Edward Ring 0:00
From call it 1980 Through through the early 2000s All apartment buildings were bought with negative leverage. Leverage was always the price of debt was always higher than than the cap rates are very frequently a higher than the cap rates. And people got used to figuring out how to how to buy real estate with that kind of debt environment if you had equity just buy with equity because why would you pay a lender you know you know, we get to the later part of the 90s and now all of a sudden you know, early 2000s Now we’re talking about leverage cost of debt that’s actually lower than your cap rate. So you walk into a project and the more debt you can put on it, the higher return your equity is going to get that’s how the math works. And so everybody got pretty excited about using that call it certain read about when I got into the business so read read around 2002 You know borrow it 4% Or four and a half percent and buy a property that has that’s thrown out for five and a half percent. And why yield that feels great.
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J Darrin Gross 1:42
Welcome to Commercial Real Estate Pro Networks CRE PN Radio. Thanks for joining us. My name is J Darrin Gross. This is the podcast focused on commercial real estate investment and risk management strategies. Weekly we have conversations with commercial real estate investors and professionals who provide their experience and insight to help you grow your real estate portfolio.
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Today, my guest is Edward Ring. Edward founded New Standard Equities in 2010 and serves as its chief executive officer Edward has transacted over $2 billion of real estate over an illustrious 25 year career. And in just a minute, we’re going to speak with Edward about the relation between interest rates and cap rates.
But first, a quick reminder, if you like our show, CRE PN Radio, there are a couple things you can do to help us out. You can like share and subscribe. And as always, we encourage you to leave a comment we’d love to hear from our listeners. Also, if you want to see how handsome Our guests are, be sure to check out our YouTube channel. You can find us on YouTube at commercial real estate pro network. And while you’re there, please subscribe with Anna want to welcome my guest, Edward ring. Welcome to CRE PN Radio.
Edward Ring 3:37
Hi, thanks for having me. It’s a pleasure to spend morning with you.
J Darrin Gross 3:42
Well, I’m looking forward to our conversation. But before we get started, if you could share with listeners a little bit about your background.
Edward Ring 3:51
Sure, I I’ve been in the multifamily real estate space since 2002. I was working for another company for about eight years when the great recession hit and I decided to do what I was doing for them for my own book and my own investors and you know, I was full of hubris and ignorance and just enough to keep the blinders on and the things I didn’t know about and you know enough to give me the the courage to try to do this on my own. So it’s been about 13 years now and I’ve got currently about 2000 units in my portfolio. I I do strictly value add apartment investing, and I own and operate and manage the investments with a team of course, we’re about 60 stronger so on the employee side and I stick to the markets that I know I’m in as greater see Seattle, I’m in Northern California, I’m in Southern California, and I’ve been farming Denver for the better part of about four years. So eventually, we’ll be in Denver as well. I use equity from anywhere, anywhere from Mom and Pop type investors, to large institutional equity sources, and in all parts in between family offices and whatnot. And my debt, generally speaking comes from Freddie Mac, Fannie Mae debt funds, banks, kind of whoever’s giving us the best rate at the moment in time, all nonrecourse talking about risk, I don’t want to lose my house over this stuff. I am very, very cautious. Some of my peers are more cowboys, and I tend to be very slow and steady wins the race kind of kind of character.
J Darrin Gross 6:06
No, I appreciate you sharing that kind of your background there. So you’ve been doing this long enough to see the front end and the and the kind of the back end of a cycle. I feel like a lot of people I speak with are kind of all, you know, post, you know, the the crash where everything was, you know, so low that you you didn’t really have to know anything you’ve just got in at the right price, you could write it up and, and, you know, get out and make some money. Because if my math is correct, 2013 or, excuse me, 13 I guess you were 2010. So it was kind of postcrash. Is that kind of the when you got in as far as doing it doing it on your own?
Edward Ring 6:56
Yes, exactly. Um, as far as going on my own, there was a small recession in the early 2000s 2000 123 ish. And, of course, I saw what was going on in that. And interestingly, the folks I was working with back in the early 2000s had gone through the previous downturn and recession in the end the and the, the credit crisis of the early 90s. And that was fascinating, because everybody that I learned from and my mentors and whatnot, We’re all veterans from multiple cycles. And for sure, it’s a pretty interesting time right now, because I to meeting all sorts of people who jumped into this business in 2010, or 2011. And have never really experienced what it means to sign on the dotted line, and what it means to have, you know, your credit crisis or, you know, or fundamental changes in, in the macro economy where your values can get impacted. It’s, it all looks so easy from afar, but it’s far from easy.
J Darrin Gross 8:15
No, well said. So I’m kind of curious, you know, I, when, when I have these conversations, a lot of times, what I find is that there’s a viewpoint that what happened last time that caused the crash is, you know, and this is more like a pre crash conversation. And I’m not saying we’re having her, we haven’t crashed yet, but there’s certainly been a slowdown right now. But the the want is to look to the past, and identify what caused the, the the last crash and look for those signs on the horizon for the next crash. Clearly, the the, the 90s was a credit crash, you know, you said the mentors you learned from and, and if I remember, it was not like the savings and loan kind of debacle that that kind of came on, done with I don’t remember what the circumstances were. Yeah, that’s
Edward Ring 9:19
effectively Correct. was you know, back way back then you’re talking about a a system that didn’t have really didn’t have the internet. I mean, that’s how, that’s how long ago it was. And that really that that information flow changed everything. Obviously it changed and we hear about it all the time. But when you really think about commercial real estate and and what’s going on, you went from a system where it was a weird thing to invest in an apartment building, because who knows what’s going on and what you got to fix the toilets. I don’t get it. You know, there’s a lot of ways There’s stuff out there and people are like, Oh, no, you can make money by investing with, you know, this guy from Chicago. It’s like, Oh, my God, that sounds terrible. Well, then the internet comes around. And you know, the last, the last big recession? What 2008? We talked about that in a minute. But all of a sudden, you had asset managers at banks, who were, you know, all of my peers and mentors, and people who had been around were like, oh, no, no, the banks, they don’t want to own this stuff, the banks are just going to take it on the chin. And don’t worry, you’ll buy it pennies on the dollar. Well, not so much. In 2008, there was this thing called the internet. And there were things called cameras that you can plug in, you know, put on your computer desk and take a look at the asset. And even in 2008, we had that technology. And so now all of a sudden, you have banks that are now populated with highly educated people who aren’t necessarily afraid of, of this thing called an apartment building, they’re not necessarily afraid of what they don’t know and are willing and able to jump in with two feet. So whatever it was afraid, or whatever was excited about in 2008, and nine was out, we’re gonna, we’re gonna go and make a ton of money, because banks are going to take it on the chin. And now that didn’t happen too much a little bit. Some, some borrowers and some owners really got over their skis and bought in markets that they didn’t understand or whatever. And sure, there were some losses. But cut to today. And the most fascinating conversation I had, I think was really at the front end of this thing back in, in June. And again, we don’t know where we’re all heading. I have some, I have a hunch. But back in June, I had a extremely sophisticated, very, very intelligent investor, institutional investor manages billions of dollars. And he’s literally one of the smartest people I’ve ever met. And he said to me, he pulled out of a project that we were trying to buy. And he said, Eddie, I know where this is all heading. I remember 2008 I know where this is all going. Like, really? You’re the most sophisticated guy I know. How do you know where this is heading? And he said, Yes, this total straight face and I said, Listen, I can tell you one thing for sure. One thing for sure is, it’s not going to happen the way it happened in 2008. That’s the only thing I know. In fact, nobody knows anything about anything except for no things happen in the exact same way each and every time. If they did, that’s called a crystal ball. And he would everybody would make money, I guess, or everybody would lose money. And, you know, think of a world where everything happens the exact same way every single time, first of all, but pretty boring. Second of all, that’s not the way human beings are. So now the question is, well, what’s going to happen in this next go around, and that’s where I’ve been mulling a lot recently, and kind of think through the various factors and, and, and prepare for a downturn prepare for the worst. But however, this is not 2008 2009 that was the scariest time I’ve ever seen in my life, not just as an investor, but as a sophisticated person who reads the reads the news and watches what’s going on and understands what’s happening with with credit markets, that was a really, really scary time, we were very much on the brink of an entire financial system collapse. And so if you think about that, and he cut to today, we have some inflation, we have a group in Washington dialing up the interest rates, we don’t have anything remotely close to what it looked like in 2008. And in fact, we’ve got full employment we’ve got lack of employment, we don’t have enough people to fill the jobs that we have out there. So you know, I the assure a bunch of layoffs in the tech industry right now and you know, you open up the newspaper here about somebody else laying people off but that’s actually normal. It’s a normal course of business. That doesn’t necessarily mean that we’re facing a ginormous credit crisis and everybody should run for the hills.
J Darrin Gross 14:38
No, I appreciate you kind of going through that and I’m you know, a believer like you say that whatever happened last time was now not what is going to happen this time you’re you know, that’s too easy. In a lot of it is because the the holes get fixed or like in the instance where you’re talking about the 90s where it was pre internet and now we have the internet You know that that’s a whole lot of information coming in everybody that’s available 24/7 365 as opposed to some sort of a local on the on the street kind of knowledge that, you know, may not be available to everybody. So let’s talk a little bit about, you know, kind of the, where we are now. And then, if we, you know, however it works best talk about, you know, that that that relationship between interest rates in and cap rates, because I think one of the things that, that, you know, people, historically, the interest rates read today, the mark would be doing cartwheels on the broad, kind of the broad spectrum of time. But having come from such a low interest rate environment, it’s a shock to the system. Right now, in my sense, and I guess my question to you is, do you think that the market will accept this and continue forward? Or will there be a complete stoppage? You know, and, and the recession, and then the need for the low interest rates to get the market going again?
Edward Ring 16:23
Yeah, it’s a great question. And I think that when I really like look at the landscape, and and I think about where we’ve been, and where we’re heading, first of all, there’s a couple of factors. From call it 1980, through through the early 2000s. All apartment buildings were bought with negative leverage, leverage was always the price of debt was always higher than, than the cap rates are very frequently higher than the cap rates. And people got used to figuring out how to how to buy real estate with that kind of debt environment, if you had equity, just buy with equity, because why would you pay a lender, you know, you know, we get to the later part of the 90s. And now all of a sudden, you know, early 2000s, now we’re talking about leverage, cost of debt that’s actually lower than your cap rate. So you walk into a project and the more debt you can put on it, the higher return your equity is gonna get, that’s how the math works. And so everybody got pretty excited about using that call it certain read, right, when I got into the business, so read, read around 2002. You know, borrow it 4%, or four and a half percent and buy a property that has that’s thrown off a five and a half percent. You know, and why yield? That feels great. You know, in some markets, that was a six versus a four and a half, or a seven versus a four and a half. And, you know, some markets, that’s a four and a half or a four and a half. But either way, that was everybody got used to the idea that that was part of the calculus, that would be there forever. And again, things change, and things move around. And people who are buying these things with financial engineering in mind are not looking necessarily at the proper metrics. Just because you can buy a seven cap somewhere, and finance it at a four doesn’t mean you should be buying that property. There’s a, there could be a lot of reasons why you shouldn’t be buying a property and we can talk about that in a minute. But, you know, today, last couple of years cap rates fell, because you know, the Fed cut interest rates to zero when Cap rates fell through the floorboards, and all of a sudden, people are getting comfortable at a three, three and a quarter cap. And the lower that cap rate, the tougher it is to dig out of it if you’ve you know, if something changes. And so we were very slow in 2021. And we were very cautious. I kept looking in my markets, we had a bunch of people not paying rent, and we couldn’t kick them out. And it was it was still very, very, very challenging. But we we tried our best to stick to our knitting and stick to our park discipline. And some folks may have not done that. And they bought it a three and a half cap and today they’re sitting at a four cap, maybe with some rent growth and you know, the markets are decidedly in the five and a half kind of range. All those folks are underwater. And so at some point, if they don’t have additional equity or they can’t do capital calls or Then those properties will be sold. And the equity holders will take a loss and maybe isn’t the lenders will take the loss depending on again where that property is. However, the other funny thing about today, and this is what makes me laugh every time I think about it, every single conversation I’ve had in the last nine months, is some version of the following. Oh, it’s gonna there’s gonna be a lot of opportunities out there. We’re excited. Oh, yeah. Yes, we have. We have dry powder. We’ve got billions. We have you know how much money we’ve raised billions of Okay, great, wonderful, all your dry powder well, and then I turned the conversation to their own portfolios and said, Well, what are you going to do on your own portfolios? Oh, no, our portfolio is fine. Right? So nobody, nobody’s, nobody wants to look at their own stuff is saying like, Yeah, I’m gonna get rid of my junky stuff and buy this now brand new stuff, like, you know, eight caps, nobody’s talking about that. They’re just talking about how everybody has dry powder. Well, somebody’s got to not have it, somebody has to have a deal, the clothes to sell, if nobody has to sell. And you know, it’s a little bit like the single family home market. And you want to talk differences between 2008 and 2023, the single family home market in 2008, there were tons of people with floating rate debt and tons of people that are underwater in their homes and forced to sell. And there were a lot of things well, this time around, not only has there been fiscal discipline on the part of the lender side, in the last 10 years. But now we’re coming out of this crazy time where people were refinancing their homes at two and a half 3% 4%, whatever it is, but there is no sale pressure at all in the marketplace for single family homes. Very, very little. And so now we’re just like in the multifamily spot, if people don’t have to sell, they’re not going to sell, they’re not going to sell and say, Yeah, we’re gonna sell it or nightcap, just because No, not we’re gonna hold because we don’t have to sell. Just reified. We’ve got 30 year mortgage on my house, why should I sell it, you know, that kind of thing. So I don’t know, if you can look at today’s market and say, yeah, there’s gonna be tons of deals gonna just materialize. But I can say that when the market fully resets, there will be a new cap rate, we won’t be buying in the threes anymore, we won’t be buying, you know, across the country at the same cap rate, which we can talk about that too, will be bifurcating and diversifying what we think is a good deal in Des Moines, Iowa versus Hollywood, California versus Hollywood, Florida, you know, there’s going to be a difference in all of those cap rates that we haven’t seen really in the last couple of years. And that’s driven in part by written by interest rates.
J Darrin Gross 23:03
Yeah, it is, I love the comparison that you’re making there about, you know, in what what created the market opportunity in the in the Oh eights is that people had had the sell, they didn’t have the revenue, they had a loan being called, or the I mean, the capital markets dried up to where they they couldn’t meet their, their, their debt covenants or whatever, whatever those situations were, they were forces outside that were causing them to have to sell. Whereas again, right now, like you just described, if somebody’s got, you know, low cost debt, and their property is performing, what’s the where’s the supply of opportunity going to come from? Other than get their markets where maybe there was a overbuilding that occurred or maybe you’ve got, you know, a debt that’s that’s coming due or that has to be refinanced, or I’ve heard a couple of stories where maybe a fund has a property and because the stock market has not performed well, that they had to liquidate, to rebalance their portfolio and, and I heard about a, you know, a group that picked up a property with tenure debt that was only one year into the debt, you know, at a at a great rate, I mean, they had bring more capital than maybe maybe it would have but but, you know, I am not hearing all of the story is just yet, of all the opportunities that have been forecasted by those you’ve talked with and many others and you 90. And I mean, there is a chance that this just could be kind of a boring cycle that that is the new norm of, of business. But I guess the history books will tell us what it what it what it was, or, you know, after we have to go through it. So, let me ask you about, you know, we’ve we’ve already talked a little bit about, you know, kind of the compression, the cap rate compression that occurred, and, and I guess even going back before, like the 2000s, how, you know, debt was always more expensive to wear, you know, the way people you know, the performance of a property. I mean, it encouraged people to come with more equity than it did. Debt. Is it possible that, you know, that becomes the new norm? And if that is the case, what are your thoughts on how long it will take for the market to accept that that’s the new, the new norm?
Edward Ring 26:09
Yeah, great question, I definitely think that it is possible that that is going to rapidly become the new norm. And I think that the what, what we’re getting back to, and this is, I think, good for my business. But we’ll see. But that is that you pay a lower cap rate. A lot of times the cap rate is always a function of risk, and you’re going to pay a lower cap rate, if there’s less risk in the project. And part of that risk comes from the market fundamentals. So we’re here on the West Coast, and we get a lot of a lot of grief about our politics and a lot of grief about, you know, this, that and the other thing, but you know, at the end of the day, we’ve got a ton of jobs here, we have a ton of high paying jobs. And so if we’re buying properties, even if we have to finance them at, you know, five 6% and whatnot, we can go and buy a project at a five, four and a half 475 cap rate, even though there’s, there’s negative leverage, because we know that our incomes here are so high, and the jobs are so plentiful, and this housing supply is so limited, that we have a very good sense that we’ll be able to move that rent in place up to basically cover ourselves, maybe we’re negative leverage for a year, year and a half. But within two to three years, we might be positive leverage, if we put the right data on, so all of a sudden, that opportunity feels a little less risky. And so we’re willing to pay a lower cap rate for that particular play. Now, if you’re buying something in a different, I don’t know where other markets where your listeners are, but let’s just I don’t know, pick some market in the middle of the country somewhere east coast or something that I don’t know. But let’s pretend there’s a market that used to trade at a six and a half. And lately, it’s been a three and a half. Well, in the last two to three years that didn’t necessarily add a bunch of high tech high paying, you know, supercharged jobs. And you’re really talking about service workers and you know, retail employees and whatnot. Well, now you don’t have the fundamentals that you could then make that bet that your cap rate was that you were safe at buying a three and a half, four and a half cap rate, because you’ve been moved that cap rate up as tight as you can raise rent, all of a sudden, you’re stuck with the rent, you know, barring maybe two 3% a year or something increases, but by and large your market is your market. And all of a sudden, that feels very risky. If you’re putting on a piece of data at five and a half, and you’re buying at four and a half and you’re in a market where that that market growth is not going to happen. Now how you can actually generate enough yield for your investors or enough appreciation so that when you go to sell your project in three to five years, they’ll actually make money. So now all of a sudden, that feels a lot more risky to me. And so that going in cap rate had better be a little higher than say what you’re buying in California. So all of a sudden, you know, what we saw in the last three or four years is just a real compression of cap rates around the country to a single kind of cap rate. Oh, this is the cap rate for an apartment building. Well, now I think we’re going back to No this is a cap rate in Tucson. This is a cap rate in Los Angeles is the cap rate and northern cow and each specific pocket. Each sub market has its own risk measurements and its own risk profile and its own fundamentals. And that’s why you have to be really, really diligent and smart about what Your buying and where you’re buying?
J Darrin Gross 30:03
Yeah, I totally agree with you, I’ve, I’ve definitely come to the conclusion that, you know, the cap rate does dictate, will there be anybody behind me wanting to buy this, when I’m ready to sell, you know, if if, even when, you know, cap rates are crazy in the twos and threes or whatever, in some of your bigger metro areas, and that was felt like that the one safety, you know, piece of security that they had was that market was not going to collapse. Whereas you get somebody that’s all excited, because it’s a 10 cap, you know, or something like that. I’m gonna like, you know, the 10 cap, you better love that property, because you may own that forever, as opposed to, you know, something that’s more in a, you know, in a market with jobs, I mean, the fact that you, you know, have said jobs, jobs, jobs, that’s, that’s pretty key, because those people with jobs are the people you want in your, your property. Right. And I feel like, you know, with is cheapest capital has been for the recent past, it’s allowed investors to, I don’t say, overlooked jobs, because jobs have always been kind of that statistical point that you have to be able to identify, you know, what’s the median income? You know, what’s the, how much how much rent can your, your potential tenants afford. But, you know, with the, we mentioned, the internet will shoot, you know, the whole COVID taught us that you can work remote. And so there was this kind of this almost this thought that you didn’t necessarily need to be in the market where the job was, you could be, you know, you know, at any point. And I think that, by and large that has played out, and I think there’s a lot of people that have relocated, you know, talk to anybody that’s investing in an office space, and I’ll tell you, certainly some, some stories about that, but but, you know, again, it still comes down to jobs. And, you know, there’s got to be some sort of concentration of jobs, high paying jobs, so that you can whether you buy a property at a low cap today will be, you know, cash positive or leverage positive here in a short amount of time. And I just think that, you know, kind of what, what I’m hearing you say, and what I’m kind of picking up from, from others is just that, you know, there is a reset that’s occurring. It’s, I’m assuming, and tell me, how long do you think? Is there a timeline you think are you believe that it will take for people to accept? This is the new norm? Um, we I know, we talked about Yeah, we think it could be, but is it like a year? Is it two years? Do you think it’d be three years when everybody just kind of accepts us? Or is this just a everybody keeps looking for something different until it doesn’t happen? And then they say, Oh, I guess this is what it is.
Edward Ring 33:36
Yeah, I think, I think that we’re we, as a real estate investor, as a group are impatient. And I think I I’m a no, no, no exception to that. It’s been, as far as I can tell, since about April of last year, so we’re talking about it’s been 10 910 months now, where the Fed has really started changing the dynamics of our marketplace, you know, with their intentions, good intentions or not, whatever their whatever people feel that they’re doing. They’re doing it and they’ve moved rates so quickly, so rapidly that investors haven’t been able to find their footing. And by and large, don’t want to actually be a participant in a market where they really don’t understand what the landscape is. And I think in you know, get my crystal ball out. But if the Fed pauses or stops, decides, hey, you know, we’ve moved interest rates high enough. We’ve slowed the economy down. Inflation is back to normal. Our jobs are still plentiful. Let’s, let’s just wait and see now and see how this goes on. I think then we’re going to start getting real estate investors to, to really kind of jump back into the market, I think that if they can project what’s going to happen, they’re okay to invest, if that means to get rewarded at some point with interest rate cuts, and great, they’ll take it. But if they presumed interest rates are what they’re going to be for the next three or four years, I think people will start jumping in sooner than later. And I think helping all of this, at least in the markets that we play in, on the west coast, is that our rents are, now there’s they’ve softened up a little bit, but for the most part are holding. And if we were getting, say, $1,800, for an apartment, a year ago, we’re still getting that 1800, you know, and maybe it’s a little bit more, maybe now we’re getting, you know, 1950 if we renovate the project or something like that, so we’re actually still seeing fundamentals been in a decent shape. So if that’s the case, and we can work those higher rents through the rent rolls than our cap rates will be rising, and somebody can turn to us and a year from now and say, Hey, would you want to sell this thing at a six cap? Yeah, I’d be like, Sure, why not? I could sell it a six cap, because my basis, my cost basis is really at an eight cap now. And so if I’m selling at a sixth grade, I’m gonna do well. Now, you know, if I am forced to sell fairly, and I haven’t been able to move the rents, then well, I may be pretty upset, but I might have to sell anyway, in which case, you know, we go back to what it was, like, many years ago with, with having to sell into a market that we prefer not to be in. So
J Darrin Gross 36:56
right. Now, I think that the recognition and understanding of the cap rate, you know, obviously, it’s a market. It’s a market cap rate, like you, like you said earlier, it’s not a, a nationwide cap rate, although that’s kind of what it was portrayed as. More recently, but, but definitely each market has its own home campaign be to be intimately familiar with that, and understand the, the likelihood or the possibility of it moving, I would expect that, it’s probably wise to assume it will go up. So if you’re, if you’re getting a deal, and you have an exit strategy plan, that you you know, plan for something a little higher, you know, but or at least have a plan to be able to hold through, you know, whatever is immediately in front of us. Let me ask you, because I think this is the, you know, it’s probably a question that seems obvious to some people, but I’m always kind of curious about this. How do you see the the the commercial debt? Just the structure of commercial debt? And does it not kind of create the cycles in the market all by itself? Meaning if you have a low rate environment, and people either rush into the marketplace and buy or refinance? Does it almost create a, you know, a natural cycle for when that debts, you know, to be to be refinanced, or extinguished? Or does it present just part of the the operators? You know, Rubik’s cube that they have to solve for?
Edward Ring 38:55
Yeah, I think it’s a little of both. I think, you know, over the last 20 years, we’ve seen commercial lending, take on a very interesting characteristic. Or maybe it’s been going on more than 20 years, but for sure, I see it today that commercial lenders are really just investors. And so they’re just investing in a sub stack of the of the, of the capital in particular project, you know, with between one and 70% or 65% or so. But at the end of the day, all those folks are investing and they’ve got investors and they’re mining their ship for what they’ve promised their people and Gone are the, you know, are the days of, you know, the local bank, you know, Mr. Potter had to go get your loan, you know, that those days are so far gone that now it’s, you know, everything’s been sliced and diced into bonds and you know, that Most people have investors, and so everybody’s basically an investor. And so, and there’s a lot of creativity and investing, as we all know, there’s a lot of creativity in structuring debt. And so yes, what you’re saying is, is quite true, which is, the more creativity that lenders get, the more they’re able to offer the lower interest rate, because they are making certain fundamental assumptions that the next lenders not making, again, trying to arbitrage and squeeze out a little bit more yield for their investors and do a little bit better. So one, time for bonuses come in February, their their bosses are all happy. And you know, because home and celebrates, that kind of competition really mirrors what goes on in the operator space, where we’re going to chase apartment building with, you know, five other groups. And we’re saying, Yeah, but we think we can do XYZ, so we’re gonna pay a little bit more. Well, if we’re right or wrong, that’s kind of where the rubber meets the road. And the same exact dynamic dynamic is happening at the lender level, from at the lender level is the losses could be even higher than, say, the losses and operator level, even though it might feel like feel worse, because you know, losing all of your equity, in one deal was terrible feeling but a lender could lose the, you know, 10s of millions more, and that is a much, much larger loss to bear.
J Darrin Gross 41:30
Yeah, that’s that old saying, if you have a $5 million loan, that’s a huge problem. If you got a $500 million loan, that’s a bank problem,
Edward Ring 41:39
exactly.
J Darrin Gross 41:43
Hey, Edward, if we could, I’d like to shift gears here for a second by dam and insurance broker. And as such, I work with my clients to assess risk and determine what to do with the risk. And there’s three strategies we typically look to consider, we first look to see if we can avoid the risk. When that’s not an option, we look to see if there’s a way we can minimize the risk. And when we cannot avoid nor minimize the risk, we look to see if we can transfer the risk. And that’s what an insurance policy is a risk transfer vehicle. And as such, I like to ask my guests if they can look at their own situation. It could be their clients, investors, tenants, the market political, the Fed, how are we you would like to frame and consider the question, what is the biggest risk? And for clarification, while I am an insurance broker, I’m not necessarily looking for an insurance related answer. And so if you’re willing, I’d like to ask you, Edward Ring, what is the Biggest Risk?
Edward Ring 42:56
I think the biggest risk I’m facing right now is not having the patience to to get comfortable with the knowledge base that I have, and what I see on the horizon. So I’m, I’m a person that tends to slow down when other people are rushing. They want me to make a decision quickly. So I peel back and take a moment, take a pause. I do my best work when I’m thoughtful. And I assess. And I think that that’s the risk that most humans not just in real estate, but most humans face is that they are making decisions without actually understanding the fundamentals surrounding the problems that they are faced with. And I think that folks out there would, would do well to get educated, and to really make sure that they’re arming themselves with intelligence and intelligent reporting. So they understand the markets that are in they understand the risk, reward calculus, and they understand what, what they’re facing. And if they understand all of those factors and are comfortable with them, then it’s pretty easy to make the right decision or at least a decision. And time will tell if it’s been right or not. But at least you’re eliminating the one single factor that everybody has and that’s your own ignorance. If you can eliminate your own ignorance, man, you’re gonna do great.
J Darrin Gross 44:35
Now, let’s say wise man speaking there. That’s That’s good stuff there. I appreciate that. And where can listeners go if they’d like to learn more connect with you?
Edward Ring 44:49
Yeah. NewStandardEquities.com. You can send us a note I think we have info at and I think there’s investors. There’s an investor portal if anybody’s saying interested in investing with us. You just go visit our website and click around you’ll find you’ll find it pretty easily. We, you know, we’re very cautious. So it’s not like you’re gonna go and see 1000 deals like a crowdfunding platform, you know that. So it’s a couple of year maybe. So, I welcome people to, you know, hop on our site and become one of our investor members. And we’ll see what happens. Hopefully we’ll find some decent deals out there.
J Darrin Gross 45:34
And can’t say thanks enough for taking the time to talk today. I’ve enjoyed it, learned a lot. And I look forward to doing it again soon.
Edward Ring 45:42
Cool. Anytime, take care.
J Darrin Gross 45:44
All right. For our listeners. If you liked this episode, don’t forget to like, share, and subscribe. Remember, the more you know, the more you grow? That’s all we’ve got this week. Until next time, thanks for listening to Commercial Real Estate Pro Networks. CRE PN Radio.
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