Flipping America 634 RyanCadwell

I brought a friend along today who is going to help us answer your questions. His name is Ryan Cadwell. He's a successful investor and property manager from Indianapolis, Indiana, and he's going to be with us in just a minute on Flipping America.

It's time for Flipping America, the show that helps you understand how real estate investors think, analyze opportunities, and build wealth through real estate. Your host, Roger Blankenship, has participated in more than 2,000 real estate transactions and Ryan has spent over 2 decades investing, renovating, managing, and teaching others how to succeed in real estate. And now, here's your host, Roger Blankenship.

Ryan Cadwell is a seasoned real estate investor and managing partner at Resolute RDM, an Indianapolis-based real estate firm. With over 17 years in the industry and as a real estate broker since 2008, Ryan has been instrumental in over $100 million in real estate transactions, development, asset management, and property management deals. What sets Ryan apart is his refreshingly honest, no-Kool-Aid-drinking approach to real estate investing and his philosophy of creating a life that you really don't want to retire from. If you're looking for someone to tell you— I like this part— if you're looking for someone to tell you real estate will make you rich overnight, Ryan is not your guy. He's more likely to tell you when not to buy a property and why most investors are overpaying. While working on his CCIM designation and maintaining his CPM certification, he also sits on the board of 91 Place, helping youth who age out of foster care find stable housing. Ryan's standing by. Let's dive right in. Ryan, welcome to the show.

Thanks for having me.

Yep. Glad to have you, man. And, uh, we're gonna get right into it for a minute, but I've already teased the audience a little bit by telling them that You have agreed to participate with us in answering questions from the listeners. It's something we do with our guests from time to time. And so what I want to do is just get you the questions and I will tell everyone listening, if you have questions about real estate or real estate investing, then I want you to send those questions to questions@flippingamerica.net and we will answer them. As long as we're not, you're not asking us to do your homework. We're not going to run comps for you or that sort of thing. But if it's a general question about real estate, even if you're a homeowner and you're wondering about this whole process that you're about to go through or that you're in the middle of, send us your questions. We'll answer it. And some of the questions we'll use on the air, including the 3 that we're going to throw at Ryan today. You ready? Yeah.

All right, let's go.

Candace from Bend, Oregon says, I bought a duplex 2 years ago, which is my only investment so far. I just heard about REITs, R-E-I-T-S, and that's real estate investment trust, and did some reading. I'm wondering, are there other ways to invest passively in real estate?

Well, Candace, congratulations on your first one. That's big, you know, and, and also congratulations on so, so soon after doing that, asking, you know, asking to learn more. Those are those are great signs of of you being you know you being a lifelong learner in this field. That's going to be important going forward. Answer your question directly. Um, yes, actually, if you look at our website, the resources, I have what's called the real estate investment spectrum. And um, you mentioned REITs, and REITs, these are what I would put on the far left. Um. They are the most liquid because it is, you know, essentially a stock. So there is a there is a market for it to be exchanged quickly. So with REITs, the you know that that is more of a passive thing. You're trusting the people you that are operating the properties to do all the work. You're gonna get, you know, you're gonna get the dividends. You're gonna get some price fluctuation. That's how you're gonna make money. And then there's the opposite side, which is where you're at, which is direct ownership. That one comes with more risk. You are the bank essentially for anything that's needed cash-wise. In between those two, in between those two, it would be something like a syndication. So usually the minimums on that are $50,000 to $100,000. Sometimes you can get in for less. There are a few other platforms that have popped up in, in like the last 12 months. I think Fundrise is one of them where you don't even have to have that full $10,000, $25,000. You can invest smaller amounts into those types of deals. I know Fundrise right now, I talked to them about what they're doing. They're mostly in the Sunbelt areas. multifamily Sunbelt area, at least when, when I talked to him last month. But yeah, syndication would be like where you'd land if you wanted something in between what you're doing now and, and a REIT stock.

All right. That's a very good answer. You've, you've covered all of the ground. I will tell you this also, Candace, that I am personally acquainted with the people that Have— are the founders of Ground Floor. And I'm putting their QR code right here, right above my shoulder. And if you want to talk with them, I and many of my students that I've trained over the years have invested with Ground Floor. They make hard money loans to people who are fix and flip investors, and you can actually invest in those loans and the returns that they make for as little as $100. Which is that's that's a nice little thing. The crowd there are several crowdfunding things. Now, if you think you want to go the way of syndication, I'll just throw this in there too. Where will you find these syndicators? All you have to do is start listening to real estate investing podcasts like this one because syndicators one of the ways they it's in some seminar mastermind or something that they've done. One of the ways they tell people about them is they get on real estate podcasts. And I've had a bunch of them over the years. And some of them I've kind of wondered about. But some of them I have a lot of confidence in and have tracked and followed them. And I read their packages all the time. So that's how you find them. And that's a good answer. You want to throw anything else in? We're gonna— we need to move next one. Right.

I'm good.

Yeah. I mean, yeah. Loved your answer too.

There are the REIT shares. I guess you could find REIT shares, just research. And there are some big publicly traded companies. There are also, I should mention, there are real estate companies that are publicly traded. You can invest. And if you have enough money, you can buy into a hedge fund.

Yep.

All right. Ramona from Oklahoma City, Oklahoma. I am trying to flip a house, but my contractor can't seem to finish the job. We have done the demo, started the repairs, but it seems he got called to another job as an emergency. It's been a week with nothing happening. I gave him 25% of the total job bid to begin, and I think he's done perhaps 15% of the work. My uncle has flipped a few houses and he has some suggestions, but I'd like to hear your ideas. So we asked her and got back his suggestions were number one, issue an ultimatum. 2, fire him. 3, sue him. And then she concludes by saying, this contractor came highly recommended and our agreement is a handshake. All right, Ryan.

So, um, the handshake thing, I would say use this one as the only lesson that you need. Um, handshakes, handshakes are good for the beginning of the relationship and when you give them the final check. As far as the scope of work, what's expected, when they're going to get paid, writing all that down and and getting and getting agreement on it. It's very important. It it sets your relationship up for for more of a positive interaction, and anybody who's not willing to put their word in writing to me is skeptical. It's not somebody we would work with. We even go as far as, um, if you, if you're coming on board with us, we like, we walk you through expectations and that's all in writing from the beginning. Um, you got to check their certificate of insurance and licensing. Um, so as far as the $25,000 and what to do between the 3 options, um, suing is the very last thing. That's going to cost you money. You're, you're going to have to decide whether you're going to spend good money for bad money. Um, I mean, at this point, at this point, what you really want to do is find a way to get him to engage, get him to recommit. Um, I, I, I try to start with them and trying to figure out what's, what's really going on. Like, do you— if you feel like you can trust them to tell you, you know, did you start this job and start 3 other jobs and you're behind? Like, what's the real delay? If he starts trying to squeeze more money out of you before he finishes the $25,000, that's a red flag. I wouldn't give him any more money until until you either have a written agreement moving forward. He hits that $25,000. I would then add a written agreement for the remainder of the work. I'm trying to think through if there's any other options.

Okay, I'll just jump in here while you're thinking. If you come up with something else, just give me the signal and I'll, I'll bring you back in. All right, so agree with all those things. That's good. I would go as far as to say the handshake in this thing should come after all the paperwork is signed, at the conclusion of what we call the mobilization meeting. I've got a whole course on this, and we've already sent it to you, Ramona, and you've, you've got the course now. Go through the course. But along with that, we have a complete set of documents that we use, including a construction work agreement that we use with our contractors. I don't care if they have one or not. We're not using— they want to work for me, it's our agreement. And we don't put any pressure on them. We will give it to them and let them take it to their attorney and read. Our attorney developed it over many years and thousands of dollars, and we used it on hundreds of properties that we've renovated over the years. And it does a nice job of communicating expectations right from the get-go. And now we give it away. All you have to do is write into the show and we'll give you the entire contractor pack, the questions that we use to interview contractors, the construction agreement, payment policy, A sample of the lien waiver that you need to hand them every time you give them a check and all that. Now, okay, that's for the future. For where you are right now, Ryan nailed— hit the nail on the head when he said, just try to find a way to get him re-engaged. And I will tell you this, I've dealt with a lot of contractors over the years and their standard way of doing business is Uh, and really for them, just try to think of it from their perspective. Uh, it's job security. After they finish with you, what's next? Well, a lot of them want to start what's next before they finish with you. And so they'll start one, go on to another one and start it, and then come back to you and then go start a third one and then go back to the second one. And that, that way they're stringing everybody along and no one is completely happy, but everyone's work eventually gets done. That's the way a lot of people do it. But those that don't do a really good job of managing their own finances find themselves coming up short and can't pay their people. So, they've got to go start another job and get a big down payment to pay their people. And they're paying their people for your job with the money from the other one. And so, they're in a vicious cycle that turns their entire company into something like a little Ponzi scheme. That's what you have to be aware of. And you've got to run from that. Now, in this situation where you are right now, talk to him, try to get a little bit more work out of him, try to get him, you know, where you're squared away. But in the worst case scenario, it may be that you've got a $15,000 haircut you're gonna have to take just to find somebody else to do the work. And, you know, cut this guy off. I agree with Ryan, don't sue him. That is throwing good money after bad because most likely it's going to take a few years, a lot of money, and unrecoverable legal expenses. And when you win that judgment, you'll never collect. Why? Because if he's been doing this for a minute, by the time you win, he will have formed a different company. You have a judgment against a company that is bankrupt and Mm-hmm. Yeah. So don't bother with the lawsuit. All right. I'm sorry to bring you bad news. You know, it can't all be peaches, cream, and unicorns here. But that's the way it is sometimes. And sometimes these lessons are expensive. I just hope that you can get, get your project finished. Kristen from Louisville, Kentucky says, I've been doing flipping. I've been doing okay flipping a couple of houses a year in Louisville as a side hustle. I even recently acquired my first rental, but the house is old and seems to need repairs constantly. Meanwhile, my friends are telling me the counties just south of us seem to be growing and prospering. I need some guidance on how to approach remote investing, even if just in the neighboring counties.

Okay, so I wouldn't consider a neighboring county remote investing unless you're unwilling to drive there. If it's a neighboring county and you'll drive, I mean, at least you can keep your eye on that investment. If you want to, you know, if you want to use it to like get used to like out-of-state investing, and then that turns into out-of-country investing if you grow big enough. I think the first of all, I think you need to check the information. When people are when when people are talking about a boom that's going on, you need to you need to figure out what stage of the cycle it's in. You don't want to be the last one to market because that that'll end up like the GameStop boom and bust where where you're the person buying from everybody else's appreciation of that market, and then you're gonna buy at the peak, and then the only way for you to make money is the very long game. So establish first what you want. What do you want in the return? If you're if you're gonna go south or or to your neighboring county, I assumed it was south. I guess if you're if you're gonna look for other markets to invest in, start setting up like what it is you're wanting as far as a return, as opposed to just. What somebody's going to tell you, because if you get on that roller coaster, that roller coaster will never stop. It's a form of it can be in investor world a form of investor FOMO, and there's always another market to invest in. There's always somebody who thinks that that this market's going to work and that market's going to work. So you can find any of that as far as remote investing. And kind of hedging yourself. Um, once again, I always come back to the plan. Like, how much do you have? What return do you need? Is that market supporting the return? Um, and that, you know, very dry, rational approach is the best way to invest regardless of whether you can drive there or not.

Yep. All right, that's a very good answer. And really, you just need to replay that entire thing and listen to it again and again. Ryan, good words. And I want to start with especially agreeing with the very first thing you said. If you're willing to drive there, it's not really remote. And so you may be thinking of Bullitt County or the counties right just south of Louisville. And all right, disclaimer, I grew up in Louisville, Kentucky. I don't know all of the counties in all of the states in the But I grew up in Louisville, and I know that you can't go north and still be in Kentucky. However, I would encourage you to go north, look across the river. I was just talking a couple of weeks ago to a friend of mine that I went to high school with who just sold his house in Louisville and moved across the river to Indiana, and he likes it there so much better. And now he's not an investor, he's retired, but he was talking to me about different things that's going on and that are going on right over there across the river. And I took a little bit of a look. And I think that the market is pretty strong. And Ryan is right, study the market. And when people are saying you should look here, look there, maybe you also should look at what they're buying. And are they buying? Are they just people who, you know, have a friend who's a real estate agent who gets their nails done at the same time? That's not the same as professional level investing. Okay. So Yeah, just be careful about who you're asking and study. And Ryan, great answer, man, with knowing, you know, thinking about what you want out of this and establishing your return. That's great. All right. We're going to take a quick break. And when we're going to come back, we're going to talk about Ryan. We publish some newsletters around here, and I'm just going to pop all 3 of them on the screen so you can just scan the QR code and subscribe if you want. The first is Real Estate Investing Quick Tips. I've been at this for over 20 years, done more than 2,000 real estate transactions including 1,700+ full fix and flips. I've learned a lot of lessons the hard way and I boil them all down into a daily 2-minute tip so you can learn the lessons the easy way. It's free. All right, just try it. Go to flippingamerica.net/quicktips. There you go, flippingamerica.net/quicktips. And you can subscribe, or you can just— if you're watching this, you could scan the QR code. The next is Rewind. I'm a big history buff. I love it. And so I have dreamed for years of doing this, and now I'm doing it. I'm publishing a newsletter called Rewind, which is a daily look at the top 10 events from world history that happened on this day. We throw in some bonus things like what's going on around the world in a certain year, and some history of things that just really can't be dated very well. But every day when you open it up, you've got 10 headlines and a bit of a story, and we dive deep on one of them. And it's a way to just kind of keep up with, uh, what's going on in our current world by taking a look at what happened in the world up to this day. 3,000 years of recorded history all in one day. That's Rewind. The other one is Wonder. And I don't know if I have a favorite, but if I did, I suppose this might be my favorite one to research and write. It's a daily look at the things from the universe that just make us go, wow! I call it taking a look at the majesty and mystery of the universe, and it's called Wonder. All of these newsletters are free. Try them out for a few days. If it's not for you, that's fine. You could unsubscribe. It's just as easy to get Out as it was to get in. You're not going to be put on some marketing list. Yeah, the newsletters are ad supported. That's how we pay the bills, but they're free. So give them a try, and thank you so much for reading. All right, we're back. Our guest today is Ryan Cadwell. Ryan, thank you so much for joining us, and thank you for imparting the wisdom to our listeners in the last segment. And just a quick reminder, everyone: if you have questions about real estate, send them to questions at. Flippingamerica.net. We will answer your question. And we answer every question that comes in. As long as it's reasonable, not, you know, will I get cancer if I play too much pinball? We're not going to answer questions like that. And we're also not going to answer any questions about if you want to sell us your mailing list, or our car warranty. Don't bother. Okay. But questions about real estate, we will answer and we're glad to have them. We've answered thousands of questions over the years. We will answer yours. All right, Ryan, let's talk about you. You've got this thing going in Indianapolis. You, you've, you've got this company. And you know what, rather than me putting words in your mouth, why don't you give us the elevator speech about your company and what you're up to?

Sure.

Resolute, uh, RDM, we are a real estate brokerage. What we, we focus on operations and development And investment projects. We deploy capital into different sectors depending on market cycles. Been around for 18 years. I started out with a family. My dad bought low-income housing apartments along with where he operated his auto repair shop. Grew up in that world, started out by mowing grass, turned into a into a very young maintenance guy, and then helped him helped him redo several of those units when tenants moved out, improved the values of them. He got a little bit more rent. That that gravitated, and and and as you know, when I was looking at what to do as an adult, you know, I had experience in in business. I had experience in auto repair, and then I had. And then I had experience in real estate. Real estate was more my thing. So that's that was the direction 18 years ago when my wife and I founded the company. Since then, gone through all kinds of different things. I mean, we started during the crash, the first recession, the Great Recession, 08 to 12. That grew into that grew into a lot of opportunity between 12 and 18, 19. At least for Indianapolis, that market, there was a lot of a lot of improvement that happened. You could really do real estate in a very in a very real, and I would say it was it was easier only in the fact of your margins weren't as tight. You didn't have all the stuff that came out of COVID Interest rates were stable. Pricing of labor and materials was stable. So we did a bunch of flips. We were a part of both sourcing those for other other people, doing the construction work. You know whether they whether they sold them, and then we would end up managing them for the new owners. There was a whole cycle that that all happened during that time. That grew into us doing ground-up construction, brand new builds, and then and then that's continued to where we're pushing into the commercial world.

Um, a little bit of everything. Yeah.

Yeah. I mean, we're pushing a little bit away from, uh, I mean, we, we do have the development in Missouri right now that is a duplex build-to-rent, build-to-sell community. Um, it'll be 242 total units, 121 buildings. Um, and then locally we're looking at some more commercial stuff. The size just helps. The size helps combat kind of the, the interest rates with the, the economies of scale right now.

All right. Now, I know you've got a property management company, right? We're going to talk about that for a second.

Yeah.

But do you do any coaching or training? Somebody's listening to this saying, man, I need to learn from this dude.

Yeah, we would, we would offer a training program. I've got a, I got a 4-part investor series that I've taught several times. Part of that involves the property management too.

Okay.

If we also pride ourselves on being a people development business. So yes, I am opening— I am open to mentoring opportunities that would come with, you know, walking through, making sure we're a good fit because there would be expectations, there would be accountability. We want you to succeed, and in order to succeed, usually, actually almost always, I've never in my life set a goal where I didn't have to change in order to achieve that goal. But a lot of improvement and change comes, change in our lives, if we want to either make more money or we want to be better at negotiations, all of that comes with changing ourselves and starting with ourselves first. Um, yeah, I mean, the mentoring side and operations is really— if you're not paying attention to like what's happening right now with the adjustment, um, the adjustment in the market, the main people that are making it are the really good operators. So being able to operate real estate is, is, is, is more important for long long-term stability than it is to just be able to get a deal, raise money for a deal, get the deal built. If even if you get to that point, you still have to fill it up. You still have to operate, understand the tenants, understand their needs, have processes for all the problems. And then at that point, then you've actually achieved the goal of the valuation you were shooting for. So operations I'm sorry.

I'm sorry. I didn't mean to interrupt you.

No, you're right.

We've had a link on the screen for the past couple of minutes, flippingamerica.net/RyanCadwell. And if you're listening and not watching this, go to flippingamerica.net/RyanCadwell. And that link will take you where you need to be to get in touch with Ryan and learn all about his coaching and process. Okay. All right. So Uh, let's talk about property managers. At, you know, rather than getting into the long history of it, let's just answer a couple of practical questions. And, you know, questions that I've— I wrestled with, you know, 15 years ago myself. When I started in the whole thing, I did everything myself.

Um, yep.

But I, I learned pretty quickly that it's, uh, actually cheaper and more efficient to Hire other people to do things that they can do and leave for yourself only the things that only you can do. And so, um, but I still, it didn't seem to be worth the haircut in income to hire property management until I got to 10 rental properties. Um, I did hire once I got to 8, um, because it was just getting to be too much. I had one assistant and we were flipping 100 houses a year. Um, I didn't really have time to manage the rentals and we were getting ready to add a bunch more in the crash. And, um, so I hired a management company. What would you say would be the number of properties, um, would be that threshold? How would you have answered that question for me 15 years ago? How many properties do I need before I need to turn over to a property manager?

My initial thing would be to say, what do you want? If, if, if your goal is to build a portfolio The the most fundamental and disciplined way to do that is to always pay for a property manager, even if you're paying yourself. Because two things happen when you do that. Number one, you're gonna buy it with an expense in place to replace yourself at any time. Two, you're also not gonna overpay. One of the most common things. That a lot of early investors, including myself when I started, is you were so excited about getting into the deal that you didn't understand all the expenses you need to do to plan for and include for that thing to operate.

I can sing every verse of that song, brother.

So if you're planning to get to 10, 20, 30, especially single-family residential, Understand single-family residential and property management. I'm going to give you a little peek behind the curtain into, into SFR property managers. After COVID, one of the biggest things going around for these property management companies is what's called fee maxing. And their goal is to maximize as much revenue for their company as possible. Getting clarity on what that is, how that's going to impact your tenants, how that's going to impact you, but also understanding that when if you do scattered scattered lot or scattered investment, which is what you know even if you have twenty in the same city, it's not twenty sitting next to each other on the same street. That changes economies of scale. So even when you're doing Even if that's your goal, you need to build with your goal in mind. Build foundationally with the discipline to, like I said, to pay that property manager, to buy it with that expense in place, but also to understand exactly what the fees are going to be. Because normally in the single-family residential space, you have a ton of competition because the bar for entry is so low. And you're going to probably have to look at 200 deals before you buy one or two. If you're being disciplined, if you're only going to look at five to ten, you you're probably going to overpay. You're going to have a few years where it's net negative cash flow, net negative, which means the money you're making on your wage job is going to be put into that deal. So. When you're interviewing property managers, it's find one that you feel comfortable being a partner with. Understand their entire, their entire fee structure. Understand what their standard is. This is something we're having to adjust even in our own company, is making sure that our owners are maintaining their properties to the right standard because tenants think that we own everything. Even if we're third-party managing. So they blame us for everything, which means we're trying to constantly work with our owner partners on help us maintain our level of service, our level of quality, so that, so that the experience that the paying customer, the tenant, is receiving matches in a way to where they want to stay longer. They're not resentful and going to damage stuff on the way out. They're not looking for a way out. All of those things help decrease vacancy, increase returns.

Hold on. Let me ask you a question. When, when you're— when you get a repair request and you arrange for someone to go out there, do you charge a surcharge to your landlords, to your owners?

There's always that. That is always presented as, as assumed that, that it is going to happen. It's always billed. Now, if it can be billed back to the tenant because it was something that they should have done in their lease, it might be charged to the landlord but then billed back to the tenant, and then we seek to collect it. The service charge— the service charge for us is typically waived or rolled into the actual deal if it's a legitimate thing. Like, I mean, we're not just going to run We, we, you can't afford when you got $4 gas to run around and, and do service calls constantly, you know, all over the city with, without there being some sort of rev component attached to it.

Yeah. Yeah. But you know, the person doing the service call, they've got their charge. I'm just wondering if you put another charge on top of that just for, for the time involved in—

Oh, there'd be a management, there'd be a management percentage added to it. Yeah. For, for us coordinating it. If you wanted to coordinate your own, um, that is one thing. We, we don't force owners to use us to do that, but if our staff is doing it, then there, then, then there's a, a service charge on that.

Yeah.

Okay. All right. Um, well, we're gonna have to move on in a minute, but, um, one other thing I, I, I had hoped to, uh, it's just a thought that occurred to me as we've been talking. Maybe we can tap into your wisdom here. CapEx reserves. The first time I ever encountered the phrase— now keep in mind, I, I was not trained. I dove in and, you know, learned to swim, built myself a life preserver on the way to drowning. The first time I ever heard CapEx, I thought, what the heck is that? And then when I got the explanation, I said, oh, that's why they don't make the kind of money I thought. Oh, so, um, of course now we're setting aside CapEx reserves, but what is your recommendation as a percentage of rent? Uh, how much should an owner set aside for CapEx? Capital expenditure is what we're talking about, everybody.

Yeah, so capital expenditure would be anything that has to be paid for that is not part of, you know, your normal plan. The simple explanation and our recommendation for a single-family rental property would be actually a requirement is $500, $500 to $600 minimum. I suggest the cost of a water heater. So $1,200. That's, I mean, that's essentially what I would put down just Just be— it's an easy way to kind of understand what you're putting the money towards. Um, but what it does is it makes it to where the surprise isn't as bad. Yeah, it doesn't feel great at the beginning, but it's not as bad when it happens.

Oh yeah. Well, I started, uh, 15 years ago doing something a little bit different than that. I just started setting aside 5% of the gross rents into a reserve account. Because, um, roof will go bad.

Yep.

A 20-year roof in Georgia lasts 15 if you're lucky. And the 30-year architectural shingles will last 20, maybe. Right. But air conditioner's got to be replaced pretty much on a schedule, water heaters, all those things. And those expenses can really add up. And if you haven't, if you haven't put anything aside, They can crush you. Now, when I started out, I was okay because I was making enough money flipping houses. I could throw money at the problem without realizing that my rentals weren't actually— they were actually cash flow negative. I only learned that after a year or two of doing it. And those are some things I try to help people not learn the way I did. You know, learn a few things in advance.

Right.

All right. So, this is, this is good. Now you're, you're building stuff, you're doing build-to-rent communities. You want to weigh in on the, the Road to Housing Act real quick before we get to our final segment? They just passed it. And I suppose it's a law. And I have my opinions, but I don't want to color your opinion. Go ahead.

What's it— Well, before I start, I haven't fully read everything. And for me, I'll try to wrap my head fully around it before I have a fully formed opinion. I usually kind of know that the way politics works on the road to housing and all that stuff, what they want to have happen and then how that's actually going to meet the road. I mean, I have an opinion on that. The I I don't fully know the you know the act and and and what they're trying to do. I know that there's a I know that there's a void between between affordability and what it costs to build a property. I know that there's a well you got affordability, you got a cost to build the property, and then you also got wait you got a wages and a job problem, and. Now wages and jobs apply to that affordability piece. They're trying to solve, usually because I feel like most of the time politicians are short-sighted because they're looking at things with 4-year, 4 to 6-year windows as opposed to like what's really going to solve the problem. Now do I have that, do I have that answer? No, I, I, but I'm not paid to think that way, the way they are. The problem that I find with most of the things that are thrown out that I have read is it's usually short-sighted. It's usually done in such a way that's looking for public approval of the people that voted for it. Yes, at the heart of it, the intention is probably really to help us, but is it a really good fix to the problem? Some of it to me is that the affordability problem started in 2020 when we shut everything down and we started printing money. And that money has to fully flow through the cycle. And we're in like the last ripples of Of that, but that's what's caused so much more of the inflation, um, that we've seen. Um, and then, you know, the Fed comes in with the interest rates and all that stuff, and everybody blames them. But, um, do you want to speak more to that? Rein me in.

Oh no, I've already done a whole show on it. I— but I know you probably haven't heard that show, but I'll just tell you. I'm skeptical at best. No, skeptical at most, dubious at best. I actually call it the road to more votes or the road to reelection. That's really—

Oh, so we're in agreement.

So we're in agreement. They spend, they spend a lot of time picking on the hedge funds and limiting the amount of houses they can buy when they own, like, you know, a very small percentage of single-family homes. They have no impact on the market and they're not the cause of the problem. And I've isolated the cause of the problem. Well, it's more than one thing, but one of the big problems is the bureaucratic nightmare that's involved in turning raw dirt into housing and the expense of it. And not a lot of people are sitting there with pockets deep enough to wait 2 to 5 years to go from land to permits. And those that do They don't want to build something affordable with low margins. They want to build something where they can make as much money to make it worth all of the pain and the interest that they paid just to get to the point where they could start erecting structures on this land. So there's no economic motivation. And so the— this bill is trying to provide economic motivation. I just said I wasn't going to weigh in on it. Here I am.

All right.

But that's all right. This bill is trying to provide economic Motivation by giving incentives to private builders out of tax revenue. That's a principle that I fundamentally disagree with. It's like allowing the government to choose certain winners in the marketplace rather than just letting people rise. But the other thing is they're picking on the wrong thing. I, I don't really think the federal government shouldn't be involved in housing at all, but if they're going to interfere, They don't need to interfere with the free flow of capital. They don't need to ban the purchase of a legal thing. You know, a house is a legal thing. It's legal to own. And once the government starts establishing a ban on a limit on how many you can own, the government therefore is regulating legal property. And that just as a principle, I don't care if you are mad at the hedge funds for making so much money. I don't care. Honestly, I'm going to tell you, most of the hedge funds don't make money. Most of them are losing money hand over fist, which is why there aren't as many of them as there used to be. And it's why the iBuyers have never made any money. It's why Zillow got out of it. All right. They're learning the hard way. Okay, that's fine. But you know, you have Invitation Homes that own something like 70,000 or 80,000 houses. So what? It's a drop in the bucket. And if you want to attack them, You're just attacking the wrong thing. If you want to regulate something, how about regulating the communities and just not allow them to take a year to approve a zoning application? How about that?

Right.

In fact, it really doesn't take that many hands to go through to approve zoning. How about let's give it 60 days, and after 60 days, make the municipality pay a fine back to the person who applied for the zoning variance to cover their costs of holding that property. How about that? Bill the municipalities. Yeah, it's a crazy idea. No one will ever do it, but that's actually addressing the real problem.

Or, I mean, if you want to have a direct—

if you want to have a very quick and direct impact on the ability to construct property, What tariffs are are being applied to things like to things like lumber out of Canada? We get we get a ton of lumber out of Canada. He's he's slamming them. He's slamming Canada with tariffs that directly impacts housing affordability. So don't sit here and tell me on one hand you're solving affordability while you're while you're slapping tariffs, which the way tariffs work is it it's a It's trickle-down economics of you taxed it, so that increases the cost. They're passing that cost down to the builder. So it's well to the to the wholesaler, and then the wholesaler sells it to the builder. But by the time it gets to you, the the price of housing went up. Gypsum board—that's drywall. Your your sticks, your you know your lumber. Your manufactured lumber, so your particle board for roof and roof decking, or or your plywood for for subfloor. All of those things. I mean, you can easily just I mean look at 2020 when I mean we were we were doing new construction during 2020 when all of that stuff adjusted on us mid build, and you'd have your entire budget go up 20% in a matter of a week. Like, so if you didn't pre-buy all your lumber, which isn't available to everybody, that's available to well-capitalized massive community builders. But then I can get into, okay, well, do you really want massive community builders putting everything into the marketplace? Because when you— what used to be called vinyl villages, when that concept is constantly what's being built, the problem with that is you have a lock on appreciation because those, a lot of those neighborhoods don't appreciate the same way everything else does. It becomes a commodity, it becomes easily traded. It's not the same thing as a custom or separate house that's going to go for a little bit more.

And usually like you're talking about those massive funds that were buying, usually that's what they were buying. They were buying those properties in those, You know, and it might have been the starter homes, but it doesn't make them bad. If anything, it's locking down some of those properties to be rentals for, for, for people who either don't want to have the expense of being a homeowner or— I mean, there's just so many dynamics that the idea that one bill— I don't care if you call it a big, beautiful bill or not— one bill is not going to change The main problem, because you're not talking about the main problem.

Yes. And so, you know, in, in the final analysis, we'll be sitting here a year from now saying that Road to Housing thing, uh, what did it do? Nothing. Yeah, right. Um, but I did, I did like you call them vinyl villages, and that one, that's a, that's a new one to me. I like that. Uh, I have another phrase that we used back in the crash years of 2009 and '10. We called them PVC pipe farms. Did you ever see one of those?

Oh, Lord.

And for those of you, for those of you that were still in middle school during that time, I'll just tell you, there were hundreds and maybe thousands of development subdivisions that had been started. And they had, they had the plumbing, the sewer lines run. And but You know, the whole thing just shut down. So they went in and they put PVC pipes in the main line to let the air escape from the sewer above what normal people would breathe. So, you know, you— but these— so it looked like a farm trying to grow PVC pipe. And I digress.

Oh yeah.

We gotta, we gotta go to church, brother. This is the Church of the Painful Truth. And so it's, it's time for the 5 questions, the sermon outline for the Church of the Painful Truth. And Ryan is going to be our guest speaker today. And so here comes the questions. Get ready to lay on some wisdom. Ready? Well, you've already laid a bunch of wisdom on us, but here comes a little bit more. First of all, this is just more of a personal question, really. I'm sure that you— well, I'm reasonably sure that you didn't grow up wanting to be a property manager and a homebuilder. What did you want to be when you grew up, when you were a little guy?

Baseball player. Um, and then Uh, probably an astronaut. I love space. Um, yeah.

All right. How'd the baseball thing work out? How far did that go?

I only went to— I, through high school, I had scholarship opportunities, but I ended up going to a Christian college for, for ministry instead.

Okay. All right. Which one?

Kentucky Christian University, actually. You probably know about it.

That's very interesting because when I was in college, in my senior year at Baptist University in Atlanta, we made it to the Sweet 16 of the end-of-the-year basketball tournament. I played shooting guard.

Okay.

I'm 6'5. Our front line was 6'6, 6'6, and 6'7, and our point guard was 6'4. 6-foot-tall. Our first game in the tournament was against Kentucky Christian, and they didn't have a guy on the team taller than 6-foot-2, and they beat us.

Yep. I actually— I had a lot of friends that played, um, that played. And actually, my freshman or sophomore year, we actually went to the women's— the women's went to the championship, and the men— the men, I think, made it to regionals, or they were good. Yeah. Our basketball team always competed.

Yeah, yeah, yeah. Well, we weren't— we were expected to win, and I think that got into our heads a little bit, but oh well. Yep. All right, so, um, I, I asked that question because, um, everyone listening to this is probably doing something slightly different than what they intended. And I just want to let people know it's okay. Oh yeah. Yeah. And all right, next question. What's the most expensive lesson that you ever learned in business? And the third question is related to it. How do you recover from the mistakes?

Oh, what's the most expensive I've learned in business today?

Don't talk about the dollars, just the lesson.

Yeah, I was trusting people. I mean, it was a little bit of that handshake thing. It was trusting people and giving too much rope. To people without accountability and processes, that and additionally also not knowing, not fully knowing myself what I wanted and my own limitations, I would say was the real lesson in that because I didn't surround myself. I didn't surround myself with the right people that protected me from myself. Um, and then, and then I got a bad actor who, who, um, who saw that weakness and, and used it for his own gain.

Yeah. Well, all right. So, um, how do you recover?

Oh, how do you recover? Number one, you're gonna beat yourself up. Um, try to do it quick. Um, try to do it quick. Find Find ways to just forgive yourself, and then you know move on. Understand that that all of us have done it. There's not a single investor, no matter the size, that hasn't lost money in some way. The big and and and the biggest thing, and I still struggle with this to this day. It's something I work on constantly. Detach your worth. From the outcomes, you're not. Your value to the world has nothing to do with whether or not your flip goes well, right? It's that's just one thing that you're doing in your lifetime. Like it's it's not it's not the sum of who we are as people.

Ryan, that is a very good word, man. I appreciate you saying that. That's that's a good one. Yeah, thank you. Thank you.

Um, yeah, I mean, it's that, that's just so important to realize that you're, you're working hard and, and there's a lot of, you know, that you're going to put up a lot of per— and a lot of early investors do this, and, and I think we all do it to a degree. You're going to put a lot of focus on legacy and what you're leaving your family, and if you lose money, it's not going to go to them. There are so many things in life that are going to happen And whether or not this one flip goes well or not, learn the lesson that's in front of you today. Otherwise, life's going to repeat it and it's going to get worse.

All right. We got, we just got 2 or 3 minutes left and I've got 2 more questions. So now we need to speed up. Your advice to a newbie, somebody just getting started, what would you advise?

Remain patient, establish fundamentals. And my dog's barking.

Yeah, I can hear.

Um, my wife left him out. Remain patient, establish fundamentals, and know what, know what you want and why you want it, and revisit that over and over and over again.

All right, very good. Last question, define true wealth.

Your time. The only resource you can't make more of. Your ability to use your time the way you want, invest in your family, invest in yourself, that's way more important than your balance sheet or your personal financial statement. At least that's how I define it. If I don't enjoy what I'm doing or enjoy who I'm doing it with, if I'm not spending my time the way that I want to, That's the real problem. All right.

Great answers, Ryan, all the way through. Really enjoyed talking to you, man. Thanks for joining us on the show. That's all the time we have for today. If you enjoyed the show, please subscribe and tell a friend about it. We, we thank you so much. It's on every podcast platform and also now on YouTube. And I'll leave you with a quote of the day. A diamond is simply a lump of coal that performed well under You've been listening to Flipping America with Roger Blankenship.

For more resources, free investing tips, and information about today's show, visit flippingamerica.net. Be sure to subscribe on your favorite podcast platform and share the show with a friend. Until next time, keep your eyes open. Opportunities are everywhere. This is Flipping America.