How Passive Investors Should Analyze Investment Opportunities

All right, everybody, thank you all for joining this evening at our Texas Multifamily Investor Meetup. We meet on the fourth Monday of each month. We just had some good networking opportunities and here we are to dig in a little bit more on how to analyze a passive real estate investment. Just to give you a brief overview of who I am. I'm Wayne Courageous. I am the general partner and managing principal for CREI Partners. We currently hold around $33 million of assets in Texas, Louisiana and Alabama. And that spans with multifamily boat, RV storage and build to rent developments. The things that we're going to talk about today can blend in different asset classes, not only in multifamily, but other asset classes as well. The premises of what we're talking about in a lot of cases are very similar and very the same. So the last 16 years I've worked with dozens of real estate professionals building strategic plans and executing them over $60 million in transaction of capital improvements. My goal is to make our investors money. That's the goal. At the end of the day, we also have a commitment to our community as well. For those communities that we do purchase, our goal is to make it a great environment for them as well and just make it a great investment for everybody. My education background's MBA at University of North Carolina. I have a Master of Arts in Economics from OU and a Bachelor of Business Administration from National University. So a little bit about what CREI Partners does and it's really these five items here. One, we raise money to buy assets. We can't buy the assets on our own and other than, you know, up to our certain net worth, etc. So what we do is we pull other people's money with our money and grow together through buying large multifamily storage and build a rent communities with the capital we raise. As we pull money, we acquire the value add real estate. And each property has its own business plan that we are executing on. And that business plan is communicated through our private placement memorandum and our webinar presentation. When we get the project under under contract with that business plan, there's always the goal of returns. So as we implement our business plan, we will distribute returns based on the business plan and then of course we'll exit our strategy and distribute profits. So we are the active side of investments where many of you and those listening are interested more on the passive side because you have other responsibilities, family, other jobs and things that, you know, you just don't want to get in the weeds on real estate investing. Our passion and goal is, is real estate investing. So today, the discussion points we're going to be covering is one, what is passive investing? Two, determine your risk tolerance and investment goals. The third item we're going to go through is assessing the sponsorship team. The fourth is assessing the financial returns. And then we'll talk about assessing the location of market demographics, assessing the underwriting and business plan, analyze the risk and then review tax implications. So those are the things we're going to be covering in the next 45 minutes or so. So to start off defining passive investing, so I looked on different websites. I've got my own definition as well. But what I really liked about the Motley fool definition is it's pretty straightforward with this first sentence. Passive real estate investing is when you give someone your money and they do all the work for you. I mean, it's, that's in what it is. When you invest in stocks, when you invest in other investment classes that you're not actively working on it day to day, you're being more passive. A real estate investment trust or real estate partnership where you don't play an active role are good examples. The key point is that a passive investment requires, requires little work on your part. So let's talk about risk tolerance and investment goals. So whenever you are thinking about joining a syndication or passive investment to whether it's diversify or you're just done with the stock market and you want to, you know, get into more on real estate, you've got to sort of see where you fit along this chart. There's core, core plus value add and opportunistic. The higher the risk, the higher return. So let's talk about probably the most opportunistic, higher risk. That's more of a land development as an example. The biggest value add development there is is development, you know, taking raw land and improving it to make it a, you know, better use than what it was. Right. From a revenue value add standpoint. So with that there's higher opportunistic costs, that there are time delays, construction costs, interest rates. I mean, there's a lot of risks that can go along with that. Right. But holding onto it and focusing through the development piece and being patient, et cetera, there's a lot more upside where you get more into the value add. It's typically stabilized older properties that there's still room or there is room for moderate renovations, for multifamily. For example, we're going to go in and do exterior renovations, interior renovations, but we're going to do it In a way where we can still maintain a certain occupancy. Still cash flows, we're paying our debt service. It's a little less risky, a little less return, but still provides good returns. Our core plus and our core assets are typically more of an institutional buyers. You'll see when you look at, you know, downtown high rise buildings, whether they're office, retail, multifamily, a lot of times those buildings are owned by institutional funds. They could be JP Morgan, MetLife, Tia Cref, there's plenty of those big groups out there. And maybe part of your 401k or your investment, you're investing in a fund that has a real estate investment trust. Well, that real estate investment trust or that fund, a lot of funds have core assets. Now those are typically newer assets. They're typically, you know, less risky because of the location, the tenant base, etc. So but you have, you know, a less risk, less return type setup. So as I said, when you're going through this, you just sort of see where you fit, right? I'm sort of in that in between value add and opportunistic just because of where I am personally with our investment cycle. The other thing you got to look at is, you know, are you looking more for cash flow? Are you looking more for and the cash flow, maybe it's you don't like your W2 or you're trying to, you know, have more freedom with your time. You want to be in the mountains somewhere, but you need money. So you're looking more of a passive. And so cash flow is really important. Other people are more irr driven and we'll talk about that shortly. But that's not needing the cash flow because you know, we're working or you have other income that's coming in, but you're looking more for the upside. Again on this return, you'll have a higher return potentially on those IR and we'll talk about that shortly. So knowing where you sort of fit between a core and opportunistic and then where you sit on a cash flow versus equity growth, right? So depending on where you are in your investment cycle and what your goal of the investment is important. So people say in real estate, location, location, location is number one in my mind. You can have a great location, great management company, etc. But if the sponsorship team isn't strong, the deal is starting day one. Risky. I will tell you that on our deals personally, like I'm so in the weeds on day to day stuff, probably annoys the management company, but it is Just something that is really important to me. And there are really good sponsors out there and they're sponsors that, you know, are growing their portfolio very, very quickly and it's hard to focus and make sure that each one is getting the time it deserves. So one of the things I just highly recommend if you're looking at passive investments is get to know the sponsorship team. Do you know the sponsor? You know, are they active in the community? And I say active in the real estate community. When you Google them, do they come up with other events or podcasts or blogs, et cetera? Are they active in making this a, a career or, you know, something that they're really passionate about? You know, what's their track record? You know, a lot of times, you know, sponsors may not have the track record that you're looking for. Well, if a sponsor's teamed up with other team members on that team that have gone through full cycles and have had great track record like those, that's a good thing. Like that's, that's all, all good. You want to look at holistically at the team who's going to be managing the asset over the, you know, the span of the investment. So other questions to ask are how are their current deals going and do they have any full cycle investments? This is a tough environment right now. Our interest rates are going up, insurance is going up. You've got a lot of uncertainty in the economy. How are they working through that? You know, the, the biggest thing is, is communicating to investors and just being fully transparent. Right. One of the things that you want to see are monthly updates and communication where if someone's texting, they're very responsive to you. Other things that I'm noticing in our real estate syndication world is that sometimes people that are raising capital and saying they're on the sponsorship team, they're not the ones who necessarily are doing the day to day asset management. And again, that's fine if they're transparent with you and they're saying, you know, hey, we're raising capital and part of our team is these two or three people that are going to be asset managers and their experience at executing the business plan. But you're going to want to know who's actually executing the business plan. There are deals that I'm part of that, you know, I'm, you know, I'm not so hands on because I don't live in those submarkets. So it's really important for me when I'm participating in those deals is knowing that that person boots on the ground within 30 miles or so. That's sort of my, my requirement is that they're close by and they're available to see that property and are seeing that property at least weekly. Other things. Are our sponsors having expertise in the asset class in the market? You know, I get diversification within real estate investment groups and it's important, but it's just more important that they have somebody that has experience and the relationships in that sub market. You know, I focus a lot on Houston and a big reason of that is one, I'm there four days a week and I'm also in touch with a lot of brokers and construction and vendor partners, et cetera, management companies. So it's important because when things get tough or you need favors or you need assistance, et cetera, those relationships are there other things to look for? Is what technology is a sponsorship, sponsorship team using for investor reporting, whether it's an investor portal. Ideally there's a portal put in place where the investor can go and sort of see how all their investments are doing. It gets hard if you're investing with one sponsor and another, and that's totally fine. You've got to, you know, keep all your username and passwords and websites. It's a little more cumbersome, but at least having the ability to track those online, I feel like are very important. The other thing is, is the spot is the sponsor investing their capital in the deal. You want to make sure that everything is aligned, that they are investing and they've obviously put a lot of time and effort in their business, et cetera, to find this deal. So there's a lot of money that goes to even get an opportunity under contract, etc. And there's risk, but you want to make sure that they're, they're aligned. So let's go into assessing the financial returns I talked a little bit about earlier determining whether you're more of a cash flow investor, equity investor, maybe you're a little bit of both. So this slide here, there's three deal scenarios. The first one, it's a deal that is being presented to you where you put in a hundred, you receive 8,000 in cash flow each year for five years. And in the fifth year you're in returns when the property sold for 200,000. Okay, so this is more of a cash flowing deal on deal. Two ideal where you would invest 100,000, you receive $3,000 of cash flow per year over five years and they can get another payday from the sale of the property in year five for $250,000. And then in deal three, a deal that has you invest $100,000, you receive no returns for the first year, watches the properties refinance for 50,000, cash out in year two. So you've invested 100,000, they refine year two, you get 50,000 back, and then you receive $2,000 cash flow per year in years three, four, and five, and at last receive returns when the property is sold for 200,000 in year five. So these are three examples we're going to go through. So one of the metrics to look for is sort of the average annual returns. So in deal one, total investments 100,000, you get operational cash flow. That's income minus expenses, net operating income that NOI is paying out, distributions, 8,000 a year. Well, your sales price, say your 5, is 200,000. Your average annual return is 28%. It's taken all the cash flow in the sales price, upside and averaging amount. In your deal two, your operational cash flow is 3,000 each year, and then the sales price is 250,000. So higher sales price than the first deal. And the average annual return is 33%. So, and then deal three, here is $100,000, zero in cash flow. Year two is 50,000 because we refinance. And then year three, four, and five, you have 2,000 cash flow. Sell it year five, 200,000. So you see here, on the average annual returns, 28%, deal two is 33%. Deal three is 31%. If what matters to you is cash flow, even though the average annual returns on this example is less than the others, you're likely to go with deal one because it has the cash flow. It fits what you need as a passive investor, you know, for, you know, deal three, if you're okay with not having that cash flow year one, because there's a value add business plan that's going to be implemented. We refinance. Year two, get half your cash back so you can invest in another deal and still have income. You know, that's a pretty good deal as well. So let's talk about equity multiple. So this is another metric that's really important, and it's something I, I look at, you know, daily when I'm underwriting deals. So still the same investment, 100,000 each. Operational cash flow, we already talked about that Sales price is 200,000, deal to 250. Deal three is 200,000. So you take all the operational cash flow and the profit off the sales price, and you're at a 2.4x. So you have in deal one, you have a 200,000 sales price, so you already doubled. You know, you've got your 100,000 back and then you've already made your hundred thousand at sale. But then you add all the cash flows back and you're at a 2.4x on deal two. You know, similar thing, you're at a 2.65x and deal three, 2.56. If I was looking more from an equity multiple standpoint, I would look more deal two. I think deal two in this case, you know, it's more attractive, right? It's higher. But if we look at the internal rate of return and this is more so what I personally more look at and again, just where I am as an investor, but I'm more looking at the total irr, right? And it's a long complicated formula and there's spreadsheets. But ultimately it's what a lot of investors and business people use to compare assets, right? Or investments, I should say. And it's pretty much taken the net present value of all the future income and what is it from a rate of return, from an internal standpoint, so it doesn't take into account inflation and other things, but just the return on that investment. So similar thing, cash on cash, you know, we got 8%, 3% and then, you know, deal three was 0% year one, 50% year two. We've talked about that equity multiple. We've talked about, well, in this case an IR is 21% year or deal one, 22.3% deal two and deal three is at a 25% IR. So you know, cash on cash is a term that you'll hear a lot of. And you know, it's just the amount of money that you put in for the investment. What's your annual return, you know, and if there's a preferred return, cash on cash, 7% or 8% and year one, it's not hit, then in future years you will. It's usually accrued to be paid back. So hopefully this helped a little bit. On how you sort of analyze the deals. We'll talk a little bit about underwriting and I'll have another meet up on, on underwriting. But you know, for that, I mean, again, going back to the slide about where you fit in that risk and return and what are you looking for? Cash flow versus equity upside or a mixture of both. So let's talk about how to assess location and market demographics. So first thing you do is just straight up use Google, right? None of this stuff is rocket science. Like it's go Google and see what, where the property is and check out the reviews. And I love properties with horrible reviews and good locations. Like to me that's one of the things I look at and I'm like, okay, well that's good. That means you got a lot of opportunity to make operational management changes. A lot of times you'll hear or you'll get to see what stress points or what issues tenants have, residents have, whether it's H Vac or plumbing issues, etc. So you can make sure we have, you know, the capital and for that so, but you're able to, you know, maybe you don't, that's. You don't want all that risk, you don't want to do a full transition on a monument, signs for changing out the names, etc. And you're wanting more, something more stable. Well, having high 4.0 stars, etc. You know, helps build that. So I would say Google is a good place. But here's some other tools that I think are really cool. So many of you on this call today are outside of Austin, right, Or outside of Houston. But just using Google Earth and just putting the address and getting street view access of what the area looks like and then like clicking the buttons to have you walk down the street as if you were there, I think are huge. You know, if there are schools that surround the property in a multifamily, if it's off a major highway, you know, those are all really good, good things, right? If you turn the angle and you see a storefront with, you know, barred up windows, you know, it could, it should, you know, make you wonder, okay, is this a decent or good enough area for your investment? So definitely Google Earth is a great place. The other one I like to use, and this is all free, all these websites, justice map, www.justismap.org there you can look at income, you can look at the diversity of the area and, and you can, for me I use it more so for, you know, we require three times the salary of rent. So if your rent is $1,000, like we want to see that you have $3,000 of income per month. And so we'll look at that demographic, look at the income map and see if we're in an area that, that has that median income, right. So this is a really cool tool to use. The other thing is FEMA flood maps. You know, it's amazes me when I look at some of these properties, especially on the broker websites where you know, I'm like, oh, this could be a good asset for me to look at to underwrite if it's in a flood map or sits next to a flood zone. Like I'm personally out. Some other people are okay with it. They have different risk tolerance. But real estate is already risky enough. There's a lot of things that we can't control. But what we can control are things like doing your research if you're in a flood zone and, or if you're, you're building up next to it, especially in, you know, areas along the coastal, whether you're investing in Florida or anywhere along the coastal lines. So check out FEMA flood maps. It's your decision, your investment, if you're wanting to be okay with investing. And there's, you know, plenty of properties along the coast that people obviously buy. So. But from a CRI partner standpoint, my personal risk is I always am looking at the flood maps. The other thing I like to see is go to bestplaces.net so bestplaces.net, you can go into like there's, you put in the city and then there's a housing and then you can see what the rental percentage is. Like I've, I've turned or turn down opportunities where, you know, there's a high ownership percentage, you know, say 60 or more owner occupied. You know, that to me it doesn't give a large enough rental base, you know, for what I'm looking for. Right. So these are some other good websites that are free that you can go to when you're looking through a offering and just get comfortable if about, you know, like, hey, is this a good investment for you? So assessing the underwriting and business plan. So there are certain things first you want to do if an investment comes to your desk or, you know, you're sitting on a webinar, you know, expect a private placement memorandum. That ppm. The sole purpose of that is really to scare you away from the investment. You know, it's sort of like when you buy a timeshare or something, you get the, the long documents, you're like, oh, what am I getting myself into? Well, that's the purpose of it. I mean, it is a sophisticated investment getting into real estate. Right. And but the PPM is there to also talk about the opportunities, to talk about the risk and to, you know, go into compensation and, you know, other, other returns, et cetera. So those are all things that you'll want to, want to read. So I would first say check out the Webinar that they have, they're going to make it sound like an incredible investment opportunity because they obviously believe in it. That's why they're buying it. And, you know, you'll get a good feel of location and the business plan just through the webinar, but then following it up through what's black and white on these four corners of a page. And no matter what you're hearing in a webinar or in a call, what matters is what's in this document. And so you want to read it. Always recommend to our investors to have an attorney review it. A lot of times there's not, you can't really change it, but it at least gives you the ability to be like, hey, I'm going to pass on this one because of this, you know, or maybe it brings up some questions. So assess the underwriting and the business plan. The business plan will be in the PPM and again, it'll be through the webinar that you hear and then hopefully the one on one conversations you have with the sponsor. When you assess the underwriting, you know, you're not going to be given in most cases the underwriting. And if you were given the underwriting, you may not understand how to look at it, right? And it's just, you know, unless you've gone through some training on underwriting and how cap rates and all these other things work, it, it may not make sense. But what I would suggest is that you do suggest, sit down or have a call with the sponsor to go over the underwriting assumptions. And what I always tell people is that, you know, you're sophisticated enough to one be listening to this recording or to be in this meeting. You're, you're getting educated, right? And if you're learning and being educated, then things are going to seem, you know, like, oh, this makes sense, or like, yeah, this, I believe in this business plan. Or it's going to be like, ah, there's some red flags here, or I don't think they're going to be able to achieve 10 to 15% growth in today's market. They probably could a year ago, but in today's market, maybe we're getting a 3 to 5% rent bump or, you know, with inflation, you know, I need expenses more than 1% growth year over year because, you know, things are getting a lot more expensive, right? There's other things to look at, like cap rate, you know, a whole nother class and conversation on cap rates. But the higher the cap rate, the lower the value of the Property lower the cap rate, the higher the potential purchase price is. So seeing where they are buying the property and where they are anticipating cap rates to be at sell and does that make sense? Typically, you know, you could see 10 to 20 basis points a year growth. So if someone's buying at a 5 cap, you know, over seven years, you could see a 5.7 to 6% cap rate on the underwriting. You know, does that, you know, is that where it should be today? You know, ultimately everybody's going to have their own thoughts on where interest rates and where things are going to go. But, but those are just things that you want to get comfortable with. Insurance along the coastal, we talked about that there. It's. Their numbers are going up and it's getting more expensive. And it's really something that, you know, you want to make sure that your sponsor has talked to an insurance company, a broker, and that they have, you know, pretty solid pricing or expectations for where pricing is going to come. Property taxes, you know how they talk to a real estate tax consultant that's in that market. You know, in Texas, you know, we don't have income, state tax, so property taxes are where, you know, the government's getting their state funds from. And you know, so I've seen deals that come to me, you know, someone's like, hey, can you look at this deal? And I'm like, sure. And I look at it and they're doing 85%. The sponsors underwritten 85% of purchase price. In Austin, Texas. That is extremely risky. In Austin, you know, Houston, I am seeing more 80, 80 to 85% up to 90. But Austin, they are, they're really growing. You know, they're pushing for revenues. So they're being really aggressive on, on taxes. So just again, knowing the market and knowing that your sponsor has done their due diligence on it as well, ultimately think of this as a business and the property has revenues, expenses, and revenue minus expenses is income. Does all of it make sense of what they're trying to do? You know, I always like to buy properties that, you know, are supported by other properties nearby that have good case studies. Right. And so you're not going out there and, you know, putting a bet on this property that it's going to lead the growth of that submarket, but more so find properties that are supporting it. So ask for the comps, see what other properties are, are renting for on a per square foot basis and what's the marketing plan. So those are the things that, you know, you can ask to understand the business plan and assess the underwriting. You are an owner in this property. Once you invest and you sign that syndication. The exciting thing about real estate investing, especially on the passive side, is you benefit from all the tangible benefits of owning real estate, but you're doing it on a passive side, a limited partner side. But you still can go to the property and be, you know, involved from asking questions and, you know, just making sure your investment is in good hands. So other things to look at is analyzing the risk. So there's a lot of risk in real estate investing. There's a lot of risk in stocks and crypto and other things. You know, personally, I always say they're not making more dirt, you know, unless, you know, the China Islands and stuff, like they're making more dirt. But in America, we're not making more dirt. And areas that are growing or growth of path for a lot of people are the southeastern states. And a lot of it is because of the pro business and, you know, pro landlord stance that Southeast has. So that's typically why, you know, we more so, you know, invest Louisiana, Alabama, Texas. But with that, I don't have to worry about Elon Musk making a tweet and the value of my property going down. Right. Risk of an asset is cash flow for a property. You know, how is the cash flow going? If the cash flow is more than it was last year and all else equal, the property is worth more than it was last year. And so what are we doing to drive revenue, what expenses and what can impact that? So investment risk factors in real estate, you know, could be the sponsorship team, you know, or the capital reserves. You know, we put a lot of money in reserves for the event that if something were to happen, we're not going back to ask our investors for a capital call. In some cases, it does make our numbers look a lot less attractive than maybe someone else's. But big part of that is we have reserves, right? And in this environment, I think it's just another question to ask is what's. What's the reserves looking like? So in the ppn, the private placement memorandum, check out the risk factors that are in there and just make sure you're comfortable. I always say too, is with like any investment and it'd be really hard to lose investment in real estate. I mean, it's just I. It's got to be a really bad economic situation or something majors happened in the market. And even then with real estate, as long as you're looking at it from a long term Angle, you're okay. I'll give you an example. We have a property in Houston that our goal is a three year hold period. Well, interest rates have, you know, gone up, insurance, et cetera. We have a rate cap and we have a three year bridge loan. But part of that bridge loan is we one paid like $350,000 for a rate cap. So every night I'm sleeping really good, no matter where the interest rates go because I know I'm only going to be, I'm already maxed out on my rate. So it is what it is from a rate standpoint. So the other thing too is, is on that loan we have a two year, two one year extensions. So in year three, if it isn't where we want it to be from a sale price, we can look at extending another year with our loan and another year on top of that for our loan. We could refinance that into agency debt the other day that sponsorship team is looking after how do we preserve cash and when is it the best time to sell that benefits the all the investors. Right. And that's a question that you can ask is what, what is the debt service look like? It's a big question you should ask what's the debt service look like? What, what happens when you have a year two bridge and you can't refinance because it doesn't hit a certain debt service coverage ratio and you don't have any extensions. So look at the investment risk factors. It should cover all those type of items and then through meetups like the one we're at now or the recordings you'll, you know, continuously learn and you know, ask the right questions. So another thing to look at, and this is one of the last slides, but is the tax implications. So real estate attracts a lot of high net worth individuals because of the ability to have losses, paper losses, and that comes through depreciation. So for every asset we purchase, we're looking at it from a standpoint of you know, doing a cost segregation and that cost seg is calculated through with our tax advisor and we send out K1s. So that depreciation is, is important. If you've got a lot of passive income from other properties and you have passive losses, you're going to show, you know, less income, you know, on paper and oh, less in taxes. We had a great meetup last month with the recording out there about you know, shielding taxes and how she was able to accomplish it. But you know, on the slide, depreciation and accelerated depreciation bonus depreciation are all things to to consider. And talk to your tax consultant, see if this is something that makes sense for you from a tax standpoint. The other thing is from a passive investment, if you haven't done it before, a lot of times those K1s don't come out until early April and sometimes later than that. And so as you do more real estate investments, it's very common to have to postpone your tax filing until, you know, the October time frame. So it just again, making sure it's a good fit and making sure from a tax standpoint you're, you know, you're in a better place. So want to do a couple more slides? One, we've got a podcast that love for, you know, y' all to subscribe to and help us grow. But it's called the Untold Stories of Real Estate Investing. We've done it about two years now and we're trying to, you know, do at least two recordings a month and provide a lot of great value. We've got an ebook as well on the top five must know Tips for Passively Investing in multifamily. That's at creipartners.com forward slash ebook. We have this meetup that we're at today. It's the fourth Monday of each month. We bring in other speakers. Normally I'm not the guest speaker. I normally bring in other people. But that is something that I love doing and meeting relationship people for relationships. The other thing I'm super excited that we're launching in the next couple months is our passive investor coaching. I get a lot of people that ask me questions about other people's deals and such and I love providing feedback. But we're going to make it more of a formal program where I'm gonna go more into detail of each of the things that we spoke about and more and our coaching program. And then you know, from there there'll be a few spots where, you know, if people are wanting to have more of a month to month reoccurring connection, you know, I'll be available for that too. So that's going to be at www. Passiveinvestorcoaching.com. so that is something I'm going to be launching, like I said, in the next couple months. So more to come on that. And with that, here's some of my contact information here. You can email invest reipartners.com and then you can check our website at www.creipartners.com. and so with that I'm going to stop share and see if there are any questions from the group. Except there was a couple. So one of the questions is any chance you could give a bit more detail on the IR component, especially involving time and why number three's IR was greater than number two? So let me see if I can go back to. The screen and y' all can unmute too, if I think I'm sharing the screen. Yeah. So one of the questions was is, you know, ir and it's complicated. Ultimately, what you're trying to do is look at all the future cash flow and make it more of a net present value from a percentage standpoint. So in deal three, the reason why it had a higher IR is because you've invested 100,000 year one, but then you're getting 50,000 back in year two. So really, you still, you only have 50,000 in the deal and you're still cash flowing in the future years. So, you know, a deal I'm looking at right now doesn't cash flow year one has little cash flow year two, but I'm refinancing it into year three. And we're getting our investors back, you know, a large percentage of their initial investment. And then they're still. And then from there their adjusted returns are much higher, you know, 10% cash on cash years 4 to 7. And again, they have their initial, a big part of their initial investment back, and then they're still able to receive the cash flow as if they had 100%. Now, when we refinance, that's not a taxable event. The taxable event happens when we're selling the property. So a lot of, like 1031 investors, you know, we've had last two transactions, 1031 money comes our way, we put it in the transaction, and when we refinance it, they're able to, you know, get a cash out, invest in another deal, etc. So that's pretty much why the IR is better in year three. It's because when it's taken into account the cash that you have still in the deal and the future cash flow, you have less cash because you've got that good chunk of money back in year two. All right, let's stop share again. Hopefully that helped. I will jump off. All right, so any other questions? I'm going to start my video again before I stop the recording. I'm going to go ahead and stop the recording and then see if anyone has questions outside of the recording. Thanks, everybody for joining us.