point has all been multifamily, and it's ranged from 29 units up to 132 units is our largest. So we've done kind of all different things. I tell people we really play in kind of a sweet spot in that maybe 30 to 200 units space. So it's bigger than a lot of like the loan operators that can go out and buy on their own. It's smaller than where a lot of the institutions and REITs are playing kind of 200 plus. And so I think there's a nice little pocket there that we focus on. Yeah, there sure is. Could you walk the audience through because there's a lot of steps involved in what you're describing. Right. There's finding the right management people, there's finding the right debt partners, the right equity partners. There's software that's involved. There's real estate partners identifying and sourcing. There's market identification. That's a lot that's going on at once. Could you walk the audience through just what that process was like? Where do you start? Where do you finish? Not that we ever finished pulling that together, Kent. Yeah, well, I think if you're looking to start a syndication business or a business where you're going to be raising money from other people, there's really two critical things. If it's a real estate business. One is you got to have deal flow and you got to have investors. And so I would start there. I would start with building relationships. So again, if you're going to do multifamily and you're going to do larger multifamily, most of the market is controlled by brokers. So you really have to start building broker relationships. It's really difficult to think you're going to go direct to seller on 100 unit property. Sellers at that scale are sophisticated enough to know they're going to get the most money if they go to market. And so why wouldn't they? Because they're going to make more money. So you really have to build brokers relationships with brokers because they really are the gatekeepers to the deals. And you have to build good relationships because they don't send the best I want to say this, the best deals don't make it to the broad marketing blasts. Right. And they definitely don't make it to LoopNet. And so if you're looking for larger multifamily deals on like LoopNet or you're just kind of going through the large like the marketing blast because you signed up on the broker website, I can guarantee you that 30 to 50 of their good clients have already picked through those before they made it to that point. So that's why the broker relationships are so important, because you want to be on that short list for that broker. You want to be top of mind for that broker. That's number one. Number two is the investors. You have to start creating relationships with investors. I'll tell you this, and I've heard this from a lot of successful capital raisers. I underperformed, like when I only raised half the amount I thought I was going to be able to raise the first time I went out to raise money. And that's not me. You hear it from a lot of other people because I underestimated how difficult it was going to be. Honestly, what I underestimated was the fact that people see me in a lot of different ways. Maybe it's a coworker, maybe it's a College buddy, maybe we're on the softball team. Maybe it's a high school together. Right. Maybe we go get beers on Fridays. Right. Those are all ways that people view me. That's very different than being viewed as a professional person who somebody is going to trust, giving you $100,000 to and that they're going to get their money returned. Right. I think where I thought of and I had success in business. Right. So I had other things to point to, but even going to colleagues who knew me as a manager consultant and saying, oh, now we're doing real estate. What real estate? Where's this coming from? What do you know about real estate? Right. I didn't start early enough. So my whole message is I tell people, like, look, you need to start talking with people about real estate and about what you're going to be doing and raising money six months before you actually ask them for money so that they can warm up to this idea and start to view you as someone that they could picture giving their money over to because you showed them expertise, you showed them consistency. Right. And you've projected yourself as a professional real estate investor. So what you just described, I think, is perhaps the single largest thing that people overlook, the challenge of pulling that together and instilling that confidence and the fiduciary weight that that puts on us. Right. As we take in outsiders money, that's a profound commitment to make. Right. And it's a weight that many of us carry, and we don't take that lightly. This is real stuff here. Yeah. I was going to say and I think what you'll see is a lot of those people in your first deal, people are investing in you. They're not investing in the real estate. Right. It's like your aunt, the people, your cousins, whoever. Right. And they're like, okay, we're family, we trust you, that kind of thing. What I noticed was maybe it was probably deal like three or four where it was more that like second level outside of close friends and family coworkers. And things started to come in because they're kind of like, okay, maybe he actually does know what he's doing, right? He's got a few under his belt because a lot of people first feel like we're not in for this one, but let's see how it goes. Right. And so then I started to open the floodgates a little bit later. But you have to have that kind of proof. Like the proof of concept. Absolutely. So are you at that point raising commitments to fund and then as a deal came, you went out or did you actually have a deal at that point? You had it under diligence and you're going through third parties and then you went out. Which way did you do it? Yeah, let me think. So that first deal, we had it under contract and we were moving and we're like, we got to raise this money. Like I said, I should have started six months a year ahead of time, and I had some conversations. But again, it goes back to kind of that introvert personality. Right. It was hard for me to get out and feel like because I had the wrong mindset. I had the mindset that I was asking for a favor. Right. I had the mindset. I was asking them for a favor. I was asking them for money. It's not what we're doing now. We're doing it all. We're offering people an opportunity to get better returns than they can get anywhere else. And that's a very different mindset when you approach people to talk about it. Right. And it's a scarcity mindset versus, like an abundance mindset. Right. Of like, I don't really need your money because I've got a fantastic opportunity. I know that the money is going to come in because the deal is here and I've got my stuff together now. I've got the track record and all this. Right. And it's not in a cocky way at all. It's just in a confident way. But I think if you go out needy, right. People can smell that if you go, oh, I need you to give me this money. The money is only as valuable as how you're able to put it to work. Right. So if I know I can confidently give people 2020 5% returns, they can't get that anywhere else. And so I know that they're lucky to be in the deals. Without a doubt, man. The access to the deal is the value, the expertise to execute the deal. That's the value, right? Yeah, that's right. And then not having to go through the headaches and pains of doing it yourself. Right. And just being able to write a check and sit on the sidelines and be able to rely on me and my team, who has the infrastructure and has the knowledge and the data and everything else to make it work. I think that mindset shift was huge for me as far as capital raising and just the confidence to get out there in front of people and tell them what I'm doing and show them what we're doing. And then that really opened up the floodgates. Yeah. I was having a conversation just this morning with one of the younger guys that works with me here, and he's done a few deals. I've worked with him on a few deals that we've done together. Super sharp kid. And he's looking to bring a little bit of scale. He wants to do this a little bit more. And he's a bit gun shy in the ask. So we were talking through the approach and what that means and explained to him, I've never in 25 years ever come across a great deal that did not get funded. Right. If you have the deal and the expertise to execute, believe me, folks are going to want to put their money with you and they're going to want to put their money in the opportunity. That's the value. Having that inside track, having the brokerage, being able to get those deals. That's what it's all about, right? Yeah, I think that's exactly right. I think the caveat of that is you still have to build the network. Right. If you're just sitting there with the deal and you're not telling anybody about it, that money is not coming. That's where when I hear gurus or whoever say, if you got a great deal, the money will come. It's like, that's true. As long as you know enough people, you got to have that network. Right. And I think that's where people go wrong. It's like, well, if you're sitting in your basement with a great deal, like, how are people going to find out about you, right? Yeah. And that was for me, starting the podcast and doing these things for me were very difficult to get over just my own limiting beliefs. But I think we were talking about purpose and why and things earlier to me, once I got really clear on my why and my purpose, that's what allowed me to overcome all those limiting beliefs, because my purpose for doing it was bigger than my own insecurities. I had a reason to move forward, even if it felt extremely uncomfortable to me. So that is some profound stuff. Your purpose was larger than your limiting insecurities, and that's some profound stuff there, man. And that's a hell of a motivator. Okay, so let's talk deals. You're now taking these deals down. You've got the infrastructure, you've got a pathway. You have access to investors. Kent, when you're looking to identify these deals, are you looking in one particular geographic location or what does that process look like? Yeah, good question. So we focus throughout the Midwest. Primarily, it's Indiana, Ohio and Kentucky. And then as we grow, we're expanding out into geographies. But I really started out with taking about a three hour radius around Indianapolis where I live and say, okay, this is going to be where I focus really staying out of Illinois just because Illinois is not a business friendly state. But all those other States were up for grabs. And so that's how I started networking and started building relationships in those cities. Right now, we have properties in Indiana or in Indianapolis. Oval, Kentucky, Lexington, Kentucky, Cincinnati, Ohio, and Dayton, Ohio. And so we started just kind of growing out from Indianapolis and growing into those other major Midwestern cities. And so when we're looking for deals, to me, it starts with that market, right? It starts with one of the markets that we want to be in. And we like to be in markets that are really similar to Indianapolis, meaning they have a lot of job diversity. There's good job growth, there's non cyclical jobs. The things I love about Indianapolis or Woolville or Lexington, actually, all those cities I just mentioned, Cincinnati, Dayton, they all have major universities. They all have good health care basis. Right. Higher Ed. You think about health care, you think about government, you think about military. These are non cyclical jobs. Those are jobs that don't go up and down as we have recessions historically. And so it's a solid base, right. Because nothing moves more closely with rent growth than job growth. So you really have to look where the jobs going and where is there a good job base. And you just don't want to be in a town that everybody's employed by one company right now, one company goes out. So you need job diversity. Right? You want a lot of different employers. So it really starts there. And then as we drill down, as we drill down into neighborhoods and submarkets, we're really looking at what are the incomes in the area, what are home values, what is crime? How are the schools? Right. Those are four things that we really Hone in on. I've actually, over the years, I've grown a list. The list is something like 35 now, like 35 key things I look for in any deal, and it's all those things, but it's just over time, you realize you're like, wow, maybe that was more important than I thought it was going to be. I need to look at that next time. One thing that we've realized is extremely important is proximity to an interstate. And it's because if you're close to an interstate, it just expands how far you can get in a 20 minutes period, how far you can get to a job. Right. Or to school or to anything. So we love properties that are close to interstate anyway, things like that. So that's how we kind of dig into the neighborhood. And then only after you're like, yes, it's a market I want to be in. Yes, it's a neighborhood I want to be in. Are we looking at the property and saying, okay, this is a property that we want to own? And then we're starting to look at criteria such as the vintage of the property. 99% of what we buy is 1980s and newer, looking at the construction, looking at the roofs and kind of digging in and then looking especially at one thing I like to mention, hugely important, the cops in the area. Right. Because if you're going to go in and you're going to add value, you're going to improve the property. Well, what's the point in doing it if you can't increase the income on the property, right. If you can't raise the rent? That's kind of why we're in this and why our investors are in this is for a return. And if you're already top of the market and rents aren't growing, then there's really no reason to dig any further. So you got to look when you look at the submarket, you got to look at the rent. Comps and say, where do you sit? And I think an extremely important thing to look at is where is rent compared to the income? And that's why we look so closely in incomes, and we look at a rent to income ratio, and we don't want that rent to income ratio to be above 30% after we come in and raise rents through our renovations, because we know above that that's when people become rent burdened and it becomes difficult to pay that much rent. We like markets. The Midwest is beautiful because in many markets in the Midwest, and the rent to income ratio for folks is in the 20s, maybe low, twenty s. And so we know that it's relatively affordable. And everybody's talking about how crazy rents are growing right now. But in the Midwest, relatively speaking, compared to the West Coast, East Coast, south, rents are still relatively affordable. And there's a lot of room. They could still grow where people can still pay and still have a decent rental income ratio. So, folks, that's what a real syndicator sounds like. So many of the metrics that he's touched on, they're just absent from so many of these decks that I'm seeing in the last maybe six to eight months, man, the market has heated up to such a point that these syndicators are buying payments. They're not buying quality real estate. Are you experiencing that? Yeah, I still invest passively quite a bit. So I still get a lot of debts. I think the craziest thing I've seen lately was a deal out of is it Phoenix or Vegas? I can't remember. It was one of those markets, and it was like, we're projecting interest rates are going to be at 6%. One of the deals that we have out right now, that's what we're underwriting a 6% interest rate with a rate cap. I saw a deal come out as like a three cap purchase price, and I don't remember what they had interest rates at. But I remember that the cash flow in the first year was negative. What was actually happening was there was negative cash flow from operations in the first year. So actually the pitch was that the bank was going to finance an additional amount to cover their own interest payment in that first year to get it through. I was like, man, this feels like seven housing bubble stuff. This is like 100% leverage. Right. This is like what was the movie, The Big Short, like that kind of stuff. So I have seen some interesting stuff coming out. I think this people start to rectify, okay, three caps are wonderful if it can be a five cap by year two. But if your interest rate is 6%, how do you get through those first couple of years? Those deals are going to be tough. Yeah. We're finding in some of these opportunities, quote unquote, there's no parity between inflation and rates. Right. We're seeing loss to lease and rent projections skyrocketing, but expenses are stagnant. There are so many Devils and there's so many details, folks, that you really need to make sure that when you're participating in these types of opportunity, you have someone sees and someone who knows where all of these little that become massive issues can lie in the deal. And I love that you're focusing on markets and then seeing what deals fit in the market not. Well, here's a deal that's out of forecast. Let's go jump into this state and here's a four and a half down. Let's go jump into that. There's a lot of that going on in that. There's a lot of craziness out there. Yeah. It's a very interesting time. I think the next 18 months to two years is going to be a lot more of this. I think it's going to be a lot of people trying to figure it out. Right. And maybe that strategy that was working doesn't work anymore. It's happened really quickly. It's happened in a matter of like two months. Right. As rates have moved up. I mean, all of a sudden deals that we're penciling don't cancel anymore. And I guess what I feel fortunate is just in the markets that we're in, we're always relatively higher cap rates, relatively lower rent growth expectations, and relatively more stable. Right. So it kind of fits into I look at it as kind of this bastion of safety when everything else is going crazy out here. I mean, I stopped looking at my stocks because I looked at it. The S and T was down 20% year over year. And I'm like, that's too much red for me. I'll just look at my real estate portfolio over here that's actually still appreciating. But I think the next couple of years are going to be just huge fluctuations. If you look at interest rate like forward curves, which is what we watch, you see this peak, at least for like a sofa rate, which is what we base our variable debt that we have on is benchmarked off that. So as it moves up, so does our rate. It's kind of this peak out in July, August of next year, and then it starts to normalize and come down, but not even to where we are today. So, I mean, we're looking long term at five and a half percent interest rates. Perhaps now with the caveat, the interest rate curves are never right. That's the best info we have right now. And historically, they've always been wrong. But I don't think that we're back to the craziness that we were back to was 0% lending rates for the Fed. Right. I just think that that world has passed us. So I think people are going to have to get comfortable with higher interest rates. I think over time that will adjust. Sellers will have to adjust their expectations. I think we will see some softening. The only thing that I think comes over to that and totally blows everything I just said out of the water is the fact that there's still about $5 trillion sitting in bank accounts. What was the number during Kovan? Nine or 11 trillion? I don't remember something crazy like half or something of the money in the world and like 5 trillion of that is still sitting in bank accounts. It has not been deployed. So I think when that money starts to be deployed, I think that money does seek out hard assets. I don't think it seeks out services. I think it seeks out tangible assets. And so everything I said could just be totally wrong. And prices continue to skyrocket and cap rates continue to go down just because the amount of money searching for yield. Yes. But I think you hit the nail on the head and look, there's ways to hedge, right. If your models are telling you that there's going to be a peak and it's impossible, of course, to peg exactly when these things happen. But for the use of responsible debt and paying a little bit more for that debt. Now to have caps on our increases and let us get to the other side of the rainbow. Right. We could still make these deals not only work, but be immensely profitable throughout this process. That's right. I mean, everything I said is just Crystal ball, future stuff. Right. And my Crystal ball is as just murky as anybody else's. I think what you said is exactly right. You just have to be setting yourself up for success in a worst case scenario. Right. Here's the difference to me, because I speak to a lot of investors. The difference between the seasoned investors and the new investors are the new investors are concerned about the IRR and the cash on cash and all that stuff. But particularly the IRR. Right. Like a new investor will invest in 18 versus 16 just because it's an 18. Right. Irregardless of where it's at or whatever. A seasoned investor, when they ask questions, it's all about the downside. What type of debt do you have? Do you have a rate cap, what's your debt service coverage, how much leverage? Right. It's all about the downside. You can see the difference in the sophistication there and just the type of questions. I think as investors, you guys should be focused on the downside because there's a Warren Buffett quote. Right. It's like first rule, don't lose your money. That's the most important thing. Over the long term, real estate will continue to appreciate. It always has. So appreciation will come. But just focus. You got to focus on the downside. Focus on cash flows, really Hone in on people's assumptions. Rent expense growth assumptions are extremely powerful because they're compounding. Right. So I say, okay, it's going to grow 4% and then another four and another four and another four each time. It's compounding growth. That's why compounding interest is so powerful. But it's kind of in the other way. So I'd say the most important thing on deals is just challenge assumptions. And even though I realistically think cap rates will stay flat, we never underwrite that way. Right. We're always building in a cushion because we want to underwrite to the downside. If what I actually think is going to happen happens, then we just look like heroes. It's great. Absolutely. So I think what we're going to see here as we're looking through our murky Crystal balls. Right. I think it's actually going to get to a point, Kent, where some of these small to mid cap funds, banks that put debt out in places now primary markets became secondary, secondary became tertiary, and those Tertiaries became primaries. Like what happened here, folks? That's what I was referencing. Buying payments, not looking at that long list of metrics that you have to be looking at before you place your money. I fear that the big banks are starting to make some moves that are going to suck that capital out of those smaller and mid caps banks are going to fall out of compliance and there's going to be a bit of a debt crisis where when it comes time to refinance. What some of these new speculators don't understand is there is a time when there's no capital available from institutions, right? Yeah, I think you're making a great point. The other thing that I really look for when I'm evaluating deals and something that we don't do is we're never underwriting the refinance in a way that we're never going to do a deal if it doesn't work, if you don't refinance because a refinance like you said is not guaranteed and there have been times in this world where you can't go and you can't get credit and so I think the deal has to stand on its own and then if you refinance everything should just look better, right? It shouldn't be predicated on a refinance. Yeah. So look, Kent, you've dropped some really genuinely amazing knowledge today. I'm so appreciative folks. You've got to check out Ritter on real estate. He's got a tremendous podcast packed with great guests, amazing valuable information. Where else can folks find you, Kent? Yeah, you can reach me at my website, Kentritter.com. That's the easiest place to find me. We've got a weekly blog. You can access the podcast there if you'd like to. We've got some new investor terminology FAQs trying to help people just educate themselves and you can also check out current deals that we have going on if that's something that interests you as well. Yeah, absolutely, folks. Definitely. Check it out, Kent's. The real deal. It's been an absolute pleasure. Kent. Thank you so much for the time today. Yeah, absolutely. Thanks, James. I had a blast. Yeah, me too. As always. Everyone please stay safe.