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Drunk Real Estate
109. Inflation Is Cooling, But Is Real Estate Still in Trouble? with Ashley Wilson and Danille McElroy
01:15:50
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Transcript235 lines
- [00:00]
Danielle McElroy
Foreign.
- [00:07]
Ashley Wilson
Real estate.
- [00:09]
Jay Scott
Grab a drink and enjoy the show.
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Mauricio
Hey there and welcome to Drunk real Estate, episode 100. Whatever insert editor can insert there a special episode for you guys today. We're here at limitless 2025 with my amazing co host, Jay Scott Badash investor Ashley Wilson. How are you doing, Ashley?
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Ashley Wilson
Great, thanks for having me.
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Mauricio
And Danielle Underwood, co host of the Ken Mackellar show with Ken Mackell. How you doing?
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Danielle McElroy
Good. I got married a few years ago, so my Last name is McElroy now.
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Jay Scott
But is it officially?
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Mauricio
Well, when you called me earlier, the phone still says Underwood.
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Danielle McElroy
Well, that's actually because it's under my dad's name, Ron, for whatever reason.
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Mauricio
Hey, we, we just finished up day one and I heard some amazing news today. We're the, the one and only Jeff Snyder telling us that interest rates are going to be going down. I heard him say for sure.
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Jay Scott
Not only did he say for sure, he said long term. He said low, lower for longer was his exact terminology.
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Mauricio
And when they go down, they're going to stay down forever. Who heard Jeff Snyder's presentation? Who understood Jeff Snyder's presentation?
- [01:20]
Ashley Wilson
Don't lie.
- [01:22]
Mauricio
I love Justin Ida, but I have a hard time keeping up. So he was arguing, Jay, you're the economist of the panel. What was he arguing?
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Jay Scott
He was too smart for me. So basically what he was arguing is that there's a thing called credit swaps, not credit swaps, interest rate swaps, which is essentially a market for interest rate purchases that basically can allow you to foreshadow where interest rates are going and based on investor sentiment. So investors buy these, these futures in the interest rate market. And that can indicate where investors think interest rates are going. And the fact that over the last couple of years these interest rate swaps have been going down, down, down, down, down, is an indication that we are likely to see interest rates go down, down, down, down, down, and they're likely to stay low for much longer than we expect.
- [02:16]
Mauricio
Now, Jay usually does a whole TED Talk, so I'm glad we taking a pause here. But when we say, when we say investors, though, we're not talking about mom and pop investors, we're talking about ginormous institutional foreign wealth, you know, sovereign wealth funds. Institutional investors.
- [02:30]
Jay Scott
Right, exactly. And so his thesis is that it's not so much that the Fed is going to lower rates arbitrarily. His thesis is that the economy is going to, or the supply and demand in the market for, for things like treasury bonds, the things that actually control interest rates, things that control mortgage Rates, things that control your credit card rate, things that control your auto loan rate. These things based on supply and demand in the market are going to be driven down. So it's not so much that the Fed is going to say the economy sucks, we need to lower interest rates to spur growth. It's more that the economy itself or supply and demand for these bonds in the economy is going to drive those rates down. And basically it's going to create a tough market. It's not the tough market is going to create lower rates. It's that lower rates are going to coincide with a softening economic market.
- [03:32]
Mauricio
Ashley, how much stock do you put into this quote unquote market? Because the last time I checked, the market had predicted like seven cut rates. Seven, seven fed funds cut rate cuts over the last 12 months and that hasn't happened. So when you see these statistics about the market predicting XYZ happening, how much credibility do you put into that?
- [03:49]
Ashley Wilson
I was talking to someone earlier tonight and I think I've been more uncertain than ever before. Not because of anything other than the amount of variables that are at play and understanding which variables lever is going to have more impact. I think if you look over the historic economic cycles that we've had, there are certain things that are predictable and there are certain things that are unpredictable. But the fact of the matter is we have things like tariffs and we have things like immigration and we have things like our interest rate environment. And then we're coming off of an anomaly in our history with COVID and how Covids react, how we react to Covid. And historically, one of the things that we've always done as a nation is we've looked at historical data, data to predict future projections. So even the Fed does that right now. Right. So when you don't have something to rely on, plus you have all these variables at play, I think we are in the most uncertain period that we've been in historically. And I also think we're at a period of like wait and see. So it used to be like so survived to 25, now it's survived through 25. And that sentiment I think has changed because of this still the uncertainty of the entire market and our economy as a whole.
- [05:10]
Mauricio
Persistent 26 is what I heard. Persistent 26. Danielle McElroy, thank you. How does this play into your investment strategy in terms of interest rates? Do you care whether they go up or down or do you believe Jeff's. I thought Jeff was very adamant interest rates are coming down. Do you believe him and do you care?
- [05:28]
Danielle McElroy
I think that, you know, obviously I do care because I want rates to come down. I have a couple of things I want to refinance out of. And for landlords, the numbers just don't work right now. I mean, you need to put 20, 30% on certain deals to even get them to cash flow. Right. So either prices have to come down or rates have to come down. And I don't know which one's going to happen first or maybe a little of both. I do think rates are going to come down more because of Trump and who he picks as the Fed chair next year than, you know, than what Jeff was talking about. But I do think rates do have to come down.
- [06:03]
Mauricio
Now, when we talk about rates, though, I always like to emphasize there's the Fed funds rate that is set by the Federal Reserve and then there's mortgage rates, which are arguably a little bit more detached. Jay, you want to talk about the relationship between the Fed fund rate and the mortgage rates?
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Jay Scott
Yeah. So whenever we're talking about rates, what we're talking about is treasury bonds, treasury bills, treasury notes, whatever you want to call them. And basically it's US Debt. The US when it needs to raise money, when it needs money to pay its bills, when it needs money to do all of its spending, basically it creates these, these debt instruments called treasury bond bills notes, and it sells them. And we have a whole range of these treasury instruments. Some of them are short term, can buy a bond that lasts literally four weeks. You can buy a bond that lasts two years, five years, 10 years, 20 years, 30 years. So investors who want to get paid 4% over 30 years, they can buy a 30 year bond. And what we typically see is that these bonds, the rates and the yields on these bonds impact the rates and the yields on other interest rates. So for example, if you want to know where mortgage rates are going, they correlate highly to 10 year bond rates. So if the 10 year bond rates go up, if what the government's paying for a 10 year bond goes up, mortgage rates are going up. If what the 10 year bond is paying goes down, mortgage rates go down. So if we want to know where mortgage rates are going, or if we want to know where auto rates are going, if we want to know where credit card rates are going, what we really are asking is, where are these treasury bond rates going? And while Jeff made some probably really good arguments a little bit over my head, here's how I think about treasury yields, what treasury bonds tend to pay. It's based on future Interest expectations. So if I'm an investor and I'm going to buy a 10 year treasury bond, I don't want to pay a certain amount of money for that bond. If I'm not going to make money on that bond, I need to know that that bond is going to pay me at least enough to overcome the inflation. We're going to see the decrease in purchasing power over the next 10 years. So if I think that we're going to have 4% inflation over the next 10 years, I'm not going to buy a Treasury bond unless it pays at least 4%. If I think there's going to be 6% inflation over the next 10 years, I'm not buying a Treasury bond that doesn't pay at least 6%. If I think 2% inflation over the next 10 years, I'm going to need at least 2% return on that treasury bond. So the question we need to ask ourselves isn't so much all this esoteric stuff. What's the Fed going to do? What's this? What's that? The question is, where is inflation going over the next several years? Because ultimately the expectation for inflation is what is driving the returns on these bonds. And the returns on these bonds are driving mortgage rates and credit card rates and auto loan rates. So I could ask you guys, who everybody sitting here, do you think inflation's going up over the next couple of years or do you think inflation's going down over the next couple of years? And if you can guess that correctly, you're probably going to guess whether mortgage rates and auto rates and credit card rates are going to go up or down over the next couple of years.
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Mauricio
And I want to ask Ashton Daniel about this because if I'm channeling my inner Jeff Snyder argument, he would argue that the reason interest rates go down, if you think about interest rates versus the price of the bond, they're invertly correlated, right? So the higher the price of the bond, the lower the interest rate. So in times of trouble, in recession, when people are fearful, they tend to go towards safer assets like a Treasury bill. So as they bid up the price of treasury bills, interest rates go down. So interest rates going down, Jeff Snyder would argue, is actually signs of things are not going well because people think that it's a little bit risky out there. So I'm going to go buy safe assets and I'm going to buy safe assets to drive those prices up and interest rates going down. And conversely, if I think inflation is coming and I'm going to go buy real estate. And I'm going to do all these things. I'm going to sell my Treasuries, which drives up interest rates. Do you, do you buy into that or do you think it's a completely different mechanism of how interest rates get set? Is it really an inflation expectation, an inflation or deflationary expectation on real estate? On interest rates?
- [10:09]
Ashley Wilson
Ultimately, the reason why I gravitated towards multifamily was because it's an inflation hedge. So obviously I believe in that fundamental. And I think that ultimately if you're, look, if you're a believer in Snyder's, I actually really enjoyed his presentation. I enjoyed the panel afterwards because I think at the end of the day, considering all the variables to make an educated decision, because I don't think any of us, I mean, we always talk about this not having a crystal ball in terms of thinking like where interest rates are going and how they're going to play out. But if you believe in the fundamentals, and this is why you're here and investing in real estate, there's certain prerequisites that you buy into. I mean, that's why we've all come to the same table.
- [10:50]
Jay Scott
So let me say something really quick because if there's one takeaway from Jeff's discussion, George, from, from all the other guys on the second panel, it's that we tend to think that the Federal Reserve controls interest rates. If they drop rates, then rates go down. If they raise rates, rates go up. But what everybody on those panels was saying, and I think this is the right way to think about this, is the Fed doesn't control rates or they haven't for the last 15, 20 years, since 2008. At this point, it's the market that is controlling rates. So the Fed, and we saw this last year, last year, the Federal, the Federal Reserve cut the federal funds rate a full point. So they had multiple, they had a 50 point basis cut, a 25 point, a 25 basis point cut. So a full 1 point interest rate drop on the federal funds rate. What happened to mortgage rates last year didn't go down. They actually went up a little bit. And so what we saw last year was the federal, the Federal Reserve cutting rates didn't have the impact we expected it to have. The Federal Reserve does not control interest rates anymore. This hasn't been a thing since, as George Gammon said, since 2008. At this point, it's supply and demand, the market that controls interest rates. The Fed, the Fed can drop rates and we may see mortgage rates go up, the Fed can raise rates. We may see interest, mortgage rates go down. It really, it's not the Fed controlling rates any longer.
- [12:11]
Danielle McElroy
But, but Trump wants lower rates, and I think that that's important because he's pretty dominant and he likes to hire people that fulfill what he wants. Right. So when he brings the new Fed chair in and they do decide to lower rates, they also can do QE again if they need to. Right, to get the rates down.
- [12:31]
Jay Scott
Yeah, they can do qe. QE is basically, it's the Fed printing lots of money and buying bonds. And when you buy the bonds, you're creating demand and that pushes the rates down. And so, yeah, the Fed can do that, but then we're just running up more debt and more debt and more.
- [12:48]
Danielle McElroy
But, but I have a question. Do you think that Trump cares about that? Because he just passed the big beautiful bill, which increased our debt load. And he is a real estate guy and he, he keeps preaching he wants rates lowered. He doesn't really care what it does to inflation, essentially.
- [13:02]
Mauricio
Yeah. But one of the things that not too many people talked about, what we have talked about it on the podcast before, is that somebody eluded it too early. But our, our national debt is out of control. Right. We're at like, what are we, 35, $36 trillion. And a third of that debt is due to get rolled over in the next, I think, 12 to 18 months. So about $10 trillion needs to be refinanced. And that's why I think it was Jim Rickards actually on the, on the panel today, he was talking about how that, that $10 trillion that we have is basically like 2 or 2 and a half or 3% interest rate. We have to refinance that. So if we have to refinance that at 5% or 5 and a half percent, that looks a lot different than if we could refinance it at three and a half percent. So that, I think that's part of what Trump's talking about, too. It's not just the real estate part, but it's the rolling over of our national debt.
- [13:49]
Danielle McElroy
Yeah. And Ken and I did an episode on that. And, and literally, if we're over, if we're at five and a half percent, we're toast. Like, we can't afford it. Right. But if we're at three and a half, 4%, it's a whole different story. We can roll with that for a long time. And so I believe that rates are coming down because they have to. And I, I actually think that Powell would take down rates if Trump wasn't such a jerk and they were in an egotistical male, you know, who's the bigger person match. So anyways, but do you, so do
- [14:20]
Mauricio
you think the Fed tries to lower rates and the market follows or do you think the market lowers rate and then the Fed follows?
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Danielle McElroy
I don't know.
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Jay Scott
Yeah. So I think Jeff and George and Jim and Brett and Larry and all of them made a great argument for it's not the Fed driving rates, it's the market driving rates and the Fed following. And like you said, Mauricio, as Jeff pointed out, if rates are going down, it's specifically because the market is reacting to something negative. It's if somebody's willing to accept a 2% return on 10 year treasury bond, well, they must be really terrified of what's going on in the market because they don't want to put that money into real estate. They don't want to put that money into the stock market, they don't want to put that money into gold. They want to put that money someplace safe, even if it's only paying 1 or 2%. How bad do things have to get before people go back to the 2020 model of it's so bad I'm so terrified to invest somewhere else that I'm willing to take one or two for a Treasury bond. That's the thing that, that drives treasury bond yields down, that the something so bad is happening that people are willing to accept a 1 or 2% return because they'd still rather take that than put their money in real estate or the stock market or Bitcoin or anywhere else because they're terrified that those assets aren't going to perform well.
- [15:47]
Mauricio
Ashley, I know you're, you're primarily a multifamily investor. Does any of this really matter to you right now? Are you still in the camp that we need to go buy multifamily or is it dependent on the interest rates? Or where are we right now in the multifamily space vis a vis interest rates or just where we are today?
- [16:02]
Ashley Wilson
I mean, I feel like this is an episode of like Saturday Night Live where I'm like, this is how we pivot and like so now we're going
- [16:10]
Danielle McElroy
to talk about multifamily.
- [16:12]
Ashley Wilson
Personally, I think there's two different things that people think about. When you're talking interest rates, you're talking either residential loans or you're talking about commercial loans. And commercial loans is a completely different ballpark. When we're talking about interest rates versus residential loans. I was actually talking to someone earlier today about how I've recently attended a lot of RIAs that are residential real estate focused. And one of the things that never dawned on me was the fact that residential real estate folks primarily focus on like what's happening today to kind of forecast what they want to do tomorrow and their sentiments over the entire economy. As, whereas if you compare that to commercial real estate investors, like I haven't attended a commercial real estate meeting where we're talking about what's happening today. We're literally talking about what's happening in Q1 of 2026 right now. That's what those conversations are around. So like looking at why is that?
- [17:03]
Jay Scott
Why, why is that?
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Ashley Wilson
Well, it's because of a lot of reasons. I mean, number one, we go off the 10 year treasury, first of all in commercial real estate. But the other aspect is when you're looking at historic sales, the national average in residential sales is 45 days from the time someone puts a property under contract until the time they close. Free Covid closing periods were 90 days. And now post Covid. I post Covid closing I would argue is closer to 120 days, in part because equity is drying up, in part because of debt constraints, but, and then in part in, in terms of complication of closing these deals. So when you look at residential real estate, you can understand like people are more sensitive to what is going on right now, whereas commercial folks and investors, they're, they're always in the rear by at least three months, if not four or five months because they're assessing value with such historic data that there's like a six month gap. They're looking at like where was valuations three months ago and where do I expect evaluations to be in three months? Because that's when I'm going to close. So it's a completely different mindset in terms of like how the economy is doing to assess whether or not the economy is going to thrive or just survive.
- [18:24]
Mauricio
And Danielle, you do single family and multifamily. I know, I know. Can you tell the story? Because I know you've got some properties that you kind of would like to maybe move the equity around, but the, the, you're paying like 1% interest rate or something and then you can't, you can't get out of it or you can't. It doesn't make any sense. Right?
- [18:41]
Danielle McElroy
Yeah, I have this damn condo and I want to sell it, but my interest rate is like 2.5%, 2.6. And I just can't, but I want to so bad. I, eventually I will, but I don't want to go from 2.6 to 7. So maybe once it gets to like five, five and a half, I'll make that jump.
- [18:57]
Mauricio
Say that's, is that the number for you? Like five and a half?
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Danielle McElroy
Yeah, five, five and a half, depending on the deal. But I, but to go to seven, it, it just literally makes no sense.
- [19:05]
Mauricio
Right.
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Jay Scott
And this is the issue that we're seeing in the market these days is that we have 68, 69% of sellers who have interest rates on their single family houses below 7, below 4%. And when you have an interest rate below 4%, no matter how bad you might want to refinance, no matter how bad you might want to sell, no matter how bad you might want to take another job across the country, you think to yourself, I'm going to be getting rid of a 4% mortgage on this house just so I can go buy something else that's overpriced and a 7% mortgage and therefore nobody's selling. And that's why we're seeing so little transaction volume these days. And the only thing that's going to lead to single families selling or starting to transact more. Well, two things. One, we're either going to see interest rates come down so people like Danielle say, hey, it's now worth it for me to sell this because I can buy something else with, with a similar interest rate, or there's so much distress in the market, people losing their jobs, people not afford to, can't afford to pay their mortgage, whatever that they say, I just can't afford to pay this anymore and they have to sell. And so those are the only two things that are going to lead to transaction volume picking up in the market.
- [20:14]
Mauricio
So I'm done with my Jeff Snyder inner circle. But like if I channel my George Gammon, you know, self, he would argue that, yes, there's a lot of mortgages that are trapped at that three and a half year. What are you at? 2.7?
- [20:27]
Danielle McElroy
Yeah. 2.6.
- [20:28]
Mauricio
2.6.
- [20:29]
Jay Scott
Three?
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Mauricio
Three and a half? Four. But if somebody loses their job, if there's a recession and people lose their job, they're going to have to do something. Do you?
- [20:37]
Jay Scott
Maybe.
- [20:37]
Mauricio
What do you think?
- [20:38]
Jay Scott
Maybe. Well, think about this. The average homeowner right now has something like 40% equity in their house. If I can take out a heloc,
- [20:45]
Mauricio
you have no income, you're, you're unemployed.
- [20:47]
Jay Scott
But if I have equity in my house, I'M going to figure out a way to unlock that equity. I mean, certainly I have to figure out how to do that, but the equity is there if I can figure out how to unlock it.
- [20:57]
Mauricio
It's like your argument last week when you said when property taxes are too high, you could always, you've got your property paid off, but you can always get like a loan to pay your property tax.
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Danielle McElroy
I have a pushback on that, though. So if I lose my job and my mortgage payment is, let's say, you know, $1,000. Okay, I'm probably going to think out a little bit here that if I have to go rent, it's going to be way more than that. Right. And now, you know, what we have different today than in 2008 is we have the Internet so you can rent a room in your house. You know, you can go on Zillow and become a landlord. You know, there's so many different things that you can dog sit. Like, I know people that dog sit in their house. Like, I think people are going to get creative, even if we were to see mass job loss, to try to stay in their house. And I think they're going to try to do that by utilizing some of the Internet stuff that wasn't around back then.
- [21:48]
Mauricio
And I'm also hearing that there's a lot of potential, some new loan products that will come out to be able to address the fact that people have a lot of equity in their home and, and have a low interest rate.
- [21:57]
Danielle McElroy
So, yeah, most likely. And I don't want to call the housing market too big to fail, because I think anything can fail, but I think that they would do things to try to prevent 2008 again, if it was like a mass job loss situation and they got very good in 2020 about printing money and, you know, basically doing a UBI for a couple of years. So I'm not saying they would do that, but I think there would be programs people would qualify for to try to keep them in their house.
- [22:26]
Jay Scott
And keep in mind, I mean, right now, best estimates are there's about $300 billion in cash sitting on the sidelines from those who would potentially invest in real estate. $300 billion. How many multifamily deals would have to fail? How many single family houses would have to go to foreclosure and get sold as REOs before all of that demand dried up. So even if we start to see people losing their jobs and having to sell their houses or getting foreclosed on, having to sell their houses or multifamily investors having to. To sell off their properties at a discount. There is so much money out there sitting on the sidelines that I suspect we're not going to see significant price drops. There's enough demand that people are going to be willing to come in and pay maybe not 100% of value, but they might pay 98% or 97% or 96%, feel like they're getting a great deal and the housing market stays propped up. So we would have to see, in my opinion, we would have to see a significant economic event, a significant housing event, before all that demand was, was absorbed. And we continue to see foreclosures or people having to sell their houses.
- [23:36]
Danielle McElroy
Yeah, and also, you know, listings right now. Like all the YouTube videos, I always call them like the crash bro videos. Like every YouTube video talks about the real estate market crashing. But what they're not saying is while inventory is high, nothing is moving. So people are necessarily dropping their prices. We're only seeing massive price drops on flippers in the middle of flips. People that have to sell, which isn't most people. What I'm seeing a lot is things listed, and then if they don't sell, they're just delisted because people can throw a renter in there, they can stay in there.
- [24:07]
Mauricio
But we've talked, we've been talking about
- [24:09]
Jay Scott
this for, I feel like, a couple
- [24:10]
Mauricio
of years now where there's this disparity, disparity, disparity between buyers and sellers, like expectations. Buyers still think the market's down. The sellers still think that. So how long is this going to last? I mean, at some point they've got to come. Like it's been like 18 months or
- [24:24]
Danielle McElroy
two years, you know, but nobody's motivated. Like a seller is not motivated to sell. They're sitting on a low interest rate and they don't want to take less than what they think that their property is worth. So they're just holding out. And buyers are holding out, too. And how long will that last? I don't know. But if interest rate starts to drop, I think that's when buyers jump in. And I think that's why right now is a good time to buy, if you're a buyer, because you don't have a lot of competition. We saw rates drop a couple months ago for whatever reason, like down to 6.25. So many houses sold that weekend, and then they went back up for whatever reason. But I think that people are just waiting for that little window for them to drop.
- [25:01]
Mauricio
Seems ridiculous to Me, like, does it really matter whether you're going from 6.7 to 6.2?
- [25:05]
Danielle McElroy
I think it does for people because they literally are trying to qualify. Like, that's what I've kind of seen, even in the stuff we've sold, where we've dropped it just like 10 grand or 20 grand. You know, people come in that that's exactly what they're qualified for.
- [25:19]
Jay Scott
There's one other thing at play here, though. It's the expectation of housing prices going up or coming down. And for the last couple of years, there's been that expectation that things are crazy, they're overheated, there's no way we can sustain these current prices. And people are holding off buying because they think I'm going to have a better opportunity if I wait 6 months or 12 months or 24 months? What they're starting to realize is, at least in the last three or four or five, there hasn't been that better opportunity. The interesting thing is Trump's plan, it seems to get us out of this debt mess, is to grow our way out of it, to basically grow GDP to the point where we're generating so much money, we're increasing productivity so much in this country that productivity is growing faster than the debt, that productivity is outweighing inflation, productivity is outweighing whatever weakness in the dollar that we're seeing. And ultimately we grow our way out of this debt issue. It's a good plan, except that the only way to do that is through massive inflation. Basically, the only way you grow your way out of it is by absolutely ridiculous amount of deficit spending. You've got to spend so much money, and spending tons of money. The government spending tons of money means we're going to see inflation. That's the definition of inflation. And if we. If the government spends tons of money, if we see tons of inflation, what's going to happen to hard assets? Hard assets are going to go up in value, and at some point, Americans are going to see that the government's not stopping spending, that inflation's continuing, that we're seeing growth, but that growth is through inflation. Asset prices are going up, stock market continues going up, housing continues to go up, and at some point they're going to say, I give up, I'm not going to wait any longer, I'm just going to buy. Because if the government keeps doing this, housing is going to keep going up for the next five or 10 or 15 years. And I don't want to wait and hope that that, that something corrects. I just Want to. I just want to. I'm ready to just get off the sidelines, and I think that's the risk. Are there other. Are there other options? Sure. We could see a massive recession and everything could change, but barring a massive recession, I think we see government spending, inflation, and Americans finally realizing this gravy train is not going to stop. And I might as well just buy something now, because waiting isn't going to help me.
- [27:29]
Mauricio
Ashley, Saturday Night Live, we're gonna pivot. What keeps you up at night with everything, everything out by specific. Like, if. If you're a real estate investor out there, what is the. Give me the top two things you're like, just. You're really concerned about these days.
- [27:43]
Ashley Wilson
Honestly, I think it's more to do with the uncertainty. Again, I don't want to, like, drill, just keep drilling on this point. But at the same time, like, there's not one single thing that I think to myself, oh, my God, this in it of itself would be the end all. Be all. Like, when we talk about before on the panel, they were talking about the tariffs, right? And if we look at also labor supply, I think a lot of our labor supply, whether we want to admit it or not, is due to immigration. There are a lot of jobs that we as Americans just don't want to do. And what ends up happening is it ends up getting filled by immigrants. And unfortunately, we can't just. Just like we did during or recognized during the last administration where we wanted to push all these green initiatives, we can't turn it on overnight. Like, there are so many factors at play in terms of, like, going into the trades. We have one of the lowest. We're coming off of one of the lowest amount of folks going into the trades. And then all of a sudden we're like, losing all the immigration, which the majority of the trades are immigrants. So I think there's challenges to all these different aspects when you look at real EST construction, to operations, to just the capital at play. So I've never been in real estate where I feel like every variable has a question mark next to it. That's, I think, the biggest challenge for me. And then understanding, like, coming to, like an event, like, limitless and understanding people's differing perspectives. I actually love the panel because they were so polarizing. I actually don't like panels where everyone is of the same mindset and. And they're literally just regurgitating what the previous person said in a different way. So I think trying to understand every different angle and also the exposure that other people have to different asset classes. Because in real estate, the one thing that I found is that information is transferable. So if regardless of whether or not you're in self storage, residential, like warehouse, multifamily, it really doesn't matter. Trading notes, there's so many aspects. So to kind of understand like how everyone's looking at it, I think puts you in a better position to figure out, like, how do I safeguard myself? I'm not going to know what's going to happen, but how do I safeguard myself against all these different variables.
- [30:06]
Mauricio
Speaking about those variables, I know you guys talk a lot about it on the show. This whole idea of tariffs, increasing the price of, you know, the raw materials to go buy real estate. Right. Like lumber and steel and copper or whatever, those are starting to go up. I mean, how does that factor into your perspective of where we are in the market? Is a good time to buy? Or is this, is that, is that a factor in your buying decision or decision not to buy?
- [30:29]
Danielle McElroy
Yeah, I mean, how expensive is it to build? You know, and also, you know, these home builders right now are losing money, right? Because they're in the ballpark of we built it, we have to sell it. Right. So they have to discount it to whatever it takes to sell it. So, you know, people say, oh yeah, your prices will just keep dropping and dropping and dropping. Well, okay, if that's true and it's expensive to build these homes because inflation is going up and up and up, then nobody would build because it's a for profit business. So if you have no supply coming to the market, prices don't just keep going down either. Right. So you have to take that into account. And I know with Ken, like with the multifamily, he's buying things that would be cheaper or that would be more expensive to build today. So if you're buying something for less than it would cost to build today, and it's going to be hard to go wrong because when they do add supply, they're only going to add supply. If it were to make sense to build those at a reasonable price.
- [31:25]
Ashley Wilson
Yeah. I think the other thing, if I can just piggyback here, is I think that real estate as a whole, especially within the commercial industry, is overdue for a technological revamp. And I feel like thinking of outside the box ideas when it comes to construction because to your point on like supply and demand, whenever there's a challenge, what seems to emerge as the winner is any technological advancement. So with respect to everything to do with commercial, from Infrastructure when it comes to operations, to the actual foundation of construction of 3D printing, repurposing of materials. For example, like when you look at the trucks, like the, what's it called? Not like on transport truck, shipping containers. Thank you so much. Shipping containers, Repurposing of shipping containers.
- [32:17]
Jay Scott
But you can buy houses with those
- [32:18]
Mauricio
things, you can build houses with those
- [32:19]
Ashley Wilson
things, you can build apartments with those things. So I think it's understanding, like where is the opportunity and not thinking about how do we just live in this new economy or ecosystem under the same little widgets we had back in the day. We are so overdue for a technological revolution in real estate. And I think the winners that we're going to see that are going to come out of this cycle are the people who participate in that. Whether it's integration of AI, whether it's integration of new ways in which we think about housing, housing supply and operations. I think those folks are going to be the, the people who like just kill it over the next cycle.
- [33:05]
Mauricio
I feel like a year ago we were all talking about how blockchain was going to revolutionize real estate and I feel like that conversation has gone away and now we're talking about AI and stuff. But is blockchain still part of this equation in terms of revolutionizing the real estate industry or is that just a fad?
- [33:21]
Ashley Wilson
Every time that it was brought up to me, I mean, it's been brought up to me for a long time and I feel like there are a lot of folks that tried and I don't know if I would say like we're going to write it off, but at the same time I just feel like it hasn't been optimized and someone hasn't cracked the code on it yet. I wouldn't write it off entirely, but I also think that there's an angle of it that is opportunistic. And I feel like whenever we go through tumultuous periods in real estate, in any industry, to be honest with you, that's when we see people really start to crack the code.
- [33:54]
Jay Scott
I think blockchain is going to change the financial engineering of real estate investment. Basically it's going to change the way we raise money and the way we change and disperse ownership of property. So right now if I were to buy, Ashley and I are in the middle of building a $70 million ground up apartment complex and right now we need to raise, we need to get a whole bunch of debt from a lender and then we have to raise a whole bunch of equity to buy that property and then we build it and then we give our investors their money back. Well, imagine a situation where at the end of building that, instead of giving our investors their money back, we tell our investors, hey, you can keep part of, let's say you own 1% of the deal, you can keep a quarter percent, and then you can go off and sell 3/4 of a percent to somebody else and they can use blockchain, they can use tokens, they can use crypto, utility crypto coins to basically break up or fractionalize their ownership of their equity and sell that off. Right now, it's all or nothing. If I want my investors to get paid off, I need to give them all their money back and off all their profits. That forces me to sell the property. But if I tell my investors, hey, you can sell off three quarters of your investment to somebody else using blockchain, using crypto, using tokenization, they might be like, great, I'll keep a quarter percent or a quarter of my investment if I can sell off 3/4, get all my money back recapitalized. And so it changes the way we are going to do deals because it allows us to split up ownership of a deal between instead of 50 investors on a deal or 100 investors, we might have 10,000 investors. We might have somebody that comes in and says, I just want to own $10 of that apartment building or I only want to own $500.
- [35:39]
Ashley Wilson
A lot of paperwork. Mercy.
- [35:40]
Jay Scott
But we can't do that now because of the paperwork.
- [35:42]
Mauricio
We can't.
- [35:43]
Jay Scott
If somebody wants to come in and buy a hundred dollars worth, it's not worth it for me. I have to pay a $250 fee to file in their state for them to come in.
- [35:51]
Ashley Wilson
But, but at the end of the day, capital goes where it's treated best. Right. So if capital is attracted to blockchain, then it'll go to blockchain. The problem is, is that blockchain hasn't been where capital was treated best so far. So once yet. So once there's a need for it, I feel like that's when there's going to be a breakthrough. But for now, it hasn't been a necessity. So that's why it hasn't been cracked.
- [36:16]
Mauricio
Yeah, and this is now getting into my, my anonymous syndication attorney. So, I mean, the token your equity raises that's coming, I mean, I've been, A couple years ago I was talking about a lot and I haven't been talking about it much. But I do think in the next three Four, five years. You're going to see, I would say the majority of capital raises, syndications will be tokenized, which means your interest in the deal, your interest in the syndication will be turned into a token, put on blockchain, and you'll be able to liquidate that or sell pieces of it or whatever.
- [36:43]
Ashley Wilson
But, but I also think it's a fundamental. Sorry, sorry, guys. You guys need to. So I also think it's a fundamental difference too, in investment strategy, because if you're someone who believes that I invest for fluidity of capital, like you're going to believe in blockchain, you're going to believe in liquidity, you're going to believe in the accessibility of your. Your investment. So that's a fundamental change in ter. In terms of the investment thesis that we've had over the past five to seven years.
- [37:11]
Jay Scott
We're going to create markets.
- [37:13]
Mauricio
Well, we have to. Yeah, we're gonna have to create second. Right now there's no secondary markets, which is why it's not working.
- [37:18]
Jay Scott
You didn't ask me what keeps me up at night.
- [37:20]
Mauricio
Nobody cares. Okay, fine.
- [37:21]
Ashley Wilson
No one cares, Jay. No one cares.
- [37:23]
Mauricio
What else keeps you up other than your golden retrievers? What else keeps you up at night?
- [37:26]
Jay Scott
My golden retrievers absolutely keep me up at night. So short term, what keeps me up is exactly what Ashley said. The concern.
- [37:33]
Mauricio
Actually, I think what keeps you up is nice. That Ashley leaves you and goes to work at some other company.
- [37:38]
Jay Scott
Yes, I am definitely concerned about that. No, so number one, short term, it's exactly what Ashley said. Just everything going on with immigration right now, we're seeing some risk in the labor market and not just with illegal workers. Keep in mind there's enough threat to undocumented. Sorry, illegal. Undocumented. It's not just undocumented workers who are at risk right now. We're seeing that documented workers who may not be clearly American feel like they're at some risk. And so what we're seeing is that, especially I'm in Florida, we're seeing labor shortages even amongst documented or naturalized or citizen laborers. And so that's a big risk because if we see lower supply of labor, we're going to see higher prices. So that's, that's the short term concern. Long term, it's population growth. So right now we're seeing the lowest reproduction rate. I don't know what the. I forget what the.
- [38:42]
Mauricio
People are having less sex.
- [38:44]
Jay Scott
People are having fewer babies than any point in, in recent history. Long term, if we see the, the, the population rate decline, if we see the number of household formations decline, what we're going to see as real estate investors is less demand for our product. And when we have fewer customers and less demand, what happens? Prices go down, rents go down. So long term, I'm very concerned about population growth and then midterm. I'm actually concerned about AI. So we've talked about this on the podcast before, but one of the big risks with AI is deflation. So imagine I run a company and imagine I create some widget and it costs me a dollar to make the widget. I sell the widget for $2. Now suddenly, thanks to AI, I can lay off half my staff, I can improve my automation and, and that $1 widget I can now make for 50 cents and I can now sell that widget for a dollar, make the same profit margin. I'm selling that, that, that widget for less. I'm going to pay my workers less because my workers can go out and buy all this stuff for less money. They don't need as much money. Workers start making less, we see deflation, we see prices go down, we see wages go down. What happens with rents when, when prices and wages go down, rents go down. And so the big midterm risk I see is AI and deflation and basically the push down of rents. So immigration and labor markets, deflation from AI and population growth are the three things that keep me up at night.
- [40:05]
Mauricio
So before I go to Danielle to ask what keeps up or not, I do want to take at least one or two questions from the audience. I know there's a line of people lined up already to ask questions that go all the way around the corner over there. So we want to get to your questions.
- [40:17]
Jay Scott
Unfortunately, we're not going to get to all of them.
- [40:19]
Mauricio
Can't get into all your questions. But if you have a question, keep it in mind. Danielle will keep you up at night.
- [40:23]
Danielle McElroy
God, I have a lot of anxiety just in general, so. But I think for me, probably the population thing, I think I, you know, I do wonder because, you know, part of immigration is it does increase the population. So immigration is actually good for people that own property. But you know, just because we have a president right now that doesn't really like immigration doesn't mean that we won't have a president in the future that is more friendly towards it because that is how you would get your population up. Obviously a curveball.
- [40:57]
Mauricio
To our producer, Alex. I apologize. Alex, Anybody? Anybody have a question that want to ask whether it's real estate, financial? Anybody?
- [41:05]
Danielle McElroy
Okay. He said, you have short term, midterm and long term risk. Is it worth it to get a large loan with all of this risk on a mortgage?
- [41:14]
Mauricio
We'll go left to right.
- [41:15]
Jay Scott
What we saw in 2020, the risk was we had interest rates at 0% or federal funds rate 0%. We had mortgage rates at 3%, 4%, even less. And so the big risk we saw in 2020 was if you get a short term loan and rates go up, you're now going to have to refinance into a higher rate loan or potentially other bad things happen. If you're in the multifamily space, you have these things called rate caps, these insurance products. And so there was a lot of risk. Today we have rates somewhere in the 7% range. If you don't believe that rates are likely to go much higher, and I'm not saying they won't, I'm just saying if you personally believe that rates aren't likely to go much higher, there's a whole lot less risk in getting short term debt. So if you want to get a floating rate loan, if you want to get a three year loan or a five year loan, that risk is somewhat mitigated. If you don't think rates are going to go from 7% to 9% to 11% now obviously that's a risk, it could happen. But the risk of rates going from 7 to 10% are a lot less than they were back in 2020 when rates were 3% going to 6%. So I would say at this point, even though a lot of people are terrified of debt, we syndicate and I know Danielle syndicates, and our investors are constantly asking, what kind of debt are you getting? Are you locking in long term fixed rate debt? Because I don't want to run the risk of the thing all syndicators are running into today, which is having to refinance at higher rates. What they don't realize is it's a lot safer right now to take some debt risk, to take some interest rate risk, because there's a lot less chance of interest rates spiking from here than there was a few years ago. So it really boils down to your personal threshold for risk. But in my opinion, now's a better time to take on that debt risk, that interest rate risk, that short term debt risk than it was a few years ago.
- [43:06]
Ashley Wilson
I think if a deal pencils right now with long term debt, like that's amazing. And then the upside is, is that you can refinance into a lower risk if you played it Incorrectly. So I'm still a big believer in securing long term debt if you have the opportunity. So I'm contrary to my partner, which makes us good partners.
- [43:28]
Jay Scott
Luckily, she wins.
- [43:31]
Danielle McElroy
Yeah. I basically agree with what Ashley said. If you can find it where a deal works now, it's worth it. What you don't want to do is assume it will work once rates go down, because you don't know when rates will go down. You know, we all like to say it'll be by next year, and I believe that'll be true. But I wouldn't risk putting a whole entire home purchase on it to then be funding the asset.
- [43:55]
Jay Scott
Yeah, we've been saying that for two years now. We always think we're right.
- [43:58]
Danielle McElroy
Exactly.
- [44:00]
Mauricio
Pause right there. So if bitcoin is supposed to be a hedge against inflation, why did bitcoin drop when inflation was high? You're into crypto, Jay. You take the first crack of that.
- [44:10]
Jay Scott
So as, as a, as a math and statistics guy, if you do what's called a regression analysis, meaning we look at a statistical analysis of bitcoin as it correlates to other asset classes, what we find is that bitcoin is pretty institutionalized these days and it correlates very well to the NASDAQ and to the S&P 500. So to liquidity. To liquidity. To the M2 and the M1 money supplies. So typically what we're seeing is that instead of bitcoin being a hedge against economic uncertainty or running counter to the markets, or running counter to, to the economy in general, like gold often is, that's the way bitcoin was a few years ago. Now bitcoin's very correlated with traditional hard assets. When the stock market goes up, bitcoin's going up. When gold's going up, Bitcoin's going up when the money supply is going up. And it actually, the money supply dropped for a couple of years, it's now going up again. When the money supply goes up, bitcoin goes up. And so it's not so much a correlation between bitcoin and inflation. It's a correlation between bitcoin and other hard assets. And there's certainly a correlation obviously between hard assets in general and bitcoin. I don't see bitcoin as being an inflation hedge if you want an inflation right now. Oh, I certainly can't speak for the future, but today there's no reason to believe that bitcoin is. Well, I shouldn't say there's no reason to believe it's not inflation. It is an inflation hedge, no different than, again, something like the stock market. Hard assets in general tend to do well with inflation because inflation generally means that the dollar is losing purchasing power. When the dollar loses purchasing power, people move money out of their dollars. They don't keep money under their mattress. They don't keep money in savings accounts. They put it in hard assets. Bitcoin's a hard asset. So certainly there is a correlation with inflation, but it's not direct. There's a correlation with other asset classes which have a correlation with inflation.
- [46:05]
Mauricio
Yeah, go ahead, scream. You got screamed. What do you rate the percentage chance of we ever go off the dollar stamp?
- [46:12]
Jay Scott
100%.
- [46:12]
Ashley Wilson
Yeah.
- [46:13]
Jay Scott
Now, I don't know if it'll be
- [46:14]
Mauricio
by the end of the year.
- [46:15]
Jay Scott
By the end it could be 100 years.
- [46:17]
Ashley Wilson
But give a time constraint for the next 20 years.
- [46:21]
Jay Scott
I'll, I'll chime in last.
- [46:25]
Mauricio
Well, go ahead.
- [46:25]
Danielle McElroy
I don't know if I can give it like a percentage of a chance, but I think slowly, you know, I was talking to Dana Samuelson who does gold earlier and more and more countries are stockpiling gold in their central banks and they're trying to do less and less transactions in dollars. So I think in the near future, as that continues, countries will start to do a lot of transactions in their own currency. And I think countries are going to start to lean on their own currency as well with some gold backing them. But I don't know when it'll fully, the dollar will fully be removed.
- [46:56]
Ashley Wilson
I mean, it'll inevitably happen. I mean, I think we'd all be a little arrogant if we said that it'll never come off of the USD. But I think at the same time, like whether or not it's going to come off within 20 years. I think it's also a lot of forecasting on political positioning. So it depends on how much you trust what's going on currently, what's going to be, you know, the backlash of what's going on currently to determine. I mean, I know Kyle and I talked about it the other day with respect to. There are a lot of people in position right now with respect to purchasing of oil that could disrupt all of this literally overnight if they wanted to and change the currency in which they're purchasing. So it really depends on how the political climate is and I am not an expert in that at all. To.
- [47:51]
Mauricio
I would also recommend, you know, Brent Johnson's here if you check out his work. It's pretty good. You've just got to remember that we live in a debt based monetary system. And so the entire world has dollars. And so in order to get off the dollar, like every time we lend more money and print more dollars, it just means it gets stronger and stronger and stronger. So it eventually happens. All societies will, eventually. But if I was a betting man, that I would say there's no way in the next 20 years. It'll take time. It's slowly, slowly being eroded. But I think it's going to take a lot longer because of the way that system is designed. There's so many dollars. I mean people in China, businesses borrow in dollars and they have to repay their debts and in dollars. So it's just, it's just, it's harder and harder and harder. Will it get chipped away? Yes, but I think it'll take much longer.
- [48:41]
Jay Scott
Here's the bigger, Sorry, here's the bigger question. It's not when is the dollar going to lose the world's reserve or be eroded to the point where it's no longer the dominant currency. The question is what's going to replace it? And until you have an answer to that question, the US Dollar will continue to be the world's reserve. So what would it take for something to replace the US Dollar? Well, the first is that pretty much every other currency on the planet is pegged to the US Dollar. If you take the peg away, basically peg just means that every other currency on the planet, the value of that currency is related to the US Dollar. And if you kind of broke apart the value relationship between the dollar and other currencies, what you would find is that no other currency on the planet is stable enough to be the world's reserve currency. It's a lot like Bitcoin. If you took the yen and you, you broke it apart from the dollar tomorrow, the value of the yen would go up and down based on the demand for the yen in a given day, based on, based on investor demand, based on consumer demand, based on business demand. And so to have another currency to supplant the US Dollar, you would need something that is stable. And for stability you need trust. And so basically you'd have to find a, another currency that the entire world trusted enough.
- [50:02]
Mauricio
Bitcoin.
- [50:03]
Jay Scott
Well, and that's where I was going to go with this. I actually, I think I get why the President is such a big proponent of Bitcoin right now. But I personally believe that bitcoin is the single biggest risk to the US dollar. Bitcoin right now, if we give credence to Bitcoin. If we basically go out and say, bitcoin is amazing, we trusted enough that we're going to build a bitcoin reserve, we're going to start accepting transactions in bitcoin, what's going to happen? All the other countries around the world are going to say, yeah, we need to start hoarding bitcoin also and we need to start building bitcoin reserves. And when China has $10 trillion in Bitcoin and Russia has $10 trillion in Bitcoin, suddenly they don't need the US dollar because now they have this massive supply of another currency. There's not enough of another currency out in the world to replace the US dollar because so many transactions are being done. No other currency is on the same scale. But if bitcoin suddenly gains enough trust and there's enough supply out there, there's nothing to stop other countries from saying, hey, we can still use the dollar for some of our stuff, but let's start trading some stuff in bitcoin. Let's get rid of the euro dollar or the petrodollar. Instead of trading oil on the US dollar, we're going to trade oil on bitcoin or we're going to trade, we're going to pay taxes on Bitcoin. And now suddenly we've given credence to Bitcoin and that could be the thing that has enough supply and enough trust that ultimately replaces the US Dollar. I don't think there's any other currency on the planet that's as close to being a threat to the US dollar as Bitcoin. And I think our government right now, by kind of pushing crypto and pushing bitcoin, is actually doing a disservice to our currency and our economy.
- [51:50]
Danielle McElroy
We had a question back there I wanted to touch on.
- [51:53]
Mauricio
The question was, do we have any, does anybody in the panel or the podcast have any, any thoughts or pivots based on the big beautiful bill? Invest, other than, other than bonus depreciation,
- [52:07]
Jay Scott
invest in real estate. I mean you get bonus depreciation, opportunity zones, QBI, invest in businesses. This, this basically QSBs, which is this, this, this loophole or rule that basically allows you to make a whole lot of money as an ENT in a startup business. And, and the first 10 or 15 million you can actually take cash tax free. When you cash it out, salt deduction,
- [52:34]
Mauricio
I mean move to, move to California because now you get a little bit bigger salt deduction.
- [52:39]
Jay Scott
Yeah, I mean be an investor, be a business owner. This bill gives tremendous tax Benefits to anybody that's putting their capital at risk, which I think is a good thing, because that's what we. That's what, that's what tax code does. The whole purpose of the tax code is to incentivize people to do the things that are best for this country. And the best thing for this country is for people to invest, people to start businesses, people to take risk with their capital. And that's the thing I love about this bill, is that it really does create incentives around the things we want people to do more of.
- [53:09]
Ashley Wilson
Yeah, just piggybacking off of what Jay said. Ultimately, the government is taxed with this problem of how do we solve all the problems for the country. And they only have one of two ways. They tax everyone or they incentivize the wealthy to target those. So I think, you know, knowing the type of president that we have and what his focus is, I don't think anything was a really big surprise. I don't know if it was a surprise to you guys. It was. Definitely wasn't a surprise to me because this is historically something that he stood on and been a huge proponent for. And I think if you look at historically, for example, like Opportunity Zone and why Opportunity Zone was put together, I don't know if a lot of people know this or not, but I sat on a panel with the woman who literally created the foundation for the Opportunity Zone, all of the documents in terms of applying for the Opportunity Zone. And ultimately the Opportunity Zone came out of the failures when Hurricane Katrina came through. So Hurricane Katrina came through and the US government spurred investors to invest in Louisiana and New Orleans to rebuild, but it was short lived in terms of the incentive benefits. So Opportunity Zone was literally a, like a correction to the incentives that were put in place for rebuilding New Orleans to have a longer Runway. And they saw that that worked. So I was not surprised at all. A lot of people are like, opportunity Zones are going away. I'm like, no, they aren't. Like the government knows that it works and it's a way for them to tackle problems that they can pass on the taxes to everyone else to absorb.
- [54:42]
Danielle McElroy
I don't have too much to add except that Ken would always say, buy billboards because they are bonus depreciation.
- [54:49]
Mauricio
Yeah. And by the way, this is one of the beautiful things about coming to conferences like this in Limitless. Like, Jay and I literally met somebody today mingling that actually helped draft the big beautiful bill. And he was even talking about things that they, quote, unquote, slipped in at the Last minute that nobody even knows about and we have to go back and look at it. But he was talking about like something about the 1031 exchange that there was some additional benefit that nobody's talking about but it's in there. So I'm going to go back and probably upload the bill into chat GPT and focus on the 1031 because there's some additional benefits. But again, one of the beautiful things about going to conferences like this and interacting and all that good stuff. We should probably wrap it up. But we usually we.
- [55:28]
Jay Scott
You.
- [55:28]
Mauricio
Oh, wait, wait. Questions, wait. Whoa, whoa. Hey. Hello. All right, two more questions. Before, before. So usually we wrap this up with like a top 10 list and would you rather. I don't know if we're going to get to that but we play these fun games. Would you rather do this or that? Which are a lot of fun but yes sir. What's the asset that changed your guys game financially?
- [55:48]
Danielle McElroy
Well, I only have five, so I don't have that many to choose from. I would say my first one because I then realized what cash flow was and then how much, how beneficial it was to then lead me into buying the rest of them over time.
- [56:04]
Ashley Wilson
So it's what asset?
- [56:05]
Jay Scott
Yeah.
- [56:05]
Mauricio
Was your like one the number one asset that changed your financial situation?
- [56:09]
Ashley Wilson
I mean, I guess I would, I would say multifamily but I think multifamily was a lot to do with not only cash flow but also building wealth. I think there are three types of investors. There's someone who is a capital preservation mindset, wealth building or tax advantage. And then people are in spectrums of all of those things and it was the perfect fit at the time for what we wanted to do as a family in terms of our future.
- [56:40]
Mauricio
You go, because I got a wacky one.
- [56:41]
Jay Scott
Okay. I mean it's not going to be interesting or revolutionary, but like Danielle, the very first house I ever flipped. I always say that I meet two types of people in this business. In real estate, 99% of the people I meet have never done a deal. The other 1% of people that I meet have done 5, 10, 50, 100 deals. There's one type of person I never ever meet in this business and that's somebody who's done one deal because nobody does one deal in this business. Most people do zero. But if you don't give up and you can get to one deal, you're gonna do two because the second is so much easier than the first. And you're gonna do three because a third is so much easier than the second. You're gonna do 5 and 10 and 50 and 100 and I flipped 500 houses and let me tell you something, it got to the point where it was literally simple, despite how hard that first one was. So my piece of advice is, I don't know if that was the question advice, but my piece of advice is don't give up until you get the first. Because nobody stops at one. If you can get to one, you're going to get to a hundred. But if you, if you're either going to be a zero or a hundred. So don't give up till you get the first.
- [57:50]
Mauricio
Mine's a little bit more, maybe a little bit more corny. But like for me it was, I, I'm like I'm the number one asset like when I change my personal development
- [57:57]
Jay Scott
and you're so special.
- [57:59]
Mauricio
I know, but like it's like when I made that switch 20 years ago and just started focusing on personal development and bettering myself and learning and becoming a better person, that changed everything for me. And it's only because I got around like minded people. Like if I continue to do what I, what I was going to, what I was doing before, I still be working at some law firm crushing, you know, working 200 hours a week or whatever. But that mindset shift, for me it's all about mindset. So I'm a big proponent of mine.
- [58:23]
Ashley Wilson
I mean if we're going to get into like philosophical here, everyone can agree the best asset is your team. Like I was, there's no way you can execute without really good partners. And it doesn't mean have to. You have to have a formalized partner like jni, but it could be a partner that's doing your electrical or H vac work, or it could be someone who found you the deal. Like your network is the most valuable asset you have. And every single one of us has an incredible network that's probably super untapped. If you just open up your phone and go into your contacts, you probably have a billion dollars of contacts that you haven't even tapped into. Like not talking about the people you've tapped into, but people you don't even realize could provide value to you. And I don't mean from like a monetary they're going to invest with you. I mean from connections, doors, they can open mindset shifts that you can possibly have in terms of just like putting, you know, gas to the fire on building out your business. So that's something I think that is completely underrated. And in all honesty, I think it's like 95% of people don't follow up past one, follow up. So if you follow up twice, you're already ahead of the game.
- [59:36]
Mauricio
What part of your business runs without you?
- [59:38]
Jay Scott
That's an easy one. Most of it. Because what I've realized is, at least in the multifamily space. But no matter what you're doing, whether you're. You're in real estate or anything else, any. Any business is a team sport. And the best team is the one where everybody who has a role is doing the thing that they're absolutely the best at, and they're not doing the things that they're not good at. And so most of my business runs without me because most of my business, I'm not good enough to run. And so we have a team. Ashley. I don't know what that look is, but literally, Ashley's the best in the world at what she does. I couldn't do it. And so that entire half the business, three quarters of the business, I don't do anything because she's so good. The part that I'm good at, she hates doing. And so that's the part of the business that. That runs without her because she hates doing it. And so if you have a great team and if you structure your business in a way that you have the best people doing the things that they're best at, most of your business should be able to run without you because you have other people who are better than you to do all those things.
- [60:46]
Mauricio
There's a great book out there called buy back your time by Dan Martell. I highly recommend that book.
- [60:51]
Jay Scott
You're gonna say who, not how.
- [60:52]
Mauricio
No, no, Buy back your time Diamond. He talks about the replacement ladder and how to continually replace yourself. From all the way doing admin work to, you know, servicing to the marketing, the sales or whatever. And if the. The quicker you can get to the idea of you being an owner versus the actual operator of the business, the quicker you'll get to that point where the business really should be able to run without you when you're leaving for a year or whatever. I got to that point last year. I ended up selling my company because, honestly, I wasn't doing anything anymore. I think my whole team just kicked me out. They're like, you're not. You're not contributing anymore to this company, so why don't you just leave? And I said, okay, that sounds good. So for me, it was like 100% of it, but that's all because of the replacement ladder, you keep replacing yourself until you get to the point where you're an owner. And then you get to make the decision whether do you want to continue to stay in the business as an owner and have somebody else run it, or do you want to sell it and move on to the next one? Dan Martell, Q and A. I love it.
- [61:48]
Danielle McElroy
Did you hear him?
- [61:49]
Jay Scott
Yeah.
- [61:49]
Mauricio
Do you want to repeat?
- [61:50]
Danielle McElroy
Yeah. So if. So if everything's going to the roof, you know, bitcoin, real estate, stock market, inflation.
- [61:56]
Mauricio
Inflation, yeah.
- [61:57]
Danielle McElroy
And if there's a ton of inflation, if you don't have any money, how do you get started and not get caught up in just being in the dollar?
- [62:04]
Jay Scott
There are three ways to. To be successful. There are three things that any successful venture needs. Money, time, and knowledge. You have to have at least one of those three things. If you have money, you can make money. We all know money makes money. You can invest passively and hopefully get more money back. But if you don't have money, there's time and there's knowledge. If you don't have knowledge in something, go spend time. So literally, when I wanted to get started in multifamily, I knew Ashley was doing multifamily. I reached out to her and I said, ash, I want to learn multifamily. I have some money I can put in. But you don't need my money. I don't have any knowledge. How about my time? I'll give you my time. And I spent a year working for Ashley and her business. She taught me the business. She brought me into deals. I was able to use my time, trade my time to learn the business and become successful. So I could use money. Because I had money, I could use my time, knowledge. I do a lot of work outside of real estate in the tech world. I do advisory work. I sit on advisory boards. Companies give me equity or give me money to come in and advise them because I have some specific knowledge in certain areas of technology and business. And so in that respect, I'm able to use my knowledge to build equity and to make money. So for anything you do, time, money, knowledge, time, money, knowledge, you need one of those three things. So figure out which one you have the most of and use that to leverage the other two and to build the other two.
- [63:33]
Danielle McElroy
And I have something else too. Like, you're really young, and I think young people think that things are just supposed to explode in price because they have over the last four years. And the truth is, like, you have a long time, so you don't need to do it all right now. You need to take the time to learn how to make the money, and then once you make the money, invest it correctly and you'll be ahead of the game.
- [63:54]
Mauricio
What are the chances? Jay just. Jay's an expert at this. Jay, what are the chances of deflation and what is the timeline?
- [64:01]
Jay Scott
83.2%. Keep in mind that that 74% of statistics are made up. So the chance of deflation, I think it's relevant. Long term, I think there's a decent shot of deflation. I think we're going to have to figure out how to kind of revamp society over the next 30, 40, 50 years as technology basically supplants our knowledge, our ability to do work that's far down the road. Short term, I think there's a chance we could see, you think zero? I don't think zero. I think there's a reasonable chance that we see enough impact from AI and other technological innovation and advances that we might not see deflation, but we see a decent offset of inflation. Basically, if we grow at 0%, that's essentially deflation, because we're still going to be printing money. And so if we can, if the government can keep printing money, but we are not seeing inflation, that's a great outcome.
- [65:07]
Danielle McElroy
But you have to look at deflation. Compared to what, though? Like, how much more will inflation go up before we see deflation? So it's not like deflation in today's dollars, it'd be. Once inflation hits its peak and then it starts to come down.
- [65:21]
Mauricio
I have a bet with Jay that we'll see within the next decade. So by the time, by the end
- [65:26]
Jay Scott
of this decade, by the end of
- [65:27]
Mauricio
this decade, that we will reach the prior highs of inflation that we did a couple years ago, that's the bet we have. I don't know. I don't know what we bet. Probably a bottle of wine or something, I don't know, but I don't know. Like deflation from.
- [65:39]
Jay Scott
I buy the wine now because if you're right, it's gonna, it's gonna be really expensive.
- [65:43]
Mauricio
Like, again, we are in $36 trillion in debt, and so deflation does not help the US government. The way that the government gets out of debt is by inflating the debt away. So as you get deflation, it just makes the ability to pay debts harder. So if we ever get anywhere close to deflation, you're just going to see the, the quantitative easing, whether that's money printing, whether that's Whatever the manipulation looks like, they're going to the government. You just can't fight the government. Like, they're going to print so much money or whatever that mechanism is that I just don't see it happening.
- [66:14]
Jay Scott
Deflation would destroy society and the US Government. And the US Government.
- [66:19]
Danielle McElroy
And, and I think if AI really does take jobs, which I believe it will, sooner than later, I do believe they're just going to do a ubi. Whether they call it a UBI or a housing voucher or whatever they call it, they're just going to print incentive programs to help people offset, you know, the jobs. They're not going to let everything. Crap. When are they going to let everything just crash to the ground like Republican, Democrat, it does. Nobody wants that because they're going to lose the next election if it happens. And so they're just not.
- [66:47]
Mauricio
Final thoughts. Jay Scott
- [66:50]
Jay Scott
I want to thank Danil and her husband for creating this amazing conference. I go to a lot of conferences. I speak at a lot of conferences. There's literally one conference per year that I look forward to mark on my calendar and get tickets to, like, the day it comes out, and it's this one. So my final thought is I'm thrilled to be here and thank you. Awesome.
- [67:13]
Mauricio
Ashley, final thoughts.
- [67:15]
Ashley Wilson
Thank you as well. I also do the same thing as Jay. In fact, Kyle and I play rock, paper, scissors on who gets to come, which is why he was here last year and I was here the year before. So I love this conference. I hope I win next year. I don't know if there's anything. I feel like we've covered pretty much everything except a top 10, which not doing a great job hosting Mariso.
- [67:41]
Mauricio
So Kyle I hate. So it's an ongoing joke. So Kyle Wilson, Ashley Wilson's. He always says. I don't know. He calls himself Ashley Wilson's husband. That's. That's what his name is, Kyle.
- [67:51]
Ashley Wilson
I'm pretty sure he says the lesser half.
- [67:55]
Mauricio
He also says I'm Kyle Wilson, Ashley Wilson's husband. He does a top 10, which I hate. Like, it'll come up with top man. But the one I'm enjoying, though, is the. The. Would you rather. So think of the. Think of a top ten. Would you rather. We'll have the audience involved. Final thoughts? Daniel. Daniel Underwood, aka McElroy.
- [68:13]
Danielle McElroy
Well, I don't. I guess we kind of covered everything. I thought it was a great conversation. It'll be interesting next year to recap and see if we were right and what's happening.
- [68:22]
Mauricio
We're going to be right.
- [68:23]
Danielle McElroy
It'll be right after Trump elects his new Fed chair.
- [68:28]
Mauricio
That's right.
- [68:30]
Jay Scott
I've got a top five. Four. The top.
- [68:32]
Ashley Wilson
No, no, we don't want top four. We want a. Would you rather. You did not take instructions.
- [68:36]
Mauricio
This is why, like, would you rather have dollars or live alone for the next 10 years, where you can't even interact with anyone like those kind of decision. Quick question before you get your Would you rather when you're looking at a new investment, how do you balance risk and return given today's wacky environment? That's an Ashley Wilson question and a Daniel question. It's definitely not a J question. I know that
- [68:59]
Ashley Wilson
in a normal market you should have reserves, and I think that's something that historically there were a lot of folks who didn't put themselves in positions that had ample reserves. And I think that involves a whole algorithm of experience to be able to dictate in terms of what type of asset class you're buying, what's the exposure to needing to tap into those reserves and how much of those reserves you actually need. So in a market where there's more uncertainty, I would at least double, maybe potentially triple your reserves based off of exposure. So like in multifamily, for example, we had three things that came into play over the last couple years. One is interest rates, which everyone talks about because it also affects residential mortgages. So a lot of people talk about interest rates. The other aspect is with respect to insurance rates. So not only do we have rising insurance due to natural disaster risk, but we also had a lot of carriers leaving markets. So it's just a basic economic supply and demand. And then the third piece of that is taxes. So that's something I think a lot of people don't do on both the residential and commercial side is protest their taxes. But for example, one property that we just won on a tax protest, we're getting back over $330,000 because of the run up in 2022 on taxes because they're a reflection of the trades that were going on at that time. A lot of people were overpaying, not because of great interest rates, but because they would rather pay to own a hard asset than pay the government 5 million in capital gains from a sale that they just had. So they would overpay on a property, so they didn't have a $5 million tax hit, and they would overpay on a property by 3 million. Because it's better to overpay on 3 million than to lose 5 million so that was kind of the thinking there. So that was a huge run up contributor to the multifamily valuations, which in turn impacted taxes. With the recent foreclosures that are happening all over the country, there's a very strong argument to be made that the valuations have gone down significantly. And that's what we've continued to argue and been able to tap into in terms of tax advantages. So.
- [71:25]
Mauricio
All right.
- [71:25]
Ashley Wilson
Huge opportunity there.
- [71:27]
Mauricio
We're gonna do one game. We usually do one game to wrap up the pod. This is. Would you rather. And Jay apparently has found one. Jay, what do you got? Would you rather. I want to show hands.
- [71:39]
Jay Scott
Okay.
- [71:41]
Mauricio
It's better be good.
- [71:42]
Jay Scott
It's not.
- [71:45]
Ashley Wilson
Does anyone else have a. Would you rather.
- [71:48]
Jay Scott
That is not what.
- [71:50]
Mauricio
Yeah, that's not what they get. The question was, would you rather invest in a high yield, high return in a high market, emerging market versus a low yield, low. Whatever. Whatever.
- [72:00]
Jay Scott
Okay, here, here's. Let me. I'll come back to that one, but let me. Let me give this a little bit more.
- [72:04]
Mauricio
This is a little bit more fun.
- [72:05]
Jay Scott
Okay, here you go. Here you go. Would you rather have a chauffeur drive you around everywhere you go for the rest of your life, but you hit every red light or you have to drive yourself anywhere you ever want to go? No Ubers or anything. But you will never hit a red light.
- [72:28]
Mauricio
That's what I do now.
- [72:30]
Danielle McElroy
Yeah. Number two.
- [72:31]
Mauricio
Number two.
- [72:32]
Jay Scott
Yeah. Number two.
- [72:33]
Mauricio
That was not. That was an easy one. That was.
- [72:35]
Ashley Wilson
Was terrible.
- [72:36]
Mauricio
Terrible.
- [72:36]
Ashley Wilson
That was terrible.
- [72:38]
Mauricio
Usually they're like, would you rather have $50 million or. And then some ridiculous thing and then
- [72:44]
Ashley Wilson
I feel like you could have asked AI and AI would have given you a better answer.
- [72:49]
Jay Scott
Million dollars.
- [72:50]
Ashley Wilson
You are horrible.
- [72:51]
Jay Scott
Never eat at a restaurant again.
- [72:52]
Mauricio
There you go. $10 million. Or you could never eat at a restaurant again.
- [72:56]
Jay Scott
No. Uber eats.
- [72:57]
Mauricio
No. Who said. Who takes a $10 million?
- [73:01]
Danielle McElroy
I don't really like to eat at restaurants anyways. That's the easy one.
- [73:04]
Jay Scott
Wow, I'm surprised. Five million.
- [73:09]
Mauricio
Yeah.
- [73:11]
Jay Scott
Always assume tax free.
- [73:12]
Danielle McElroy
Good question.
- [73:13]
Mauricio
All right, that's good. So let's do plugs. Jay, what do you got to plug?
- [73:17]
Jay Scott
What do I have to plug? Oh, so, Ashley, this is not a TED Talk.
- [73:22]
Mauricio
Just give your plug.
- [73:22]
Ashley Wilson
You better not take mine, because if you take mine, I'm gonna even more
- [73:26]
Jay Scott
mad at you knocking to take yours. Then I'm gonna let you go first.
- [73:31]
Mauricio
Oh, my God. So, Ashley, what are you plugging? Because I know what Kyle plugs. The same thing every time Every single week. So. So Kyle Wilson always liked to plug bad ash investor because that's what he likes to plug. So what are you going to plug?
- [73:43]
Ashley Wilson
I am not going to plug Kyle because he's not here. I am going to plug Conference Connect. So I would highly recommend you go on Conference Connect and you review conferenceconnect.com and you review limitless. Five star, by the way. Five star. And then you also review every speaker here because it gives you a chance to win one of $25Amazon gift cards. We do different awards every single month. So starting tomorrow you could win another award, but you need to give five star to limitless. And funny you should ask what conferenceconnect.com is. Jay, I can tell you conferenceconnect.com is a speaker and event discovery platform. So you can find events like Limitless, you can find speakers like Ken McElroy or Tarl Yarber and you can review them and you can figure out where they're speaking next so you can follow them. And yeah, that was a long freaking plug.
- [74:40]
Mauricio
Dania, what are you plugging?
- [74:42]
Danielle McElroy
Watch the Ken McElroy show on Spotify.
- [74:46]
Mauricio
If you're raising capital, if you're a syndicator and you want to raise capital compliantly, just reach out to coachingwithmariso.com that's what I do. Coach syndicators to raise capital compliantly. And Jay, you're out. I think Ashley took the time for both of you.
- [75:00]
Jay Scott
Okay, I'm going to plug our podcast, so Drunk, the Drunk Real Estate Podcast. So Mauricio and I every week get together with our other two co hosts who are not here. Kyle Wilson, Ashley Wilson's husband, and A.J. osborne from Self Storage fame, A.J. osborne. Four of us get together every week and normally we're a little bit more prepared and we have topics to talk about.
- [75:23]
Mauricio
We're not as drunk.
- [75:25]
Jay Scott
We drink a lot. Sometimes we drink a lot. And. And we often get into some interesting arguments and debates and occasionally shouting matches.
- [75:34]
Mauricio
Drunkrealestate.com YouTube platforms. Everyone, thanks so much for everybody coming out. I know it's late. Thanks for everyone. Awesome call.