\n
Dave:
Hey, everyone. Welcome to On the Market. I\u2019m your host, Dave Meyer, with James Dainard joining me today. James, what\u2019s up, man?<\/p>\n
James:
Oh. Just hanging out in the cold, rainy Seattle.<\/p>\n
Dave:
I think we\u2019re back to having the same weather. It\u2019s just dark and rainy and \u2026 I don\u2019t know.<\/p>\n
James:
Got my space heater at my toes. Yep.<\/p>\n
Dave:
Did you know that Amsterdam rains significantly more than Seattle?<\/p>\n
James:
I was explaining that to my wife when we were trying to plan our vacation out there. She\u2019s like, \u201cNo way.\u201d<\/p>\n
Dave:
Yeah. No. But it\u2019s like April to August is super nice. So it\u2019ll be fine. It\u2019s just the whole winter. But, man, we had a long episode, long interview today. So let\u2019s do it. We\u2019re just going to talk quickly, but we have Ashley Wilson, who is a incredible multifamily investor on today. And just want to just give a quick warning. Not warning. Just disclaimer here that if you\u2019re \u2026 This is more of an advanced episode, I think. Right? If you\u2019ve never heard of multifamily or don\u2019t know that much about it, you can \u2026 Ashley does a great job of explaining things, but there\u2019s a lot of advanced concepts in here that \u2026 Honestly, I love this. I think this is one of my favorite episodes ever. But just wanted to give a heads up that there are some new terms that you might not have heard that we go over here.<\/p>\n
James:
Yeah. Ashley is one of the brightest people I know in this space, and she will educate you beyond belief. And, I mean, even for me, I got a little bit lost at a couple points in it, so-<\/p>\n
Dave:
Oh, dude. She was dropping bombs, dropping knowledge on it. But I think it\u2019s super important what she\u2019s talking about, just market conditions. She offers really concrete examples of what she thinks is going to happen in the multifamily market and why and gives really good examples of backing up some things you, James, have been talking about, some trends you\u2019ve been seeing over the last couple of months.<\/p>\n
James:
Yeah. She\u2019s just a very talented operator that knows the nuts and bolts of her business, and she just broke it down, and I think the serious operators out there are seeing the writing on the wall for the sloppy operators. But she\u2019s one of my favorite people to talk to.<\/p>\n
Dave:
Totally. If you\u2019re interested in multifamily commercial or just want to learn a little bit about it, this is a must-listen-to episode. There\u2019s just so much good information that. So we\u2019re going to take a quick break, and after that we\u2019re going to bring on Ashley Wilson.
All right. Ashley Wilson, co-founder of Bar Down Investments, bestselling author of the only Woman in the Room: Knowledge and Inspiration from 20 Women Real Estate Investors, and of course an active member of The Real Estate InvestHER community. Ashley, welcome to On the Market.<\/p>\n
Ashley:
Thank you so much for having me.<\/p>\n
Dave:
Well, I just read your official bio, but can you give us, in your own words, a bit of your background and history in real estate investing?<\/p>\n
Ashley:
Absolutely. So I started learning about real estate in 2007. My now-husband introduced me to it, so I\u2019m really blessed that he kind of gave me the first sip of the Kool-Aid, so to speak. Started listening to BiggerPockets and being involved in the community in 2007. We made our first purchase in 2009 of a single family rental. I\u2019ve house hacked short-term rental, long-term rental of single residential properties. I\u2019ve done flipping, high-end flipping, and traditional flipping. And then I transitioned to commercial real estate in 2018 and have not looked back. So I\u2019m in commercial real estate right now, specifically in multifamily.<\/p>\n
Dave:
That\u2019s amazing. And you and James, I learned, met \u2026 Did you guys meet at \u2026 Do I have this right? At Brandon\u2019s Maui Mastermind? Is that right?<\/p>\n
Ashley:
Yeah. We did. I am so blessed to have been invited to the event, but more importantly, I\u2019m so blessed to have met James and met a lot of different people there, incredible people that now are my closest friends, including James. So really, really excited that we\u2019re now on this podcast together.<\/p>\n
Dave:
I was very jealous. James was telling me everyone who was at that. It was like the Avengers. It was all of the greatest real estate investors meeting at once. I was like, \u201cDamn. I wish I was there.\u201d<\/p>\n
James:
It was like the Avengers. But I will say, Ashley and Kyle, her husband, are two of the most favorite people I met there. There\u2019s definitely a little small group that I talk to most, and they are part of that, for sure.<\/p>\n
Ashley:
Couldn\u2019t agree more.<\/p>\n
James:
Super stoked we met each other.<\/p>\n
Dave:
Awesome. Well, now the history between Ashley and James. But let\u2019s jump into this multifamily market. You\u2019re obviously an expert in everything having to do with sponsoring syndications and multifamily. So can you just give us a quick read on what you\u2019re experiencing in the multifamily market right now?<\/p>\n
Ashley:
Chaos. No. I\u2019m just kidding.<\/p>\n
Dave:
All right. Podcast over.<\/p>\n
Ashley:
That wasn\u2019t the answer you were looking for? So multifamily has had kind of a hectic past two years, all starting with COVID, and I think a lot of people across all real estate asset classes, but specifically in multifamily \u2026 A lot of people got gun shy at the beginning of COVID, and they really didn\u2019t know how the market would respond, because they really didn\u2019t know consumer sentiment, which is translation of tenants would respond and how rents would not only grow or compress, but also the ability to pay. I think there was a lot of sensitivity around employment and tenants being able to maintain income to be able to pay their rents, and then, as owners, how we would be able to continue to keep operating the properties.
So fortunately there was a lot of government programs both at a federal level, local level, and then also some charitable organizations that stepped up and provided some assistance along this past two-year runway. But what we actually saw was, I think, the opposite of what most people predicted, and I think that was in large part because just the abundance of stimulus that was thrown at this sector.
And what we saw firsthand as well as I look at national metrics all the time \u2026 We saw a higher than normal collected versus bill rate across multiple markets, and that\u2019s because of all of these different assistance programs stepping up and not only paying one or two months, but also paying six months out for tenants that were in really difficult situations, loss of jobs being the number one reason, and probably number two is more tied to family dynamics with respect to how COVID was impacting their family and whoever was the breadwinner. So that definitely played a toll as well.
So what ended up happening, because multifamily \u2026 The most traditional way in which multifamily properties are evaluated is called the NOI approach. What essentially happened is the income grew, and the income grew at a faster rate than the expenses grew, because at that time initially, we didn\u2019t \u2026 Even though we had chain supply issues, it wasn\u2019t impacting multifamily up front. It actually had a little bit of a lag effect. So we saw it later.
When we look at development, and if you \u2026 I know I\u2019m going kind of all over the place here, but I\u2019m trying to paint a picture. The overall economy \u2026 We already have a shortage of housing supply, so when you look at supply and demand, the supply was shut off with not only federal mandates of supply being shut off when contractors were forced to shut down for that period of time, but also in terms of government agencies approving permits to construct new properties. In turn, what happened is we\u2019re shutting off the supply, then we\u2019re left with whatever supply is available on the market. A lot of people were forced into situations of renting. With the stimulus, we\u2019re growing the income, but we\u2019re not also seeing that expense growth.
Then the tailwind was the expense growth. So we started to see expense growth kind of come into play. But in terms of initially when you\u2019re looking at income growth and you\u2019re looking at the NOI approach, which is the most traditional way in which you evaluate the valuation of a multifamily property in terms of what you pay, you look at it typically on a trailing basis. So by the time of multifamily transactions, if we look at it through the tail of 2021, we saw Q3, Q4, and then spill into 2022 in respect of Q1 and Q2 having these record-setting transactions in multifamily. One example, one specific data point, is in 2022 in Q1 \u2026 I just posted an article about it. It\u2019s not like I memorize all this stuff all the time. But I think it was 63-<\/p>\n
Dave:
I was pretty impressed. I was like, \u201cMan. [inaudible 00:09:51].\u201d<\/p>\n
James:
She\u2019s like a walking robot.<\/p>\n
Ashley:
63 billion in transaction volume in Q1 of 2022 across the nation, which is the second largest volume of transactions that have occurred in multifamily history, so I think with the first being in 2000, if I remember correctly. I forget which quarter. But the point remains the same, which is that all of a sudden we have this huge volume of transactions occurring that we weren\u2019t seeing prior to that.
So now we\u2019re in a situation where a lot of people were selling at top dollar and also the volume of transactions was super high. Lenders were really happy about it, because they were essentially achieving their placing of capital metrics, the goals that they have to hit each quarter. By the end of Q2, they were already hitting their goal for that year through almost Q4. So they only needed to transact a little bit more through Q3 and Q4 to hit their metrics for transaction volume. So in terms of where they wanted to place their capital, coupled with the fact that the fed interest rate hikes and how that impacts multifamily, that kind of caused a slow down.
But on the other hand, we now have all this 1031 money. So the 1031 money is now circulating, which is causing properties to still transact at a very high price point because of the fact that people would rather buy a property and even overpay for a property. Sometimes I\u2019ve heard, from personal context of mine, they would overpay by $4 million just not to have a $5 million tax hit.
So because of that \u2026 And I see James shaking his head there, but honestly I agree with James on that. I think that\u2019s crazy that people are doing that. But what ends up happening is then you don\u2019t see the compression on the cap \u2026 Excuse me. Not compression. Expansion on the cap rates that you really should see, because expansion on the cap rates obviously translates into a lower price point and vice versa. So what we should be seeing is a lower price point on these properties with expansion of cap rates, but really we\u2019re not seeing it. We\u2019re seeing a little bit, but not as much, and it\u2019s only being impacted due to the interest rate, not the cap rates, which is kind of a little bit unique situation.
So when I said it\u2019s a little bit chaotic, I jokingly said that, but I do see indicators that lend itself to chaos. Why are people overpaying? Should they be overpaying? I personally don\u2019t believe that you should ever overpay. I don\u2019t typically think that there\u2019s a good justification for that, but that is honestly what we\u2019re seeing. Everyone said it was multifamily madness in Q1, but I would say it\u2019s more the fallout of that madness that we saw is what we\u2019re seeing today.<\/p>\n
James:
Yeah. And it\u2019s crazy that \u2026 The point that you just brought up about the 1031 exchange \u2026 I feel like that is starting to dry up a little bit in the current market. The 1031s are \u2026 They already sold off their property. They had a certain amount of time to reload that money in. It\u2019s definitely starting to slow down. But yeah. That is a huge mistake. I was watching for the last 24 months. People were overpaying just to defer taxes. But if you\u2019re going to lose that position or the gain down the road, it doesn\u2019t matter. You\u2019re just losing the position.
And someone told me \u2026 I remember I was trying to do a 1031 exchange about five years ago, and I was doing six properties. Or no. Three properties. And I had uplegged a couple during that time, and I was trying to find the next replacement property, and I could not find anything. And how I buy is deep value-add buy. I want walk-in margins, walk-in equity. And I was going to buy a property that did not meet my buy box, typically. And I was talking to one of my clients who\u2019s a financial planner, and he literally just stopped me, and he goes, \u201cHave you lost your mind?\u201d He\u2019s like, \u201cWhat is wrong with you?\u201d I\u2019m like, \u201cWhat do you mean?\u201d I\u2019m like, \u201cI\u2019m deferring these taxes. I\u2019m saving these monies. I\u2019m going to increase my cash flow.\u201d He\u2019s like, \u201cYeah. But you do what you do. What are you doing? You\u2019re \u2026\u201d
And he mentioned to me \u2026 He goes, \u201cThere\u2019s two things that put people in bankruptcy. A, thinking you have FOMO, where you\u2019re \u2026 that you\u2019re missing out and you\u2019re leaving too many \u2026 or that you\u2019re not getting \u2026 that you\u2019re going to miss that return, and two, that you\u2019re trying to defer taxes. At some point, you got to eat the taxes.\u201d And I remember I ate 350 grand in taxes. I blew up the exchange and just reset my basis at that point. But that\u2019s been this greed of what\u2019s going on. There\u2019s so much money getting pumped in. People made so much. They don\u2019t want to pay the tax, but then they buy a bad deal, and it\u2019s a huge mistake, and it ends up in the long run hurting you more than just paying the tax.<\/p>\n
Dave:
I just want to explain for a minute what you guys are talking about. Just the phenomenon here is that basically a 1031 exchange, if you don\u2019t know what that is, is if you sell an investment property, you can take the profit that you earn and reinvest it into a like-kind property without paying any capital gains. You\u2019re basically deferring the capital gains till some other time. But if I\u2019m picking up right, what\u2019s sort of happened over the last couple years is people would sell. They were often trying to sell at the top or take advantage of this appreciation. But then when they went to go and find that replacement property, they weren\u2019t finding a deal with good fundamentals. But when you do a 1031 exchange, you only have 45 days to find that replacement property, so people often get desperate and make bad decisions. Right? Is that basically a summary of what you\u2019re talking about?<\/p>\n
Ashley:
Absolutely. And I think you see that more and more when the volume of transactions is so high. So I think that\u2019s what we were seeing this year more than previous years is we had so much capital at play for people to 1031. So the scale of which the transactions happen, the ripple effect, was there was more 1031 money at play.<\/p>\n
Dave:
And so you\u2019re saying it\u2019s sponsors\u2019 1031 money, and so they\u2019re selling a multifamily asset and then they are trying to purchase another multifamily asset? Or is it the LPs in these deals are also having 1031 money and that\u2019s also contributing to it?<\/p>\n
Ashley:
It\u2019s not just syndicators. It can be private owners. It can be REITs. It can be private equity firms. It\u2019s really everyone across the board can benefit from this tax incentive. So I personally saw it across the board. I didn\u2019t see it just limited to syndications trying to reinvest 1031. In fact, if anything, it\u2019s actually more difficult. I have personally witnessed for syndications to do something like this, because it\u2019s just a little bit more complicated. There\u2019s more hair on the process in terms of the actual overall structuring, how the PPM was originally worded, how many LPs you have and whether or not they all buy into it.
There are work workarounds. Excuse me. I am not a lawyer, so I won\u2019t pretend to know the answer, even though I\u2019ve been told what I think the answer is. So just consult with your lawyer if you are interested in trying to figure out a workaround there. But ultimately the people that I\u2019ve seen do it the most are really private owners. But either way, it doesn\u2019t matter whether it\u2019s private owners, syndicators, private equity firms, REITs. The impact it has on the market is massive. These individuals are doing it, but overall it\u2019s impacting everyone, is really kind of the takeaway message.<\/p>\n
Dave:
Yeah. Hey. Dave Greene on the BiggerPockets real estate show has been talking about this in the single family space for a while. Where he is, I\u2019m sure it\u2019s pretty common, especially in the Bay Area. But it\u2019s interesting, because I hadn\u2019t really thought about how that impacts the multifamily space.<\/p>\n
James:
You always know when the market\u2019s getting juiced up a little bit, because I would get phone calls from commercial brokers, and they\u2019re like, \u201cHey. I got a 1031 exchange buyer. We will buy anything.\u201d It was like if a broker landed that 1031 exchange buyer, they knew it was a done deal. Right?<\/p>\n
Ashley:
Yep.<\/p>\n
James:
They\u2019re like, \u201cWhat do you got? We\u2019re just going to get the deal done. I\u2019m going to rip my check,\u201d and it was like that\u2019s what the people were in the constant \u2026 Oh. They got to buy something. What do you got? Just give me \u2026 And it\u2019s like, \u201cI\u2019ll sell you this.\u201d We sold a couple of our properties because we got cold call with 1031 exchange wires, and they\u2019re like, \u201cWe\u2019ll pay you this,\u201d and we\u2019re like-<\/p>\n
Dave:
Just find the biggest turd house you have a listing contract for, and you\u2019re just like, \u201cHere you go.\u201d<\/p>\n
James:
Yeah. Here you go. But we got paid well. I love 1031 exchange buyers. They pay very good money for your stuff.<\/p>\n
Ashley:
The crazy thing about 1031 buyers or brokers, when a broker lands one, to your point, James, they don\u2019t tell you the buyer\u2019s buy box. They just tell you how much money they have to 1031. That\u2019s my favorite part about it is they\u2019re like, \u201cThis is how much we have to 1031. Do you have a deal that fits criteria?\u201d It could be in Timbuktu for all the broker cares about. The broker just wants to place the capital, because they\u2019re foaming at the mouth for the transaction, and it\u2019s astonishing to me that it\u2019s not like, \u201cOkay. Well, it has to be built in 2015 or 2015 or newer,\u201d or something like that. They\u2019d give you no criteria except how much money that the buyer has to 1031.<\/p>\n
James:
This is how much I can deploy. Let\u2019s get it done.<\/p>\n
Ashley:
Let\u2019s get it done.<\/p>\n
James:
Crazy<\/p>\n
Ashley:
Send over the contract.<\/p>\n
Dave:
That\u2019s a great place to be. Ashley, you mentioned a few things about cap rates that I\u2019d love to ask you some more about. But for those people listening who aren\u2019t as familiar with commercial real estate and cap rates, can you just explain the role that cap rates play in valuations and in multifamily investing?<\/p>\n
Ashley:
Cap rates. The best and the easiest, most simplistic way to understand it is actually something my husband told me when he was first teaching me about cap rates, and that is essentially if you were to purchase the property in cash, what your cash flow would be after all your expenses were paid. So if you\u2019re buying a five cap market and you purchased something at a hundred thousand dollars, just for simplicity\u2019s sake, you would receive 5,000 annually in cash flow. That\u2019s essentially what a cap rate is.
In terms of how it is utilized with respect to multifamily and commercial real estate, it is used as a determinant to tell you the trading value across different assets, and it\u2019s supposed to take into consideration risk profile and be able to go across different investments. So say, for example, you\u2019re comparing multifamily to self storage. Well, let\u2019s say self storage is a 10 cap and multifamily in the specific market in the specific buy box you\u2019re buying it is at a five cap. You\u2019re getting less of a return when you purchase a multifamily property versus a self storage, because self storage inherently has more risk. So that is kind of just high-level what a cap rate is.
In terms of how it\u2019s utilized to determine value with the NOI approach, which I mentioned previously, there\u2019s three ways in which multifamily properties are evaluated. One is the comparable sales approach, and comparable sales approach \u2026 Most people already understand that conceptually, because it\u2019s the way in which residential real estate is valued. So if you have a property adjacent to another property with similar specs, one property sells, most likely that other property will sell at a similar valuation. Right? So if it sells for $300,000 \u2026 It\u2019s a 2000, three bedroom, two bath home on a half an acre. Let\u2019s say hardy siding, two story with a detached two-car garage, and you have the exact same thing. Maybe it\u2019s even 1,950 square feet. You\u2019ll probably be able to sell that for 300,000. They\u2019re comparable. That\u2019s why it\u2019s called the comparable sales approach.
With respect to the second way multifamily is evaluated, it\u2019s called the replacement value. So think of how an insurance adjuster would evaluate multifamily. So replacement value is based off of the replacement cost in which you would replace that same structure. The third approach, which is the most common way multifamily is evaluated on the purchasing side for buyers is called the NOI approach, which is you take your income minus your expenses, you annualize it, you divide it by the trading cap rate within that given market for that specific asset class. So there are different cap rates based off of markets and then also based off of different asset classes. So whether it\u2019s an A class, B class, C class property, 2022 construction versus, let\u2019s say, a 1980s construction, those cap rates are going to vary, and then you come up with an evaluation.
A very simplistic way to determine how you add value to a property \u2026 A five cap is typically a multiplier of 20. Well, it is a multiplier, not typically. It\u2019s a multiplier of 20, so it\u2019s a very easy way in which you can determine, \u201cOkay. If I\u2019m saving a hundred dollars a year, that\u2019s an add evaluation of a hundred times 20, so a $2,000 add onto the property evaluation.\u201d So you can see how the multiplier effect is great with value-add properties, because if you add $10 a unit across a hundred units, you can see how that can have a massive impact on the overall evaluation of the property.
So now kind of understanding that basic knowledge on those three approaches and knowing that the NOI approach is the one that is used, it\u2019s important to look at mathematically what those factors are that determine the value. So you have the income and the expense, which people can manipulate those as well. Income and expense are based off of operating income and operating expense, but there are line items that are, quote unquote, below the line, which means below operating variables.
So let\u2019s say, for example, you replace roofs. Replacing roofs is actually called a capital expense. Capital expense doesn\u2019t get calculated into the evaluation, because it\u2019s considered a one-time expense, whereas if you do a roof patch, most operators would agree that a roof patch would fall as an operating expense under general maintenance. So that would impact your evaluation. People do, though, get creative. You can call it fraud. You can call it whatever you want. I\u2019ll throw around the F word. And they can hide that below the line so it looks like their repair and maintenance is lower than what it should be. So the more experienced you are in multifamily, the more you can gauge, okay, their R&M cost, repairs and maintenance, is really low for this vintage property.
A typical and the average expense ratio across the country \u2026 Now, it varies by area, so don\u2019t take this to the bank, but typically A class property typically has around a 30 to 35 expense ratio, and then every decade kind of adds a couple percentage points. So like 1980s vintage, you\u2019re typically stabilized. These are all stabilized ratios. Stabilized. Excuse me. For 1980s, you\u2019ll probably be around a 50, anywhere up to a 60 percent expense ratio.
So knowing all these things, you can see that the income and expense can be manipulated. But the other thing that can be manipulated is cap rates. So one of the things we just talked about was the whole history of the past two years of how the multifamily sector has been a little bit chaotic. And the thing with cap rates are cap rates are determined by historic transactions. So in terms of setting the cap rate, it\u2019s based off of transactions that have actually occurred. So in Q1 and Q2, when I was talking about having all of these record-setting transactions occurring, obviously the cap rates were compressed. The cap rates were compressed because we were seeing transactions at the highest or second highest rate that we had seen of all time.
So when that funnels down, then obviously when we get to a period in \u2026 Let\u2019s say, for example, we have a halt in transactions. People are really kind of guessing on the cap rates, but they\u2019re using historic sales to forecast where they should actually be at. With respect to the 1031 money circulating, if people are overpaying for properties, then we\u2019re not seeing the cap rate expansion that we think we should see, because really property values have come down, but cap rates aren\u2019t truly reflective of that, because 1031 money is making it look like the market is doing better than it is, because people are overpaying for properties. So that\u2019s part of the issue.<\/p>\n
Dave:
You said that property values have come down, but have they actually? Or are you just saying that they should be coming down? Because cap rates should be declining, and if NOI stays constant, they should be \u2026 Or excuse me. Cap rates are expanding. NOI stays constant. Then property value should be going down. Right? But is that actually happening? Or is that sort of just what you would expect to be happening?<\/p>\n
Ashley:
Well, it\u2019s my belief that it should be happening, because when you look at interest rates \u2026 And we haven\u2019t really talked about this yet, but when you look at interest rates, there\u2019s an inversion that just occurred. Right? So previously we saw interest rates lower than cap rates. And when you invest in multifamily, one of the things you\u2019re investing on is that spread between the interest rate and the cap rate. But because we\u2019re seeing interest rates, let\u2019s say, for an agency loan at six percent, bridge loan anywhere from seven to eight percent, but you\u2019re seeing cap rates at five percent, you\u2019re seeing an inversion. You\u2019re seeing interest rates actually higher than cap rates.
So in terms of where they should be at today, there should be some more expansion on the cap rates, and I think that there was \u2026 I think 1031s created a fallacy of what cap rates are. I also think with the chain supply issues \u2026 And I know this is kind of a divergence of what we\u2019re talking about now, but I do think it impacts pricing. I\u2019m a firm believer that you also have to consider replacement value. I don\u2019t think that evaluation just should solely be off of NOI. I think you should also consider replacement value, because if you can\u2019t build the same product today for the price that they\u2019re asking for, then there\u2019s a trickle effect that\u2019ll eventually happen. There\u2019s lag time. But we had a lot of chain supply issues. I mean, lumber was through the roof. It\u2019s definitely come down significantly. But we still have chain supply issues and shortage of materials and shortage of labor, which is impacting the cost to build.
So when you\u2019re in a situation where you are buying a 1980s vintage property at 150 a door, but to rebuild that it would cost you 195, how do you truly evaluate it? I\u2019m not pitching for you pay 195 for it because that\u2019s what it would cost to replace, but I\u2019m just saying that in terms of trying to determine the value just going off the NOI approach alone \u2026 I don\u2019t know if that\u2019s necessarily the answer.<\/p>\n
James:
That is one of my favorite metrics to buy on, buy well below replacement cost. When I\u2019m uncertain on a deal, any type of deal, multifamily, single family, whatever it is, if I\u2019m buying at like 30 percent off replacement cost, I feel pretty good about that deal. In the long term, it usually clicks out.<\/p>\n
Ashley:
Yep. I completely agree with you, and I actually just recently was talking about this on LinkedIn, and I got some \u2026 Obviously, there are some people who feel differently about that than you and I feel, and they\u2019re proponents of, \u201cWell, it still needs to make money. You still need to operate as a business, and you\u2019re buying the business.\u201d I completely agree with all of that. What I\u2019m saying and I think you\u2019re probably saying as well is you can\u2019t just look at it solely off of the business. It is a very important factor, but you can\u2019t discount replacement value. You can\u2019t discount replacement value, just like you can\u2019t discount location. You know? You can\u2019t discount path of progress. All of those variables come into play on evaluation. And you and I might have a different opinion of how much we push or pull back, but my whole point is gone are the days that you just look at a trailing 12 and say, \u201cOkay. That\u2019s what I\u2019m going to offer,\u201d and be done with it.<\/p>\n
James:
Yeah. And that\u2019s a big mistake people make is they want to stick to one straight way of underwriting things, and that\u2019s not the truth for anything. You have to look at all those little \u2026 There\u2019s little data points everywhere, and you got to take them all, put them in a bucket, figure out what makes sense to you and how you want to evaluate it, and then that will help you make a decision, and that\u2019s really important in today\u2019s market, because it\u2019s hard to know whether you\u2019re buying a good deal or not. And so you have to look at all the factors, and then that will help you make that comfortable decision whether to pull the trigger or not.
But yeah. But, I mean, I love buying below replacement. If I can\u2019t build it for \u2026 Because building apartments is expensive. Going back to the supply and demand conversation we were having earlier, the reason the supply is low and it\u2019s going to continue to be low is builders are bailing out of these big complexes. They waited two to three years to get their permits, it took too long, their bill costs are 20 to 30 percent higher than they\u2019re anticipating, maybe even 40 percent, and their cost of money is now up 40 percent, and they\u2019re toast. And now those units are never coming to market, because they\u2019re getting sold and repurposed at that point.<\/p>\n
Ashley:
Yep. I completely agree with you.<\/p>\n
Dave:
James, are you seeing cap rates sticking lower than you would expect in your market as well?<\/p>\n
James:
Well, there\u2019s the sellers asking for it, but they\u2019re not transacting. We\u2019re seeing good buys. In the last four weeks, we \u2026 I mean, we closed on a big deal up in Everett, and our stabilized cap rate\u2019s 6.1. Couldn\u2019t get that. No way we were getting that the last couple years. We have another one that we\u2019re looking at in West Seattle that\u2019s \u2026 I mean, the deals are out there, but it\u2019s a matter of also making sure that it\u2019s the right buy for yourself. We\u2019re seeing people negotiate pretty rapidly up here. There\u2019s definitely a huge demand fall in Seattle, which is great, because that means we\u2019re going to step up into it, but things are definitely transitioning.
It could keep slipping too. So maybe a 6.1 cap today \u2026 Maybe I want a 7.1 cap. I don\u2019t know. That\u2019s what we\u2019re trying to figure out, and that\u2019s why it\u2019s really important to know those extra metrics. The one that we got at 6.1 cap we bought at least 20 percent below replacement cost. No way we\u2019re getting that built for that. We paid under 200 a door. They usually trade at 300 a door up there. So it\u2019s like all these different categories are \u2026 That\u2019s why it\u2019s so important to know these extra little factors in your underwriting.<\/p>\n
Dave:
So, Ashley, given all the market conditions that you\u2019re seeing and, it sounds like you believe, overinflated prices at this point, how are you handling that in your business? Are you sort taking a pause? Or are you still active bidding on deals?<\/p>\n
Ashley:
We\u2019re actively bidding on deals. I don\u2019t think I would ever pause ever. To me, there\u2019s always a good time to buy. It\u2019s always a good time to buy. But the way in which we evaluate deals hasn\u2019t changed, in terms of we\u2019re sticking to our guns on how we evaluate deals. We\u2019re conservative. In terms of the actual numbers, they\u2019ve changed in forecasting interest rates and cap rates on sale. But with respect to general underwriting practices, we have not changed. We have stayed very consistent on being conservative in our approach, forecasting out what we think the interest rates will be upon exit.
A lot of the interest rate issues right now in today\u2019s market, especially on the commercial side, has to do with volatility and uncertainty. So lenders with respect to how they\u2019re pricing interest rates \u2026 They\u2019re pricing them base off of a lot of uncertainty. So once the fed hikes kind of stabilize, and it\u2019s not directly correlated, but it does impact the commercial rates, we\u2019re going to see lenders feel more comfortable adjusting the spread over [inaudible 00:35:46] and being more favorable on the terms. For example, LTV. They\u2019re little gun shy on LTV. They want owners to have more equity in the deal, and they don\u2019t want to carry so much of that risk on the deal. But, I think, once that stabilizes, which I hope we see in Q1 or Q2 of next year at the latest, I think lenders will feel more confident coming down off their rates a bit.<\/p>\n
Dave:
Yeah. And just to further that, I don\u2019t know personally as much about commercial loans, but I was reading something earlier that said that the spread right now between the 10 Year Treasury and a residential rate is almost 300 basis points right now, so basically three percent. Bond yields. 10 Year Treasury is about four percent right now. Residential rates. Owner occupied about seven percent. Normally, it\u2019s 1.8 percent. So this is exactly what you\u2019re talking about.
Banks \u2026 They don\u2019t know what to think. Right? There\u2019s so much volatility. They\u2019re nervous, so they\u2019re \u2026 Just like we talk about, they\u2019re padding their margins. Right? They want to make sure that they are going to earn a good interest rate regardless of what the fed decides to do. And to your point, I think there\u2019s a lot of people who are expecting mortgage rates, even if the fed keeps raising rates, might at least moderate or actually come down in 2023, because that spread might actually decrease back to the historical levels that they\u2019re normally at.<\/p>\n
Ashley:
Yeah. I think the spread has widened just because of the uncertainty, but that\u2019s something they can control. So to your point, in commercial, it\u2019s about 200 basis points, 200 bps. So in terms of that spread, we could see that spread come down once there\u2019s more certainty and comfort in the risk profile of where the 10 Year Treasury is paced.<\/p>\n
Dave:
Yeah. I asked you that question, because I ask everyone that question, how they\u2019re adjusting to it. And the thing I love about talking to everyone, and James gets to do this too, is just every single experienced investor is like, \u201cYeah. Of course, I\u2019m still bidding. Of course, I\u2019m still doing stuff right now,\u201d and I just hope people listening to this who are worried about this market, which is understandable \u2026 There is more market risk right now than there has been in a long time. But just listen to Ashley and James advice here is like if you just keep underwriting the same way, you behave conservatively, there\u2019s no reason why you can\u2019t participate in this market.<\/p>\n
James:
Yeah. Go back to your underwriting you were doing two to three years ago. I was talking to my sales guys about this the other day. I\u2019m like, \u201cNo. You guys, we\u2019re writing offers.\u201d They\u2019re like, \u201cWell, the deals are too good.\u201d It\u2019s like, \u201cNo, no. These were the deals we were doing three years ago.\u201d They just got brainwashed by this last market and what the yield and the profit expectations would be. And so now it\u2019s like everyone\u2019s just resetting. The banks are resetting. The banks are just getting their spread. We\u2019re trying to get our margins in there. And it is balancing out though. I\u2019m noticing it\u2019s balancing a lot quicker than I would think.<\/p>\n
Dave:
Ashley, I want to switch gears and ask you one question. Obviously, as an operator, as an investor who\u2019s active in these deals, you\u2019ve shared some really helpful insights for us. What about for people like me who invest passively into syndications? What advice do you have for people who are interested in being an LP for investing in these type of market conditions?<\/p>\n
Ashley:
So one of the things that I actually spoke about at BiggerPockets Conference \u2026 I had a talk on the speculation and manipulation of cap rates. It was called The Cap Rate Con. And one of the things-<\/p>\n
Dave:
I like that name. Very catchy.<\/p>\n
Ashley:
Thank you. One of the things I did during that speech is I polled the audience. So there are about three or four hundred people in the audience, and I said, \u201cHow many of you passively have invested in the past two to three years in a multifamily syndication?\u201d and I would say about 75 percent of the audience raised their hands. And then I said, \u201cHow many of you did well over those years if it sold?\u201d and it first had to sell, so we had a drop off about 50 percent, so about 150 people still had their hands up. And then I said, \u201cHow many people did well?\u201d and everyone had their hands up. And then I said, \u201cOkay. Out of all of the people who have their hands up still, how many of you asked for a detailed breakdown on the original projected exit cap rate, the original projected NOI performance, and the actual?\u201d and only two people had their hands raised.
So the takeaway is that when things are doing well, you don\u2019t bother the operators. You don\u2019t ask for the financials. You don\u2019t actually prove up their operations. You never verify that they were able to exit successfully based off of what they did, not what the market did.
And one of the metrics that I had up on this speech as well was a sensitivity analysis table. So ever since we got in multifamily, we have presented the sensitivity analysis table on every single offering we\u2019ve ever done to all of our investors, and what it is is on the Y axis it is the cap rates by 25 bps, and then on the X axis it is the percentage of hitting NOI. So dead center, it\u2019s 0 percent, meaning you hit your projected NOI. And then it goes off in either direction at two percent intervals. So you over perform your NOI by two percent, or you underperform your NOI by two percent. And then on the Y axis, you have that 0.25 basis points.
And what we show to our investors is the risk associated \u2026 That\u2019s the intention of the sensitivity analysis table is the risk associated with investing in general. So if we hit our NOI dead on, let\u2019s say, and we have a four and a half exit cap, let\u2019s say, for example, we\u2019re projecting a 14 IRR. Right? But if we underperform our NOI but we still hit a four and a half cap rate, it might go down to a 12 and a half IRR, let\u2019s say. Right?
So what I showed on this table was that when the cap rate compressed to three and a half, so we had a hundred basis points difference on the cap rate, and people underperformed their projected NOI by eight percent, they still achieved over a 20 IRR.<\/p>\n
Dave:
That\u2019s crazy.<\/p>\n
Ashley:
But that being said, today, if you look at the cap rate expansion, so if you take a four and a half and you go to five and a half, so a hundred basis points expansion, you have to overperform your NOI by eight percent to just get a 12 and a half IRR. So the expansion of cap rate actually translates into you having to better perform on your NOI than initially projected.
So the takeaway message there is twofold. One is, first of all, when you\u2019re vetting people as a passive investor and they\u2019re spouting off all these wonderful performance metrics that they\u2019ve been able to achieve over the last three to five years, dive into it a little bit further. Ask for original projections versus actual both on the NOI and the cap rate, because then you can do the calculation very simplistically to figure out if the operations were the reason that there was success. And then also ask for a sensitivity analysis table on the current investment that you\u2019re considering and how the impact of cap rate expansion will have on your actual returns.
I think we\u2019re in a situation right now \u2026 Maybe the cap rate expansion three to five years won\u2019t be \u2026 hopefully won\u2019t be a hundred basis points from where it is today. But you never know, so just educate yourself and be prepared for what those returns would look like, and make sure that you\u2019re comfortable with those returns.<\/p>\n
James:
What\u2019s that old saying? You never go skinny dipping when the tide\u2019s going out-<\/p>\n
Ashley:
Going out.<\/p>\n
James:
\u2026 or whatever that \u2026 I feel this is where we\u2019re going to see whether operators were good operators or not. It was all asset classes. It got so juiced up that everyone was hitting their metrics, hitting their profits. And now as things compress down, you have to operate this as a business and operate it well, or you will not make money doing this. And I think it\u2019s going to be a little scary, because we\u2019re going to see a lot of these \u2026 Yeah. They have false success, and then they reload into something else, and because they had that success, they went a little bit more aggressive on the next one. And we\u2019re going to see a little bit of issues coming out of this. I think the IRRs are going to fall quite a bit on people that did not perfect their business. It was just kind of like they bought this thing, they got it somewhat stabilized in an inefficient manner, but they still hit it, and they\u2019re not going to be able to \u2026 You have to implement the right plan and really dig down on your core metrics now to make these profitable.<\/p>\n
Ashley:
In 2019, I was on a panel at Dave Van Horn\u2019s MidAtlantic Summit, and I was on the panel with Brian Burke, Paul Moore, Matt Faircloth \u2026 The fourth person\u2019s escaping me right now, but I will remember in a second. Anyway, long story short, as I said that, in this business, operations are very important, but in a downturn, operations are the most important, and I have stood by that quote forever. That is my personal belief, and I think we\u2019re seeing it right now.
I also think that a lot of people\u2019s business models over the 10-year track and multifamily, this run up that we\u2019ve seen, has been solely based off of \u2026 Even though they don\u2019t say it, they\u2019re buying for appreciation, A, and, B, buying for fees. So in terms of when they\u2019re syndicating, they\u2019re so focused on acquisitions. And case in point, to be honest with you, and I\u2019m not trying to pitch this at all, but when I first got started in multifamily, I really struggled to find resources where I could find education, so I contemplated going to these different coaching programs. So I vetted all the coaching programs available at the time, and what dawned on me was the fact that everyone taught you how to find and fund the deals, but no one actually taught you how to operate them. No one. Not a single coaching program.
So we have a coaching program today that literally \u2026 That was a deal breaker for me if we didn\u2019t spend the majority of the time of the coaching program focused on operations, because it\u2019s like it\u2019s kind of reminds me \u2026 And I know this is probably dark to say, but it kind of reminds me of September 11th when the terrorists learned how to take off the plane and fly it, but they didn\u2019t focus on landing it. You have to focus on the entire process, and when someone\u2019s not focused on the entire process, that should shoot up a red flag.<\/p>\n
Dave:
That\u2019s phenomenal advice.<\/p>\n
James:
A hundred percent agree with that.<\/p>\n
Dave:
That\u2019s a really good point. Yeah. James said on a show recently that he thinks we\u2019re going to see a lot of defaults in the multifamily space over the next couple of years, because people maybe were too greedy, bought too high, and we\u2019re going to start to see \u2026 Like you said, the tide\u2019s going to start coming out. We\u2019re going to see who\u2019s swimming naked. Do you agree with James\u2019 assessment?<\/p>\n
Ashley:
I am foaming at the mouth to answer this, because the answer is simply yes. And it\u2019s not only for the reasons that you just mentioned, but it\u2019s also because of how people bought. So it\u2019s not about overpaying. It\u2019s about what they did with debt. So what they did with debt is they got variable rates without securing rate caps, and a lot of people are in positions right now where, A, they can\u2019t afford the rate caps.
So rate cap rates \u2026 And truth be told, we\u2019re in a situation with our rate cap being astronomical, and I\u2019m happy to share the information just for people to learn, because it\u2019s definitely a mistake we made. Now, fortunately, we also have a lot of reserves, and we counted on some of it, but we didn\u2019t \u2026 Honestly, we didn\u2019t count to the extreme that it\u2019s at. But let me just kind of give perspective here on why I think this is going to be an issue.
We purchased a property in September of 2020, and we did a variable interest rate with a one strike for a three-year term. We paid 30,000 for that rate cap. In October of 2021, our lender told us they were going to change the accrual rate. So it was a three-year rate cap, and similar to insurance and taxes, lenders accrue for the next rate cap that you\u2019re going to purchase with your mortgage. So they were accruing at a rate of 1100 a month up until October of 2021. In October of 2021, I received an email saying that they were going to adjust our rate cap accrual to $303, and I said to our accountant, \u201cThat concerns me, because the rates are not going to be this low come the time we need to buy the rate cap. So we can pay the 303 to the lender, but I want to accrue on a separate line item for the balance, because this is very concerning.\u201d
In March of 2022, we got a letter from the lender saying that they had just done another audit and that they were going to change our rate cap accrual. So this isn\u2019t our mortgage. This is just for the rate cap accrual, for 9,200 a month. And I was like, \u201cHoly crap. That\u2019s crazy.\u201d Okay. Well, that, I thought was crazy, but like life, it\u2019s all about perspective. So three weeks ago I got another letter from the lender that said, \u201cWe just did another audit, and we are going to adjust your rate cap accrual to $54,000 a month for the rate cap.\u201d
And the reason why they\u2019re adjusting it \u2026 So let me just talk about how rate caps are set. So we purchased the rate cap for $30,000. It\u2019s a three-year rate cap at a one strike. I get an email every single morning or between 4:00 and 5:00 AM, and it lists out what it would cost if we repurchased that rate cap today. It is now around 515 to 520 thousand dollars to buy that same rate cap.
So a couple things. One is that now I have to accrue based off of the remaining term that I have left, but it\u2019s compressed to account for the deficit that we were accruing at. So that\u2019s the one issue. The second issue is that we\u2019re in a situation where we have reserves. We had factored in a larger purchase on the rate cap when we went to buy it, but we didn\u2019t factor into 530,000. Fortunately, we have reserves and we\u2019re under budget on other items that we can pool from different money, but now this is cash we don\u2019t have access to.
So we\u2019re in negotiations with the lender, and the lender has communicated to us that we\u2019re by far the highest change in rate cap accrual, probably because we went with the one percent strike. And you have to go back to your loan terms to see if there\u2019s ways that you can renegotiate what they\u2019re accruing for, whether it be the term or the rate, the one percent strike. So there\u2019s room for us to have a discussion, which we\u2019re in the process of now, and hopefully we can come to some sort of agreement. But what in turn that has done is that has put us in a situation where we\u2019re telling our investors, \u201cUntil we have this figured out, we want to put distributions on hold just till we have this figured out, because it\u2019s the responsible thing to do.\u201d Now, do I ever want to do that? No. But I would rather do that than later say, \u201cOh, yeah. Well, I didn\u2019t tell you about this thing,\u201d or \u201cI did tell you about this thing, but I didn\u2019t tell you how it impacted you, and now we have to do a capital call.\u201d
So sometimes having difficult conversations is not what operators even want to do, so what ends up happening is it gets too late in the process and then all of a sudden the property\u2019s in a situation where they\u2019re either on lockbox, they\u2019re on the watch list, or they\u2019re foreclosed on, and the passive investors have no idea that this even occurred. And I\u2019m pretty sure if they were informed of the situation when it occurred and you communicated to them what outlook you had and what steps you were going to take, they would all be in agreement for conservative measures to be taken, especially if you attract the right investors.
So we\u2019re in a situation where it\u2019s tough for us, but we\u2019re heavy focused on operations, and we\u2019re going to come out on the other side favorably. But how many other people are not in that situation? Right? How many other people didn\u2019t even factor reserves into when they purchased the property, or aren\u2019t under budget on other projects, or bought a rate cap without even thinking, \u201cOkay. The lenders can audit it every six months and change the rate cap accrual rate\u201d? So I think, to James\u2019 point, I think there\u2019s going to be a lot of people that we see when the tide goes out who were swimming naked because they didn\u2019t factor these variables in.<\/p>\n
James:
Yeah. We might see some saggy stuff out there. It could get [inaudible 00:54:18].<\/p>\n
Ashley:
It could get ugly.<\/p>\n
Dave:
You should see what the beaches are like here in the Netherlands.<\/p>\n
James:
But what-<\/p>\n
Dave:
Good description of what\u2019s going on here.<\/p>\n
James:
Yeah. I mean, what she just talked about is huge. Right? I mean, that\u2019s a big deal, and that\u2019s where things \u2026 And operators like Ashley \u2026 Like she said, having that tough conversation is important. No one wants to do the responsible thing ever. Right? I\u2019d rather to be irresponsible for the rest of my life. It\u2019s a much easier, fun way to live. But it\u2019s like you\u2019re going to have to have those conversations, and you got to address those and make it up in, to Ashley\u2019s point, the operations. You have to figure how to turn your units for less. You got to keep your units more full. Operators are really going to have to excel to push through this little hump. You can push through that hump, but you\u2019re going to have to perform well.<\/p>\n
Ashley:
Well, and to your point, James, if something like this pushes someone to say, \u201cOh. I got to figure out a way where I can skim on operations,\u201d well, if you never learned operations in the first place, now you have a learning curve to contend with, plus then you have to figure out what you\u2019re going to change, and there\u2019s too much time that goes by. Right? So between learning what\u2019s actually going on at the property.
I talk to so many people that \u2026 The thing that was so surprising to me when I first started a multifamily is I would talk to these people who would own properties for 10-plus years, and I would try to have a conversation with them about operations, and they had no idea what was going on with the property. They\u2019re like, \u201cOh. The property management company handles this.\u201d I\u2019m like, \u201cBut you\u2019re responsible for the financials of that property and the performance and the business plan. How do they know how to pivot strategies? How do they know what your overall business plan is?\u201d
I mean, that\u2019s a whole separate conversation, but that\u2019s why I think most people turn to vertical integration. It\u2019s because it\u2019s actually a deficit of themselves, because they lack communication with their property management company. But case in point is they lack communication because they actually don\u2019t know what\u2019s going on. They never spent the time to realize what the property management company is dealing with day to day, coupled with how you then match your overall operations and your business plan together. So I think that situation is going to be exacerbated in this environment.<\/p>\n
James:
A hundred percent agree.<\/p>\n
Dave:
Yeah. That\u2019s great, great insight. I would love to keep talking about this, but unfortunately we\u2019re almost at the end here. But, Ashley, this has been so helpful. Thank you. If people want to learn more from you, where should they do that?<\/p>\n
Ashley:
If you\u2019re interested in becoming a passive investor, Jay Scott and I have bardowninvestments.com. That\u2019s our company. And then if you would like to be an active investor, you could also learn from us through apartmentaddicts.com, which is our coaching program. You can also follow me on Instagram, @badashinvestor, which is B-A-D-A-S-H investor.<\/p>\n
Dave:
Awesome. Well, Ashley, thank you so much for joining us. We really appreciate your time.<\/p>\n
James:
Good to see you, Ashley.<\/p>\n
Ashley:
Great seeing you guys. Thanks again.<\/p>\n
Dave:
All right, James. That was incredible. I just learned so much. I do listen to all the episodes, but I\u2019m going to listen to this one like three or four times. I feel like she just dropped so much information I want to use in my personal investing.<\/p>\n
James:
I\u2019m going to need to listen to it three or four times, because that was packed full of information where I\u2019m like \u2026 At one point, I was like, \u201cDo I need to Google something real quick?\u201d I should have had my search bar open.<\/p>\n
Dave:
Oh, man. She\u2019s just so sharp and knows everything, and I just thought her understanding of cap rates and cap rate expansion and what she was talking about validating something you\u2019ve been talking about where you think that there\u2019s going to be a lot of default in the multifamily space. Really interesting dynamics that are probably going to start playing out here in the next three to six months.<\/p>\n
James:
Yeah. I mean, how she broke down the baking, the different ways to perform of the deal, the operation side \u2026 I mean, she is just \u2026 I mean, Ashley \u2026 I mean, I remember the first time I met her, we just kind of connected right away on work ethic, because we could really see how much they care and passionate about her business. But she went over that in all of this today, and she broke it down to a next level to where, yes, I\u2019m going to have to listen to this at least two or three times.<\/p>\n
Dave:
Yeah. It was great. Well, we\u2019re going to get out of here, because this was a long interview and don\u2019t want to keep anyone too long. But thank you, James, for joining us, and thank you all for listening. We really appreciate you, and we\u2019ll see you next time for On The Market.
On The Market is created by me, Dave Meyer, and Kailyn Bennett, produced by Kailyn Bennett, editing by Joel Esparza and Onyx Media, research by Pooja Jindal, and a big thanks to the entire BiggerPockets team.
The content on the show On The Market are opinions only. All listeners should independently verify data points, opinions, and investment strategies.<\/p>\n
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Note By BiggerPockets:<\/b> These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.<\/p>\n
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Source link <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"Cap rates affect multifamily investing more than most investors come to realize. If you\u2019re in the commercial real estate space, you know that as cap rates decrease, price points for apartment complexes increase. And, as cap rates start to expand, multifamily prices begin to dwindle. With rising interest rates and high labor\/material costs, the multifamily […]<\/p>\n","protected":false},"author":5,"featured_media":4286,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"fifu_image_url":"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/11\/OTM_52_YT_.jpg","fifu_image_alt":"","footnotes":""},"categories":[9],"tags":[],"class_list":["post-4285","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blog"],"_links":{"self":[{"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/posts\/4285","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/comments?post=4285"}],"version-history":[{"count":1,"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/posts\/4285\/revisions"}],"predecessor-version":[{"id":4287,"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/posts\/4285\/revisions\/4287"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/media\/4286"}],"wp:attachment":[{"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/media?parent=4285"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/categories?post=4285"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/tags?post=4285"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}