2207: The Art of Negotiation: How to Get the Best Deal on Real Estate with Brad Smotherman

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Hey Jason, just wanted to send you a quick message of gratitude. So grateful that I got into the game and got in with properties that make sense because the rent income keeps coming in. So thank you. Glad we connected and I'm glad to be in the income property game instead of the Wall street game for my future.

Welcome to the Creating wealth show with Jason Hartman. You're about to learn a new slant on investing, some exciting techniques and fresh new approaches to the world's most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine, self made multimillionaire who's actually been there and done it. He's a successful invest lender, developer and entrepreneur who's owned properties in 11 states, had hundreds of tenants, and been involved in thousands of real estate transactions. This program will help you follow in Jason's footsteps on the road to your Financial Independence Day. You really can do it. And now here's your host, Jason Hartman with the complete solution for real estate investors.

Welcome empowered investors. This is episode 2207. Thank you for joining me today. We've got a great guest to provide some good insights on the marketplace and that'll be coming up in a few minutes. But first I wanted to show you this new report and this shows you the number of new listings per month from realtor.com and if you are not watching on video, what you are seeing here or visualizing on this chart is that the inventory growth is dramatically lower this year than it's been since any year except last year. Last year we did see fairly similar inventory growth to what we see this year, but we are still dramatically lower than 2019, 2020, 2021, even back to 2017, 2018, okay. And 2022. So we are seeing much lower inventory growth as we continue to see the lock. In effect, sellers do not want to sell their properties. And that's the situation. We have nothing really new here, but this is different than what we usually talk about on the show. We usually talk about the overall aggregate inventory, which stands at about half of normal right now. But this shows you the number of new listings coming on the market per month now compared to this year, because we're not just comparing to prior years, but let's compare it to this actual year. At the beginning of the year, we saw only about 300,000 in terms of this inventory. Now we are seeing a Higher number, but still not the peak. Inventory growth the past four months has declined and we're seeing fewer people put their homes for sale. And overall, that's this year. And then fewer overall compared to prior years. In fact, dramatically fewer compared to many prior years. Only about half of the inventory we saw in 2017, 2018, 2019 in terms of number of new listings per month. So I thought that'd be interesting. Okay, look, I got a trigger alert for you. Before we get to our guest, I gotta go through something and I'm giving you fair warning. It's a trigger alert for those of you listening. And I know some of you are listening, and I thank you for listening because we love all listeners, but some listeners and some viewers are less informed than others. And some have big bias. You know, there's that bias tendency, right? And that really hurts our ability to reason and understand and see things that are right in front of our face. Now, what was right in front of our face? Well, just last night, right in front of our face was the presidential debate. And if you looked at. And by the way, you know, of course, the mainstream media, the lamestream media, is not reporting on this. And you know, a lot of people will say, oh, it's bogus. It's just a conspiracy theory. But let's look at the actual evidence, okay? Kamala Harris in the debate last night, her earrings look exactly like an earring. That is an earbud that allows you to talk and to listen just like your Apple AirPods or whatever. But it's an earring and it looks pretty cool. It looks just like a normal women's earring, okay? It's called the Nova H1. It's an audio earring. The first and only wireless earphones embedded in a pair of pearl earrings on gold or silver plated clip. It is exactly like what Kamala Harris was wearing last night. And you know, she usually sounds like pretty much a blithering idiot. A laughing hyena. Okay? Not that I have an opinion about this or anything, but she does. Okay? Objectively, she sounds like a laughing hyena. She avoids every question with laughter. Probably because she's had a drink or three. And she was pretty good last night. I mean, she was pretty good. She tried to imitate Dr. Martin Luther King, who would be totally ashamed of her, by the way. Instead of I have a dream, she.

Has a plan, but nobody knows what the plan is.

But she has a plan, but nobody knows the plan. I have a plan that one day, I have a plan.

I have a Plan.

She kept saying that over and over and it was pretty ridiculous, but she sounded pretty good. I got to give her some credit. Now, who was in her ear? Who was her Cyrano de Bergerac. Right. And if you're looking on video, you see the images of these Nova H1 audio earrings. I looked them up, I went to the source, I went to their website and I got all the screenshots for you. And then I've got a screenshot from the debate last night. And it is exactly the same earring. Okay, here's another picture for you or a couple more pictures for you. You get them on gold or silver and they're basically AirPods, but they look like an earring. And here's another close up. There is our presidential candidates here, close up. And there is the Nova H1 audio earrings from the website. Close up. It's an exact match. Exact match. So was that Obama coaching her as to what to say? Was it one of her aides, her chief of staff, who was telling her what to say? Because she just came off pretty darn good. I gotta give her credit, or I really should give credit to her coach. Maybe Obama. Who knows? I kind of think it might have been Obama. She sounded Obama esque last night and he's a pretty good speaker. You gotta give him credit for that. So Elon Musk posted this on X and he said, vote for Kamala if you want this to happen in your neighborhood. As 20,000 non citizen Haitians destroy a town in Ohio and reportedly kill and eat people's pets, here is the border czar, Kamala Harris, bragging about allowing them to flood into our country.

We extended temporary protected status to over 100,000 Haitians. Folks, how could you interpret this is anything other than treason? Your own vice president and scarily maybe your own president literally working against the wishes of their own citizens. It is truly shocking. We are under attack. We are literally under attack. Here's another story. Daily Mail, right? Two illegal Honduran migrants are arrested after shooting down a bald eagle. Now think about the symbolism of that. The American bald eagle, right? That's the iconic American animal symbol shooting down a bald eagle that they planned to cook and eat in Nebraska. As sheriff reveals, the local community is in uproar. And you know, Marie Antoinette said, there's no bread, let him eat cake. To show her complete disconnection from the French people at the time leading up to the French Revolution, she got her head cut off. But in today's world, we don't do that anymore. We just promote people and give them real credit. I mean, this is a person that is completely fabricated by the media. It's a person that her own party never liked. It's a person who was literally in the dustbin of history until the media turned her into something. She is a nothing with virtually no accomplishments. It's absolutely unbelievable. So there's the meme of let them eat cats with Kamala in the Marie Antoinette style dress. It's really something. And then look at this. You think about the criminality in our government. It is just so disappointing. BA's Biden family members have 22 businesses with 233 bank accounts, 175 LLCs and they have not made one product or service. Wow, talk about a bullshit economy and businesses. Now I guess you could argue that Hunter Biden sells his ugly overpriced art or fake money. And the art market, by the way, if you want to learn about where.

There'S a lot of fraud and a.

Lot of really funky dealings, go to YouTube while it still lasts before they censor it. And look up the art market is a scam. If you want to learn some stuff, really interesting stuff about the way wealthy people and corrupt people launder money through the art market, it is really fascinating. There are a few videos on this that I've seen. It's quite fascinating. The art market is a scam. Maybe use those keywords. You find some really interesting stuff there. Okay, that's it for my intro portion. Thank you for suffering through my for those of you who were triggered, but you just got to report the stuff that the mainstream media is not reporting. And I encourage you, if you hated me saying that, if you have such a bias against the facts, really, please open your mind. The left is supposed to be the open minded, tolerant group, but there doesn't seem to be much tolerance for contrary ideas. I'm just saying.

It is my pleasure to welcome Brad Smotherman to the show. He is an expert on creative financing, a podcast host, and he has done about a thousand deals and he is looking for that cheap money that exists in the mortgage market. You know, I've talked many times before about how around 25% of the country has a mortgage at or below 3% and about 65% of the country has a mortgage at or below 4%. So it is a phenomenal opportunity if you can take over those cheap mortgages. Brad, welcome. How are you doing?

Very well, man. Appreciate you very much for having me on.

It's good to have you and you're coming to us from the Truman Show.

Right, from the Truman Show. Seaside, Florida. Here we are.

Yeah, good stuff. But you are from Nashville and you've seen Nashville grow a whole bunch over the years, of course. Do you want to speak to that? Just before we dive into.

Well, you know, being a real estate guy, you know, I have mixed feelings about it because it's been very, very good for our company and very good economically for the area. But also coming from an agriculture background where we were farmers, you know, the life that I remember growing up really doesn't exist in that market anymore. So like with every change, there's good and bad with everything.

Yeah, yeah. But you know, this is really, folks, I mean, just think about it. This is what happens when you have this massive housing demand. I was on our empowered investor pro zoom meeting yesterday and presenting some population stats. And you know, just since, you know, the early 80s, I mean the population has increased by like 120 million people or something like that. So there is just a giant demand for housing and people have got to live somewhere. These population stats are probably understated with all of the illegal immigration going on. And plus, you know, we're halfway through the decade and the census is only every 10 years. So let's keep that in mind as well. So a lot of housing demand. Brad, give us your kind of outlook on the real estate market, if you would. When I say that, I'm probably talking about the for sale market, the buyer and seller demand and supply levels. But then I also want to do a part two of that question. Talk about rental demand and what you see there for sure.

So I think it's interesting times in the market and I appreciate you prefacing the question with the sales side of the market because everybody's like, well, is it a good market or a bad market? It depends on if you're a buyer or a seller in that market cycle. And so everybody really looks at a good market as being from the seller side of the market. And I think we're in really interesting times. You know, right now at the point that we're recording this. It's really right before the election. I do see that the election begins to put a hamper on buyer demand. I really saw this for the first time significantly in 2016 and we had stuff going on the market in areas where, you know, we actually bet over under whether we were going to have more or less than 14 offers on a house going on the market. It sat for 30 days and we didn't get. Yeah. And it was right before that election in 2016 and then it ended up going multiple offers and closing in December, you know, so it's very, very interesting that I saw that for the first time and I am seeing that again. But it's a really strange market, man. And I think you would agree with this because we're, we're hyper under supplied, population's growing. So those are really, really good macro metrics. But we're also in, you know, on a ten year curve, a higher inflation, inflationary environment, higher interest rate environment. Jobs seem to be a little bit, have a little bit of pressure in terms of the jobs market and it's softening up a little bit. And so. But this inflation has really, really hurt people. And you know, on our purchasing side where we're, we're purchasing from motivated sellers and we're seeing a lot more financial distress than we've seen in a long time. So I think that it's a really interesting market. I think any time you hold something for 10 years, you're going to be to the best. And I still believe that. I still think that real estate is the way to go. Do I feel like we may have leveled in terms of pricing or potentially maybe may dip a little bit in some markets? I do think that, but it, it really depends on the market. And this is where we just come to buy really, really good deals.

You know, the infamous George Soros has this philosophy, you know, that he's done really well with. It's called reflexivity. And this isn't exactly what he talks about, but I sort of liken reflexivity to what people tend to forget when they're trying to sort of forecast the market or figure out where things are going is they forget about the way the central planners are going to react. And this is how a lot of people got it wrong during COVID Even, you know, my friend Ken McElroy that we're partners in a mastermind group that we run together. And, and you know, he admitted he got it wrong because during COVID you know, he was saying the market is over, it's dead, you know, don't do anything. This year there were all these, you know, very doomy videos. But later he said to me, you know, what I didn't really consider well enough is how the Federal Reserve would react to the crisis. And of course, you know, they just massively pumped the market with money and Jerome Powell became Helicopter Jerome. You know, they talked about with that with Ben Bernanke. Helicopter Ben was the saying there that he would just dump money from A helicopter to fix the economy. That's the thing we're seeing right now. Right. The Fed has announced that they are going to pivot. Right. And just take a look at this. I'm going to give you something to some thought. Look at this. We took a baseline interest rate of 7%. Right. And of course rates are a little lower than that now, thankfully. It's about time. But we started with that as a baseline and said, look, look, if it goes to 6.5%, how many new buyers can qualify for the median price home? And the answer is 2.8 million. And then if it goes to 6%, how many new buyers can qualify for the median price home? And the answer is 5.4 million. And then if it gets way down to 5.5, which by the way, Fannie Mae is predicting.

Right.

Okay, well, I don't know if they're going to be right or not. I mean, you know, the Fed is really in control of that. But that's 7.7 million new qualified buyers who can afford to buy the median price home. And you look at something like this and just think, there's only 700,000 homes for sale in the country. I remember, Brad, you, you know, a moment ago you were talking about, you know, you would make bets with your, your team. Are we going to get 14 offers or more or less? You know, you know, when you see stuff like this, just comment on it if you would.

Well, it's really interesting. I'm concerned about the buyer side of the market. You know, I have an employee at my office and she just bought her first house. She spent $250,000 for an 800 square foot house that needs work across from.

A cemetery in what city, by the way?

In Nashville.

Okay.

And so, you know, when I look at my first house is 150,000 and 2200 square feet in a good neighborhood, you know, and, and how difficult it is for, for people to come up. And you look at the average American, a lot of their wealth is held in housing, you know, their primary residence.

So made in their housing.

Correct?

Yeah.

Great wealth building tool that a lot of people, seniors cash out with reverse mortgages or sell and go to assisted living and use that equity to live. And you know, the ability that people have to, to accomplish that is continually being squeezed. And I have a deep concern for buyers in the market that. Yes, I mean, as the money gets cheaper, that's great. There's more affordability in some aspects, but in other aspects, I mean, people are being priced out of the Market completely. And I think that going back to a 2021 market where it was common to waive appraisal contingencies and home inspection contingencies just to get into something was a really difficult place for, for a lot of people to be.

The only way that this crunch will be solved is to simply build more houses or have less people. That's it. It's just simple supply and demand. And we are massively undersupplied in this country. You know, of course the estimates vary, but we're just massively undersupplied from the investor side. It bodes pretty well for the rental market. It also bodes well for appreciation, of course. What are your thoughts on the rental market? When see very typical rents being $2,000 a month or more, that's a change.

But it is a change and it goes back to the, the staple. If you buy well and hold, then you're almost always going to be okay. I try to stay away from the words always and never if I can. So you're almost always going to be okay. But it goes back to affordability. I don't know how the average family does it, you know, and I look at the, the people that we have working for us and, and I try to pay people more than what they could probably make out there in a similar position, number one, because that serves me best. And I'll have to continually train people because we keep people. But at the same time, if people bring the value to the company, I want people to make money. I have a deep concern for the average American right now with these prices inflating. But it's a great time to be a landlord if you've held these properties for more than five years.

Yeah, yeah, no question about it. But Brad, you see this pressure on housing and I think the answer to the question is people will just simply have to learn to accept less. You know, we've all sort of got it in our heads and I think the baby boomer generation taught us that, that, you know, this idea of the American dream, a house with a white picket fence and a nice suburban neighborhood and, you know, that's just not the world anymore. You know, it's, it's just different. It's kind of like moving from, you know, say, moving from Nashville, because we'll use that as an example to New York City. Of course, when you move from a low price market to a very high price market, you're going to have to learn to accept a lot less than you got before. You know, whereas in Nashville, you might get a four or five thousand square foot house. And you know, that same maybe million dollars buys you a 650 square foot apartment in New York City. Right. And that's the way it is. That's what gives. When economists try and predict the market and say, you know, housing is just unaffordable, the market's going to crash. Well, not really. People capitulate, they make different decisions. They just get the best thing they can at the time. So thoughts on that?

I think that that's true and I think it's very interesting for the people that continually look for the next market crash that has yet to happen for, you know, a decade. You know, I remember and I'm sure you will too, man. You know, at first it was shadow inventory, foreclosure. There's going to be this next round of foreclosures that never came. And then, you know, we had swine flu. And then Covid was a big blip in the market. Nobody knew what that was going to be. And there's a lot of, of unpredictability in the market. But most people said this is the crash. You know, it's here with, with COVID And that didn't happen. You know, right now there are people saying, well, you know, the Fed is going to crash this thing. And you know, but I think the, the macroeconomic supply and demand, you look at those curves, I mean, there's no way, you know, the thing about real estate is crashes can't happen quickly. You know, Even in the 2008, 2009 market, you would see pricing come down maybe 2, 3% per month, where stock indexes can do that in half a second.

Right.

You know, so you have a certain amount of stability in real estate that you don't have in other asset classes. And I think that that's really good. But this idea that, you know, all of a sudden we're going to crash, I mean, it would take so much to have to happen outside of a Black Swan event. I mean, of course, the World War 3 scenario, nobody has a playbook for. But outside of a Black Swan event, I just don't see it. You know, I don't think pricing is going to come down that much. And I agree with your assessment. I mean, buyers are going to have to, to really change what they expected.

Yeah, they're just going to have to accept less. That's what always gives, is people just learn to accept less. But if World War three happens, for example, of course what will happen is another Fed pivot right you know, the central planners react to the market. They don't want the economy or the housing market to crash either. Okay. You know, the people in power want to be reelected and you know, that's always a huge, huge motivator. All right, well, talk to us about what you're busy doing in terms of what you are buying, what kind of deals you're looking for, and how you make them work.

Yeah, I think the way that we've done the business has really been the same effectively for the past 10 or so years, but the way that we have exited has changed over time. So in 2010, I started as an investor. I had very little. I had 300 in the bank. I was 23 years old and had to chase this dream of maybe owning something one day. So fresh out of college. And everything that I did from 2010 to 2014 is I would put a contract on a house subject to and then I would sell it with owner finance and create notes. So I'd create a down payment that would be better than like a traditional wholesale deal. But I would have this long term asset in a note that would cash flow. And so I was building my cash flow over time. And then, you know, so all of that was really good up until the market really started to kind of recover in 2014, 2015, you know, so that 2010 to 2014 market was very, very easy to buy in, but more difficult to sell in. Well, owner Finance really solved that because they're in, in tough times, banks tighten their lending perimeters and more people need owner finance. So it's actually easier to owner finance really in tougher markets. And so in 2014, 2015, the market started to stabilize, started to recover. It became more difficult to buy and easier to sell. So at times we would go more retail to cash out houses and really just, you know, exit, you know, take the cash. And so that was helpful, you know, and now we're really doing a combination of both of those things, but then also keeping a lot as rentals because there's so much, like you said, 2, 3% money that we're taking over. So we're not qualifying for the loan, we're not assuming the loan. We're just taking title subject to that existing lien and then we continue to make payments on it. Okay. And so we're taking over these assets that have, you know, equity and price. Yes, but a lot of times the real equity is in the rate because if I was going to go qualify for this turnkey rental, It'd be an 8% rate, but we're getting it at 2, 2 and a half percent, which if you factor inflation is a 0% rate. So we're really just building the asset base bigger and bigger and bigger because we want to hold more assets, you know, through this inflationary environment.

And how do you find those deals?

Let me go back and go more macro and then more micro. I think that good deals are not just found, they're also made. So I think that you can have the lead, you know, the seller lead, and be bad at a process once that lead is captured and still not maximize. But in terms of how we are going to, to really find leads, we want to be found. So I think that there's a big difference in like me asking someone to sell me something, which would be direct mail and cold calling and those kinds of things. You're asking everybody to sell you something. I want to be in a position to be found when someone is asking me to buy something. And so almost everything that we do is search related. So the major search engines, like as an example, man, years ago I had a lady that typed in sell my house before I burn it down. Okay. So she went to Google, sell my house before I burn it down. I took that call.

Well, you don't, you don't want to have that in your search history if you're ever filing an insurance claim.

That is probably true. But the funny thing, man, is she said, brad, come and buy this house before I burn it down. And my ex husband's in there. And I was like, whoa, we got ourselves a lively lady here.

Wow.

I went, I bought it and I found out that it was her that searched that because I was looking at my keyword report and it there's somebody that searched sell my house before I burn it down. I said, that was that lady. So we're in a position where people are searching because they've already identified that they have a problem. They find us. And right now we're buying one in every 12 leads. So 12 leads come in, we buy one house. It's very, very efficient.

Yeah.

Okay, so, so you're advertising, you're doing SEO. I mean, you're obviously running a business, right? You know, how many employees do you have or how many team members?

I should say, because around 20.

Yeah. Okay, so you've got 20 people on your team and you're doing this in different parts of the country, right?

Correct.

Yeah. Okay, good. And are you advertising for people with low rate existing mortgages for subject to or are you not advertising that specifically?

So we're advertising for.

Are you just saying, you know, if you want to sell your house. Right, yeah.

So we're advertising for the problem, not the property. So I believe that good purchases are found with the problem first. So these problems, pre foreclosure, inheritance, tired landlords, health and safety. I say safety because we buy close to a dozen houses per year from people in abuse situations, either elder abuse or spousal abuse. So if we can source people that have problems associated with real estate, then we're going to have the properties that are good, you know, by default, just because we do it in volume, you know. And like you said, a majority of rates are under 5%. And so I see value in a sub 5% rate right now. So if we're getting these people that have problems, we're having conversations with them, you know, and then take them through a process of negotiation, then at some point we're going to find out what the mortgage balance is, what the repair cost is, what we expect that the value is, and then in part, hey, is there a mortgage we need to take care of if we buy the house? Okay, great. Is it current or a little bit behind? Approximately what's the rate? And so we go through that on the first phone call, and then we're deciding, okay, is there potential equity just in the rate? Because if, if something, again, is a two, two and a half percent rate, I may want that deal. If it's got a 10% equity position, I may not need a great equity position in price. If it's a turnkey house in an area that I like that has a two, two and a half percent.

Right? Yeah. Okay, so you find out about their underlying mortgage, but you're not saying, hey, if you have a cheap mortgage, sell your house to us.

No, no, definitely not.

Okay. And how long have you been in the business?

Well, total, 21 years, but on the investing side, for about 15.

Okay, so 15 years. So really, you started in the Great Recession?

Yes, I was an agent from 2005 until 2010.

Yeah. Okay. And what's interesting about that is this market of distressed homeowners has become much, much smaller. That's right. Since then, in fact, there's very little distress in the market because so many people have these very cheap mortgages. Comment on that, if you would, because you, you saw it in a market where people were going to foreclosure sales and, you know, they were sourcing all kinds of properties from distressed sellers. But that has just, especially during the COVID era, largely dried up. Tell us about operating in a slimmer market of potential sellers.

Yeah, I think it's really interesting, man, because there were certainly parts in the country where one in six, one in seven houses were behind on payments.

Not anymore.

Yeah, and that's a colossal supply of motivation. But you know, I think that there's more motivation, more distress than what people realize right now. And what I would look at is Google search terms to really identify that. So people are typing in sell my house fast and that is trending upward. Then that's an indicative of more financial distress or other distress to get rid of property.

It might be, but you know, let me just unpack that a little bit more. I mean, nowadays the more and more aligned we are with technology and the more capable that technology is, the more we just randomly search everything we think about. Like every thought that comes into our mind. You know, we search it nowadays. Right. And oh, what about this? What about that? You know, it's not like we're doing it with a lot of intent because the barrier to searching something is so easy. You can just ask Siri, you can just turn my voice. It's. You don't even have to type anything. You know, just because people are sort of like considering something, you know, I think what they usually do is they find out it just doesn't make sense. They've got a much better deal than they think they have. Right. Comment on that if you would.

Yeah, I think it really depends on, on what time frame you're really analyzing it. So of course, if we were analyzing that same search term from 2024 to 2014, that there's so many factors that would be variables within that that would be, would maybe disassociate any type of relevance between those two data sets. But if we're looking at it on a 90 day trend, then I think that we can look at it because it's so closely related. It's like, oh, we've got a 15% bump or a 20% bump and we have seen that. So I think that that gives us a little bit more reliability in what that data might mean.

I wonder how much of that comes into play with the election. These people thinking that the end of the world is going to happen if Trump gets elected or the end of the world if Kamala gets elected, which probably actually will be the end of the world. But.

How much of that plays into an election, you know too.

Yeah, certainly could be. And like anything, you know, if you try to do one to one analysis, it's almost impossible to do you know, it's like everything's a multivariate equation. And certainly I think that that's. That has impact.

Yeah, definitely. Okay, talk to us about, you know, how you negotiate the deals. I mean, how do you structure them? Subject to. Is your favorite thing, right?

Well, actually, what we call some now, some later is probably my favorite because that's when we get a zero percent rate.

Talk about that.

Yeah. So everything that we do is predicated on never making an offer, never giving a price. So whenever we negotiate, I don't want to be in a position where I'm giving an offer. And there's three reasons for that. So number one, an offer, in my world is a commodity to shop. So many of your listeners have been in a situation where they've given an offer, they want to think about it that's reasonable. And now you're getting shopped because they're calling everybody else and saying, hey, can you beat this price? Can you beat this price? So many of your listeners will remember, they'll think, oh, that happened to me on this house. I know it. Right? So that's the first thing. An offer is a commodity to shop. Number two, a lot of times the price that your seller will give you is going to be lower than your price. Okay? So I've had many times where, you know, we went in kind of thinking, well, this is what we could pay. And then they say, well, we, this is what we would take, okay? And we always go with their number. Because I've also had times what I used to do was I would say, well, my number is this. Why don't we go with my higher number, okay? Because I, I don't believe that you should always, just because someone will sell at a discounted rate, that that is always the moral, ethical thing to do. Okay? Now, I stopped doing that because what I found out was that people would, in their minds, discount because they know of problems that you don't know, you don't yet know about. So now we're in a situation where we will go with the lower price. And then if the deal works out the way that we hope, then we might cut a check back to a seller, okay, after the fact. So we do that at times. But number two, the seller's price is going to be lower than your. Your idea of what you would pay. So It's a type 2 error, right? So it's an unrealized gain if you give your offer and it's higher than what they would have accepted. And then, number three, not giving an offer Puts you in a situation where you can get to deal structure easier. And so that's what we're Talking about with sub 2 or some now, some later. So the idea of we always negotiate based on price first. So we assume that we're going to get a price that is so good that we would pay cash for the deal. Okay. Now sometimes that doesn't happen. Either they are unable or they are unwilling to take that price. And so we're in a situation that now we have to switch to terms. So Jason, you know, and many of your, your listeners know that price is a function of terms. So everybody looks at price as all cash at closing. But let's say that a house is worth $250,000 and the seller wants a million dollars. Well, we can come up with a deal structure that we would pay a million dollars. Now, it might be $10 per month until paid at 0% and we turn it to a rental and cash flow it. But price is a function of terms. So if we're negotiating a deal and we can't get to a price that we would pay cash, then we switch to terms. Which is the beginnings of, well, if there's a loan, we might go sub 2. If there's a loan in a big equity position, we go into a more of a hybrid structure. If it's free and clear, then we go into a some now, some later deal where we give some cash at closing and then payments per month which Is at a 0% rate. And some of those deals can be your best deals. And some of those deals don't actually have price equity. The, the real equity is in, hey, these are only principal payments, right?

Yeah. And it's interesting, I hope everybody noticed how you pointed out there's equity in that cheap mortgage. Right. There's equity in terms. Right. So you don't even have to get a good price. The tens of millions of people that have these ultra cheap mortgages, the mortgage is an asset. I've been saying that for 21 years and you know, it's like I think people are finally coming around to understand that especially with the low covet era mortgage rates, that's just a huge asset. You know, regardless of the amount of equity in, Americans have a record amount of tappable equity that they've never had before. Regardless of that just their low rate mortgage is an extremely large asset. So that makes them likely to not want to give up that house. That's the mainstream part of the market for sure. But absolutely, yeah, money is always made finding opportunities and that's, you know, that's exactly what you're doing. Anything else you want to share, Brad, before we wrap up? Just anything in general, you know, could be about market outlook or any of the kind of deals you're looking to negotiate or whatever.

Yeah, I'd like to talk about commercial for a little bit. It seems like commercial is under major distress.

And, and when you say commercial, which part of commercial are you going to say?

Office or what office is, is what I'm, I'm really looking at. We just recently bought a two million dollar class A office building, half a million down and the balance at 0%. And so this thing pays off in six years and it's in a, an A class part of Nashville. And so we're seeing for the first time, you know, this distress, this type of distress in corporations that hold these, these assets, even free and clear assets, you know, that they can't rent them or, you know, whatever. And I've got a friend of mine that just bought a 22 story building for 3.4 million in Chicago. You know, it's unbelievable to me that these deals are coming available, but I mean, literally.

But what's the, what's the reuse of that? I mean there's still.

I agree.

Right.

I agree on that.

You. Is it a residential conversion or is it just a cheap office building that you're going to rent for much lower rates to whoever will rent it? What is the plan? What's the game plan for that property?

Well, for the 22 story one, man, that's beyond my pay grade, so I have no idea.

All right, well, for the stuff you're doing.

Yeah. The office building that we picked up, I mean we're able to turn that into more of a co working space and do very, very well at that, you know, so that is one option.

There's different co working space. You're operating or just leasing it out.

To spaces or we work, so we are operating it.

Okay. That's a lot of work. That's a business.

It is, but luckily it's, it's where my team is anyway. So like there's on staff people there, you know, to help us.

Right.

Come up with that. So it's worked out well. But I think that there's tremendous opportunity with that. You know, the naysayers on the market, they're always going to say the market crash is almost here. I don't suspect that that's the case. Again, outside of a black swan event, I think that we are going to have a little Bit more inventory than what we're used to seeing. But you know, I saw this in 06. I remember one builder in 2000.

Are you going back to residential now or.

Yeah, yeah, going back to just the overall market. I think that there's a lot of opportunity in commercial, but back to residential, people say, oh, the next market crashes here. I think it's all about perspective. And when your perspective is a house should sell in six days and it takes 60, that feels like a crash.

Right?

But if you're from the world of like, you have a little bit more perspective and a little bit more experience, right. Three or four months is a pretty good time turnaround to sell a house. So if it's 60 days, that's actually not a crash. So there's always going to be opportunity and I think that it's a great business to be a part of and I'm excited for what the next five, six, seven years looks like.

Good stuff. Well, Brad Smotherman, thank you so much for joining us. And I concur on your optimism in terms of the market. I mean, there's just a huge rental demand and purchase demand coming at us. What's already here, we all know that. But, but there's a few doomers out there who just keep publishing their clickbait, don't they?

Well, one, one year they'll be right here. In the next 20, 30, 50 years they'll be right and they'll say I told you so the whole time.

I, I know, it's so funny. You know, like they say a broken clock is right twice a day. You know, they'll eventually be right. The problem is, and I'll just leave you with one more thought that's kind of interesting that I've been thinking about. I've been saying this on the show is it's interesting that if you invest with someone and they lie to you and misrepresent the investment, of course you can take them to court and sue them. Right? Because they did, you got damaged based on their bad advice or their frau fraudulent advice. But why is it that no one sues the doomers who basically prevent people from investing because they lie to get clickbait to get views, to get clicks on their blog post or views on their YouTube video or whatever, right? We should be suing them for the missed opportunities because tens of millions of people have missed opportunities because they fell for their doom and gloom forecast. And, and you know, I mean, these people are intelligent, some of them. They have to know that they're Lying about what they're saying. I mean, I look at, like, the YouTuber Nick Jarelli. Right. You know, I've watched a lot of his videos, and I saved them. I've saved screenshots of them because his predictions have just been so wrong. Although he. He sounds right. But if you really analyze it, you know, they. They just conveniently, like, leave out a few really important details and make these kind of leaps in logic, and that's why they're just wrong. You know, it's interesting, but. Comment on that.

Yeah, for sure, man. I think about this all the time because most attorneys and most CPAs will tell you what not to do. And it really comes down to, in my opinion, just the idea of conservatism. And, you know, there's risk on their license for telling you the wrong thing.

Right.

But the thing is, you only know if it's the wrong thing. If you do something you shouldn't have done. If you don't do something you should have done, that's an unrealized gain.

Right.

You know, so it's the idea of unrealized gains versus realized losses.

Yeah. Yeah. You know, it's. It's like the old saying. You can't hear the dogs that don't bark, and the dog that sort of doesn't really bark is the stuff you didn't do.

Yeah.

And. And how you lost out by not taking action. Right. You know, if you take action and it doesn't work out, you really see that and feel it. But if you don't take action, you sort of think, you know, well, you know, I missed the boat, but maybe I didn't. You know, people rationalize that all kinds of ways. So. Very interesting talk. Brad, thanks so much for joining us.

Appreciate it very much. It was great.

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