[0:01] Welcome to Blueprint to Billions,
[0:03] leverage and legacy in apartments.
[0:06] Welcome back to Season 2 of Blueprint to Billions
[0:09] where legal strategy meets real estate scale.
[0:11] How to turn in multi-family housing strategies
[0:13] Terry Bruner has spent his career
[0:15] guiding developers, nonprofits,
[0:17] and investors through complex housing transactions
[0:19] with the focus on building both legacy and leverage.
[0:22] I'm evan Mack.
[0:23] Today, we're going to talk about what happens
[0:25] when the storm rolls in from political headwinds
[0:28] to the financial shifts.
[0:30] Terry will explain how to stay steady,
[0:32] when to pivot and why resilience can be
[0:34] the ultimate competitive advantage.
[0:36] This is when the headwinds shift.
[0:38] Terry, sir, welcome back.
[0:40] Hey, Evan, good to be back.
[0:42] Awesome, awesome.
[0:44] We built both with the wealth and relationships now.
[0:47] Let's get real.
[0:48] What happens when the winds change, sir?
[0:51] Hey, we're a family show.
[0:54] We don't talk politics on this.
[0:56] That's when things get real.
[0:59] I'm telling you, man.
[1:00] A lot of people have lost a lot of friends.
[1:02] These couple, about eight years ago.
[1:05] No, man.
[1:06] It's different, different, different time.
[1:08] You're sorry, you're sorry.
[1:09] No.
[1:10] So I think you had a question.
[1:12] What was your question?
[1:13] Yeah, yeah.
[1:14] Listen, we talked about the relationships.
[1:16] We talked about how the people build wealth.
[1:18] But what happens when those winds change
[1:20] and things get a little bit different?
[1:22] Yeah, you know, there are,
[1:26] if you've done anything long enough in life,
[1:29] you will see that change is inevitable.
[1:32] You know, I remember there used to be an old saying
[1:36] from older folks when I was growing up.
[1:38] And they would say,
[1:39] there are only two things that are certain in life,
[1:41] death and taxes.
[1:42] Well, I think they left out change
[1:46] because the only thing that's certain
[1:48] is that change is going to be a constant part
[1:51] of life's journey.
[1:53] And that includes real estate and hood work too.
[1:56] You know, I've done this long enough where I've seen
[1:59] all kinds of iterations of hood structure
[2:02] and how hood structures itself.
[2:04] You know, I think back 10, 11 years ago,
[2:06] or so, hood went through this thing.
[2:08] They called transformation where they were getting rid
[2:10] of a lot of offices and consolidating.
[2:13] And, you know, there were people who were ticked off
[2:16] about that.
[2:17] Some people left.
[2:18] Some people hung around to retirement.
[2:20] And then they, you know, got rid of some offices.
[2:22] And obviously they were consolidated
[2:24] in some of the regional offices.
[2:26] And now, you know, where we are now,
[2:28] there's kind of a new wind of change
[2:31] where certain positions are being eliminated.
[2:34] And, you know, just all sorts of things
[2:36] are different just in the broader economy.
[2:39] You know, I, the only thing I can say to that is
[2:43] don't ever get too high.
[2:44] Don't ever get too low.
[2:46] Kind of stay, you know, just stay above the fray
[2:48] and just kind of stay in the mainframe.
[2:52] And it'll all level out.
[2:54] There may come a time when that doesn't, you know,
[2:57] hold true.
[2:58] But in my, you know, my years of doing this,
[3:00] which is, you know, which is not insignificant.
[3:03] I've seen it tend to level out.
[3:06] There are ebbs and flows.
[3:07] And that's the, you know, that's the same for any of the deals.
[3:09] So, I'll just give you an example.
[3:11] So, you know, during COVID, for example,
[3:13] we were doing a lot of refinance work.
[3:16] You know, interest rates were historically low.
[3:19] We were doing a lot of deals where people were like
[3:21] cashing out, taking money out because they could get a lower interest rate.
[3:25] You know, and then two or three years after that,
[3:27] interest rates went up and then that line of business.
[3:30] It didn't dry up, but it was significantly diminished.
[3:33] One of the reasons why we've always done, you know,
[3:36] loan assumptions is because the work is not only steady,
[3:39] but it tends to, it doesn't do this.
[3:42] It just tends to even out.
[3:44] And I think if you can find, you know,
[3:47] your lane in real estate and in, and in hard work where there's a steady,
[3:52] you know, there's a steady state, it matters.
[3:56] So, what are the biggest external forces that threaten deals as a political
[3:59] as a financial?
[4:00] Because no matter what side of the political spectrum people fall on,
[4:03] I do believe, depending on who's off in office,
[4:05] things can change for you in one way or another.
[4:08] Yeah, I do.
[4:09] I mean, we've seen, you know, we've seen changes from, you know,
[4:12] from various administrations to the next and not just in recent vintage.
[4:15] I mean, over, you know, historically over time.
[4:17] We've seen those changes, you know, different administrations come in.
[4:20] There are different policy focuses.
[4:22] Yeah.
[4:23] Or maybe it's Fokai, I don't know.
[4:25] But there are different, there are different, you know,
[4:28] agendas that every, you know, every administration will have.
[4:32] But for the most part, for the most part,
[4:35] the way in which the business of HUD is conducted,
[4:39] has pretty much been the same over 30 plus years.
[4:43] And what I mean by that is, you know,
[4:45] when you process a transaction,
[4:47] it's the same general way that that transaction is going to be processed.
[4:51] The way in which loans are made,
[4:53] it's the same general process as was true 30 years ago.
[4:56] And I think you have to focus on what is steady.
[4:59] You have to focus on what's consistent.
[5:01] And I'm constantly telling, you know, our staff,
[5:04] we can only control what we can control.
[5:07] There's no sense in us worrying about what the interest rate is going to be a year from now.
[5:12] No more than we're worried about, you know,
[5:15] if it's going to be sunny or snowy on Christmas day, I don't know.
[5:19] So I can't control that, we can't control that.
[5:22] But I think to the broader point, yes, historically,
[5:27] we have seen changes from administration to administration,
[5:31] you know, create some, you know, create some pressures
[5:35] or some opportunities that we, you know, wouldn't see elsewhere.
[5:38] But I think the interesting timeframe around, you know,
[5:42] where things stand is that it's both financial and political at this point.
[5:47] The political is so tied to what we see in the market right now.
[5:51] And the market is so tied to what you see, you know, politically and economically.
[5:57] And so it's to the broader point of those headwinds.
[6:00] They're always going to be headwinds.
[6:02] Today it's interest rates.
[6:03] Tomorrow it could be, you know, rising insurance rates.
[6:06] Next year it could be, you know, next year it could be, I don't know,
[6:10] maybe the counties are charging more taxes or something.
[6:13] You know, there's always going to be some new thing that you have to account for,
[6:17] some new variable.
[6:18] But you know, it's kind of like an algebra problem back in eighth or ninth grade.
[6:21] You just saw for it however you can.
[6:23] Absolutely.
[6:24] Can you share a story about those headwinds and how they killed a deal?
[6:28] How did you push through?
[6:30] Well, so we have seen in certain parts of the country,
[6:34] a rise, for example, in insurance rates.
[6:40] So if you're building a property or a firing a property in an area that's near the coast
[6:46] or that's in a tornado, you know, kind of a tornado alley, you know, kind of jurisdiction.
[6:54] We're finding a lot of instances where insurance rates are just exorbitantly more expensive
[6:58] than they were 20 years ago.
[7:00] And we have seen deals that were, you know, that were engaged at the outset
[7:08] that in some ways could not be brought to fruition because as we say in the industry,
[7:14] it just wouldn't pencil anymore.
[7:16] Meaning we just couldn't make the numbers work.
[7:18] The principles just couldn't make the numbers work unless they got some sort of relief
[7:24] on the backside with, you know, with lower interest, I mean, lower insurance rates.
[7:28] We've actually seen those things happen.
[7:30] I'll tell you in other instances where some of our existing clients that we do some compliance work for,
[7:38] there are counties where the local taxes have increased so dramatically that it's forcing, you know,
[7:46] it's forcing the ownership to make different decisions about how they monetize that property or their properties
[7:52] and in fact, how they manage them because the carrying costs are so much more expensive
[7:58] than they were, you know, 10 or 20 years ago.
[8:02] I mean, imagine, like, imagine if this were your house, for example,
[8:04] and you budget it for, you know, county taxes or local jurisdictional taxes to be $1,000
[8:12] and then five years later, there are five times that.
[8:14] You know, obviously some different decisions are going to have to be made
[8:18] and there are only so many rate increases you can make on how much to charge someone, you know, as a tenant paying rent.
[8:26] So yeah, I've seen plenty of those headwinds, you know, come up over the last, you know, how many every years.
[8:32] And frankly, you know, we saw a lot of them during the COVID years where people, you know,
[8:38] were struggling financially in some respects, couldn't pay their rent.
[8:40] There was a moratorium on evicting people for not paying rent.
[8:46] And everyone thinks that that's a great deal and I get it.
[8:50] Sometimes, you know, you fall on hard times and people need the relief.
[8:54] But unless there's someone to backstop that, the owner of those projects, they still are responsible for paying the water,
[9:00] the electricity and all those things.
[9:02] And if they're not getting rent paid on those, then, you know, obviously there's a cascade of events that begin to happen.
[9:08] So yeah, these headwinds that we speak of, they're very real.
[9:14] Well, what's the difference between smart pivoting and maybe a panic reaction?
[9:18] A panic reaction is to just sell everything and sell everything and get out.
[9:24] That's a panic reaction.
[9:26] Pivoting means, like, here's a small example.
[9:32] If I own a 200 unit apartment complex and maybe I have, well, let's say all of them are market rate.
[9:41] But I know that in my local community, there is a glut of vouchers on the open market for people who need housing.
[9:49] So maybe a small pivot is that I allow section 8 vouchers for a limited time for not all 200 units, but maybe 20% of those units.
[10:01] And we get some guaranteed money from the local housing authority while we're working out some of the other, you know, financial issues on a particular property so that then we can ride out the storm, so to speak.
[10:15] That's an example of a pivot.
[10:17] Another pivot might be, hey, maybe there's commercial income on a property that we could be deriving.
[10:22] Maybe there's excess space that you could lease out to a business owner and generate some rent there or create some sort of opportunity where people could rent out garages for higher fees.
[10:35] Maybe you marginally raise rents to cover some of those added expenses.
[10:41] Those are pivots that can be made as opposed to just throwing up your hands and saying, I'm getting out of the business.
[10:46] Or in the case of so many of our clients, I'm just not going to invest in anything right now because it just doesn't work.
[10:51] There's always a deal to be had. You just got to go find it.
[10:56] How do you coach clients or lawyers with that are building their practices to hold steady when they have that uncertainty that's coming around the pipe?
[11:04] Well, it's so this is a strange comment coming from someone who has a course called the niche practice.
[11:10] You diversify, but you diversify within the niche, right?
[11:16] And what I mean by that is maybe, for example, let's take our practice, for example.
[11:23] We do a lot of loan assumptions, do a lot of loan assumptions, which are called TPAs.
[11:29] Maybe it's smart if loan assumptions aren't performing nearly as well as we'd like them to, maybe we go out and get some business representing small housing authorities.
[11:41] Or maybe we go out and get business representing management companies in the time being or for the time frame.
[11:48] Am I saying that that's ever going to supplant all of the loan assumptions that we do into perpetuity? No.
[11:55] But it's a way of writing the way out in such a way that you're keeping more of a steady state than you would if you were just solely focused on the one thing within the niche.
[12:06] So the niche actually has a lot of rewards. And part of them is that you can develop pretty quickly micro niches or sub niches out of the main niche that you're able to continue going forward with.
[12:18] And I would say that the same thing to any developer as well. Like maybe you can't go and do your normal 300 unit deal.
[12:26] But there might be any number of 50 unit complexes out there that can either be built or acquired at a time when people are looking to sell.
[12:34] So it's about not abandoning the overall objective or the overall goal.
[12:39] It's just about finding ways within that to, you know, to again, steady the ship so to speak, but to also continue to build while you're writing out whatever, whatever situations you're facing in terms of the internal headwinds or the external headwinds.
[12:55] So why is long term thinking so hard for most people when these storms hit?
[13:00] Come on Evan.
[13:04] We are not, we are not built to be long term thinkers. We are.
[13:10] Patience is the virtue. Patience is definitely a virtue. We are built in the moment simply to just live in a reactive mode.
[13:20] Think about your average sports team. If you lose a couple of games, what are people saying?
[13:26] Fire the coach. He's in over.
[13:31] They were talking about getting rid of Patrick Mahomes after the first game.
[13:36] Yeah, like you're three games in or whatever, four games in whatever. And you're saying, oh my god, you know.
[13:42] Is he lost his, he lost his step? I'm like, oh my god.
[13:47] Yeah, I love the, I love the conversation around Jaylen Hertz, for example, it's like, oh, this guy is a bomb.
[13:52] He lost for 100 yards. He's got a Super Bowl ring. I think he knows something.
[13:59] So, so the point is we are built for short term thinking right or wrongly. That's just the nature of humans.
[14:08] And I'm a big fan of surround yourself with people who've seen a few more storms than you have.
[14:17] And this is, I think this is where wisdom sort of takes over.
[14:21] If you are, if you are in the space and you are working on deals, go find yourself someone.
[14:27] If you've done five deals, go find someone who's done 15 or 20. Learn from them.
[14:32] Because I guarantee you what they're going to tell you is, yep, seeing that, been there, had that experience too.
[14:40] And you can glean from them certain, you know, lessons and certain pieces of understanding
[14:45] that hopefully will give you a little bit of insight to maybe not, not doing it as analogously to how they did it.
[14:52] But doing it in a way that you can learn something so you can figure out how am I going to get through it.
[14:57] I just think that if you, if you do the right calculations from a long term perspective
[15:04] and then you can backwards plan from whatever the long term, the end game is,
[15:10] you can make better choices and you can make much sounder decisions.
[15:15] If you have that, you know, if you have that timeline in a way that you probably aren't looking at when something initially happens.
[15:23] So if, for example, if you get news, I'll just take it in my world.
[15:27] If you get news that you're going to lose one of your biggest clients.
[15:30] The time to just say, you know, or the time to react in a, you know, throw up my hands and cry kind of moment.
[15:37] That's not, that's not, that's not to happen then.
[15:41] You probably should be thinking about, okay, what else do we have in the till so that we can, you know, measure this out.
[15:47] So that we can, you know, withstand this.
[15:49] And maybe you also want to go have a conversation with, you know, with the client and say like, hey, you know, is there anything we can do?
[15:55] What do we mess up on? How do we, you know, how can, how can we do this better?
[16:00] And I think the same thing applies for a real estate investor.
[16:03] The same thing applies for someone who's doing hood work is like if something doesn't go right the first time, you don't just say we're done.
[16:10] You figure out how to do the next one a little bit better.
[16:13] Maybe it takes you a little bit longer, but you commit yourself to it and you figure it out.
[16:18] So, so what are some insider lessons you've learned about writing out these cycles in real estate?
[16:26] I think number one is that real estate is really no different than the broader, the broader market, the broader economy.
[16:35] We're fortunate, those of us who live in America to be in a place where these ebbs and flows usually balance out.
[16:45] And so, if you are a student of history, yes, you know that there have been crashes, you know there have been calamities.
[16:53] But for the most part, we recover. The question is how long does it take to recover?
[16:59] And when you're in the midst of that moment waiting on the recovery, it can seem like six months is like an eternity.
[17:07] Two years is like forever.
[17:10] So, that's the first lesson I would say is like be a student of history and understand that usually it all balances out.
[17:18] And the second thing is you've got to educate yourself.
[17:22] Like being educated about what the predicate problems are that's leading to this current situation, whatever the current situation is.
[17:30] Be smart about that, be knowledgeable about that because the more information you have, the better you can plan for how to write it out and into your earlier point, how to pivot appropriately in the moment.
[17:42] And those two things from a strategy or I guess a strategy, they might be tactics.
[17:48] But those two things have really served me well as any pivots have come and as any headwinds, you know, that I've confronted throughout the time that I've been doing hood work.
[17:59] And I think that generally applies broadly. So again, the real estate market, the hood market, really no different than any of the other broader market or economy.
[18:08] I know we're in this in a microwave society, but what role does patients play here compared to these maybe quick wins?
[18:17] Well, I'll just say this, if you are going after any financing where the government is involved and if you think that's going to happen overnight, then let me just disabuse you now.
[18:29] You probably need to go find, you know, a day trade or something else is going to give you that's going to give you more instant gratification.
[18:36] That's just typically not how it works. So if that's what you're looking for, this is probably not the right environment and the right set of deals for you to for you to be working on.
[18:44] That being said though, if you are smart about what you're doing and I mean smart and not just like an academic way.
[18:51] But if you really reasoned about what you're doing, I think what ends up happening is you assess the environment and then you make the appropriate calculations for what that's actually going to mean for you and how much time that's going to take.
[19:05] So in the sense that you're waiting for something or wanting something that's instant, if you know that that's not going to be the case up front, then you've already saved yourself a lot of trouble.
[19:15] In the broader system or the broader economy, understanding that things are probably just going to take a little bit longer, but you keep your eye and your focus on the end goal and how quickly can you get to that end goal within the constraints that you're working with.
[19:29] How can resilience itself become a competitive advantage?
[19:33] Oh gosh, you know, if you hang around long enough, if you're the person in the room that's done, you know, that's been doing deals consistently, I promise you, as Ralph Waldo Emerson said, the world will make a beaten path to your doorstep.
[19:51] So there's something to be said for longevity, just lasting.
[19:55] And if you can figure out how to last, it'll be a creative team in the long run, usually.
[20:03] Absolutely. So next time we'll wrap up this season on legacy thinking, what's the mindset shifts listeners need to hear before we close out?
[20:13] I think they need to need to understand the legacies aren't built in a day. Sometimes they're not even built in a decade.
[20:20] Legacies are typically built over multiple decades, sometimes even longer, but you have to figure out you meaning us broadly.
[20:29] There needs to be some sense of what's your place, what's your part of the legacy building cycle.
[20:37] And again, everyone's got a job to do, what's your job doing it as best and as well as you can. That's the key.
[20:46] Good stuff. Thank you, sir. Thanks.
[20:51] Thank you all for tuning in the blueprint, the billions. If you're navigating HUD back development and want to elevate your credibility from day one, connect with Terry Bruner at Terry Bruner Law dot com.
[21:00] And if you're attorney looking to build a legal practice on your own terms outside the big firm pressure and into a niche that actually reflects your values, check out Terry's course at the niche practice dot com.
[21:11] Be sure to subscribe, leave a review and share this episode with anyone that might find it helpful. Thank you so much. We'll see you next time.
[21:21] Thanks for watching. Be sure to hit that like and subscribe button and leave us a review in the comments.
[0:03] leverage and legacy in apartments.
[0:06] Welcome back to Season 2 of Blueprint to Billions
[0:09] where legal strategy meets real estate scale.
[0:11] How to turn in multi-family housing strategies
[0:13] Terry Bruner has spent his career
[0:15] guiding developers, nonprofits,
[0:17] and investors through complex housing transactions
[0:19] with the focus on building both legacy and leverage.
[0:22] I'm evan Mack.
[0:23] Today, we're going to talk about what happens
[0:25] when the storm rolls in from political headwinds
[0:28] to the financial shifts.
[0:30] Terry will explain how to stay steady,
[0:32] when to pivot and why resilience can be
[0:34] the ultimate competitive advantage.
[0:36] This is when the headwinds shift.
[0:38] Terry, sir, welcome back.
[0:40] Hey, Evan, good to be back.
[0:42] Awesome, awesome.
[0:44] We built both with the wealth and relationships now.
[0:47] Let's get real.
[0:48] What happens when the winds change, sir?
[0:51] Hey, we're a family show.
[0:54] We don't talk politics on this.
[0:56] That's when things get real.
[0:59] I'm telling you, man.
[1:00] A lot of people have lost a lot of friends.
[1:02] These couple, about eight years ago.
[1:05] No, man.
[1:06] It's different, different, different time.
[1:08] You're sorry, you're sorry.
[1:09] No.
[1:10] So I think you had a question.
[1:12] What was your question?
[1:13] Yeah, yeah.
[1:14] Listen, we talked about the relationships.
[1:16] We talked about how the people build wealth.
[1:18] But what happens when those winds change
[1:20] and things get a little bit different?
[1:22] Yeah, you know, there are,
[1:26] if you've done anything long enough in life,
[1:29] you will see that change is inevitable.
[1:32] You know, I remember there used to be an old saying
[1:36] from older folks when I was growing up.
[1:38] And they would say,
[1:39] there are only two things that are certain in life,
[1:41] death and taxes.
[1:42] Well, I think they left out change
[1:46] because the only thing that's certain
[1:48] is that change is going to be a constant part
[1:51] of life's journey.
[1:53] And that includes real estate and hood work too.
[1:56] You know, I've done this long enough where I've seen
[1:59] all kinds of iterations of hood structure
[2:02] and how hood structures itself.
[2:04] You know, I think back 10, 11 years ago,
[2:06] or so, hood went through this thing.
[2:08] They called transformation where they were getting rid
[2:10] of a lot of offices and consolidating.
[2:13] And, you know, there were people who were ticked off
[2:16] about that.
[2:17] Some people left.
[2:18] Some people hung around to retirement.
[2:20] And then they, you know, got rid of some offices.
[2:22] And obviously they were consolidated
[2:24] in some of the regional offices.
[2:26] And now, you know, where we are now,
[2:28] there's kind of a new wind of change
[2:31] where certain positions are being eliminated.
[2:34] And, you know, just all sorts of things
[2:36] are different just in the broader economy.
[2:39] You know, I, the only thing I can say to that is
[2:43] don't ever get too high.
[2:44] Don't ever get too low.
[2:46] Kind of stay, you know, just stay above the fray
[2:48] and just kind of stay in the mainframe.
[2:52] And it'll all level out.
[2:54] There may come a time when that doesn't, you know,
[2:57] hold true.
[2:58] But in my, you know, my years of doing this,
[3:00] which is, you know, which is not insignificant.
[3:03] I've seen it tend to level out.
[3:06] There are ebbs and flows.
[3:07] And that's the, you know, that's the same for any of the deals.
[3:09] So, I'll just give you an example.
[3:11] So, you know, during COVID, for example,
[3:13] we were doing a lot of refinance work.
[3:16] You know, interest rates were historically low.
[3:19] We were doing a lot of deals where people were like
[3:21] cashing out, taking money out because they could get a lower interest rate.
[3:25] You know, and then two or three years after that,
[3:27] interest rates went up and then that line of business.
[3:30] It didn't dry up, but it was significantly diminished.
[3:33] One of the reasons why we've always done, you know,
[3:36] loan assumptions is because the work is not only steady,
[3:39] but it tends to, it doesn't do this.
[3:42] It just tends to even out.
[3:44] And I think if you can find, you know,
[3:47] your lane in real estate and in, and in hard work where there's a steady,
[3:52] you know, there's a steady state, it matters.
[3:56] So, what are the biggest external forces that threaten deals as a political
[3:59] as a financial?
[4:00] Because no matter what side of the political spectrum people fall on,
[4:03] I do believe, depending on who's off in office,
[4:05] things can change for you in one way or another.
[4:08] Yeah, I do.
[4:09] I mean, we've seen, you know, we've seen changes from, you know,
[4:12] from various administrations to the next and not just in recent vintage.
[4:15] I mean, over, you know, historically over time.
[4:17] We've seen those changes, you know, different administrations come in.
[4:20] There are different policy focuses.
[4:22] Yeah.
[4:23] Or maybe it's Fokai, I don't know.
[4:25] But there are different, there are different, you know,
[4:28] agendas that every, you know, every administration will have.
[4:32] But for the most part, for the most part,
[4:35] the way in which the business of HUD is conducted,
[4:39] has pretty much been the same over 30 plus years.
[4:43] And what I mean by that is, you know,
[4:45] when you process a transaction,
[4:47] it's the same general way that that transaction is going to be processed.
[4:51] The way in which loans are made,
[4:53] it's the same general process as was true 30 years ago.
[4:56] And I think you have to focus on what is steady.
[4:59] You have to focus on what's consistent.
[5:01] And I'm constantly telling, you know, our staff,
[5:04] we can only control what we can control.
[5:07] There's no sense in us worrying about what the interest rate is going to be a year from now.
[5:12] No more than we're worried about, you know,
[5:15] if it's going to be sunny or snowy on Christmas day, I don't know.
[5:19] So I can't control that, we can't control that.
[5:22] But I think to the broader point, yes, historically,
[5:27] we have seen changes from administration to administration,
[5:31] you know, create some, you know, create some pressures
[5:35] or some opportunities that we, you know, wouldn't see elsewhere.
[5:38] But I think the interesting timeframe around, you know,
[5:42] where things stand is that it's both financial and political at this point.
[5:47] The political is so tied to what we see in the market right now.
[5:51] And the market is so tied to what you see, you know, politically and economically.
[5:57] And so it's to the broader point of those headwinds.
[6:00] They're always going to be headwinds.
[6:02] Today it's interest rates.
[6:03] Tomorrow it could be, you know, rising insurance rates.
[6:06] Next year it could be, you know, next year it could be, I don't know,
[6:10] maybe the counties are charging more taxes or something.
[6:13] You know, there's always going to be some new thing that you have to account for,
[6:17] some new variable.
[6:18] But you know, it's kind of like an algebra problem back in eighth or ninth grade.
[6:21] You just saw for it however you can.
[6:23] Absolutely.
[6:24] Can you share a story about those headwinds and how they killed a deal?
[6:28] How did you push through?
[6:30] Well, so we have seen in certain parts of the country,
[6:34] a rise, for example, in insurance rates.
[6:40] So if you're building a property or a firing a property in an area that's near the coast
[6:46] or that's in a tornado, you know, kind of a tornado alley, you know, kind of jurisdiction.
[6:54] We're finding a lot of instances where insurance rates are just exorbitantly more expensive
[6:58] than they were 20 years ago.
[7:00] And we have seen deals that were, you know, that were engaged at the outset
[7:08] that in some ways could not be brought to fruition because as we say in the industry,
[7:14] it just wouldn't pencil anymore.
[7:16] Meaning we just couldn't make the numbers work.
[7:18] The principles just couldn't make the numbers work unless they got some sort of relief
[7:24] on the backside with, you know, with lower interest, I mean, lower insurance rates.
[7:28] We've actually seen those things happen.
[7:30] I'll tell you in other instances where some of our existing clients that we do some compliance work for,
[7:38] there are counties where the local taxes have increased so dramatically that it's forcing, you know,
[7:46] it's forcing the ownership to make different decisions about how they monetize that property or their properties
[7:52] and in fact, how they manage them because the carrying costs are so much more expensive
[7:58] than they were, you know, 10 or 20 years ago.
[8:02] I mean, imagine, like, imagine if this were your house, for example,
[8:04] and you budget it for, you know, county taxes or local jurisdictional taxes to be $1,000
[8:12] and then five years later, there are five times that.
[8:14] You know, obviously some different decisions are going to have to be made
[8:18] and there are only so many rate increases you can make on how much to charge someone, you know, as a tenant paying rent.
[8:26] So yeah, I've seen plenty of those headwinds, you know, come up over the last, you know, how many every years.
[8:32] And frankly, you know, we saw a lot of them during the COVID years where people, you know,
[8:38] were struggling financially in some respects, couldn't pay their rent.
[8:40] There was a moratorium on evicting people for not paying rent.
[8:46] And everyone thinks that that's a great deal and I get it.
[8:50] Sometimes, you know, you fall on hard times and people need the relief.
[8:54] But unless there's someone to backstop that, the owner of those projects, they still are responsible for paying the water,
[9:00] the electricity and all those things.
[9:02] And if they're not getting rent paid on those, then, you know, obviously there's a cascade of events that begin to happen.
[9:08] So yeah, these headwinds that we speak of, they're very real.
[9:14] Well, what's the difference between smart pivoting and maybe a panic reaction?
[9:18] A panic reaction is to just sell everything and sell everything and get out.
[9:24] That's a panic reaction.
[9:26] Pivoting means, like, here's a small example.
[9:32] If I own a 200 unit apartment complex and maybe I have, well, let's say all of them are market rate.
[9:41] But I know that in my local community, there is a glut of vouchers on the open market for people who need housing.
[9:49] So maybe a small pivot is that I allow section 8 vouchers for a limited time for not all 200 units, but maybe 20% of those units.
[10:01] And we get some guaranteed money from the local housing authority while we're working out some of the other, you know, financial issues on a particular property so that then we can ride out the storm, so to speak.
[10:15] That's an example of a pivot.
[10:17] Another pivot might be, hey, maybe there's commercial income on a property that we could be deriving.
[10:22] Maybe there's excess space that you could lease out to a business owner and generate some rent there or create some sort of opportunity where people could rent out garages for higher fees.
[10:35] Maybe you marginally raise rents to cover some of those added expenses.
[10:41] Those are pivots that can be made as opposed to just throwing up your hands and saying, I'm getting out of the business.
[10:46] Or in the case of so many of our clients, I'm just not going to invest in anything right now because it just doesn't work.
[10:51] There's always a deal to be had. You just got to go find it.
[10:56] How do you coach clients or lawyers with that are building their practices to hold steady when they have that uncertainty that's coming around the pipe?
[11:04] Well, it's so this is a strange comment coming from someone who has a course called the niche practice.
[11:10] You diversify, but you diversify within the niche, right?
[11:16] And what I mean by that is maybe, for example, let's take our practice, for example.
[11:23] We do a lot of loan assumptions, do a lot of loan assumptions, which are called TPAs.
[11:29] Maybe it's smart if loan assumptions aren't performing nearly as well as we'd like them to, maybe we go out and get some business representing small housing authorities.
[11:41] Or maybe we go out and get business representing management companies in the time being or for the time frame.
[11:48] Am I saying that that's ever going to supplant all of the loan assumptions that we do into perpetuity? No.
[11:55] But it's a way of writing the way out in such a way that you're keeping more of a steady state than you would if you were just solely focused on the one thing within the niche.
[12:06] So the niche actually has a lot of rewards. And part of them is that you can develop pretty quickly micro niches or sub niches out of the main niche that you're able to continue going forward with.
[12:18] And I would say that the same thing to any developer as well. Like maybe you can't go and do your normal 300 unit deal.
[12:26] But there might be any number of 50 unit complexes out there that can either be built or acquired at a time when people are looking to sell.
[12:34] So it's about not abandoning the overall objective or the overall goal.
[12:39] It's just about finding ways within that to, you know, to again, steady the ship so to speak, but to also continue to build while you're writing out whatever, whatever situations you're facing in terms of the internal headwinds or the external headwinds.
[12:55] So why is long term thinking so hard for most people when these storms hit?
[13:00] Come on Evan.
[13:04] We are not, we are not built to be long term thinkers. We are.
[13:10] Patience is the virtue. Patience is definitely a virtue. We are built in the moment simply to just live in a reactive mode.
[13:20] Think about your average sports team. If you lose a couple of games, what are people saying?
[13:26] Fire the coach. He's in over.
[13:31] They were talking about getting rid of Patrick Mahomes after the first game.
[13:36] Yeah, like you're three games in or whatever, four games in whatever. And you're saying, oh my god, you know.
[13:42] Is he lost his, he lost his step? I'm like, oh my god.
[13:47] Yeah, I love the, I love the conversation around Jaylen Hertz, for example, it's like, oh, this guy is a bomb.
[13:52] He lost for 100 yards. He's got a Super Bowl ring. I think he knows something.
[13:59] So, so the point is we are built for short term thinking right or wrongly. That's just the nature of humans.
[14:08] And I'm a big fan of surround yourself with people who've seen a few more storms than you have.
[14:17] And this is, I think this is where wisdom sort of takes over.
[14:21] If you are, if you are in the space and you are working on deals, go find yourself someone.
[14:27] If you've done five deals, go find someone who's done 15 or 20. Learn from them.
[14:32] Because I guarantee you what they're going to tell you is, yep, seeing that, been there, had that experience too.
[14:40] And you can glean from them certain, you know, lessons and certain pieces of understanding
[14:45] that hopefully will give you a little bit of insight to maybe not, not doing it as analogously to how they did it.
[14:52] But doing it in a way that you can learn something so you can figure out how am I going to get through it.
[14:57] I just think that if you, if you do the right calculations from a long term perspective
[15:04] and then you can backwards plan from whatever the long term, the end game is,
[15:10] you can make better choices and you can make much sounder decisions.
[15:15] If you have that, you know, if you have that timeline in a way that you probably aren't looking at when something initially happens.
[15:23] So if, for example, if you get news, I'll just take it in my world.
[15:27] If you get news that you're going to lose one of your biggest clients.
[15:30] The time to just say, you know, or the time to react in a, you know, throw up my hands and cry kind of moment.
[15:37] That's not, that's not, that's not to happen then.
[15:41] You probably should be thinking about, okay, what else do we have in the till so that we can, you know, measure this out.
[15:47] So that we can, you know, withstand this.
[15:49] And maybe you also want to go have a conversation with, you know, with the client and say like, hey, you know, is there anything we can do?
[15:55] What do we mess up on? How do we, you know, how can, how can we do this better?
[16:00] And I think the same thing applies for a real estate investor.
[16:03] The same thing applies for someone who's doing hood work is like if something doesn't go right the first time, you don't just say we're done.
[16:10] You figure out how to do the next one a little bit better.
[16:13] Maybe it takes you a little bit longer, but you commit yourself to it and you figure it out.
[16:18] So, so what are some insider lessons you've learned about writing out these cycles in real estate?
[16:26] I think number one is that real estate is really no different than the broader, the broader market, the broader economy.
[16:35] We're fortunate, those of us who live in America to be in a place where these ebbs and flows usually balance out.
[16:45] And so, if you are a student of history, yes, you know that there have been crashes, you know there have been calamities.
[16:53] But for the most part, we recover. The question is how long does it take to recover?
[16:59] And when you're in the midst of that moment waiting on the recovery, it can seem like six months is like an eternity.
[17:07] Two years is like forever.
[17:10] So, that's the first lesson I would say is like be a student of history and understand that usually it all balances out.
[17:18] And the second thing is you've got to educate yourself.
[17:22] Like being educated about what the predicate problems are that's leading to this current situation, whatever the current situation is.
[17:30] Be smart about that, be knowledgeable about that because the more information you have, the better you can plan for how to write it out and into your earlier point, how to pivot appropriately in the moment.
[17:42] And those two things from a strategy or I guess a strategy, they might be tactics.
[17:48] But those two things have really served me well as any pivots have come and as any headwinds, you know, that I've confronted throughout the time that I've been doing hood work.
[17:59] And I think that generally applies broadly. So again, the real estate market, the hood market, really no different than any of the other broader market or economy.
[18:08] I know we're in this in a microwave society, but what role does patients play here compared to these maybe quick wins?
[18:17] Well, I'll just say this, if you are going after any financing where the government is involved and if you think that's going to happen overnight, then let me just disabuse you now.
[18:29] You probably need to go find, you know, a day trade or something else is going to give you that's going to give you more instant gratification.
[18:36] That's just typically not how it works. So if that's what you're looking for, this is probably not the right environment and the right set of deals for you to for you to be working on.
[18:44] That being said though, if you are smart about what you're doing and I mean smart and not just like an academic way.
[18:51] But if you really reasoned about what you're doing, I think what ends up happening is you assess the environment and then you make the appropriate calculations for what that's actually going to mean for you and how much time that's going to take.
[19:05] So in the sense that you're waiting for something or wanting something that's instant, if you know that that's not going to be the case up front, then you've already saved yourself a lot of trouble.
[19:15] In the broader system or the broader economy, understanding that things are probably just going to take a little bit longer, but you keep your eye and your focus on the end goal and how quickly can you get to that end goal within the constraints that you're working with.
[19:29] How can resilience itself become a competitive advantage?
[19:33] Oh gosh, you know, if you hang around long enough, if you're the person in the room that's done, you know, that's been doing deals consistently, I promise you, as Ralph Waldo Emerson said, the world will make a beaten path to your doorstep.
[19:51] So there's something to be said for longevity, just lasting.
[19:55] And if you can figure out how to last, it'll be a creative team in the long run, usually.
[20:03] Absolutely. So next time we'll wrap up this season on legacy thinking, what's the mindset shifts listeners need to hear before we close out?
[20:13] I think they need to need to understand the legacies aren't built in a day. Sometimes they're not even built in a decade.
[20:20] Legacies are typically built over multiple decades, sometimes even longer, but you have to figure out you meaning us broadly.
[20:29] There needs to be some sense of what's your place, what's your part of the legacy building cycle.
[20:37] And again, everyone's got a job to do, what's your job doing it as best and as well as you can. That's the key.
[20:46] Good stuff. Thank you, sir. Thanks.
[20:51] Thank you all for tuning in the blueprint, the billions. If you're navigating HUD back development and want to elevate your credibility from day one, connect with Terry Bruner at Terry Bruner Law dot com.
[21:00] And if you're attorney looking to build a legal practice on your own terms outside the big firm pressure and into a niche that actually reflects your values, check out Terry's course at the niche practice dot com.
[21:11] Be sure to subscribe, leave a review and share this episode with anyone that might find it helpful. Thank you so much. We'll see you next time.
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