The State of OUR Economy - 2023

Wes Reinhardt [0:00] Yeah, I would say, um, on a micro level, um, I'm very bullish on, on Asheville still. Okay? I'm bullish on North Carolina as a state. I think it's driven by inmigration of people leaving New York, in California, and halfbacks coming from Florida, and I think that that is a tremendously strong demographic that's gonna continue to drive the economy here.

Zac Ruiz [0:23] We'd like to take a moment to thank one of this month's sponsors, Sabrina West. Sabrina West, a local mortgage expert with guaranteed rate, will provide you and your clients with real talk in real time. Sabrina is a mentor, investor, and money mortgage expert who provides customized individual consultations with a behavior finance approach and education to help build wealth through real estate. She believes in clients for life, so reach out today, sabrina.west at rate.com, or give a follow on Instagram at sabrinag rate.

Rodrigo Afanador [0:55] All right, guys, so we're going to go ahead and get started. Thank you all so much for being here. Couple of quick things right off the top. If you look up here, you'll see that there are 3 things that we're going to talk about a little bit tonight, but to make it easy for a little bit of a participation section. We got a little bit later. You'll see. Got 3 places to go. If you check in. everybody filled out a poll if you want to kind of get a pulse of everybody else in the room. You can go in, see what the poll results are, and that'll kind of give you an idea of what people think to the same questions you answered.

If you've signed in, you'll also be able to be part of the matchmaking services that we were trying to encourage people to check in, and you can just click there. It says, AVLmeetup matchmaker, and then last and last, last but not least, we've got the have once and needs board that we'll continue to talk about. It'll be a good place to keep networking and getting some transactions going. So, tonight, right off the top, I just want to say thank you to our sponsors for tonight, which is Zen contracting, CFO consultants and Sabrina West mortgage lending. Thank you guys so much for your support. So after that, we're going to talk about Let's Make a Deal.

It's just gonna be a quick overview of the net profits philosophy, and how we're trying to embody that. Then quick Ruiz Report market update, followed by some table discussions, and then what everybody's here to listen to, which is our panel on what's going on in our economy and what's coming next. All right, so our goal for AVLmeetup is to bring together the movers and shakers in the actual real estate world. So that's all of you all. Thank you so much for coming out. Thank you for being movers and Shakers. As you'll see, one of the best parts of the community is everybody else in the room.

So, bring a friend, make sure they're a mover and shaker, and if everybody brings a mover and shaker with them, then there's more opportunities for good conversations, more opportunities to put some deals together, and more opportunities to connect with other people. My name's Rodrigo. Coast, this is with Zach, but I run a company called Vesta Property Management. So if you need any property management for any long term rentals, would love to connect with you.

Zac Ruiz [3:08] My name's Zachary Rees. I run the Ruiz Report, which we're gonna go over here a little bit later, and I do a lot of real estate data and analytics. I'm also the developer of the website. So as we're doing all these little features, would love any feedback. If it works, if it doesn't work, let me know, and we'll see what we can do about that.

Rodrigo Afanador [3:24] Zach loves the extra work. So, we're about the net profit philosophy. If you've been here before, you've heard this, but it's very important, so we're always gonna touch on it. Net profit philosophy stands for networking, education, and transactions. We believe that all of that put together. is very important because net profits is what matters. It's not the gross transactions, as you can see. Nobody cares about the gross, right? So, networking. A couple questions, how many realtors in the room? Just raise your hand. Wow, that might be the smallest number ever. Investors, primary focus is investing. Nice, nice. And lenders? All right? Is there anybody who's all three? Couple of all three?

All right. And then, uh, service provider. So maybe you're not an investor or a lender, but you're, you know, supporting some... Anything, yeah. Yeah, why not? Yeah. So a couple people. And Zen, of course, in the back, thank you. And Ben, as well. Oh, are there two of these?

Zac Ruiz [4:24] Well, then we have N reps, right? Non real estate professionals. Are there any normies in the room? Does anyone just come to learn about the economy, by any chance? Oh, we got one. There you go. A couple people. Thank you for being here. Welcome. Bring your friends.

Rodrigo Afanador [4:36] Bring your friend. So, feel free to connect with us online at AVLmeetup. We're really trying to focus on YouTube over the next year. So help us reach our goal of a 1000 subscribers. And that way, we'll keep doing the videos, and you can always watch these and not just listen to these as well. So help us get to a thousand. Oh, if you want to help us volunteer. Please see Ray Ray in the back, Ray, Ray, say hi.

Zac Ruiz [5:02] Looking very festive for the holiday season.

Rodrigo Afanador [5:04] And then also, if you have any feedback, please connect with Scott or email Scott. Scott McGee is trying to help us. Make the back end a little bit smoother. So any feedback is always appreciated. Uh, so... education.

Zac Ruiz [5:20] All right, so the second part of the NetProv philosophy is education, and that's what we're doing right now. Right? So it turns out this is the 23rd AVLmeetup. We have covered a lot of topics. So if it has anything to do with real estate in any way, shape, or form, we've probably talked about it, and we hope to continue talking about it in the future. As you can see, the bottom right there, we're at the state of our economy, and, kind of, a precursor of what's happening, the same meeting last year had around 100 to 110 people crammed into a room, 'cause things were hot. And they're a little less, they're a little fewer. people here, right? So, moving on, as you can see, we've done.

Of the people who checked in, and if you look around you, right now, we have about 37 people who've checked in, you'll notice there are more than 37 people in the room. But based on the people who've checked in, we've at least done 2,950 networking education hours, we've had at least 1,044 people check in, and we've had 62 speakers, that one's for sure. So here's our Hall of Fame. Everybody on this wall is at the top of their game, in some way, shape, or form, is some of them are in the house again tonight. So pay attention to who you're talking to. You can see them in their member profiles. And finally, in their transaction.

Rodrigo Afanador [6:27] So, transactions, personally my favorite part. I always say, is, we talked about, is, like, networking, education. If you do those two thing wealth, transactions are just the natural result of those two activities done well. So, we've spent two years trying to figure out how at AVLmeetup, we can do something to encourage transactions other than just say, Hey, we believe in transactions, you know, talk to people, do deals. So, what's the hardest part of doing deals in a room of people that you might not know everybody is? Like, who do you talk to? Why would you talk to that person? So, we're introducing the matchmaking service.

If you checked in and you click on your bubblehead at the top right, you'll have the opportunity to look at this menu. So if you're looking to buy something, You are going to be connected with people who have said that they're looking to sell something. If you're looking to lend money, you're going to see who are the people who are looking to borrow money, vice versa. If you're looking to raise money, then you're going to be able to connect with people who are raising their hand and says, I'm actively trying to lend money.

And so the goal of this, right, is that you can walk away with some networking and education that leads to some really good transactions, some, like, very good structured, uh, a little bit sniper focused action. There is one catch, though. It's only going to be available during the meetups. So the matchmaking service ends tonight. And then I'll come back again, next month, during the meetup hours. And we talked a lot about, like, what are we gonna do in between? And so then that's what we got, the, have wants, and needs board. So, there's a quick, is, like, 10 seconds video, right? So this is how you post something on the have needs and or have wants needs board.

Zac Ruiz [8:02] Very simple. Hit the plus, type what you need at lightning speed. Say if it's a have, a want, or a need, and you're done. That's simple. Right? And you can comment on it, you reply to other people and all that great stuff. And that's what it ends up looking like, right? So this is essentially an ad for you. So format it. Put in links, put in a list, like make it bold and metallic, all the usual stuff, right? Attract people to what you have, want, or need. And then all you have to do is log on, and you can scroll through and see everyone's have wants or needs and comment right then and there.

Rodrigo Afanador [8:33] And you can also sort it by have wants or needs. So the one tweak on this is the needs disappear in seven days, right? Seven days? Eventually. Yeah, so, if it is a need, you know, we're gonna treat it as such. If it's a want, I'll stay around a little bit longer. All right, so, please fill out your profiles, because if you post something on the messaging board, people might want to get ahold of you, and the best way to do that is if your profile's filled out, so I have a little bit of context on who you are. And as we always say, you're just one conversation away from the next deal, your next partnership, the next Monday that you're gonna be able to raise. So have the conversations.

And on that note, we're gonna do eight minutes to do structured networking around the matchmaking service. So if you signed in, go ahead and take this time. and talk to somebody who's got something that you're looking for, and vice versa.

Zac Ruiz [9:19] See you in eight minutes. meet the people at your table. All right, so really quick, any chance anyone in the room put something together? Anyone meet anyone useful? Can anyone hear me yet? Are you still meeting this person?

Unknown [9:43] All right.

Zac Ruiz [9:47] All right, so we're gonna kick into the the report segment of the meetup so we can get to the panel. It's gonna be a little bit different than we usually do. We're gonna quickly cover the report. Kind of change it once we get to supply and demand, and that's where the rest of the night's gonna head. So, my name is Zachary. I run the Ruiz Report, and we are on the 45th edition. So it started the month of the pandemic, and we've seen some fun changes. It has been a time. Right? So, the reason report our mission is twofold.

One who want to equip realtors, and basically, you know, investors, anyone in the market, with data driven market insights, with a 10 slide presentation, and we're gonna go over three of them tonight. And second is to empower them with industry leading training to become that local economist of choice, and tonight is part of that. We're gonna train you a little bit about the data, right? We're going to start with the graphs, because why else do you show up to a brewery at 7, right? So pretty shapes and colors is how I like to call them. Don't worry about it, all right? If you don't like math, you're good. We're gonna tell you how to read the graph, and this is how it goes.

On the far right, you're going to see the report month, and you're going to know it has a little green box at the bottom for our purposes tonight. We're going to be going over November. On the left with a red box, you'll see the year over year. So that's 12 months, and then you'll notice that there's two months leading into it, so that's a little seasonality, all right? That's three months of the year, it's last quarter, essentially. What did that look like? So we can kind of get some trends. And every graph follows this pattern. So congratulations. You know how to read a graph. So, first, we're gonna go over volume and activity in Buncombe County.

And the point, what we're looking for here is the height of the bar. The red bar is the total act of listings, and that's how many homes were for sale, residential homes, at any given point during the month. That is all of the available inventory. And then the green is those homes that sold, which, remember, were probably under contract from a previous month, and then the homes that went under contract in that month. So basically, the green bar is the inventory coming off the market, whether forever or temporarily, while it's under contract. And you can see that, compared to last year, where there was a dip coming into November, well, we were experiencing some version of that dip again.

So seasonally adjusted, it makes sense that less is happening. Listings and pendings. This is my favorite slide, and we're going to talk about this a bit tonight. And you'll see here there's a pro tip. So keeping an eye on the difference between homes added to the market. That's the red bar. Those are new listings in the month, and the green line, so home's taken off by going under contract, that's the green line, is the best way to gauge supply and demand. Right? This slide tells the story of supply and demand. And this is how you interpret the graph. When the red bar is above the green line, as you see here, highlighted in yellow, then that means we added more inventory to the market.

We put more new listings than we took off. And analogously, when it is below that gap that's highlighted in yellow, the gap is how many homes were removed. That's supply being reduced overall. So as you notice here, since about March, we have been adding more inventory to the market than we've been taking off. This is somewhat new. This has not been happening since about 2020 or so, right? So we've been consistently adding supply lately, but it's not enough. And that's what we're going to talk about. How do I know it's not enough? Well, supply and demand directly affects pricing. Just think of any other area in your life. Same thing happens in real estate, right? So let's look at prices.

The average price of a home in Buncombe County for November, based on all sales, was $701,000. Right? So, you'll notice at the bottom there, there's a little explanation of why the red line is above the green line. The red line is the average, so that's if I took everything that closed in November, and then divided up by how many there were, that's my average. But the median is if I took them all and went from the least expensive home to the most expensive home, and I picked the middle. And what this tells us is that in November, the median, 50% of homes in Buncombe County, were at least $485,000. This is an expensive count. All right? This is a thing, right?

So the pro tip here is one of the things people talk about all the time is that prices are coming down. Prices are coming down. Well, you're noticing that people are having to reduce their list price. But the list price is just an advertisement. No one agreed to that price. The price that matters is the clothes price, and you can see the trend line of the clothes price in Buncomb County is still up into the right. Now, it may not be as hockey stick shaped or as aggressive as previous months in periods, but it is still up until the right. Prices are still, for some reason, increasing. And that has to be because supply and demand, because interest rates are significantly higher.

So the home is more expensive, and that you would think that that would make them less expensive. Which brings us to Zack Secondomics 101, part two. All right? We gave this class last year, and we're gonna go over it a little bit with some clarifications and some updates. So basically, all we're gonna talk about tonight is how our interest rates calculated, and you might think it's like this, right? I mean, like, ah, you know, we're gonna raise it today. Like, why not? Right? Turns out, there's a little bit more to it. There's a little bit more to it. And so, an interest rate is essentially comprised of more or less four parts, right? The first part is the federal funds rate.

When they say that the Fed is gonna increase or decrease, That's what they're talking about. And here's the gap. So if you look on the right, that little red block. Well, it went from nothing, zero, right? To something, about 5% and change right now. We're gonna talk about that, right? The next thing is the prime rate. The prime rate is basically, if I was the most credit worthy person that's not the U.S. government, what would you charge me? And that's about 3%, right? But you can see that it's going up, and we'll explain that shortly. The next thing is risk in general, right?

And all you gotta do is, like, turn on your favorite social media platform or news, and you will know that the world's a little risky right now, whether it's geopolitical interest rate. Pick your risk, we got it, in droves. And then the last part is you. Right? When they're analyzing your profile, how risky is this person, right? So, let's take a look at these individually. So, like I said, the federal funds rate from the last meeting says about 5.25, 5 1/4 to 5.5%. That's where they're looking to keep it. The prime rate is basically fix at three, and that's not it, but this is it. And so what does that mean, right? The prime rate is said to be pegged to the federal funds rate.

So if you look at the shape of these graphs, they look the same with one difference. When the bottom one is at zero, the top one, which is the prime rate, it's not, right? So it's adding that, it's pegging it to it, and that difference is the federal funds rate, essentially. Right? So risk in general, well, that's increasing. We know, whether it's wars or everything that's going on, there's a lot of risk. And then there's you. Hold my beer, all right? So we're going to go over the same slides, but year over year change. So, you, credit card debt.

You'll notice the red line is the same slide from the same source, this is Federal Reserve, funny enough, from lending tree, but the red line was last year, and then the yellow line is where we're intersecting this year. So on the left, we have outstanding credit card balances. And there's about a 22% increase year over year. On the right, we have percentage of total outstanding credit card balances that are at least 30 days overdue. So delinquent credit, right? About a 72% increase. Right? You're a little riskier. We're gonna talk about this. Chris is going to talk about this. Well, basically, banks are preparing to have to write off loans.

To some extent, they're preparing that, maybe they won't be getting paid back. It's timely. Student loan and auto debt, like the big chunk of people is dead. Well, kind of the highest that's ever been, right? Even though it's tapering off in the last little period there we have until January of 2023, it looks like. It is a lot, right? Mortgage debt. This is from the Federal Reserve, again, mortgage debt, and you'll notice it doesn't go to 2023. This is a little bit lagging metric. We're still up until the right. Right? And now for the real kick in the... A, we've got median income. Let's look at real median household income in the United States from about before the pandemic to now.

It's not looking good, guys. So we need to spend more money on debt, excuse me, and we're making less of it. Hey, hey. By the way, there are nothing Bunt cakes in the back, where the noise just came from. If you haven't grabbed one, go for it. Right, so combining these factors together causes mortgage rates to kind of look like this at the bottom right, right? So mortgage rates have been going up. They have to, right? Your riskier risk profiles are going up, the Fed is raising its rates, all the combinations of what an interest rate are, are increasing. And if you just draw, like, a line, right? The last time we hit that same amount was about February of 2000.

So these are the highest rates we've seen in about 23 years. Right? So let's do some quick math. I wanted to use this meme. I didn't know where to put it, but here's where we are, right? So, we're gonna do some quick Mac. All right? So this is all of the outstanding mortgage. And you'll see, at the top, I've got a green box, it's between 3 to 4%. The biggest chunk of outstanding mortgage right now. is between 3 to 4%. Right? So let's call it 3.5. Then we've got the average outstanding. I remember just doing average nationally here. And that's 241, 815, of mortgage debt.

We're gonna call it 240, and even though that's the weirdest rounding you've ever seen, it's 'cause I made a typo, and I didn't want to go back and do this. So if you go to the mortgage calculator for North Carolina, at our 3.5%, which is what we said most of the outstanding debt is, for $240,000, which is what we said most of the outstanding debt is, your monthly payment is $14.92.

Unknown [19:13] Right?

Zac Ruiz [19:14] Problem is, today, at the average of 7.5, that would be the equivalent of $174,000 home to get that same monthly payment. Right? So seller's next home needs to be 28% cheaper to have the same payment. Or sellers need to apply a 28% net profit, a fun term we like, towards their new home to get the same payment, right? Well, let's look at some other areas needing cash. So the average student loan balance in the U.S. right now is around 38,000. Average credit card is about 6,400. Average auto loan is about 23,000. Most of the HELOCs that exist were at about $42,000. There's a lot of money that needs to go out to become whole, right? So, found another fun meme.

You know, you can't really run away from your problems forever, but he's really fast. Right? So it looks like many sellers will be forced to trade horizontally or down? That is not the greatest incentive to sell. Another slide we got from DLP Capital that we'll be speaking to tonight, as well, is that housing affordability is the worst that has been since 1984. Renting is looking like a potential option in some of these cases. Right? So, let's just recap really quickly. House prizes are at historic highs. All right? Interest rates are at their highest years in 20 years, so what does that mean? The house has two prices, one of the things I say, right?

So unless you're buying with cash, it's the sticker price, and then there's your monthly payment, which is based on your debt to income ratio. If real income is going down, and debt is going up, the house is getting twice expensive in two separate ways. Right? You really can't afford a trillion dollar house if it was a .000000% interest rate. The sticker price isn't as important to most people financing. It's about their debt to income ratio. And that's where the interest rate comes in. So all signs points to price reductions. Except, well, prices? Prices have continued to be, you know, sticky, or at least increasing, a little bit.

Right, so we're going to go at our first table, or first table question. We're gonna give you five minutes, flick the lights. You're all gonna come back. It's gonna be very respectful and nice. And here's our first question. Are you or anyone you know in this golden handcuff situation? I am in this situation. I bought a house hack that I was like, this is gonna be a great chess piece, and I'm stuck there, 'cause I have, like, a 3% rate, and it would be very expensive to get out, right? So are you in this situation, and if you are, what's your plan? So we'll give you five minutes on the clock to talk about that. Starting now.

Rodrigo Afanador [21:44] Hey, guys, Rodrigo here. Just wanted to do a quick shout out and introduce you all to one of our sponsors this month, and that's Zen contracting. They were also one of our sponsors at the net profit summit. So just big thank you to them for sponsoring this month and for being one of our sponsors at the Netprofit Summit, they are amazing to work with. I've worked with them for over 4 years now and anything from doing fix and flips to using them to renovate bird projects that we were going to turn into rental. So if you need a contractor, we encourage you to look for them at zencontractor.net.

As we wrap up, is there anybody or is there any table that wants to share some feedback from the table conversation? Is this a normal occurrence, not so normal occurrence? Any volunteers? Give feedback to the group?

Zac Ruiz [22:36] All right. Kenny Rice. Can you hear out? We're gonna get you a mic. It's for the, it's for the people at home. It's for the people at home. Really loud without it.

Wes Reinhardt [22:49] Check, check.

Chris Youngblood [22:52] So what we were talking about was, it's what's happening is, I said, if you've lived long enough, I hate to date myself, but interest rates at 8% really aren't that bad, right?

Rodrigo Afanador [23:06] Anything over anything under 10, I think, is awesome, especially if you've done private money lending and things like that. But we're comparing it to where we're coming from, to your point. So if we're at five, three, four, five, right. And now we're trying to move up into eight, that's the difference. So we have to have this, like, larger picture of, like, 8% isn't that bad. Let's take it into, you know, context. We're not in the 80s. We're not at 15%, 16%, which could happen. Be grateful. But we're still having to deal with the shift and the change, which is how do we sell a place? We're gonna have this 30% difference in what we can expect. Yeah. It's definitely different now. Anybody else?

Feedback? Anybody want to share? Come on, one more person. All right, thank you. The mic doesn't reach that far, so you'll have to yell. All right. Awesome. Uh, the recap. I was not planning to recap.

Zac Ruiz [24:10] Okay, the recap. Zach's gonna deliver. It may be that the math of you moving doesn't make as much sense. So what you do is you rent the home that you're living in now. Use that rental income to offset the income needed for your debt income on the next place. You put down 5% to get in the next place. Your rent pays that mortgage, hopefully a little bit more, and you make moves. You get in the game. Which kind of brings us to another question here.

Rodrigo Afanador [24:32] We had a lot of conversations about what would be a good question. Whether you should sell or not was definitely a question we played around with. But I'm assuming everybody knows Grant Cardone in this room. I don't know if anybody saw, he had a little video that I was very interested in. And he said that we will be seeing 50, 60, or even potential 100 year length mortgages in our lifetime, depending how old we are, I guess. And that's the question. As a lender, do you think that's gonna happen or not?

I've seen some 40 year mortgages that have come out that are have been structured to make things affordable and to make people, as he says, feel like they own something that they don't really own. And the logic made sense, at least from where I was sitting, but again, I don't write any loans, so I can't comment on it. So 5 minutes, is this going to happen? And how many years are we going to see? We're already seeing 40? Is it going to keep going up or is it going to come back down? How do we hit play? So 5 minutes. So if we can have our panelists come on up, that would be great.

Zac Ruiz [25:39] If you could sit, he's not at the panelist table, so you can sit wherever you want, but if you sit under your head, it'll be less confusing.

Rodrigo Afanador [25:48] All right. So, We're all way more interested in what the panel has to say, then whether we think mortgages are going to go to 100 years or not. So we'll go ahead and roll right into the panel in just a moment. All right, so, uh, if we can start, Wes, we'll start with you. Maybe just do a quick minute introduction onto who you are, what you do, and then we'll just kind of do a minute introduction each. We just start, go down, and then we'll roll into the questions afterwards. Go ahead and set the stage. Okay, sounds good.

Wes Reinhardt [26:23] Hey, hey, everybody. I am Wes Reinhart. I am the co-founder of a Primarily commercial property management company here headquartered in Asheville called Ultimus Property Management. I've lived in Asheville for 20 years, originally from New York. Originally had a Wall Street career and relocated here and reinvented myself into commercial real estate, and I'm a licensed real estate broker. But I spend my most of my days in property management, and we do do multifamily, and we do association management, as well. So, um, I know most of the people here seem to be residentially focused, so I hope I'm not over my skis, but, um, I'll try to share whatever enlightenments I have.

Andrew Davis [27:06] Two fingers? Two fingers from the mic.

Zac Ruiz [27:10] Watch the video.

Rodrigo Afanador [27:11] No, you did great. Thank you.

Andrew Davis [27:13] All right. Well, I think it's important to say I feel underdressed. You guys look very sharp. My name's Andrew Davis and personally been investing in real estate for about 13 years, single family, small multifamily, vacation rentals, and professionally. I work for DLP Capital. I've been in investor relations for close to 4 years now, raised about $500 million, for commercial real estate acquisitions, from multifamily, self storage, hospitality, debt, and car washes. And my current role is director investor success at DLP Capital. And we are primarily focused on workforce housing in the Southeast and Texas.

And so, basically, we just have a self-imposed mandate that the housing that we either invest in or lend on is going to be affordable for the American workforce. So glad to be here with you tonight. Heck yeah.

Unknown [28:03] Thank you.

Chris Youngblood [28:03] Good evening, my name is Chris Youngblood. I'm a commercial lender with First Bank here in Asheville. We loan money for construction, commercial real estate projects, and also commercial and industrial, which would be operating companies, folks that make stuff or service companies that provide service like HVAC services. But yeah, happy to be here. Look forward to talking with you guys.

Zac Ruiz [28:29] Awesome. Thank you. All right, so actually, Chris, if we can start with you and we'll kind of come back this way. So the question is essentially, given the, one, do you agree with the picture that was painted, I suppose. But given current marking conditions, how is your organization kind of preparing itself to deal with this? We alluded to how First Bank is maybe getting ready to potentially have to, you know, write off some or get less debt payment coming in? DLP was saying that home affordability is at all time low, so maybe we're looking at different investment vehicles. And Wes, when we spoke to Wes, Wes, was like, you know, armchair economists.

Don't put me in deep waters here, but also very modest. One of the properties managed is the Grove Arcade in downtown. These are a great mind here. I would love to hear what you have to say about that as well. So again, now that I've talked too much, the question, how is your organization preparing for the economy ahead? Sure.

Chris Youngblood [29:22] Well, as you guys have probably seen on the television, and if you've borrowed money, you perhaps have experienced interest rates or at a high, at least relatively speaking. The Fed Funds rate went up five percentage points in 14 months, which is really unprecedented. It's a historical, historical level of growth. I mean, there's been other time periods where interest rates have gone up more, but not as fast. So what this has done is a number of things. It puts stress on consumers.

So if you're a commercial lender where you have loan money to businesses that are dependent on consumer spending to pay you back, you're going to look closely at the factors that play into can my customers, customers pay, continue to spend money at the level that gets the bank paid back? It's a complicated undertaking, and there's no one answer, or one way to do that sort of math, and that sort of forecasting, but it's something that is taken into consideration as we put credit out on the street, and deploy capital. I would say, you know, another thing that is coming up is two things.

One is that with interest rates being higher, the math doesn't work the same way that it did five years ago or two years ago. So more people are having to stand on the sideline, perhaps, because they're not in a position to participate, because the math doesn't work. Before they could they could afford a $450,000 house or a commercial building, and now they can only afford $300,000 or $250,000, and there's not a lot of those properties floating around, so people are gonna have to kind of wait it out. Related to that is, if the math doesn't work the same, people have to put in more of their own money.

And folks are saying, Hey, you know, do I want to drop my liquidity or cash position below a level of comfort, and if I do that, what happens if there's further downturn or erosion in the economy? There's a reason that cash is at the top of every balance sheet. is really important. It puts you in a situation where you don't need a bank, if you have a good liquidity position. And the other thing, the last thing I'll mention, I've talked a lot just on this first question.

The last thing that I'll mention is that loans that we did 3 or 4 years ago at 3% or 3.5% or 4%, when those loans balloon, which are commonplace in the commercial real estate market, if the new rate is 7.5% or 6.5%, or if there's high risk, it's in the 9s or 8s, perhaps, the math doesn't work. So one of 2 things happens. The bank enters into a workout situation, which most banks do. We don't want to own real estate other than the branches we own. Or we require that the bar were put in liquidity to bring the loan back into guidelines. So, you know, the risk there is can alone be brought back into guidelines.

And if it can't, we have to downgrade the credit related, rating for that borrower, we have to file, you know, we have to file with the Fed, that maybe we entered into a workout arrangement with this borrower. So it gets it can get complicated really quick. But anyway, that's sorry to talk so much, but passionately.

Zac Ruiz [32:58] We'll just skip you for the next question. It's fine. Don't worry.

Unknown [33:00] Yeah.

Andrew Davis [33:00] Yeah, I think for us, you know, it's we responded in a couple different ways. We have 2 equity funds. We have 2 debt funds, and so our largest one is our housing fund, and that invests in existing multifamily assets throughout the Southeast and Texas. And for us, over the last 14 months, We've done no acquisitions. So 2000000000 in assets in that fund, but we've just pressed pause because similar to what you saw with single family prices. Multifamily prices have gotten to a level that it just doesn't make sense for us to invest based on our criteria. And basically what we do is any market we go into, we take the median household income in that market.

And then we have a, we basically guarantee that we are not going to raise rents in that community above 30% of the median household income. And we feel that that's a great service to our tenants, but it also keeps us really honest with our underwriting and make sure that we're really sticking as value and bases investors and not speculating on rent growth or coming into a property, renovating it to the hill, jacking rents up and selling it because that's not a sustainable strategy. And so as we press paused on acquiring existing assets, what we've done as we pivoted to development. And so we started what's called our building communities fund.

And what we found is because we're vertically integrated and we have construction and development and property management, as we started to see these prices of existing assets get to a level that just made no sense from an acquisition perspective. We saw land prices become more appealing. We started to see labor costs drop. We started to see material costs come in line to where we could buy raw land, develop it and get in at a basis of a brand new asset that was lower than existing assets in the marketplace. And so what that looks like, depending on the market, depending on the land price, et cetera, somewhere between 175 k to 275 k a door.

And if you paid attention to, you know, multifamily, what they've been trading at, it's 300, 350, sometimes 400 k a door. And so for us, able to add a tremendous value in the community, but then also get it at a really solid basis in that fund. And then as interest rates have gone up, debt has become harder to come by, especially for ground up development. And so we have a debt fund as well. So we've been able to provide a real valuable service to people that are operating in the same communities that we're investing in as well. And so our debt fund has grown substantially over the last 12 to 16 months. So in terms of how we're positioning to just kind of for what's ahead. We don't know.

Nobody does. But just getting really conservative on our terms. So in the debt fund, we only do senior secured mortgages with personal guarantees, the average loan to value in that fund is about 55%. So we're positioned very well in the capital stack, even if you see values significantly decrease, or we see a high number of defaults, we're still positioned very, very well to preserve investor capital, and make strategic moves with the debt on that fund. So that's how we've responded.

Wes Reinhardt [35:56] Nailed it. I agree with everything they just said. I have a little bit of a just a different perspective because I'm coming at this question from a property management perspective, right? So, like, we're an organization of 14 employees, we have construction services, we have maintenance, we have accounting. We have a collaboration with Dewey property advisors, who's our, what we call our sister company, which handles the brokerage. And so for me, when I look at this question, it's all about ownership goals, right? Like, we're working for the landlord, the owner, and every owner's goals are different. So we try to tailor.

So whatever the market is telling us about, you know, inventory or prices or interest rates or what have you, ultimately, that question can be answered differently by every owner because they're at different bases, they're at different entry levels. What I sort of preach to my team is a couple things. 1st thing is this. What is the ownership goals and how are we going to execute on this? What people don't understand, no matter what old these, you know, market headwinds may be or dynamics, what I preach to people is, we're not putting a person on the moon here. This is property management. Like, it's simple. Execute on what you say.

If you don't know your answer, tell the owner you don't know, and then go find it. And you'd be surprised at how many people in property management and any occupation, for that matter. Don't do that. It builds incredible confidence in an owner when you can tell them that you don't know the answer, but you go get it. So it's the simple blocking and tackling that I think is important for how we look at the at the at the marketplace right now. And so the other thing I would say is that I've also told my employees to date is, you know, headwinds will, you know, your mistakes will be magnified because of some of these economic headwinds. So let's be careful not to make too many mistakes.

And mistakes are forgivable. We all do them. We're not running a perfect shop. But when owners for the last 10 years have had an incredible run, an incredible return, and all of a sudden, now they're talking to Chris, and he's got to refinance them, and it's at terms that are different, and the construction costs are different, et cetera, et cetera. Well, all of a sudden, they're not feeling as good as they did over the last eight, seven, 10 years, or whatever it might be. And so, I want to reduce the mistakes, because an owner will find a reason to blame somebody but themselves. And I don't want to be in the crosshairs of that. So I'm not sure that fully answered your question.

Rodrigo Afanador [38:57] No, no, that's great. Just, I think moving in, kind of like the local side, as far as I've heard from a lot of different people, I'm sure everybody else in the room has, like, going back to the fundamentals and, like, really having really intentional focus steps is very important right now. What is the impact of that locally that you guys are seeing? Obviously, you're going to have 3 very different viewpoint or vantage points, but maybe we can work through this question a little quicker, guys. Sorry, because we have more than like 3 questions. But what are you seeing at a local level?

Like, I think a lot of people who are in business, Probably a lot of people in this room weren't around in 2008, or if they were, they were doing something totally different. So what is gonna be that ripple effect? Locally.

Wes Reinhardt [39:43] Yeah, yeah. So I'll be very more concise. I think, you know, I am a bit of an armchair economists, and that's worth nothing. Um, but I think what we have to be mindful of here locally is no different than any municipality in the country, which is, you know, you have rising interest rates, falling property values, and all of a sudden, the income, you know, the property tax revenue is not enough to support the infrastructure. And so what you get is, you get these quality of life issues that we're seeing in other cities. And what happens is that becomes a very difficult gap to fill. And the problems multiply.

And so my concern here locally would be, you know, exactly what I talked about, and we all know them, I'm not pulling any punches about what those quality of life issues are. Um, you know, as far as, um, you know, policing and and homelessness, all real issues in our marketplace. Um, But I'm, I would be concerned that we don't have that we won't have the tax resources to solve some of these social, socioeconomic problems.

Zac Ruiz [41:08] To your point, actually, we'll try and get this for you guys in the show notes, but this morning, the Citizen Times did a piece on just that. There's gonna be a budget shortfall, and they can't make up for it, right? So they were trying to get their levy. They're saying that they're going to try not to levy property taxes, but that is just the reality. Right? you gotta balance the budget in some way, shape, or form.

Rodrigo Afanador [41:26] Andrew, how about yourself? What are you seeing at the local level ground level?

Andrew Davis [41:31] I mean, I would come at it again from the workforce perspective, and I think, you know, what you see, and it wasn't on that particular slide that I shared, but before, you've got that housing affordability being at the lowest or the least since 1984, but then you also have the highest number of people in history spending over 50% of their income on rent. And so you think about, I can't tell you how many conversations I've overheard just being out and about in Asheville, people lamenting that their leases up, that their rent's going up, that they need to find a place to live. And so I think what it really does is it just creates, it's what Wes was saying, right?

It's the instability for the workforce or the people that we interact with every single day that are doing really valuable services and work here in our community, but just aren't compensated highly as some of us. And so it creates instability in our community. And I think that that's a great cause for concern because everybody should make a living wage and have an affordable place to live where they're not spending a disproportionate amount of their income on housing. So I mean, there's plenty of plenty of impacts, but that's the one that's front of mine for me.

Chris Youngblood [42:43] Yeah, I mean, from the perspective of activity, um, kind of going back to what I said earlier, not to rehash all of that, I don't want to ask you to sit through that again. Activity is slower. Um, there's less transactions going on. If you drive around town, you're like, oh man, they're building another apartment complex. Well, all of those were planned out probably 2 or 3 years ago, but activity now, new starts have slowed down. My teammates in my and myself at the bank, we're not getting people coming to us saying, hey, we need to add 20,000 square feet onto our factory. So the feds, the feds, the feds goal of slowing things down, for the most part, is work.

I mean, they're still in inflationary pressures. Consumer spending is still, you know, going well if you're on the receiving end of that. But so activity is slowed down a bit. And from a development perspective, as we're seeing it at least. And then from a commercial industrial standpoint, these are companies that either make something or sell something or provide a service, that is slowed down as well. And when those companies buy less, it's a trickle down effect. They have to buy those products from somewhere. And so they're buying less from other businesses.

Those businesses are experiencing margin compression, reduced profits, lower revenue, and it trickles it down to eventually employees and maybe the need to have less of them. So, um, it's, it's an interesting situation. Um, We think that it'll turn around probably in not to get ahead of the questions, but we think it's going to turn around, start turning around next year. But things are working out as the Fed has designed the purpose behind raising interest rates or to the only way to combat inflation and it slows down the economy. Awesome. Well, that's actually a great segue, Chris.

Zac Ruiz [44:54] Sorry with you and come back. So the overarching question is, how would you recommend that people navigate these current environments? Like, what is the actual nuts and bolts device that you're giving to your clients? And I guess if each one of you could kind of answer respectively, So from the bank's perspective, so I guess people looking to lend. From the funds perspective, people looking to place their money, and then for your clients. If that payment is coming up and it's not looking the same, well, how are you recommending? My name is Benoit, and I'm owner of CFO Consultants in Asheville, North Carolina.

We are an accounting and consulting firm that provides end to end support for small business owners. Too often, accounting firms provide business owners too little, too late. We believe in doing the complete opposite. With CFO consultants, you can truly feel that you have someone by your side who helps you understand the numbers to help you run your business and achieve all of your goals.

Chris Youngblood [45:41] We're advising people to, to, to just be very mindful and be very deliberate of of engaging in, you know, an expansion or asset acquisition or or even, or even, you know, anything that involves spending money. We're in the interest of loaning money, and we, as you may imagine, enjoy realizing interest income at the bank. But our 1st job is to protect our clients and to be good advisors. And with uncertainty in the economy comes hesitancy. And I think that's a smart way to approach this. So we're advising folks to be careful if bringing on new business creates a concentration exposure for you, perhaps. Be mindful of that.

What if you make an investment in your business to meet the needs of that new customer that now maybe makes up 30% of your revenue and that revenue goes away? You know, what are you, how can you address that? So we're encouraging people to be mindful of their liquidity, put themselves in a position where you don't need a bank necessarily? Um, and just kind of wait this out? We're we're, um, what goes up must come down. Um, it's very rare that the Fed, um, has these soft landings that you may have heard about that that they they try to construct. Usually they either undershoot and they keep raising rates or they overshoot and they start lowering rates.

Um, and and like alluded to earlier, we think that that um, rate decreases are going to begin next year. Thank you.

Unknown [47:23] What about you, Andrew?

Andrew Davis [47:24] I'm just going to do this every time, the 2 fingers. So, yeah, I mean, I think I think from an investor perspective, as you're thinking about how to allocate your capital. You'll hear people that are in my position, say, you know, don't invest in single family, single family's dead. I don't think that at all. I think single family is an incredible, an incredible mechanism to build wealth. I think you just have to go into with proper expectations right now. Anybody run the cash flow numbers on a single family rental lately? Yeah, they're not very good, right? It's hard to get it to pencil, but, you know, what's what has been great for us as a wealth building tool. Not the cash flow.

We broken even. Sometimes we've lost a little bit, but the appreciation that can be generated and the equity that can be built and what you can do with that equity. And then, you know, just selfishly to pitch, I think, investing wisely with somebody that's diversified, that has experience, where you can get the cash flow, you can get the appreciation, because we've got scale and leverage and vertical integration, which private investors can benefit from. And so I would just say be very cautious that your expectations accordingly know that you're not going to, you're not going to cash flow like crazy in this environment.

And my personal opinion is even when there is a correction, I think the heyday of single-family investing is probably behind us because one of the things that hasn't been talked about in terms of what's driving single-family pricing is, of course, supply and demand, but the institutional demand for single family. And also, you know, I don't think this meetup would have existed 10, 15 years ago, right? There's a huge community of real estate investors and podcasts and all these things that didn't exist before that have turned 1000000s of people onto real estate investing that were kind of on a traditional investing path.

And so the demand for investment properties at an institutional level as well as an individual level has substantially increased and is not going to go away. And so that would be my advice, is just proceed cautiously in the single family environment, get creative, and then look to who you can partner with, to diversify your investments and get some scale.

Wes Reinhardt [49:29] Thank you, Wes. Um, yeah, I agree with agree with that. I think the demographics of investors being in this sector, the real estate sector is, you know, the tale's gonna wag the dog, and I think that that's gonna continue. Um, what I would say that we advise our owners is just a couple things. One is to stay in contact with your bankers, be in front of be in front of that relationship, you know, if the normal duration of a commercial bank loan is five, you know, five or 10 years, maybe locally here. But if that's coming due, you want to be in front of that. You don't want to be, you know, behind the 8 ball.

And, um, the other thing that I think that we do a really good job on, and it's, again, it's just simple blocking and tackling is like managing the expense side of the equation and make that property, not just from an income perspective on the top line, but from an expense perspective, figure out how to really sharpen your axe, operate a property at the highest level of efficiency. And you're gonna make that property more competitive to the other competitor set.

You know, if you're looking at a shopping center in East Asheville, and it has operating expenses of $5 a square foot, um, versus another shopping center, not too far away, and they're at a higher per square foot operating expense, you're creating value for your owner. And that's what we really spend a lot, a lot of time. doing. And, you know, we take a lot of pride in trying to figure out that equation for an owner.

Zac Ruiz [51:11] To your point. So when I was studying for these, like, investment banking and, uh, like, uh, consulting things, like these case studies. And one of them is just that, right? Profit is just a function of revenues minus costs, right? And so if your revenues are going down, you gotta look to the costs, right? It's the only way to control it. Sage advice there.

Rodrigo Afanador [51:27] To make sure we leave audience time for audience questions here. So get your questions ready. the last question. If we're sitting here a year from now, what are we talking about? Is it the same conversation? Do we have a more positive outlook, a more negative outlook? What's the prediction? And, you know, on top of that prediction for next year, maybe what's the biggest question that you think people are going to be trying to answer next year? And, uh, Wes, do you want to start? Well, Andrew, you haven't, you haven't. start with Andrew. We'll go to your left. we'll go Andrew West and then finish with Chris.

Andrew Davis [52:02] No pressure. I don't know. Yeah, I mean, you know, the Feds signaled that rates are tapped out, that they're going to reduce rates, but and supposedly inflation has gone down, but not by a lot of the metrics that we use to gauge inflation. So goods and services have stayed high, housing has stayed high. And so, you know, I think what, I guess my concern is as rates tick back down, then you'll see another rush into real estate acquisition on the single family side and prices will continue to go up. So I'm not super optimistic. I'm sorry about that.

I wish I wish I was more so on the commercial side, you know, what I see over and over again is likely what you're going to see is regional and asset specific, recessions or corrections, specifically my focus being multifamily and residential. What I know is that there's a real flight from office and some retail, some hospitality into industrial, into multifamily, and just kind of being in the world that I'm in, talking to people that I talk to, there's more, I think, what makes this next cycle different than the last cycle is there's a lot of dry powder out there. So there's on a high net worth side on a institutional side, on kind of the in-between side.

There's 100s of 1000000000s of dollars out there waiting for pricing to get a little bit more attractive. And so it's not as if, again, my opinion, I don't know the future, but it's not as if there's going to be this huge foreclosure wave or this huge buying opportunity where cap rates are going to expand up to 7 or 8 basis points and we're all going to get killer deals. And I could be totally wrong. I hope that I am.

I'd be the 1st one in there, you know, buying and competing for deals with the rest of y'all, but I think there's just some distinctions in this cycle, which soft landing from a, you know, an individual perspective, probably not, but in terms of blood in the streets, for at least my particular category, my particular asset class, I don't see it.

Wes Reinhardt [54:10] Yeah, I would say on a microlevel, I'm very bullish on Asheville still. Okay? I'm bullish on North Carolina as a state. I think it's driven by immigration of people leaving New York and California and halfbacks coming from Florida. And I think that that is a tremendously strong demographic that's gonna continue to drive the economy here. Um, Let's see. I was trying to, I was, I had a couple other points that I wanted to make. So, I'm bullished there, but what I would say is on a macro level, on a national level, I think that we're gonna see basically sideways action between now and the election. Okay?

I don't think that there's going to be, I think that the current administration is going to make sure that to the extent that there's not a Black Swan event in a geopolitical sense is going to make sure that the domestic economy is just painted like a Rembrandt on the wall. Okay? It's not a political commentary. It's just a fact. that, um, I think that the Fed is pulled off a soft landing. I think the Fed is often wrong, and late, and early, you know, I, you know, the one thing I'll say about this is, like, economists are not very smart. And we all have opinions, but like, if they were so good, then they would tell us what tomorrow's stock market was gonna do, but they can't.

And none of us can. So, what the last thing I would say is that, like, you know, your best advice is your own advice. That's what I would say. Awesome.

Chris Youngblood [55:54] Thanks, Wes. Chris? It's hard to follow that up. But I typically agree. I'm bullish, as well, on Asheville and North Carolina. I think people are gonna continue to move here for a number of reasons. Quality of life is one of them. Price and cost of living here, relative to other places, is still attractive, for some of the demographic in this country. So, um, I'm bored. bullish on that. You know, one of the things that, and kind of the golden handcuff question that came up, I do think that because of the pandemic and cheap money to stimulate the economy, there's going to be a lot of housing inventory that's going to continue to be locked up in 2.9 and 3.one% mortgages.

It's going to take a lot for those individuals to put those properties on the market and create inventory. So there's kind of the saying, if you want a new house, you may have to bill it, build it. And national homebuilders like Ryan Holmes and D.R. Horton, those stocks are doing very well because of that. So, um, I think, I think things are going to continue to go well for our community, um, in terms of the social issues that, that, um, what West discussed earlier, I don't know if those are going to get better. Those are really complicated and a lot of them ultimately lead back to affordable housing, which I think in our community is among the most difficult to tackle.

It plays into our homelessness problem, and a lot of other things. But, you know, from a stuffy banker perspective. I do think that things are going to get better as interest rates go down and some analysts are saying that they may go down as much as 135 basis points next year, with further decreases in 2025. It's going to stimulate activity. Things are gonna start happening again. But, you know, going back to 2.9% mortgages, I just don't know if or when ever again we may see that. It was a crazy time. And the thing that I just find interesting about all of this is the ongoing effect that the pandemic has had on our lives. Inflation leads back to it, the shortage of vehicles leads back to it.

I mean, a lot of what we're experiencing now leads back to the pandemic, the increase in our community, and folks experiencing homelessness leads back to the pandemic to a degree. So it's just a fascinating time. I think we'll all look back on this. Not unlike how our grandparents or great grandparents look back on the Great Depression. It's really just been unprecedented, and it's morbidly fascinating. Very comforting, Chris.

Rodrigo Afanador [58:45] Thank you. Great depression. Awesome.

Zac Ruiz [58:48] Well, I know I'm personally always humbled and extremely grateful that our speakers are always just so candid. And so for one, I want to just protect these gentlemen, and these are their opinions. They're not speaking on behalf of their institutions. And second, I want to thank them for these bold and honest predictions and opinions, honestly. So if we could please get a round of applause for our speakers. So we're sticklers of getting you guys out of here on time. So we have seven minutes for questions, but if we're feeling the vibe, we'll go a little earlier. So, make them concise, questions and answers, please. Yeah. So, uh, we're gonna repeat them because we're recording lists.

So no matter how loud you are, we're still gonna repeat it. Don't be offended. Who wants to go first? Because Rodrigo has his own question, if someone else doesn't want to. Going once. Going twice, right?

Unknown [59:39] Oh, Scott.

Rodrigo Afanador [59:42] At what point in time did the bump in the road become the new road in your mind? Month ago, 3 months ago, yesterday?

Chris Youngblood [59:56] I would, that's a difficult question to ask. Um, sometimes I tell myself every day is the worst day of my life, but, um, But, you know, um, in my in my in my world, it, it, you know, it's one thing to look at it on an Excel spreadsheet and say, this company had margin compression. They're not doing very well, but when you have lunch or dinner with these people and they talk about, hey, we're having to try to figure out a way to help my daughter find childcare or I've had to make alternate plans for retirement, I'm going to have to work another 10 years. And you're looking at them, and they're already 65.

So, I think, for me, it's connecting what I see on paper, which is the sucky part of my job, to real people and hear their stories, that reminds me that what we've been experiencing since 2020 is, in fact, real, and it's not over to a degree. In my world, we tend to think of things in calendar years or fiscal years, and it's easy to say, well, the pandemic was in 2020, and it ended on December 31st. Um, but, um, we're still we're still feeling the ripple effects of it every day.

Rodrigo Afanador [1:01:13] Wester Andrew, do you guys want to add anything to that?

Wes Reinhardt [1:01:16] I mean, for me, I mean, like, I think I've I personally, you know, I've always been an agent for change. Like, to me, change creates opportunity. Adversity creates opportunity. In my previous life, I was a commodity futures trader, one of those guys that stands in the trading pit, we're in a colorful jacket, yelling and screaming and waving their arms that you've seen on TV. I did that for 10 years. And what I learned in that process, while that business is totally over based on technology, what I learned in that process was that, like, you had to be adaptable to the changing environment of the marketplace. And I had to change my mind like that.

I mean, like that, not once a day, but 20 times a day. And so that's in my maturity of my almost 55 years, I've learned, and I've shared this with some family members, that, like, while I didn't think I was gaining a lot of skill doing that business, I did learn how to be adaptable to market changes. And so for me, I kind of welcome it and I'm good with it, but I understand that change is not always easy.

Unknown [1:02:25] Injury?

Andrew Davis [1:02:27] Yeah, I think it was probably twofold for me. I think when COVID hit, I thought, here they come, here come the deals. And then when the Fed raised interest rates at unprecedented levels, I thought, here they come. And so it's been a, I would say, a progressive revelation for me or acceptance that there's just some fundamentally different factors at play in this market cycle.

Rodrigo Afanador [1:02:51] All right, thank you. All right. Anybody else have another question? No questions. All right, Rodrigo, what's your question? It was a good one. So, although this is very different, obviously, than 2008 for a variety of reasons. It's just, maybe it's a two-part question is, is there anything, as you guys are looking, you know, in your own organizations, as far as what to do next, that you're looking back that far, to just try to, you know, as they say, like history doesn't repeat itself, but it rhymes to see where the rhymes are, or are there any trends that you're paying attention to that you think are gonna be really important to keep an eye on?

You know, obviously, there are some big companies that came out of the last 2008, and there's some big changes to the way we do live life from that. And so wondering if you're seeing any of that or kind of, what's your thought process or either one of those things?

Andrew Davis [1:03:40] I mean, I would, I guess, would kind of piggyback off of what Wes said. I think that, you know, I talked about how we're positioned, just getting more conservative and looking more towards the lending and the development side. But I think also there's just, there's going to be more room for creativity and entrepreneurial thought and real estate investing. has been kind of boring traditionally. It's like buy a house and rent it out, and I think that it's going to become more of a team sport where people collaboratively get together and figure out ways to build wealth with their different skill sets and backgrounds. I think you're just gonna see, you know, this co-living thing.

I think is really interesting. I think that's going to become a necessity for a lot of people. So I think there's opportunity there. I think you're just going to see a lot more creativity and entrepreneurial thought applied to real estate investing going forward and then obviously leveraging technology and AI and all that jazz. And I feel old just saying that. But, um, that's those are my 2 cents. Wes?

Wes Reinhardt [1:04:37] Yeah, I was gonna, I was gonna say AI. I mean, it's become so ubiquitous and somewhat cliche, but what I see in the property management realm for how AI can sort of change our business. I'm pretty excited about. I mean, you know, I got 60 properties to manage and have to come up with 60 budgets every year, and if I can plug that into some sort of artificial intelligence that is reliable, and, um, you know, it's gonna save a huge amount of time. Um, so property technology is very interesting to me.

I would say going back to your question about, you know, looking at a structure, you know, a mortgage that's 40 years or 50 years or 100 years, I mean, one thing I can tell you from my my previous life on Wall Street was, Wall Street needs to create products to trade. So you're going to see those things happen. I promise you, you know, in the 80s and 70s and 50s, it was the stock market, then stock market said, hey, we have this idea about what are options on stocks. And all of a sudden we started trading options on stocks. So whatever your opinion is about Bitcoin, whether it makes any sense or not, I'm not here to tell you that.

I can just tell you, it's gonna be a product that people are gonna want to trade in. And Wall Street is not ignoring it. And so these things is where I, this is where my mindset goes. And, you know, I just share that with the group. Awesome. Thank you. Chris, do you have anything?

Chris Youngblood [1:05:59] Yeah, I would just say that unfortunately, I think we're going to continue to see downturns and periods of expansion, which is a component of the economics cycle, right? So you're going to have periods of deregulation followed by challenging circumstances for Americans and folks in the global economy. And then it'll be followed by a correction, which may be regulation buckling down. I mean, a great example of it is in in 2006, 2007, you could walk into a bank. And if you had a 800 credit score, you could borrow a half $1000000 without proving your income. And people said, that'll never happen again, we're not going to make that mistake, well, you can get no ratio loans right now.

You can do debt service coverage loans that aren't based on personal income and really digging into someone's the propensity to pay the loan back. So, I think history is circular, much more than it is linear. We'll, in all likelihood, 10 or 11 or 12 years from now, we'll be facing another challenge and making promises to one another how we won't get into this situation again. I just hope we're better prepared for it.

Rodrigo Afanador [1:07:10] Yeah, thank you, Chris. If somebody has a quick question. sneak it in. If not, we'll get you out. Okay. Now there's questions. Come on, guys. Oh, there we go. All right, so we have 2 questions. If you both promise to make him 152nd questions. try to make it happen. Caleb, go first. So, question is, Wes, what's the price point that you consider workforce housing? West does commercial? I'm not an expert on workforce housing, so I'm going to...

Wes Reinhardt [1:07:37] I'm going to defer to Andrew. Yeah.

Andrew Davis [1:07:41] Yeah, so for us, it's that very simple formula is just whatever the median household income is in an area that we're going to ensure that the rent in one of our communities does not exceed 30% of that. And so to give you a number, an average number, the average rent in one of our communities is $1,200. 1200, sorry, for as a rental price or okay, got it.

Rodrigo Afanador [1:08:03] All right. Spencer, question. So I think the question is, what has to happen in the economy for the money on the sidelines to jump back in? Does anybody have a take?

Wes Reinhardt [1:08:18] I mean, typically the answer would be capitulation of some sort, but I'm not sure we're going to see that, right? I mean, that's where the opportunity lies. Um, I think we're going to see some, that's why I said we're going to see some sideways sort of action between now and the election. And then, and then I think you're not going to be able to hide the real facts of what's happening in the economy, and that's where the opportunities are going to lie. So I would just say, keep your powder dry. And I think that's what we're seeing probably in the marketplace right now, especially on the banking side, I got to speculate, is that, you know, people are just waiting. They're just waiting.

And that's not a bad thing. It's okay.

Rodrigo Afanador [1:09:02] Do you guys want to add anything to that or...?

Andrew Davis [1:09:06] Yeah, I would just say, I mean, at some point, asset pricing becomes attractive, right? So office in New York is not attractive right now. At some point it does become attractive. At some point, it becomes feasible to buy that property at a great basis and convert it to apartments. And so I think there there will be a point in different asset classes where it becomes, it becomes very attractive. And especially the institutional dry powder. They don't have the same, they don't have the same targets as your individual investor. They're very happy with six, seven, eight. They're thrilled with 9% as long as it's as long as it's super conservative.

So they've got different, they've just got totally different metrics than your individual investors. So I think it will become attractive at some point. I just, I'm speaking specifically from a multifamily residential perspective and there's so much, there's so much demand in that sector. I just don't see a massive correction there on a national level. Awesome.

Chris Youngblood [1:09:57] I would just add, yeah, I think on an individual basis, people are going to look at their at their at their worth, whether it's cash or real estate or whatever, and make individual ROI decisions. I've met with folks recently who have who have kind of done math, we've done math together on an acquisition, and they're like, well, if my return on this is 6 or 7%, and I'm subject to tenant rollover risk, economic headwinds, and I can go buy treasuries and get 4.5 or 5% with 0 risk, why would I do that? And my answer is, I don't know. you shouldn't. I guess I can take you off my loan pipeline.

Um, But, um, But those conversations are the type of conversations that folks have, uh, as a family individually, and then with the folks that they that they trust, and I think, um, I guess what I'm saying is there's probably no no right answer, but but it's going to take some sort of movement, some sort of opportunity, um, in a bit of individual math that that kind of aligns with their risk profile. A lot of the, a huge amount of the, the money in this country is is still controlled by baby boomers. And as they get older, their risk profile is going to change. So you're going to see them making less moves in terms of purchasing real estate and things of that nature. So, could go to play.

Rodrigo Afanador [1:11:23] All right, guys, so we're gonna end it on that note. Thank you guys so much. Please, big round of pause for our panel tonight. So, we typically meet on the 1st Tuesday of every month, but the 1st Tuesday of January, January 2nd, and nobody wants to meet on the 2nd, so we're gonna meet on the 2nd Tuesday of January, which is gonna be January 9th. So we'll see you guys back here. Subscribe to our YouTube channel, please, guys. with that. Listen to the podcast, share with your friends. We'll see you all back here in January. You're in review. So we'll kind of do something similar to what we did last year. Thank you all so much for being here and have a great night.

Hey, guys, Rodrigo here wanted to say thank you for taking the time to listen into this month's panel conversation. We hope that you join us in person at next month's meeting. You can find out more at AVLmeetup.com. We primarily meet on the 1st Tuesday of every month, but be sure to check out our website, AVLmeetup.com. You can also watch this conversation on YouTube at AVLmeetup. Also, I have a quick announcement. We started a property management company called Vesta Property Management. So if you're looking for 3rd party management for long-term rental, we'd love the opportunity to talk to you. Our goal at Vesta is to turn houses into homes and investments into returns.

If you're looking to work with a third-party management company that will allow you to have peace of mind and experience freedom around rentals. Reach out to us. We can help make that happen for you. That's the PM.com. What's going on, everyone?

Zac Ruiz [1:13:07] Zach here to close it out before you sign off for the day. If you liked the data driven portion of today's meetup, then I'd love to take a moment to tell you about the Ruiz Report and REMC.co. If you're a real estate professional, then you know that you should become the local economist of choice, but you're probably unsure of how to learn the skills required. That's where the Ruiz Report comes in. We offer customized marker reports to promote your business, training videos so you learn how to interpret the market data, and monthly quizzes to keep you sharp. Learn more at resreport.com and sign up for a free account to watch all of our training videos at no cost.

If you're more interested in the live data and some data and analytics dashboards than I highly suggest you check out ramc.co. REMC.co is the 1st of its kind data and analytics dashboards for the real estate industry. Now you have to be an active participating member of the MLS in order to sign up, but it is unparalleled data on every market participant, whether that's an office, a listing, or one of the realtors. Again, you can find out more about REMC.co at REMC.co. As always, thanks for listening, and we hope to see you at one of our next meetups.

If you can't make it and you still want to be part of the movers and shakers, then sign up for a free account at AVLmeetup.com and get yourself into our member directory. Thanks again. See you next month.