The Power of Many: Multifamily Real Estate Market with Kris German | Part 2 #875

Kristopher German has specialized in selling multi-family residential properties since joining RE/MAX Commercial in 2007. Kris consistently ranks among the Top 3 Commercial Agents within the RE/MAX Commercial National Division, and over the last 16 years, has been awarded every award RE/MAX has to offer. With a proven track record of more than 400 successfully closed transactions, accounting for more than $450,000,000 in investment real estate, Kris attributes his success to a client-centered business based on hard work, honesty, and unparalleled negotiation skills.

In his spare time, Kris has been an active community leader working with high school youth through religious and athletic outreach programs. In addition, Kris is a contributor to philanthropic efforts such as St. Jude Children’s Hospital, the American Cancer Society, and annually provides a Holiday Celebration for Veronica’s Home of Mercy, a women’s and children’s shelter in San Bernardino, CA.



In this episode:

• Is multi-family in trouble?
• How will landlords deal with having to refinancing at higher rates?
• There are 24 new laws that affect housing, how many benefit landlords/investors?
• How cities and counties stack rent control on top of the state’s limitations.
• What is The Justice Fror Renters Act?
• From historical years in 2022 to a very dismal 2023.
• Why you must be much more intentional about your investments.
• His number one rule on his investments.

The Norris Group originates and services loans in California and Florida under California DRE License 01219911, Florida Mortgage Lender License 1577, and NMLS License 1623669.  For more information on hard money lending, go www.thenorrisgroup.com and click the Hard Money tab.


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Narrator: 0:01

Welcome to The Norris Group real estate podcast, a show committed to bringing you insights from thought leaders shaping the real estate industry. In each episode, we'll dive into conversations with industry experts and local insiders, all aimed at helping you thrive in an ever-changing real estate market. continuing the legacy that Bruce Norris created, sharing valuable knowledge, and empowering you on your real estate journey. Whether you're a seasoned pro or a newcomer, this is your go-to source for insider tips, market trends and success strategies. Here's your host, Craig Evans.

Craig Evans: 0:45

Hey welcome back. Thanks for joining in today for part two with Kris German, The Apartment Dealer. So let me jump back to let's say 2020, Pandemic starts and it was a strange time in the single family market. We started with a lot of fear of you know, what's going to happen, and I never forget, within probably two weeks of that, all of a sudden, it was very apparent that hey, this thing is going gangbusters. wheels are coming off. And we're about to, we better hold on because we got to build we got to sell as fast as we can go, especially as a builder, you know, one of my companies is a building company, and we have to build us that way. You know, we saw that pricing going up about 40% Over the next two years. What did the what did the pandemic do for you guys in the multifamily space? Did you see a similar trajectory? Did it? What was it?

Kristopher German: 1:41

So you know, what's interesting is that Bruce was at my event, the fall of 2019. He and I were talking backstage, if you will. And he says, Kris, wouldn't it be interesting, if we had a black swan event? Now, Bruce just has this knack to like, see things come in. And obviously he didn't know COVID was coming. I don't think he was in cahoots with the Chinese or something. But he's talking about this. He's talking about this black swan event, that if it came, what it would mean to real estate? And I'm going well, you know, what could that be? You know, and and so it's interesting, then, sure enough, come March, here we go COVID. Now with the single family space. Oh, but let me go back for a second. So as Bruce was going through the charge, he's saying, Look, we have a problem, because affordability is very attractive. And when you look at income, income's very attractive, why aren't home selling was kind of like his question at the fall of 2019. Affordability's there, income is there. Well, what gives? And if we aren't selling homes with these parameters, tell me how we are going to sell homes. So as you, and I bring that up, because as you look at COVID Yes, of course, interest rates came down even further. But I don't think that was the biggest catalyst of people buying homes. Now, for anyone who's ever done any type of study of human behavior and what have you. My gut tells me that was, of course, a big piece of it. But you're telling me that the same person who would put on bullies gloves, a mask, you know, the whole nine, just to go get toilet paper, that same person risked life and limb to go to an open house with 30 and 40 people. So what was it that drove them to do this? And I think, again, it was a lot about human behavior, that they had been stuck in the house, they're realizing now that, hey, I live this busy life, I never you pay attention to my accommodations, but now that I've been forced to be home for some time, maybe I would like something better. And maybe I'm not gonna live as long as I thought I was going to and I'm not gonna, you know, I'm not immortal. So when you start thinking about some of these bigger ideas, and it really was driven by emotion, so people can say, well, I did it for a rational reason, that we decide emotionally and we justify rationally. And that's not me. That's Tony Robbins, anyone who studied his work and all the time it proves out, so that so that's the setup. So now let's get to multifamily. So you have tenants who now are told they can work from home? Is this new work from home paradigm? Same issue there at the apartment saying, Well, you know, I gotta be here all the time. You know, I need more space, not maybe I need a space for at home office. I can look at living further I was only living and getting gouged for, you know, LA rent prices because I had to be within driving distance of the office. But now I can move to the suburbs. And that's exactly what happened. So as rents were falling in LA County and vacancy increasing. You look at like San Bernardino County just to the east. Rental rates were skyrocketing vacancy went down to next to nothing, literally, and these counties are what 30 minutes apart, two different dynamics. And so again, people they were moved, they were looking for space, they were looking for affordability to get out of the city. And so of course, investment real estate is tied to the income, the value is tied to the income. And so rental rates are going up vacancies coming down, investors saw an opportunity, people started refinancing loans at, you know, 3%. Now they have money that they got to deploy, they can buy, you know, if now you're talking about the interest rate was lower than the cap rate, something that we hadn't seen, and I don't know how long, that's a good, you know, opportunity there but now. So everyone jumped in, you took advantage of a three and a half percent rate. Well, rates are three and a half percent anymore, some of these loans are coming due. So anyone who's reading the articles and following it, and this is one of the points I made at our educational event. Our economy as a ticking time bomb, when it comes to commercial real estate, there's something like $860 billion worth of commercial real estate loans that are coming due just this year, and next year is even more. Why is that a problem? Well, again, these individuals have a loan of three and a half percent. When it adjusts, it's gonna go to six and a half, somewhere between six and a half and 8%, depending on what it's tied to, what index and so they're not gonna be able to refinance and get the same loan dollars, they're going to have to bring cash to the closing table, they may not have the cash in the property may not cash flow at the new interest rate. So it's going to be insured. Now, of course, I think you're gonna see more of that in the office sector, retail sector, we'll see what that's going to mean to multifamily. But everybody has the same problem, I even have that on one of my own buildings, we, in 2020, I bought a building, we were able to get a loan that was interest only at 3% for three years, well, this July, it burns off our 2021, I took that loan. And so I'm looking at the as we adjust to the new rate, you know, my cash flow is going to be much different. Now luckily, I've done a good job raising rents over time, we've improved the property so I can handle that increase in mortgage, but many cannot, especially because again, we have rent control. So it's gonna be interesting what that means to the market. It's one of the seven things that I think needs to be on landlord's minds is as the top seven obstacles we're looking at right now as investors. So it'd be interesting where we go from here.

Craig Evans: 7:34

So last year in June, at our event, you were one of the panelists, you were on stage, you're talking, I remember you mentioned about how difficult it was to be a landlord at times in California, but because of legislations, and oftentimes how much they favor the renters. I know you talked earlier today about some of the legislation coming out. But where's that out in the state of California? Is it better? Is it worse? What do you see coming forward out of that?

Kristopher German: 8:04

Oh, it's only gonna get worse. So Mike Brennan, who's the eviction attorney that speaks at our educational events. He's also involved in the legislature. So he In other words, he sees the laws that are being dreamed up. And at our last event, he went through what's on the wish list, if you will, of the politicians, and you cannot imagine some of the things that these guys dream up. And if any of that were to come to pass, it would just be horrible. But where we are right now is just this year alone. About 24 laws were signed into law by our great governor, that effect just housing, 24 I bet you landlords can't name two. And that has been the way it's gone. And not to mention, not one of those are in a landlord's favor. So it's not like we're saying legislation is being passed because it's helping out the landlord, no, no no. Everything is being done to protect the landlords at the state level. Now, let's talk about the county level. County, LA County moved in and said,'Well, we know better than the state.' And in the unincorporated area, so certain cities. A part of that city is say in the county area, they have their own version of rent control. Then there's whole cities that said 'we know better than the state and the county, we're going to dream up our own rent control.' And so they've put that in motion. And what that means is like in California, the ceiling on rental increases is 10%. Some cities have rental increases as low as 3% If you can imagine so you won't even keep pace with inflation. That's rent control. But when you look at things like a new law this year, you cannot charge more security deposit than one month's rent. Well, that affects things and like I said, vacancy control is on going to be on the ballot this is a real thing. So for those of you in California look it up. It's called the Justice for Renters Act. Again, for a review, single family homes will be under rent control, and new construction will be under rent control. And if you own a multifamily property and you get a vacancy, you'll have a politician determining how much you can rent that unit for. So for those that are landlords, I suggest you speak to your representatives, email, call, do something, you know, that's been one of the problems here is that, in large part, the landlords thought that the trade organizations like the associations, the different apartment owners associations, we're going to do all the heavy lifting, but there's only so much they can do and they've done what they can and they fundraise and try to do what they can. But I've had many landlords that tell me, Kris, I went to the city meeting where the city is talking about rent control. And there's five landlords and 150 tenants, and they're all yelling at the back of the room. So who do you think the politicians here five landlords or the tenants? Number one, number two, if I'm a politician, and what keeps my job security is votes. Well, there's more tenants than there are landlords. And that's the state of affairs. So it's only going to get more difficult. And I think one of the overarching themes of our last event was here in California, if you're a landlord, you need to decide are you in or are you out. And by that meaning, if you're in then you need to grow economies of scale, because all these new laws are impacting Mom and Pop landlords, the smaller you are, the more difficult it's going to be to maneuver these things. And if you can't stomach, the laws, just as they are today, you're really not going to be happy tomorrow. And so it's probably time for you to look at your exit. Whether you go out of state, maybe you purchased like you know what you guys offer the single family homes as rentals where you guys have it? I mean, would you guys have as a great program, where it's the new construction, and you guys have the management in place and everything else, maybe people should should consider something because in California, given the politics, they can pass about just anything that they want. And so landlords need to be aware of that.

Craig Evans: 12:13

Well, I think that's interesting that you're saying that because I was even. I was speaking recently in South Carolina, at a big event. And it amazed me, I probably in the next hour after I came offstage, I probably had somewhere between 20 and 30 people that were there at the event come up talk to me that they were from California. And they're talking to me about all of the issues that are coming about to them from a landlord and they literally at their wit's end, you know, I got drums on one listen, that there's a reason the reality is to this point, I have stayed out of California with my personal investing. And I think there's some good things in the economy. There's some crazy things in the politics there. But you know, you're there, you're in the nick of in the thick of that day in and day out. For people that are listening, you just gave a few things there. But I think what would you advise landlords to do to protect themselves to get ahead of the issues, things like that, that California's legislature is bringing or may bring? I know you'll have the crystal ball. But uh, you know, I think people are looking at this issue. It's a hot, but how do they get ahead of that?

Kristopher German: 13:31

You know, so it's funny, since the passage of rent control, the number one statement that landlords have told me is, you know, Kris, before rent control, I didn't raise my rents that often because I was trying to help the tenants, and I didn't want to seem like a greedy landlord, or what have you. But now that they've passed rent control, I'm hammering the tenants and I'm raising it to the maximum or whatever is allowable year after year. So rent control does the opposite of what the politicians intent and even though they believe otherwise, and landlords just need to be aware that there's more coming down the pike, again, envision a world where let, right now we're allowed 10% ceiling in California, I imagine that won't last for long, especially since individual cities now are cutting that in half or even less than half. So envision a world where your rental increases are diminishing over time. And if this vacancy control thing passes, even you, in the rare event that you get a vacancy and this would be your one opportunity to take a unit that was grossly under market to market or above market. Actually, your new rent is going to be predicated on what the previous tenant was paying. Imagine that and so, what do you do now? What you do now is under the guise of the law, unless your city has some special rent control on place, you give your tenants a notice to vacate to do substantial improvements. It's still legal as of now it changed a little bit as of April 1, and I'll mention that in a moment. But what am I referring to here? Under statewide rent control, you can lawfully give a tenant a 60 day notice to vacate if you plan to do substantial improvements, substantial improvement being new plumbing, new electrical, they actually mentioned that in the law itself, things like this, but the work you're going to do with would cause you to pull permit. And now with the change on April 1, you actually pull permit. And you have to give the tenant a notice of the scope of work to be done of why it's going to take more than 30 days time. So, of course, this takes an analysis, what's the current tenant paying versus what you believe market rate will be? What that differential is? How long would it take you to recoup those monies in terms of the rehab cost. But rule of thumb, at least as the way that I've been told and the way we teach it as well, and what we I follow as an investor, as if you can recoup those monies in about two and a half years time, it's worth going through this substantial improvement. Now, why would you do this? Well, obviously, maybe you can't do all the units, maybe that's not you can't afford that, but as many units as you can get those units to market, so that if we, unfortunately get vacancy control or something like it, as many of your units in your portfolio that you own, as you go forward. And even if they lower rental increases, say to 3%, while he says 3% of a higher number, not 3% of a rent already, that's 50% below market. So most of what I own, I would say probably 35% of my units have all been turned and are above market rental rates. It comes down to cash flow here in California, given the risk involved the complexity of being a landlord, not to mention your time and money you have invested, I believe you should have the greatest return possible on that investment. It comes back down to cash flow, the cash flow is going to impact your equity, your equity is going to impact how much growth you can have over time, whether that be you know, taking out equity, buying other properties, doing 1031 exchanges, it's gonna matter in your later years seeing you through your retirement, and then when the kids inherit the property, whoever the heirs are, you can only imagine given inflation, what else how much money, they're going to need to be able to replicate the same lifestyle that you've enjoyed. So any growth that you do today, your heirs definitely will thank you for and the work you do on the rental rates, it'll mean that much more equity, net wealth you've passed on to them and monthly cash flow. These are some of the things I think investors should be thinking about.

Craig Evans: 17:40

Yeah, and as you're sitting there talking through that, I can't remember in the multifamily space, because I know there's some stuff that just changed on the 45L credit side of things. And I know this is more of a tax situation. But I know if I remember right, those two changes that just came to that space that allow multifamily to take some of those credits for some of the major upgrades, especially when you're talking about mechanicals, things like that. So that'll be an interesting play to see how some of those things shake out as well within some of the credits as well. So, you know, because I remember when I owned when I had probably 35-40% of my portfolio was multifamily. This was 20 plus years ago. I noticed how inflation at that time and the way it was tracking through then seem to affect my multifamily a little more than it did my single family. Do you see that as the case? Well, I don't even know if that's a question you answer, because you don't deal with a lot of SFRs. But you know, with that process, how closely are you monitoring fit? And I know you talked about your prediction with the fed on their rate changes, things like that. But where do you see the basis of inflation against multifamily in the state of where things are at today?

Kristopher German: 19:11

So if you look at here locally in California, the markets that we service tenants are utilizing about 60% or more of their discretionary income to pay for rent. So historically, rule of thumb has been that inflation is good for real estate and drives values because it should drive the rents up well. The one issue we have, at least here recently is that we had historic gains when it comes to rental rates in 2020 and 2021. The biggest growth that we've ever seen ever in history. So we took our rental rates to the hilt, and then inflation came. So tenants were already being stretched on the rental rates now at the grocery store and elsewhere. You know since the new presidency inflation has gone up at least say 20% or more depending on you know who you're talking to, or who's lying to you. But that the point is tenants are being, they're stretched. And we see that rental rates have pulled back a little bit, we've seen a vacancy increase a little bit. So if inflation were to continue, now, at the same time, you may have hurt here, fast food restaurants, they had to take their minimum wage to $20 an hour. So I guess, you know, in that respect, you know, maybe some of that money should flow out and should affect things. From what I've read, that means that there's only going to be more layoffs. But I mean, we'll see. But I just don't know that it's gonna, again, inflation will be as much of a gift to real estate, as it typically has because if anything, our clientele, the tenants, they're being eaten alive, you know, with the state of affairs as it is. So, you know.

Craig Evans: 21:02

Well, that's all I wanted to ask you, you know, because I was looking at their own stuff as well, you know, the rates were already being raised pretty early, especially in through COVID when everything the supply and demand factor was kicking in, and rates were already climbing. Then once you know, inflation hit a little different scenario in the markets that we're in, but in the markets is you're in once the inflation really started kicking in what have you guys seen in relation to the evictions in the multifamily space?

Kristopher German: 21:34

You know, while through COVID, we saw a big jump in evictions, of course, because of all that meant, you know, and some of that was fueled by the politicians because essentially, they were saying, 'Hey, Mr. tenant, you don't have to pay rent.' And so those that assumably could decided not to and then got burned by that because once things changed, and then many of them were met several months behind couldn't make up the difference. And so we've seen a big uptick in evictions to where we are today, I would say it's back to business as usual. Landlords are collecting the vast majority of their rent. And at least you know, that's the case for me and I haven't really heard a big you know, outcry from our clientele saying, you know, Hey, Kris what gives, you know, a lot of people are behind, tenants are paying. But at the same time, I don't, well, I just read a study, they looked at the 12 top metros, Los Angeles is only slated to see a 1% increase in rental rates this year. And that goes back to because again, we had these historic gains, it's hard to push the rents any further at least for the time being. And so if an investor is smarter landlords smart, you take a look at, you know, what the rental rates are in the local area. Maybe you pause your rental link, you know, if you're already at market or above market, like we are with some of our properties, you might take a pause and say you know what, you don't just raise it for the sake of raising it because you might find yourself with a vacancy. And so you have to just, you know, just know your market. You know, people can use tools like Rentometer, or Zillow to take a look at, you know, what the rental rates are and just be smart about your rental increases. At the same time. I'm not saying don't raise your rents for most of you raise your rents, because I know that your rents are well below market, but for those of you that have been proactive, now's the time of caution.

Craig Evans: 23:29

So, you know so much about the multifamily space because of the size and scale, which you talked a few minutes ago about the financing of it. You know, it's a different game on how you finance, multifamily considered to or in the consideration to SFRs from a single family to multifamily space, you know, based on where interest rates are at now, things like that what's the kind of the talk in your town, the chatter in your world in relation to new deals coming forward, based on where rates are at right now? Are you seeing as much are you seeing that people? Is that even slowly? I guess maybe the second part of the question, are you seeing as much action going are people slowing down transactionally because they have to bring more cash to the table?

Kristopher German: 24:18

So last year was a just a dismal year. And which is interesting, because the year prior at least for me personally was a historic year 2022 was a historic year. 2023 our business got chopped, like in half. Now half of my business is still pretty good most people would you know, Kris, what are you crying about? But with respect to if we're talking about just the flow of inventory, first quarter this year, we started out very strong. We've had a very good first quarter. But now let's take a look at those sales. Many of those individuals by least again my personal sales were individuals exiting real estate altogether. You don't like the right, now, these are individuals that have been in the market for some time. So these are not say, individuals your age or my age, and they're saying, oh, you know what I'm folding, you know, folding, forget it. No, these are individuals that have been in landlords for some time. And they're saying, You know what, this isn't what I signed up for. This is not the world of investing that I knew two decades ago. Now, the pendulum that used to be in the favor of landlords has definitely swung in favor of the tenants, especially here locally. And so I'm out, now in getting out. And we talked about how the interest rates impact things. And it impacted the value of the properties that they sold, of course, because they didn't do a good job keeping up on the rental increases. So again, the new buyer coming behind them is saying, 'hey, great building, but I'm taking on, for all the same reasons you're selling, I'm taking on those headaches, so I need a certain rate of return.' Now look at the market at large, it is somewhat slow. We just I just had my staff, the end of last week, hey, let's take a look at what's sold first quarter the corridors we work, what's pending, what's active. I mean, it's nothing to write home about. And again, it's this reality of of landlord saying, I'm not comfortable lowering my price or my price expectations because of interest rates. And they're not if they don't have a need, they're stuck somewhat staying pat. But for those where the loans are coming due, they're having to refi the cash flows getting hit. They're the folks that are saying, okay, yeah, I need to relook at things because it's about your rate of return, you'd be surprised when we evaluate properties for clients, the average rate of return on equity, return on equity that we see is about 4%. They think it's much higher, they think, 'well, how can that be my, you know, my tax basis is low, my property is free and clear?' Well, exactly. So your rate of return because you haven't done great on the rental increases is safe, about 4% that shouldn't have. I mean, you could take your money out and put it in treasuries, bonds, put it in a high yield CD and have no tenant worries for five to 6%, right. And here you are. So you know, these are things that people are contemplating too, especially as things readjust and saying, okay, maybe I need to do something differently. But yeah, it is somewhat slow. Interest rates are definitely the culprit, because it's not vacancy buildings are full. It's not rental rates, because we're still riding on the waves of historic gains. So what is it, it's the interest rates, people are not excited about, you know, as of today, somewhere between six and a half 6.7%. And we really are at the line in the sand, if you look at what's taking place over the last few days with treasuries because commercial real estate is large and part time, you know, where the treasury market is. We are at a line in the sand where we could see seven again, as much as I fear what that would mean, and maybe even higher. So people right now that are like, 'No, I'm gonna wait for that decrease in June that the Fed keeps talking about and then I'll refi or then I'll lock or something.' Your Savior may not be coming. And so you might want to take a look at what reality is today, because you might, again, I'm not an economist, these are just from their sources that I respect and what I'm looking at and reading. This is what I'm, you know, this is what I'm being told.

Craig Evans: 28:45

Well, you know, one of the things I think that is so interesting, and I hope our listeners hear you say today, you've talked so many times about multifamily landlords that have not kept up with rent increase. It's easy to talk about and blame the rent game that rents are so high because I think you and I probably both seen a lot of that to where, as you said, the small mom and pop investors and landlords, they have not always kept up with what current rents are, should be, you know, what is that going to affect and do to their portfolio down the road from a finance perspective or from a value perspective, and they end up getting caught. And I think that's one of the things that as I've sat here and just kind of reminding myself through that was one of the things we had to manage in our own portfolio a lot more aggressively, you know, because it's easy when you've got a bunch of SFRs you can start picking and choosing when you've got that multifamily conglomerate that you got to start working through and rental increases. It's a different animal, and what I've seen with so many people is they would oftentimes get comfortable in the magnitude of money that came out of the one product and got blinded by the aspect of see a windmill, there's a lot of money, there's a lot of cash coming there. But is it true positive cash flow. And I got, I got lost in that and didn't raise their rents when they really should have.

Kristopher German: 30:10

But one of the points I make to investors is, that worked two or three decades ago, you could have bought in and buy just about any property three decades ago, and you wake up today a millionaire, not knowing much not doing, you know, intense studies annually on your rate of return, you would have done just fine. There wasn't much law to really navigate and so forth and the politics but it's a much different world today, you have to be much more intentional, or use that word intentional about your investments here locally. Because it's a different paradigm. And for those landlords that are like, 'Well, I just don't want to be seen as a greedy landlord.' Look, I just took a client out and a lender out to dinner to a nice steak house here locally. Now, when I made the reservation, I know what I signed up for that eating there was going to mean, about double than if I went to say an average Steakhouse. But why did I do it? Because of the ambiance, the food, the quality, what that means to our brand. We'd like to deliver service. So I was embarking at that steakhouse saying, 'Well, you know, after all, you know there's inflation and people are being eaten alive. Don't you guys think you should bring down the price?' No, you get what you pay for. So when it comes to rentals, you are agreeing the landlord if your units are all beat to hell, and there's leaks everywhere, and they just, you know, they're not appealing to the tenants. Yeah. And if you're trying to get market rate at the same time, you're a greedy landlord. But if you've done and stayed on top of capital improvements, your property, you would want to live in your own property, let me put it that way. I'll shorten my comments. And this is what the rule that my wife and I live by, if you had live in your own rental, then there is no problem with you asking as much rent as the market will bear because you're that high quality Steakhouse. And if they don't want the high quality Steakhouse, there's options in the market, they can go and rent somewhere else where the landlord doesn't care as much. And he's more or he or she's more of the first example that I gave, but have a good quality product that you're offering focus on your capital improvements, modernize your units, because millennials are the, biggest segment of the rental population today. And here locally, these folks will give you money hand over fist, if you're giving them a nice modernized unit in a safe community, that they feel good about bringing friends and family over to entertain, they'll gladly pay you you know, on average, we get 10, 15% above market rate on our rentals, because we've gone the extra mile with our capital improvements. And I think it's just up until now it's been a winning approach.

Craig Evans: 33:06

Well, Kris, listen, I know I'm sucking up a lot of your time if you can. I got two other questions. I want to ask you if that's all right?

Kristopher German: 33:14

Anything for Bruce or anyone that's affiliated with him. So go ahead.

Craig Evans: 33:18

So, you know, when it comes to forecasting in the multifamily space, you know, Bruce, The Norris Group has always mentioned you as kind of a go to in this world. What would what could you tell our audience about how multifamily and how you believe multifamily will fare the rest of this year, and kind of for the next few years?

Kristopher German: 33:37

So having given my comments, I want to be clear, I'm not suggesting sell everything you have. I'm not selling everything that I have. Now, I'm in a different position and I acknowledge that because I literally have the bat line to anyone I need to call attorneys, eviction specialist, whomever it may be. So I get those answers fast and free. I realized that that's not the case for everyone. If you go to our YouTube channel, you'll get a lot of fast and free content there. That's a lot of the same. But the reason why I bring that up is because again, I'm not saying I'm not suggesting sell everything. This is not a doom and gloom forecast that I'm giving what I'm saying is intentional, I want to I think I'm gonna live with that word, you have to be more intentional about your investments. So going forward. In the words of Jim Rohn, it's gonna be about what it always has been in the sense that the market is going to have cyclical cycles, ebbs and flows in the last go round in 2007, who would have thought that the residential market was going to collapse other than Bruce, who would have thought that the residential market was going to collapse at the great degree it did. Interestingly enough, you know, one point I wrote down here for our conversation is treasuries on Monday popped to 4.63 you know, the last time they were there, June, no the fall of 2007, just before the financial crisis.

Craig Evans: 35:04

Right.

Kristopher German: 35:06

Things to be aware of you got to be intentional. So the forecast would be those that are intentional with their investments, and those that are business minded those that have attended to the financing on their properties and they've they've, you know, taken a look at what do these rate adjustments mean, or potentially mean? You should do just fine. And there's going to be opportunities coming up, there's going to be individuals, unfortunately, that have to sell. And that's going to be a great time, if you have some dry powder that you've been sitting on a great time to deploy it and take advantage of it because again, people need a place to lay their head, housing is always going to be needed cannot be taken out by AI, Jeff Bezos or anyone else. And overtime, historically, values have gotten up rental rates have gone up, vacancy stays about the same or goes down. And so it's tried and true. But at the same time, it's not something that you can dabble it. You're either in or you're out at this point. Understand the politics of the state, what the laws, are you familiar with the laws, and capsulate yourself with a network of professionals that can help you in these various areas. And maybe values will go down, maybe they will go up, a lot of this is going to fall in rise on interest rates. Of course, just you know, we need to watch interest rates. If, and I hope I'm wrong, if rates come down, and we see high fives I think just high fives would not like a high five but high 5% interest rates, that will send the market ablaze because people want to be involved. They believe in multifamily here locally. Right now we just have this challenge no different than I remember in 2010 one of my mentors in this space at Kris call me when apartment buildings go to 100,000 per unit. And I thought 100,000 per unit? You know, like What planet are you living on?' Well, the next caller, that gentleman was 'Sir, I just listed a 20 unit building for $2 million. Do you have interests?' 100,000 unit he had nailed it. And so again, there's going to be opportunity here. And again, you know, it's going to be about what it always has been.

Craig Evans: 37:25

Well, I think you answered my last question, but I'll see if you've got anything else I was gonna say. If you're talking to every multifamily investor in California, what would be your last message to them today?

Kristopher German: 37:42

I think taking the fact that, if you're an investor, and you own multifamily real estate or on the I'm sorry, investment, real estate, you're in the top percentage of the citizens of this country wealth wise, and just take that in and be appreciative of that, because there's for the vast majority, they're not in that position. There's plenty of people hurting right now that because we're in this position, they need our help. So what I would say, be grateful for while maybe it's not ideal, because of the politics and wreckage. And again, I get all that but big perspective, you know what, compared to where we could be somewhere else, or another country or even in this country, but coming from different financial means. I didn't come from money, you know, my wife and I have built what we have be grateful. Beyond that. I would say be intentional with your investments. The days are gone, where you can be laxa daisy and complacent. You have to be intentional, that that pendulum now is in attendance favor probably is going to stay on that side with tenant protections or what have you. Learn how to navigate that stay informed. Yeah, and focus on that financial legacy. In my opinion, it's three pillars, you're there maximizing your current investments, focusing on capital improvements to get the rents up, we spent a lot of time there, then you focus on growth, economies of scale, so that no matter what they dream up, you can handle it financially and otherwise. And then if you're in your later years of investing, is it cash or properties you want to give to the kids? Are the kids want to be landlords? Do they want to be business partners? Do you know what that means? Have you had that conversation? Do not just drop it in there lap because then they're gonna come to me, except they're gonna also have lawyers at their side. And that's probably not where you want things to be. So you know, had that conversation, so.

Craig Evans: 39:36

Kris, listen, before we sign off. There's one thing I want to touch on. And we haven't gotten any space in here for this. So I just want to ask you personally, if you can, if our listeners that want to find out about you, whether it's your YouTube, other social media, how do they get in touch with you? How do they tie into you?

Kristopher German: 39:52

So yeah, social media, so I would say best place to go first is our YouTube channel. Youtube.com/theapartmentdealer, I have probably a couple 100 hours now worth of free educational content there, much like this where we're going out and interviewing people in the investment real estate space. So Youtube.com/theapartmentdealer. And then Instagram if you go there, which is going to be also Instagram.com/theapartmentdealer. Don't worry, I'm not posting what I had for lunch. And like all this, you know, it's real estate specific. And a lot of times you'll find there snippets of the longer content that's on YouTube. So if you only have a limited amount of time, you're gonna get the you know, the talking points, if you will on our Instagram. And that that probably helped the viewers out the most.

Craig Evans: 40:45

Well, that's awesome, Kris, again, I can't thank you enough for being with us today. Thank you for spending your time I'm grateful for you giving us your time and your knowledge. You've given us a wealth of information. So to everybody listen, thanks so much for being here today. And we can't wait to see you next time. Have a great day.

Kristopher German: 41:00

Thank you.

Narrator: 41:02

For more information on hard money loans, trust deed investing, and upcoming events with The Norris group. Check out thenorrisgroup.com. For more information on passive investing through the DBL Capital Real Estate Investment Fund, please visit dblapital.com.

Joey Romero: 41:21

The Norris group originates and services loans in California and Florida under California DRE license 01219911. Florida mortgage lender license 1577 and NMLS license 1623669. For more information on hard money lending go to thenorrisgroup.com and click the hard money tab.